Africa’s Hard Black Gold

Whereas consumers in industrialized countries take uninterrupted power supplies for granted, much of Africa experiences some of the world’s greatest power deficits, with only two in ten people having access to electricity. Just as many developed countries rely heavily on coal to meet their power needs, so should Africa.

LAGOS - Few infrastructure services in the developed world may be as taken for granted as electric power. To consumers in industrialized countries, uninterrupted power supply is a given. Not so in much of Africa, which experiences some of the world’s greatest power deficits, and where only two in ten people have access to electricity.

According to the International Monetary Fund’s most recent Regional Economic Outlook for Sub-Saharan Africa , in 2007 alone, nearly two-thirds of the countries in the region experienced an acute energy crisis marked by frequent and extended electricity outages.

There is no shortage of hydropower plants for electricity generation in Africa. However, many of these plants are unable to keep up with rapid population growth and attendant increases in demand. Furthermore, they are prone to frequent drought, which reduces their output significantly, leaving many as little more than decorative infrastructure landmarks. Increasingly burgeoning populations in countries like Nigeria and Ghana imply a greater extraction of water resources for power generation. Rapid expansion of agricultural activity is requiring more and more water all across the continent.

Other resources like fuel oil, diesel, light crude, solar, and gas are also available as means of electricity generation, but their costs are all quite prohibitive.

These factors make a good argument for coal as a cheap alternative source of Africa's power. Coal has historically played a crucial role as a source of energy worldwide, and has several important advantages over other fossil fuels.  First is its relative abundance. The current level of proven coal reserves worldwide stands at roughly 850 billion tons. Africa has about 50 billion tons. Coal is also much more widely distributed geographically than any other fossil fuel.

Worldwide energy demand has increased by more than 50% since 1980, and is expected to grow annually by 1.6% between now and 2030. More than 70% of this new demand will come from developing countries, with fossil fuels projected to account for about 80% of total energy demand by the end of this period. Coal is the world’s fastest growing fossil fuel, with annual production increasing by 6.4% since 2004. It is already the dominant source of power generation in some very important energy-consuming nations.

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Much of the future increases in coal-fired electricity generation will come from strategically important developing countries like China and India. In 2006 alone, China added about 93,000 megawatts of coal- fired electricity generating capacity, and this trend is expected to continue as the country tries to meet its huge energy needs.

Even in many developed countries, coal still accounts for a large share of power generation. Coal plants currently provide more than half of America’s electricity supply. Denmark, which houses some of the most efficient coal-fired power plants in the world, equally relies on coal for half of its electricity production. The same is true for Germany, which is home to some of the most efficient pulverized coal combustion units in Europe. Poland uses coal for 98% of its electricity production, and South Africa uses coal for about 50% of its electricity production.

Against this picture then, it is hard not to expect developing countries to exploit their abundant coal resources to generate power for their own development, especially given that modern technology can help produce coal cleanly.

Some argue that gas might be a better alternative to hydro or coal, but for countries that must import much of their gas the benefits of a stable and reliable source of cheap fuel in the form of coal present a very strong counter-argument to the capital costs of a gas plant. Unlike prices for coal, which is abundant and dispersed geographically, gas prices are subject to significant volatility, and the long-term trend in the face of fossil fuel depletion is uncertain. In contrast, coal prices are more stable, and may remain that way for a long time.

Apart from electric-power generation, coal also has wide application in a number of industries. It is pivotal in both steel and cement production. Moreover, the use of wood by Africa’s growing population is causing increasingly rapid deforestation in many countries. There is significant potential domestic demand for coal briquettes to replace wood for cooking and domestic and industrial heating. The demand outlook thus appears favorable for the coal industry, creating significant investment opportunities.

Clearly, there are environmental drawbacks from the use of coal as an energy resource, and these concerns are far too important to overlook. The massive reserves notwithstanding, coal is still a finite resource. It must be mined with greater efficiency and with a view to mitigating the environmental impact.

Fortunately, much greater attention is paid today to mine safety and the management of the by-products of coal use. With acid rain and other public-health hazards linked to coal combustion, more technologies are emerging for reducing harmful emissions from power plants. Fueled by research, the past few years have witnessed the development of increasingly cleaner and more energy-efficient coal-fired generation plants and the retirement of older technologies, especially in the developed world. Developing countries have lagged behind in this process, but, with the common threat of global warming, there is now growing pressure to adopt conservation policies.

Africa's mineral-rich countries must exploit their abundant natural resources. They must use coal to advance their economic development. Failure to do so would be a missed opportunity at a time when African countries must avail themselves of all available resources for poverty reduction.