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JIMMY MOYAHA: We’re taking a look at the Africa Energy Forum that kicked off yesterday [Tuesday 17 June]. This is an important event where a lot of the conversation centres around the energy picture on the African continent. We’re going to take a look at some of the developments from that conversation, but also some of the bigger drives in areas like the green hydrogen economy.
I’m joined on the line by the executive vice-president at Scatec, Alberto Gambacorta, to take a look at this and see if we can make sense of it. Alberto, thanks so much for taking the time. Lovely to have you on the show.
The Africa Energy Forum that kicked off yesterday – take us through what’s been on the agenda from that perspective, and the importance of that forum at this point.
ALBERTO GAMBACORTA: Good afternoon, Jimmy. Good afternoon to you and the listeners, and thanks for having me on the show.
Let’s maybe start with the theme of the Africa Energy Forum this year. It’s Africa United. That’s a great statement in itself. It means coming together, the private and public sectors, to accelerate renewable energy projects or energy projects in general on the continent, to remove bottlenecks of different sorts that we have, create the right partnerships – and that’s quite important as well – and find solutions for Africa.
So this is clearly one of the important themes for the Africa Energy Forum this year.
JIMMY MOYAHA: Alberto, is this something that we’re seeing kind of transcend into not just the African conversation but the global conversation? We have had more renewable conversations, especially since the Covid-19 pandemic, and a lot of countries from various areas around the world have made a more concerted effort towards managing their energy footprints and their energy conversations. Is this something that is lining up with global themes at the moment?
ALBERTO GAMBACORTA: It is indeed. It’s evident that renewable energy is a force to reckon with. Actually some of the largest investments in energy are in renewable energy worldwide – not just in the continent, not just in South Africa. The reasons are several.
First of all, it’s become evident to everyone that there is a need to decarbonise the economy, there’s a need to have cleaner energy – but it’s also a matter of investments.
These technologies are becoming a lot cheaper, a lot faster to deploy. So it’s a matter of pricing of the electricity as well as having it quickly enough.
Some of the other resources take a much longer time to develop and bring online, whereas renewables generally are somewhat faster. So that’s one of the reasons why worldwide you’ve seen a lot of investments in the trillions of dollars in renewable energy.
JIMMY MOYAHA: Alberto, where does the nuclear conversation fit into all of this, understanding, of course, there are growing tensions in the Middle East at the moment? A lot of that is around nuclear disarmament and those sorts of things. Is that something that is a part of the conversation? I can imagine from an energy point of view nuclear energy does form part of the energy mix somewhere along the line.
ALBERTO GAMBACORTA: Sure. Many countries have nuclear in their plans – in the energy mix or in the future planning or in execution at the moment. Now, what we need to consider, of course, is its two elements.
One is how long it takes to develop and put online nuclear power plants versus how long it takes and how cheap it can be to develop renewables.
I think they need to be evaluated on the merits of both technologies and applied a bit to the context.
If you’re trying to solve for quick deployment while the nuclear power plants will take 10 years – sometimes even double that; you will see examples of nuclear power plants in the UK and in the rest of Europe taking much longer at double the budget – whereas if you’re trying to solve for faster deployment, well, renewables will be your quick answer, maybe not providing for the full capacity that you need but a faster route to market.
So it shouldn’t be a war between technologies. It should really be adapting the strategy to context.
JIMMY MOYAHA: One thing that we can agree on is that there are some energy solutions, or some things that are easier to adapt and easier to implement into certain economies. I’m thinking on the African continent, things like solar, things like green hydrogen have become quite topical. I know our own Public Investment Corporation has made investments in that space as well, and I know that’s also something that’s coming up at the Africa Energy Forum around the green hydrogen conversation. How is that playing out at the moment and what conversations are being held?
ALBERTO GAMBACORTA: It dates back a few years, when the conversation around green hydrogen started. Let’s go back a bit to why it started in the first place.
Green hydrogen has been seen as both a vector of energy, meaning it’s something that will be able to transport energy storage, as well as feedstock to other products which require a heavy deal of decarbonisation.
I’m looking at, of course, ammonia for instance, which has hydrogen as a feedstock, or green steel and other applications as well.
So why the need of green hydrogen in the first place? It’s clearly to decarbonise, to avoid a great deal of carbon taxation or some penalties applied by the Carbon Border Adjustment Mechanism, the so-called ‘CBAM’, for commodities going into Europe – which are made with fossil fuel. So that’s the regional need.
Now, the continent is blessed with great solar and wind resources, and in order to have green hydrogen you need to have a clean value chain producing that hydrogen.
So you need to have renewable energy, you need to have fuel, transmission, you need to have water and access to ports. So the conversation then quickly moves into, okay, the rationale is that of decarbonising the economy, and then the conversation becomes one of how we can make it work.
That becomes a bit less evident. You have a long lead time to development, and [it’s] capital intensive. You need a lot of support from policies, from investors, from donors, and a lot of infrastructure that normally takes a lot of time to be developed.
JIMMY MOYAHA: Alberto, when we look at the financing side of it, this is obviously a big concern as well, because these projects don’t fund themselves necessarily. It does require a lot of capital investment, especially in transitioning economies where there is existing energy that needs to then be looked at differently – but also just globally in terms of development. This is an expensive exercise. How are we having the financial conversations around the energy mix on the African continent?
ALBERTO GAMBACORTA: That’s a great question and a great dilemma to solve, indeed. How can we finance these big projects?
Let me just make the point that these projects need to show additionality, meaning that they shouldn’t be taking energy that can be used elsewhere in the country. So the green hydrogen needs to be produced from new renewables that need to be built and developed.
Now, the problem is clearly one of how an investment can stand on its feet for 20 years on the basis of something that has never been sold before, such as a green hydrogen commodity, or green ammonia, or green steel?
So the pricing part, which is at the end of this, is that [whoever] is going to buy this product is going to determine the quality of the projects, which in itself is going to attract more or less capital – or no capital at all.
And capital means, of course, private investment from investors or developers, IPPs [independent power producers] like us.
And then, of course, you need to have your development finance institution, your commercial lenders and other types of donors. You need grants as well.
So for instance, we have our own project in Egypt called Egypt Green Hydrogen, and that has attracted funding from different DFIs [development finance institutions] and other types of grants, because it has offtake, it has viable products at a price that has met the expectations of the buyers of that product itself. So the project is able to attract that level of investment.
The same thing cannot be said of many other projects. They are far behind, or the economics of those projects do not stack up.
JIMMY MOYAHA: Alberto, before I let you go I want to get a sense of the practical steps that are being implemented, or that are being proposed in terms of implementation and moving forward. A lot of these conversations at these sorts of forums start out as discussions. Then the roadmap is developed and we seldom get updates on where we are on that roadmap.
I know there was a report from last year’s gathering – for 2024. What are we implementing or have we implemented from last year’s report, and what are we expecting to come out of this year’s gathering?
ALBERTO GAMBACORTA: Jimmy, it’s important to put in context the timelines of these types of projects.
They are large projects and large investments, so they develop over the course of years. You don’t measure progress in months.
You need to develop it; you need to measure progress in the range of years. So from one year to the other you will always have a bit of limited progress. When it comes to making the development of the renewable energy part of the investment, you can see progress year on year. But when it comes to structuring the investment and coming to a final investment decision, then it takes three, four or five years – or more.
So it’s a bit of a long run and it requires a lot of patience, but it also requires a few structural elements to come into place. And as I said, the offtake – meaning who’s going to buy those commodities – is the central piece of all of this.
So if you if you hear of deals, then you know that those projects are going to move forward.
JIMMY MOYAHA: Well, all the best to the Africa Energy Forum and the gathering that’s taking place there. We hope that the outcomes are fruitful and we can move them forward.
Thank you, Alberto, for the time and for the insights. Alberto Gambacorta, the executive vice-president at Scatec, joined us to take a look at the Africa Energy Forum currently taking place at the Cape Town International Convention Centre, and what’s being discussed there.
