Home Opinion Featured Articles Energy transition and the future of resource-rich Ghana

Energy transition and the future of resource-rich Ghana

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Energy Transition
Energy Transition

Energy is a crucial input for development. Non-renewable energy sources which include coal, oil, and natural gas, supply about 80% of the world’s energy and Petroleum also accounts to about a third of the total global carbon emissions.

Governments around the world are now engaged in efforts to ramp down greenhouse gas emissions from fossil fuels to prevent the worst effects of climate change.

The Conference of Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) met in November 2021 at Glasgow for its 26thannual summit to accelerate progress on reducing carbon emissions and keeping the global temperature rise below 1.5 ℃. Renewable energy (RE) technologies were the central theme as the conference ended with several initiatives and agreements aimed at accelerating the inclusion of RE technologies into the world’s energy mix.

Ghana relies heavily on fossil fuels for its electricity generation and domestic energy consumption. However, increasing global concerns over climate change has led to technological advances and global policy transformations especially in the demand for oil and gas. Research suggests that, globally, a third of oil reserves, half of gas reserves and over 80% of current coal reserves should remain unused from 2010 to 2050 in order to meet the target of 2 °C.

Meanwhile, hydrocarbon deposits in West Africa have only just started to attract investors and development partners. However, major oil companies are already pivoting into the RE markets and without these companies, it would be almost impossible for governments and national oil companies to develop the upstream sector on their own.

Many African countries are already heavily dependent on fossil fuel reserves for foreign exchange. Revenues, particularly from oil and natural gas, exceed 90% of total export earnings in some countries. According to a 2020 World Bank publication, “Africa’s Resource Export Opportunities and the Global Energy Transition” the world’s shift towards RE and clean energy technologies will provoke a reduction in global demand for fossil fuel such as oil and natural gas.

Given that nearly 50 percent of Sub-Saharan Africa’s export value is composed of fossil fuels, the global energy transition may have profound effects on its economies. Nonetheless, the region has vast green mineral resources that can constitute a major share of its gross domestic product if developed. Ghana may be able to take advantage of the global shift from hydrocarbons to RE due to the abundance of mineral energy materials such as silica, lithium, manganese, and bauxite.

According to research provider BloombergNEF, the transition could require as much as $175 trillion in energy supply and infrastructure investment over the next three decades. Countries pursuing mineral-based industrialization strategies with emphasis on green energy minerals such as lithium, cobalt, silica, and bauxite will profit from this global shift.

The production of lithium and cobalt is expected to increase by up to 500% by 2050 and the World Bank estimates that over 3 billion tons of minerals and metals will be needed to deploy wind, solar and geothermal power, as well as energy storage, required for achieving a below 2°C future. It is estimated 80% of global lithium demand will come from electric vehicle market by 2030.

This will provide opportunities for Ghana to transform and diversify its economy using green energy minerals. Investments in renewable technologies are already taking place in the developed nations such as Germany, France, the United States and China and this will continue to grow in the coming decade.

This therefore puts Ghana in a prime position to take advantage as global exporters of sustainable energy technologies.

Ghana for that matter should not focus only on being a hub for providing raw materials for these technologies but can play an active role in technology export. The sectoral change that Ghana should pursue is the shift from mining raw materials for export, towards manufacturing of equipment and technologies to be able to optimize the gains from these resources.

Leaders must find a cross-functional solution which answers simultaneously to socioeconomic and environmental challenges. Energy policymakers who work in isolation risk creating energy policies that slows energy-access gains, decelerates economic growth, and mitigates one environmental impact while provoking another.

Therefore, broad stakeholder engagement is important. Energy stakeholders must come together to design a customized energy transition based on the Ghanaian context taking into consideration the green mineral resources Ghana can leverage on.

Leaders must liaise to harness these green resources and leverage on the Africa Continental Free Trade Area (AfCFTA) to trade and develop these transition technologies from within. To this end:

1. Ghana must select minerals that are considered critical that will play a role in the energy transition and define those as key metals that could enhance the economic and manufacturing capabilities of the continent.

2. Development in green minerals should be geared towards creating value added products that places the country at a strategic point on the global renewable technology market. To this end, investment in infrastructure would be critical to the course.

3. There is the need for policy guidelines taking into consideration the global context of renewable technologies. Stakeholders must come together to design a roadmap customized to specific country contexts.

4. The country can seize the opportunity and use the potential windfall to invest in downstream capacity, skill development and strengthening regulatory regimes and ensure local content participation in the green minerals industry to internalize the revenues accruing to individuals and organization.

In the short and medium term, fossils may remain an enduring source of fuel and government revenues. Nonetheless, Ghana should anticipate in the long run, a permanent decline in the demand for fossil fuel as conversations on the global energy transition develop. For Ghana, endowments in green minerals serve as a lever for a strategic position on the global renewable technology value chain for which sound policy and strategic investments are expedient.

Energy transition is inevitable, Ghana must therefore commit to a more deliberate adoption of RE by restructuring national policy to direct significant projects and infrastructure investments in RE technologies for sustainable national development.

Writer : Daniel Daam Jarajara

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