ARTICLE

ECONOMIC BENEFITS OF DIGITALISATION TO AFRICA’S ENERGY SECTOR.

Introduction
In sub-Saharan Africa, only about a third of the population have access to electricity and the number of people without access is on the rise, according to the World Energy Outlook 2014, published by the International Energy Agency (IEA). This presents a significant barrier to economic and social development. Governments across the continent are seeking ways to enhance their existing energy infrastructure and develop new or diverse energy sources that are reliable, affordable, and sustainable.  About half of  Africa’s  total population  (548 million people) were  without access to electricity in 2018  (IEA 2020). Most  of  these  people  live  in  Sub-Saharan  Africa.  Meanwhile,  African  businesses,  from  micro-enterprises to agriculture  to industry, are held  back by the lack of a reliable, affordable energy supply.  Unless these challenges  are addressed  in a concerted manner, they will only intensify, as estimates by the World Bank indicate  that the population  will  increase  by one billion  people in  Sub-Saharan  Africa  by the year 2050. 

A recent study of the International Renewable Energy Agency (IRENA) shows that, indeed, doubling the share of renewables in the energy mix by 2030 would lead to a rise of global Gross Domestic Product (GDP) up to 1.1 percent. It would also improve global welfare by 3.7 per cent and support the creation of over 24 million jobs in the sector all over the world.  The rise of digitalization is driven by numerous factors such as automated metering, grid decentralization and growth in distributed generation. It is also enabled by significant advances in data, analytics, and connectivity. Therefore, digitalization of energy systems enables utilities to maintain grid stability and reliability, monitor the grid and identify points of failures, reduce operations and maintenance costs, optimize, and forecast energy production and extend the operational lifetime of assets.

Digitalization is considered as a key factor in meeting the future energy requirements of Africa. According to the International Energy Agency, digitalization - described as “the growing application of information and communications technologies (ICT) across the economy”- is set to make energy systems, particularly power generation systems, more safe, productive, accessible, and sustainable. The pace of digitalization in energy is increasing rapidly. Between 2014 and 2016, global investment in digital electricity infrastructure and software increased over 20% annually, exceeding investment in gas-fired power generation.  The adoption of digitalisation in the energy sector of Sub-Saharan Africa will contribute to the capacity of the continent to expand its energy resources and facilitate economic growth and development. Therefore, implementing policies that create an enabling environment for digitalisation in the energy sector will immensely benefit the sector and the region.

Economic Benefits of Digitalisation to Africa’s Energy Sector.
Digital technologies are set to transform the global energy system in coming decades, making it more connected, reliable, and sustainable. This will have a profound and lasting impact on both global energy demand and supply, according to a new report by the International Energy Agency.  In a comprehensive report on the interplay between digitalization and energy, the IEA provided an analysis of how digitalization has been transforming energy systems. From the rise of connected devices at home, to automated industrial production processes and smart mobility, digital technologies are progressively changing how, where and when energy is consumed. 

Thus, digitalisation of the energy sector in Africa will result into enormous economic benefits for the sector and the region.  Employment of smart solutions will ensure more flexible and connected energy outcomes, subsequently improving the transmission and distribution lines, and ultimately assisting in meeting energy demand in African countries. In addition, digitalisation of Africa’s energy sector will contribute to a wealth of employment opportunities for the teeming youthful population of the continent. Moreover, energy technologies advancement, such as renewables, clean coal and nuclear, energy storage, off-grid technologies, smart grids, mini solar kits, and small wind power plants will provide an array of opportunities for new investment and development of energy resources in the continent.  Furthermore, the digital space has the capacity to upskill workers, improve capital productivity and labour efficiency as well as improve energy security, accessibility, and affordability, thereby promoting local economic development and societal benefits. In addition to this, digitalisation includes the collection and use of data to gain exhaustive insights to improve efficiency and productivity levels, further boosting the energy landscape.

In the African oil and gas industry, digitalization can bring various benefits to day-to-day operations and cost reduction. For condition monitoring, specific, industry, historical and real-time data lets operators improve maintenance and inspection regimes. Real-time data from wells will allow timely decisions on underperforming wells and other potentially high-cost issues. Detecting anomalies during drilling and operations will enable more effective decision making that can deliver cost savings. There are also potential benefits for health, safety, security, and environment (HSSE) performance. Data-enabled dynamic barrier management can provide a more accurate view of condition status, allowing better prediction and mitigation of equipment failure. Extensive data on efficiency and emissions provides for better monitoring of HSSE performance and compliance. Data analytics improves understanding of environmental risks, and authorities can create more effective regulations and monitoring. These benefits will contribute to the productivity of the oil and gas sector and its contribution to the economic growth of African producing countries.

For the benefits of energy digitalisation and technology to help the continent achieve its economic growth and development aspirations, there is the need for necessary investments in energy digitalisation initiatives and sustainable infrastructure.  These fundamental elements will ensure that digitalisation and technology are leveraged to create a remarkable opportunity for a sustainable, inclusive, resilient, and resource-efficient society.

Concluding Remarks
Whether  and  how  African  countries  take  advantage  of  these opportunities  will  depend  in  large  part  on  the  way  that  energy  policies  evolve.  With  the right  institutional  and  policy  foundations,  a  well-functioning  energy  sector  can  be  the cornerstone  of  economic  development  and  make a  huge  difference  in  the  lives  of  Africa’s people.  Effective policy  choices  can guide  the  continent  to a  more  inclusive  and  sustainable  energy  future and accelerate its economic and industrial  development.  The  choices  that  lead  in  this direction  vary,  reflecting  the  different  resource  endowments  and  starting  points  across  a very  diverse  African  energy  landscape.  But  there  are  reasons  for  optimism,  both  from  the  dynamism  of  Africa’s energy  sector  and  from  the  technologies  that  offer  a  cost-effective  way  to  meet rising demand  in  a  sustainable  way.   Technology and digitalisation developments and innovative approaches are opening new opportunities and making an indisputable business case for their adoption in the continent’s energy sector.  With abundant  indigenous  resources,  Africa is well placed to  leverage this potential. However,  the  potential  and  availability  of  cost-effective  technologies alone  are  not  sufficient.  Seizing  this  opportunity  will  require strong political will, attractive investment climate  and  a holistic  policy  approach  to fully  reap  the economic benefits  of digitalisation in Africa’s energy sector.  It also means that  current average annual investments in the  African energy system  must  double by  2030 –  to  approximately 40-65 billion USD.

AMETRADE’s mission is to facilitate the flow of investment into Africa’s energy sector through its conferences, seminars, workshops, and capacity building events that showcase the challenges and enormous opportunities in the energy sector.

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