Angola’s energy transitionAugust 9, 2021
Chindalena Lourenço, of counsel at Fátima Freitas & Associados, and Ricardo Silva, co-head of energy at Miranda & Associados, discuss how the energy transition is shaping Angola’s energy industry and electrification efforts, and how the government is taking steps to embrace and steer this shift.
The “energy transition,” a term coined in the developed world and which has taken on a strong political and ideological connotation, is threatening to strongly disrupt not only the business of Western oil companies, but perhaps more importantly the social and economic fabric of oil producing countries and developing nations.
If it is undeniable that a swift move away from traditional energy sources to 100% reliance on newer and more expensive technology (some of which has not yet been developed or achieved commercial maturity) may lead to increased energy costs in developed countries (to be borne one way or the other by the population), what will the effects be on the populations of poorer countries, including emerging nations in Africa and Asia?
For starters, according to the International Energy Agency (the same body that recently aggressively pushed for an end to new oil and gas developments), sub-Saharan Africa is home to approximately 600 million people without access to electricity (an astounding three-quarters of the world population in that situation), while in 2018 close to 850 million still relied on charcoal, wood and other toxic means for cooking fuel.
The seriousness of this situation is reflected in the fact that more than 400,000 Africans die each year due to indoor pollution arising from heating, lighting and cooking. To make things worse, it is estimated that the Covid-19 pandemic has thrown 30 million Africans that had recently gained access to electricity back into energy poverty.
IMPORTANT STEPS: Angola has in recent times taken important steps together with partners such as the African Development Bank to address its energy deficit and increase access to energy by the country’s population (it is estimated that only 40% of the population has access to electricity).
In a sign that their shift from pure oil and gas companies to “energy companies” extends to the African continent, TotalEnergies and Eni have partnered with <a href='https://theenergyyear.com/companies-institutions/sonangol/’>Sonangol to promote two different solar PV projects, with a total combined final production of 130 MW. Also on the solar front, Sun Africa is investing USD 650 million in seven solar plants in various provinces, in what is the largest solar PV project in sub-Saharan Africa, with a total combined capacity of 370 MW.
These projects have only become possible due to the Angolan government’s focus on renewables to assist in reducing the country’s energy deficit, which has included important legislative changes.
A MODERN FRAMEWORK: In line with the Angola Energy 2025 policy, the Angolan Executive has been busy over the last couple of years improving and modernising its energy legislative and regulatory framework. In the power sector, and besides new rules on electricity tariffs, 2021 saw the entry into force of Presidential Decree 76/21 of March 25, 2021, which approved the Regulations on Production, Transportation, Distribution and Sale of Electricity. This important statute includes modern rules on production (including renewables), securing a role for both public and private sector players.
Acknowledging that natural gas will have a critical role as the transition fuel of choice, and that the country (as with most other developing producers) simply cannot afford to leave its natural resources in the ground if it is indeed to improve the livelihood of its population and develop the economy, Angola has also turned its focus to natural gas.
The reform of the legislation applicable to the natural gas sector has thus also been a driver for change, with the approval in 2018 of a long-awaited legal and tax framework for upstream natural gas activities opening the door to new projects aimed at monetising this important resource.
In addition, the government also appointed a working group to propose a solution for the conversion of its existing (and highly polluting) diesel-fired power plants to natural gas. Since then, the Soyo power plant in the north of the country has already started using Angolan produced natural gas to generate electricity.
Finally, water, another natural resource that is abundant in Angola and has, in the past, been used to generate power in the country, is also being tapped into in a groundbreaking transnational project known as the Baynes Hydropower Project. This joint project between Angola and Namibia will build a major hydroelectric dam on the Cunene River, producing 600 MW to be sold in equal portions to Angola and Namibia.
AT A CROSSROADS: Angola, like many oil and gas producing countries, is at a crossroads. It needs to urgently increase its electrification rate to improve not only the living conditions of its people, but also to allow economic activity to flourish (as industry and large-scale agriculture cannot take hold and survive with an irregular and unreliable power supply). At the same time, it needs to find ways to ensure that the much-needed increase in stable power production is achieved in a manner that is at the same time cost efficient and addresses the environmental concerns of its younger population.
Being involved in most of the energy transition projects in Angola, Fátima Freitas & Associados and Miranda Alliance are certain that Angola is on the right track. Now it’s time for the rest of the world to do its part, and assist Angola and other developing economies in the double challenge of increasing electrification rates and diversifying sources of energy. The world that grew and developed on the back of oil and gas produced in developing nations has a moral obligation to not turn its back on these countries in their moment of need.
Opportunities abound for foreign investors that wish to be a part of the solution and assist Angola in overcoming its energy challenges. The revamped energy regulatory framework and available incentives have already proven that the right projects are bankable and profitable. Now the secret is – as with any other investment – to get in early while the best opportunities are still available.
About the authors
Chindalena Lourenço is of counsel at Fátima Freitas & Associados in Luanda, and has significant experience in advising oil and energy companies in their day-to-day business in Angola and in the negotiation of PSCs and other petroleum contracts. Ricardo Silva is co-head of energy at Miranda & Associados, and has two decades of experience in the energy and natural resources sector, having advised private companies, national oil companies and host nations in a wide variety of energy and related matters in Africa (including Angola), Europe and Southeast Asia.