Energy transition: Africa to host 2 bn cars by 2040

Sopuruchi Onwuka

Nigeria and other developing economies of the world must brace to host about two billion vehicles that are fired with petroleum fuels as the industrialized nations that currently champion the global movement for energy transition plan total switch from liquid transportation fuels.

The advanced countries, mostly in Europe and North America, currently have 2040 to 2050 deadlines to phase out or drastically cut use of petroleum liquids for transportation, a situation that would inevitably force manufacturers and vehicle owners to give up their internal combustion vehicles for export.

And the world’s petroleum producers and global refiners see the developing countries and emerging economies where there are scant or no infrastructure for electric vehicles as the future markets for petroleum.

The Oracle Today reports that emerging energy choices associated with energy transition will in the next 20 years determine the new destinations for estimated two billion petroleum fired vehicles in a process that would also reshape the global market for petroleum fuels.

The imminent global redistribution of fossil fired vehicles comes with new era of green energy and electric vehicles. It also poses immense concerns to oil producing and resource dependent economies.

Road transport vehicles and heavy machines including cars, trucks, tankers and construction equipment constitute the largest demand segment for liquid petroleum fuels. Industrial and power generation plants are mainly fired with fuel oils, coal and natural gas.

Already, climate activists and governments of energy intensive economies that collaborate in the broader movement for energy transition have succeeded in draining significant incentives from investments that promote petroleum and coal consumption. They have also persuaded global lending institutions to freeze financing for new from fossil fuel projects. Instead, all commercial, policy and financial incentives are channelled to renewable energy and zero emission vehicles.

A survey of new energy policies by governments of rich nations in Europe, America and Asia shows strong fiscal incentives and official support for massive investments in alternate transportation energy. The trend follows rising momentum in the global campaign for energy transition.

According to figures on the platform of the World Economic Forum, governments also continued to encourage the move to EVs, spending $14 billion on direct purchase incentives and tax deductions – a 25% rise year-on-year.

“Before the pandemic, many countries strengthened key policies such as CO2 emission standards and zero-emission vehicle (ZEV) directives. By the end of 2020, more than 20 countries had either announced bans on sales of internal combustion engine cars or decreed that all new sales be zero-emission,” according to the WEF.

Some European countries increased buying incentives and incorporated the promotion of EVs into their post-pandemic economic recovery plans. China postponed the end of its New Energy Vehicle (NEV) subsidy scheme to 2022, to safeguard EV sales from the economic downturn.

Executive Vice-President of the European Commission, Frans Timmermans, stated in recent in a webinar hosted by the International Energy Agency (IEA) that “EU’s Green Deal is an opportunity to drive Europe’s strategy for long-term clean economic growth.”

He said the bloc’s strategy on energy and climate was to boost employment and achieve growth in clean industries over the long term. He added that Europe was in the middle of industrial revolution “driven by and accompanied by a massive energy shift.”

“And ten years before, it was coal that was exploding as an energy source,” Timmermans said, adding, that “solar energy is likely to be the king of power generation for decades to come.”

He listed three critical sectors that prove difficult to decarbonize to include transport, housing and agriculture.

For transport, he said, Europe needs to stimulate electric mobility for lighter vehicles, while hydrogen fuel cells can offer a solution for heavier vehicles, including shipping and aviation.

All known automobile companies across the world, our survey showed, are in a race to churn out new brands of electric vehicles, thus creating a fast rising industry and market for emission free vehicles that would be powered by batteries and fuel cells.

Bloomberg New Energy Finance estimates that electric vehicles will form 58 percent of global passenger vehicle sales and less than 33 percent of all the cars on the road by 2040.

Also, ancillary industries for new kinds of production materials and accessories are fast growing. From mining to cable manufacturing and battery production, world governments and ingtergovernmental agencies support the electric vehicle industry to propel activity across its full value chain. 

The World Economic Forum supported the formation of the Global Battery Alliance, public-private collaboration between 70 organizations across manufacturing, public service and civil society, to bring sustainability to the EV battery value chain.

An article on the website of the World Economic Forum claims that consumers spend 50 percent more to a total of $120 billion on electric cars in 2020 despite the pandemic lockdown.

According to Statistica, it is expected that there will be 115 million vehicles in the global electric vehicle fleet by 2030, up from an estimated 8.5 million units in 2020 when the global electric vehicle fleet grew by more than 3.0 million units.

According to the IEA, the number of EVs registered across the globe expanded massively in 2020. The agency added that global deployment of EVs is set to continue over the next decade.

The competition is accelerated by official deadlines to phase out petrol fired vehicles in Europe and some parts of America and Asia by 2050 when the integrity of all the prevailing projections about energy transition, emission reduction and oil demand destruction would be determined.

And a successful migration of transportation energy from fossil and associated ban in the use of internal combustion engine vehicles in advanced countries of the world will indisputably demand a new destination for nearly about 1.4 billion fossil fired cars, trucks and heavy equipment currently in use in these countries.

According to the United Nations Environment Programme (UNEP), the world will have an estimated two billion vehicles on the road by 2040, with older and mostly used cars owned in Asia, Africa and Latin America.

Already local and international concerns are rising over the possibility that the global population of old combustion engine vehicles would inevitably migrate to the poor countries of Africa, Asia and South America in the immediate future.

The last estimate by the United Nations Environmental Programme (UNEP) holds that about half of used vehicles shipped from Europe, North America and Asia find destination in African countries. This has raised fears that Africa might become the most vulnerable dump site for petrol and diesel vehicles as car makers replace fleets in developed economies with electric vehicles.

Whereas international agencies raise concerns about pushing oil fired vehicles to poorer countries in Africa after peak oil demand, blocs of oil producers including Nigeria see new market opportunity in continued use of internal combustion vehicles.

The Secretary General of the Organization of Petroleum Exporting Countries (OPEC), Dr Mohammed Barkindo, told The Oracle Today in an Interview that rising global population especially in developing countries would still rely on petroleum as primary energy source.

He said that whereas green energy sources would grow to fill anticipated energy supply gaps, petroleum would still dominate the global energy mix in the medium to long term.

“In 2045, the projection on renewable will be less than 20 per cent of the energy mix,” he pointed out.

According to him, “The world goes beyond Europe, North America, and Japan. And we have said population wise, the focus of 1.7 to 1.8 billion people that will come into this world between now and 2045, which more than 50 per cent are from developing countries.”

Dr Barkindo made it clear that developing countries that suffer acute energy poverty must be allowed to drive growth with available petroleum energy.

Africa where producers have declared their resolve to continue with petroleum exploitation and Asia where energy diversification would be required to meet strong demand growth are expected to form the new markets and probably host production plants for engine powered vehicles.

Dr Barkindo stated that over 50 percent of projected growth in energy demand would be in Africa where over half of estimated population boom would also happen.

Also Secretary General of the African Petroleum Producers Organization (APPO), Dr Omar Farouk Ibrahim, declared at several events that oil and gas would remain the propelling energy for the continent’s economic development.

He said the continent’s growing economy would continue to provide market for the energy it requires to sustain expansion.

Group Managing Director of the Nigerian National Petroleum Company Limited, Mallam Mele Kyari, consistently declared at industry conferences that Nigeria and Africa would resort to internal consumption of petroleum should the export market for the commodity lose lucre. He pointed out that the domestic and regional markets for transportation and industrial fuels are yet to be adequately supplied to meet growing demand.

Mallam Kyari noted that whereas the country would continue to keep pace with the global community on new energy developments, it must also sustain capacity expansion in the petroleum industry. He noted that acute energy and infrastructure deficits in the continent would not support use of electric vehicles for effective transportation.

With low technical capacity for green energy production and lack of infrastructure and facilities to support mass deployment of electric vehicles, internal combustion engine vehicles will still present huge industrial opportunity for developing economies, he pointed out.

Industry veteran and eminent investor, Mr Austin Avuru, agrees with both Dr Barkindo and Mallam Kyari that petroleum would still dominate global, regional and domestic energy mix in the foreseeable future.

He made it clear that as a finite resource, fossil fuels would eventually exhaust. He therefore sees the global movement for energy transition as logical course in developing alternate sources that would fill supply gaps as natural decline in petroleum production begin to set-in in distant time.

He also dismissed the fears about switching of transportation energy from petroleum, adding that rising demand from all corners of the world would continue to sustain fossil fuel as preferred transportation energy. He also described the electric vehicle technology as complementary to the traditional combustion engines, noting that automobile makers would always strive to meet the specifications of different markets across the world.

He pointed out that whereas the global auto makers are building new production lines for electric vehicles; they are also sustaining and modernizing their traditional combustion engine production lines.

He opined that the new destinations for fuel burning vehicles might also host the production and assembly plants for new vehicles by 2050 when the major industrialized nations would have banned fossil fuel for vehicular use.

Mr Avuru who is Chairman of AA Holdings and Platform Petroleum as well as the founding Managing Director of Seplat Energy Plc said that the emerging changes in the global energy sector also lay proposition for enhanced investments in local production of automobiles in developing countries that would continue to rely on petroleum for transportation.

He said the demand patterns that would rule the future energy mix would also compel redistribution of consumption patterns.