offshore Africa enters a new energy era

Scattered around the fringes of the continent, Africa’s small island countries are notable for their diversity. Some – such as Mauritius, a hub for financial services, and Cabo Verde, a tourist hotspot – are relatively wealthy. Others, like Comoros and Madagascar, are among the poorest in the world. The Seychelles consists of low-lying islands that are extremely vulnerable to rising sea levels, whereas São Tomé and Príncipe is made up of towering volcanic peaks.

While each of Africa’s island nations is unique, their small size and relative isolation create some common challenges.

When it comes to generating electricity for island grids, “in general, your cost per unit is extremely high,” says James Ellsmoor, CEO of consulting firm Island Innovation. “The smaller the island, the higher the cost per unit, just because of economies of scale. And so that has a knock-on effect down the whole economy, and it puts island economies as a whole at a real disadvantage.”

African islands are largely reliant on small power stations that burn imported diesel or heavy fuel oil (HFO). Dependence on these facilities renders islands especially vulnerable to fluctuations in international oil prices.

“The cost is very high now,” says José Maria Gomes Lopes, an energy researcher from Cabo Verde, which spends around 7.5% of its GDP importing fuel according to IMF figures. He adds that costs are heightened by the need to redistribute imported fuel around the archipelago. There are no transmission cables between Cabo Verde’s 10 islands, or to the African mainland, meaning the country is forced to maintain multiple small power stations for a total population of just over 500,000.

Burning diesel or HFO has, however, long been the only viable option for isolated islands where the smallness of the market makes the upfront cost of more modern methods of power generation commercially unviable.

Yet a growing range of renewable energy technologies are providing new options for Africa’s islands. An energy revolution could be about to take shape – but, with no two islands sharing identical characteristics, it will be a revolution that takes many different forms.

Alternative energies

“My opinion is that solar-and-storage is, far and away, the biggest opportunity,” says Ellsmoor. Solar panels can be arrayed on a scale that matches the needs of each island. And, with solar costs continuing to fall, many islands are already making considerable progress in rolling out the technology. Cabo Verde commissioned what was at the time sub-Saharan Africa’s largest solar park in 2010. Solar provided 13% of the electricity mix in the Atlantic archipelago in 2022, according to International Renewable Energy Agency statistics.

The Seychelles, meanwhile, has been attempting to overcome space constraints by developing floating solar installations. The government signed a power purchase agreement in 2023 with French developer Qair for a 5.8 MW floating facility, to be built on a lagoon on Mahé, the largest of the country’s islands.

Wind energy is also an option, although the technology tends to need economies of scale to be viable. As a general rule, wind speeds are typically lower closer to the equator, and there is only modest potential for wind power on some of Africa’s islands.

Meanwhile, islands are paying close attention to battery storage as they look to lessen their dependence on imported fuels. Curaçao, a Dutch Caribbean island, is aiming to use solar and wind, combined with storage, to provide 70% of its power needs by 2027 – up from just 30% today. Its energy utility signed a deal with technology firm Wärtsilä last month that will see the Swedish company install storage and use its software tools to maximise the use of renewables at the expense of HFO.

The 70% goal is “very exciting for us,” says Anders Lindberg, president of Wärtsilä Energy. “If you do this in a big country, it takes many, many years. What is interesting, of course, with an island like this in the Caribbean, is that you can do this fairly fast.”

Wärtsilä is currently building a battery storage system on the island, which should be ready later this year. Its software will then help optimise how power is used and stored, so that HFO engines only kick-in when renewables or storage are unavailable.

Lindberg says the Curaçao project could have wider lessons. “I think it is very much possible to replicate,” he says, noting that the project could be “a showcase and blueprint” for other islands. “And I don’t just mean physical islands,” he adds. “I mean electrical islands.”

Lindberg points out that mining companies, for example, often operate in remote locations where grid power is unavailable and typically rely on HFO to meet their power needs. They have much to learn from Curaçao as it seeks to lower its power costs while cutting its emissions.

Getting to zero?

But opinions differ on whether islands should aim to be fully reliant on renewable energy – especially when intermittent sources like solar and wind would make up the majority of the power mix.

Ellsmoor highlights how Tokelau, a group of atolls in the Pacific Ocean, has been fully reliant on renewables since 2012 – although power is not usually available 24 hours a day. But this is an extreme example. “I’m an advocate for the economic optimum. And sometimes 100% is not the most economically feasible level,” Ellsmoor says.

“Your economic optimum for renewables can be anywhere from 40-90%,” he adds. Above this level, he cautions, renewables cease to be cost-effective due to the cost of installing huge amounts of battery storage.

Whether the targets for renewables set by some island governments are really backed by genuine commitments is also open to question.

Cabo Verde has a target of reaching 50% renewables penetration by 2030 and aims to hit 100% in 2040. Lopes, however, describes this as “very ambitious”. He points out that the government had previously set a target of achieving 100% renewables by 2025. That goal proved wildly over-optimistic, with renewables only accounting for around 25% of the power mix today.

“Right now, I don’t see the amount of investment being done throughout the country to allow me to believe that it’s a realistic goal,” says Lopes. “There’s a lot of technical capabilities that we need to develop here so that we can guarantee this goal will be met in the next 15 years.”

Cabo Verde does have some potential to produce hydropower. A pumped storage hydroelectric station is set to open on the island of Santiago in 2028, which will be able to generate 20 MW for up to eight hours – the government says this will help reduce the island’s fuel consumption by 22%. But hydro resources are often limited on islands, particularly those that are small and low-lying.

Geothermal energy, which was first deployed on a large-scale in the island nations of New Zealand and Iceland, is another possibility on some islands as a source of baseload power. Yet the best geothermal resources are largely restricted to volcanic regions. And even where the resources are present, geothermal power stations are expensive to develop and need a reasonably large market to be financially viable. But on islands, the search for better options will involve looking not just at the land, or under it – but out to sea.

Harnessing the sea

Several marine energy technologies are already tried and tested. A tidal barrage, built across a river estuary, works in a similar way to a hydroelectric dam, with water held behind a wall at high tide then released to drive a turbine. Tidal stream power, meanwhile, is like an underwater wind turbine that is driven by the ebb and flow of fast-moving currents.

Various wave energy technologies have also been developed, although none have yet reached commercial scale.

An approach that appears particularly well-suited for African islands is ocean thermal energy conversion. “OTEC is essentially a heat pump in the ocean,” says Dan Grech, CEO of Global OTEC, a company attempting to pioneer the technology. “It uses the temperature difference between warm surface sea water and cold deep water to run a turbine and produce energy.”

Grech has identified São Tomé and Príncipe, volcanic islands that rise precipitously from the seabed in the Gulf of Guinea, as an ideal place to run a pilot 10 MW project. “You don’t have to go very far offshore to be in 2,000 metres of water, which means we can access the thermocline – the temperature difference between warm surface sea water and cold deep water.”

And São Tomé and Príncipe is in desperate need of new energy technologies as it teeters under the weight of its fuel import bill.

Conditions are not ideal for solar or wind power. But a 10 MW OTEC facility would “provide all of the baseload power that the country needed,” says Grech. This could be supplemented with solar installations to render diesel generators obsolete. “Our mission is to make diesel generators history on these island states from a utility-scale perspective.”

Climate finance problem

The challenge, though, is finding a financial institution that is ready to take the risk of funding a pilot project for nascent technology in one of the world’s smaller and poorer countries.

Countries like São Tomé and Príncipe have “poorly developed financial markets, with little capacity to offer long-term credit,” says Marina Melo, project manager at ALER, the Lusophone Renewable Energy Association. Access to financing is a “major limitation,” she warns.

Ellsmoor agrees. “The problem for infrastructure and for investments in small island states is that the money is too expensive. If you want to get a loan, you’re fundamentally going to be paying a far higher rate of interest than you are if you’re in Europe or North America.”

He adds that insurance costs are another major obstacle in small islands. “All of these financial barriers come together in ways that they perhaps wouldn’t in a European or North American country to make projects that should be financially viable, in my opinion, fall out.” Islands on the front lines of climate change have tended to rely on multilateral financial institutions – yet have long complained at a lack of support as they seek to strengthen their infrastructure. The SIDS group, representing small island developing states, staged a walkout from last year’s COP29 in Baku over rich nations’ reluctance to commit to financing goals sufficient to meet their needs.

Many have expressed support for the “Bridgetown Initiative”, spearheaded by Barbados, which aims to reform the global finance architecture.

Compared to the scale of the problem, the amount of funding currently accessible for SIDS certainly appears modest. One option is to turn to the Global Environment Facility (GEF), a funding body established under the UN climate process to aid climate adaptation in developing countries. SIDS that are classed as “least developed countries” are eligible to access up to $20m over GEF’s current four-year funding round. São Tomé and Príncipe, for example, has been allocated just over $10m under the 2022-26 GEF programme.

GEF has recently created a new “window” to finance projects in SIDS that are not classed as least developed countries (LDCs) – a category that includes the likes of Cabo Verde, Mauritius and the Seychelles. These countries will be able to access at least $3m.

“Now, one would say, ‘well, that’s not nearly enough’,” admits Jason Spensley, senior climate change specialist at GEF. “It isn’t, but it’s something, and $3m can be catalytic if used really, really well.”

“The question for multilateral funders like ourselves,” says Spensley, “is how do we use precious public resources, which unfortunately are a finite resource, to catalyse a much larger scale of private investment?” He highlights that blended finance mechanisms, while not providing a panacea, could help to attract private capital by offering first loss guarantees. In some cases, Spensley adds, it may be possible for multilateral funders to cover some of the interest payments demanded by private lenders in SIDS, thereby helping to reduce the cost of capital.

Whether these kinds of mechanisms can provide a solution for Global OTEC as it seeks to unleash ocean energy in São Tomé and Príncipe remains to be seen.

Global OTEC’s project is “shovel ready”, Grech insists, and could in theory be powering homes on the islands within two and a half years. In the longer term, he suggests OTEC could be harnessed in more than 100 countries.

If this vision does materialise, OTEC would end up as another example of a technology developed in an island setting that is eventually scaled up globally.