Africa Poised To Become Solar, Green Hydrogen Hub

By the EMIS Insights Editorial Team

Africa is widely recognized as the world's leader in solar energy potential and while solar energy has witnessed the most rapid growth among renewable energy technologies in Africa, immense potential remains unrealised.

According to IRENA, an estimated USD 200bn per year is needed from 2026 to 2030 to meet Africa’s growing energy demand and provide universal access to modern energy. Crucially, around 67% of this investment needs to be directed towards clean energy sources.

The continent's abundant renewable resources present lucrative investment opportunities in green hydrogen production and Africa is increasingly being recognised as a future hub for green hydrogen production and exports, particularly catering to the European market, with several large-scale projects already underway.

Africa's energy demand is projected to surge significantly faster than the global average. Global consultancy McKinsey estimates that energy demand in Africa could be as much as 30% higher in 2040 when compared to 2021 levels, outpacing the global projection of a 10% rise in demand over the same period. The African Development Bank (AfDB) forecasts that power demand on the continent will increase six-fold between 2010 and 2040.

Africa accounted for less than 2% of global renewables-based installed capacity as of end-2023, according to IRENA. As at the end of 2023, Africa had installed 62.1 GW of renewable energy capacity, an increase of 2.7 GW compared to 2022, IRENA data showed. Hydro accounted for the largest share of installed capacity at 65% in 2023, followed by solar with 21.7%. IRENA data also shows that between 2014 and 2023, Africa added 29.5 GW of renewable energy power capacity, an increase of 91% for the period. Feed-in-tariff models and competitive auctions have played a key role in driving the procurement of on-grid renewable energy for countries across Africa according to IRENA’s Renewable Energy Auctions: Cases from Sub-Saharan Africa report. 

Africa boasts some of the world's best solar resources which can be used for electricity generation and for thermal applications. According to the IEA, the continent has 60% of the world’s best solar resources, but only 1% of global installed solar photovoltaics (PV) capacity. IRENA reveals Africa's impressive solar potential. The continent receives an average of 2,119 kWh/m² of solar irradiation annually, with many countries in North, West, and Southern Africa exceeding 2,100 kWh/m². Assuming a 1% land-utilisation factor, IRENA puts Africa’s solar technical potential at 7,900 GW. The AfDB believes that Africa has a solar capacity potential of 11,000 GW. The African Energy Chamber forecasts installed capacity for solar on the continent to reach 65 GW by the end of 2030. 

Solar energy has been the fastest-growing renewable energy source in Africa. According to data from IRENA, 11.8 GW of new solar energy capacity had been added between 2014 and 2023, representing an average compound annual growth rate of 26.1%. Breaking this down, 10.9 GW of solar PV and 0.9 GW of concentrated solar power were added over the 2014-2023 period. 

Africa’s vast solar and wind resources in combination with falling costs mean that the continent has huge potential to become a global leader in green hydrogen production according to the IEA. This clean-burning fuel offers a promising solution for decarbonising various sectors and tackling climate change across Africa. 

Estimates by the IEA indicate the continent possesses the capacity to generate 5,000 megatons of hydrogen annually by 2035, with a projected production cost as low as USD 2 per kg, vastly cheaper than any fossil fuel-based energy. The African Energy Chamber projects the continent to have a hydrogen capacity of 22.5 GW by the end of 2030. Analysis by McKinsey notes that Africa is expected to produce enough hydrogen to meet its domestic demand by 2050, which the consultancy firm estimates at 10-18 megatons.

Echoing the optimistic outlook for Africa’s hydrogen sector, the European Investment Bank (EIB) has issued a bullish forecast for Africa's green hydrogen production capacity. The EIB predicts that by 2035, the continent could potentially surpass 50mn tonnes of annual green hydrogen production.

To fully realise its potential as a key player in both the solar and green hydrogen markets, Africa requires substantial capital and investment in infrastructure specifically designed to support large-scale green hydrogen production and export. As projects progress and African nations continue to explore and expand their renewable energy capabilities, investor opportunities will undoubtedly continue to grow.