The Bedington Campus will be developed somewhere in this area near Bedington, WV.

1. The Bedington Campus project

The Bedington Campus is a proposed USD 4 billion data center development in Berkeley County, West Virginia. It is developed Penzance Management, which is based in Washington, DC. The project covers about 548 acres in the Falling Waters and Bedington area. It is expected to include roughly 1.9 million square feet of data center space and up to 600 megawatts of computing capacity.

The scale of the project reflects the rapidly growing demand for computing power driven by artificial intelligence and cloud services. The campus would be connected to the existing electric grid, drawing power from the regional system rather than relying on a dedicated power plant.

West Virginia has designated Bedington as the state’s first High Impact Intelligence Center under its new data-center framework. State officials estimate that construction could generate about 1,000 jobs, with at least 125 permanent positions once the campus is operating. The project is being financed with private capital. The governor’s office says no state funding is being used.

The project is still in the development stage, and some important details, including the eventual data-center tenants, have not been announced. Current plans call for site grading to proceed toward completion by the end of 2027, while the timing of actual building construction remains uncertain.

The Bedington substation connects 500-kilovolt transmission lines to lower voltage lines for distribution. It is located near the planned data center site.

2. West Virginia’s approach to data centers

West Virginia’s approach to data centers is based on House Bill 2014, the Power Generation and Consumption Act of 2025. The law creates a regulatory and economic framework for large data centers with at least 90 MW of load. Qualifying projects receive broad exemptions from local zoning, land use, noise, lighting, construction permit, and other requirements. The law also facilitates dedicated power arrangements and microgrids, while protecting existing utility customers from having to absorb the costs of infrastructure built to serve these large loads.

Overall, the law is designed to make West Virginia attractive for very large data-center investments by combining regulatory certainty, streamlined permitting, power flexibility, and substantial local and statewide fiscal benefits. While several states have slowed down data center development, West Virginia’s state government is trying to attract more investment.

The allocation of tax revenue from data centers is of particular interest. The law does not exempt qualifying data centers from property taxes. Instead, it creates a special formula for the incremental property-tax revenue generated by the new investment:

· 50% goes to the Personal Income Tax Reduction Fund

· 30% goes to the county where the data center is located

· 10% is distributed among all West Virginia counties on a per-capita basis

· 5% goes to the Economic Enhancement Grant Fund

· 5% goes to the Electric Grid Stabilization and Security Fund.

This revenue formula has two notable aspects. First, half of the revenue goes to West Virginia’s fund to reduce state income tax. Second, only 30% goes to the county hosting the data center.

Reducing state income tax has been a major policy goal in West Virginia for some time. Both in 2025 and 2026, the legislature reduced the state income tax. The highest marginal rate is now 4.58%, well below neighboring Virginia’s 5.75%. West Virginia’s new data centers would fund future efforts to reduce the state income tax even further.

Only 30% of the property tax revenue from data centers goes to the host county. This is important because it means that most of the tax revenue goes elsewhere. The host county still receives some tax revenue and other benefits, such as employment opportunities, but most of the property tax windfall is spread across the entire state.

In the 2026 legislative session, the state legislature considered several bills to give counties more influence. Senate Bill 652 would have given the host county 80% of the tax revenue, instead of the 30%. House Bill 5620 would have provided the host county more authority in decisions related to data centers. But neither bill passed.

3. Political economy analysis

West Virginia’s data center strategy has several distinct features worth discussing. Most importantly, the heavy focus on reducing the state income tax stands out. Whether this is the best use of the state’s limited resources is not for me to say. But Governor Morrissey’s pitch to the people is that data centers will enable his government to reduce the state income tax, yielding savings to anyone with an income.

Generally speaking, most state income taxes redistribute wealth from higher-income households to lower-income households. This is because the tax brackets are progressive: the higher your income, the more you pay. This is true in West Virginia, though the highest bracket is relatively low. As such, reducing the state income tax is a regressive measure that benefits those with the highest income the most.

The other important element is that only 30% of the revenue goes to the local community. This means that the communities hosting data centers are giving away most of the tax revenue to other communities. One possible outcome here is that a small number of counties will host data centers, mostly to the benefit of other counties.

This lack of local control is an interesting ideological approach. On the one hand, the state government is using its power to create a pro-business environment. On the other hand, the same government is forcing local communities to accept data centers that they may not want.

The Bedington project is also interesting because the data center will draw power from the electric grid. West Virginia’s electric grid is aging and has relatively poor reliability. The state has abundant coal resources, but the demand for coal-fired power generation has decreased. One possible reason for the data center push is to create demand for the state’s coal-fired power plants. For our climate, this is not good news.

4. Lessons learned

Governor Morrissey’s data center gamble is a bold one. To put it simply, West Virginia wants to attract data center investment and has passed laws to stop not-in-my-backyard policies at the local level. While many American states are turning against data centers, West Virginia’s contrarian approach could create an economic opportunity in the second-poorest state after Mississippi.

Will this strategy produce a good outcome for the state? If the data centers bring substantial tax revenue, they will benefit West Virginians through income tax reductions and public investment funded with the revenue. The counties hosting data centers will see new employment opportunities, though most of them are in construction and disappear when the data centers are built.

There are costs, too. Data centers can change landscapes, create noise, produce water/air pollution, and increase electricity bills. Much depends on how the state regulators manage the new facilities.

Politically, the situation is also complicated. At the local level, the combination of localized harms, statewide benefits, and limited control will probably cause a backlash. But people in other counties will see, first and foremost, an income tax reduction. Expect state leadership to campaign heavily on the benefits.

West Virginia’s approach is quite different from the growing backlash across the country. It is based on the state leadership’s idea of using the state’s legal authority to restrict local opposition and guarantee a predictable environment for data center develops.

Donald Trump carried every county in the state and won by 42 percentage points in the 2024 presidential election. This was the second-widest margin after Wyoming. As such, West Virginia Republicans have little reason to worry about a Democratic challenge to this approach. But Governor Morrissey himself may face challenges, as people frustrated with data centers consider their options in November 2028.

During this hectic week, our online students come to the Johns Hopkins University Bloomberg Center here in Washington, DC. The residency focuses on networking, community building, and intense work to develop a robust capstone proposal for each student.

This year, we visited the American Geophysical Union’s (AGU) terrific net zero campus. I greatly appreciate the AGU for these insightful tours.

The joys of advising our talented and hardworking students are many. One key benefit of the residency is that I get an update on what’s exciting in the world of energy transition. By reviewing the capstone proposals, I see what future business leaders, policy experts, and changemakers are working on.

In this year’s residency, two themes stood out: data centers and battery storage. I will briefly discuss what I learned about each during a week of robust deliberations.

1. Data centers

Not surprising to anyone paying attention, data centers are central to today’s energy policy both in the United States and elsewhere.

Before the epic rise of AI, most industrialized countries saw flattening or even declining electricity consumption. With aging populations, declining productivity growth, and improved energy efficiency, there was little reason to worry about meeting increased demand.

AI changed all that. Because computing capacity is central to AI expansion, the technology industry is looking to build thousands of massive data centers in the United States alone. If built, these data centers will consume massive quantities of electrical energy.

But data centers are facing a political backlash. Many communities are concerned about rising electricity bills, land use, noise, and water pollution. Add general concerns about job destruction and other problems associated with AI, and you have a nationwide fight.

Interesting proposals emerging from MASE students focus on designing policies and regulations that avoid rising electricity costs and evaluating community acceptance.

Both approaches are relevant to the current policy debate. If data centers bring their own generation capacity, remain flexible in emergency conditions, and contribute to grid maintenance, they may not have to increase electricity bills. But as usual, devil is in the details.

Community acceptance is equally critical. Most voters do not have a deep understanding or concrete experience with data centers. How can state and local authorities make such decisions about permitting data centers that benefit the population? As data center projects proliferate, answering these questions will be important.

2. Battery storage

Another key topic that garnered a lot of interest in this year’s residency was battery storage. Long story short, the rapid expansion of solar capacity has resulted in a lot of solar generation being wasted because the kilowatts are only available when the sun shines. Meanwhile, battery storage technologies are improving at an astonishing rate.

Against this backdrop, several MASE students are investigating how battery storage siting can be optimized, what to do about battery recycling, and how utilities can tap into residential battery capacity as virtual power plants

All of these investigations add new knowledge about how the battery storage revolution can best accelerate the energy transition. Many countries around the world have access to massive amounts of inexpensive solar energy, but turning that potential into productive energy services requires dealing with solar’s variable generation profile.

3. Next steps

Now that the residency is over and the students are back online, the capstone proposals are simmering on the back burner. The cohort graduating in the summer of 2027 still has a number of demanding classes to go.

The intense writing will take place in the spring, just months before the final residency, where the students defend their original work in front of the cohort and the faculty.

I am very excited to work with the students on the capstones soon and then celebrate graduation.

Yet the global energy markets have not collapsed. Many experts initially thought that this supply disruption would send oil prices to USD 200 per barrel, causing massive inflation and a global recession. Instead, oil prices peaked at USD 126 per barrel in April 2026. As I am finalizing this note, on August 20, 2026, October futures for a barrel of Brent crude costs go for about USD 93.

Why?

In this note, I discuss four key reasons behind the global energy market’s resilience. First, the energy transition has reduced the global economy’s dependence on oil. Second, supply chains have proven resilient and adaptive. Third, producers outside the Middle East have acted fast to produce more oil and natural gas. Finally, drawdowns of global oil inventories have filled the remaining gap.

1. Energy transitions, globally and in China

Compared to the 1970s oil shocks, the world economy today is a lot less vulnerable. The oil intensity of the world economy has decreased from 1.13 barrels per 1,000 dollars (2015 prices) in 1973 to 0.39 barrels in early 2026.

This 66% decrease in oil intensity reflects a number of changes. Today’s energy efficiency is much higher than back in the day, as technology has advanced. The economy today is far less physical. The advance of electricity, from electric vehicles to heat pumps, has enabled the use of affordable renewables, notably solar power.

China is the most important example of this transformation. China’s economy has grown over the past few decades, but its oil consumption has grown less than its GDP. Since 2000, China’s real GDP has increased more than tenfold, while oil consumption has roughly tripled. China’s expansion of electric vehicles is particularly important. China remains the world’s largest oil importer, but the role of oil in its economy is already far smaller than it would have been had its energy system followed the development path of earlier industrial powers.

2. Resilient and adaptive supply chains

The supply chains for petroleum produces have also turned out more resilient than many anticipated. As oil prices skyrocketed in the early weeks of the Iran conflict, both governments and the industry acted. Governments regulated production and exports to avoid shortages. The industry shifted toward the scarcest products, as those commented the highest prices.

The case of European jet fuel illustrates. In April 2026, the International Energy Agency was concerned that European jet fuel supplies might run out in the summer. But that didn’t happen. Besides the use of European emergency oil inventories, refineries promptly shifted their production toward jet fuel. The United States produced more jet fuel, too, and exported it to Europe.

In China, oil imports decreased by about five million barrels per day. Relevant measures include stopping petroleum purchases to increase strategic reserves, restricting exports of refined products, and various domestic conservation measures. Combine these with higher prices, and China alone shaved off a fourth of the gap left by the Iran conflict.

Middle Eastern oil exporters also found alternative routes to the Strait of Hormuz. Saudi Arabia is using the East-West pipeline to transport oil to the Red Sea, bypassing Hormuz. The UAE has a pipeline to the Gulf of Oman. Iraq uses the Iraq-Turkey pipeline. While Iraqi exports through the pipeline are low, the Saudis and the Emirates can transport between 3-6 million barrels a day using these alternative routes.

3. Producers outside the Middle East

Producers outside the Middle East have boosted their oil and gas output. Producers outside the region have responded to high prices by increasing output, with production outside the Gulf rising by nearly 2 million barrels per day above 2025 levels during the crisis. At the same time, the growth of global LNG trade has made natural gas markets considerably more flexible. Gas can increasingly be shipped from North America and elsewhere to replace supplies disrupted in the Middle East.

In Latin America, Guyana and Venezuela illustrate the pattern. Guyana has gone from producing virtually no oil a few years ago to more than 900,000 barrels per day, with output expected to exceed 1 million barrels per day during 2026. New offshore projects are still coming on stream, meaning that Guyana’s production is continuing to grow even as Middle Eastern supplies have been disrupted.

Venezuela is an equally striking example. After years of economic collapse and underinvestment, Venezuelan production has been recovering. The country has increased exports during the crisis.

African producers are also active. Nigeria, Libya, and Algeria together produce roughly 4 million barrels per day. Angola and other producers are investing in new fields and infrastructure. African production cannot replace the entire Persian Gulf, but these barrels can be directed toward markets that lost imports from the Middle East.

Russia and the United States are exporting as much as they can. Russia remains one of the world’s largest oil exporters, and the Ukraine conflict has encouraged some additional crude exports because attacks on Russian refineries have reduced domestic refining capacity and therefore domestic crude consumption.

The United States has likewise become an increasingly important swing supplier. American oil production reached a record 13.9 million barrels per day during the crisis, while LNG exports have been running at historically high levels.

4. Drawdowns of global oil inventories

Finally, emergency oil inventories have buffered the remaining gap. Governments have released roughly 300 million barrels from strategic reserves so far, as part of a 400-million-barrel emergency release under the International Energy Agency.

According to Saudi Aramco, the world has already lost 2.6 billion barrels since the beginning of the conflict. This broader withdrawal from reserves, government or not, suggests that the pressure on the global fossil fuel market continues to increase.

5. Crystal ball time: anticipating the future

The Iran conflict is not yet over. The longer the conflict continues, the more time there is for a global energy crisis. But so far, adaptive forces have kept chaos at bay. We can only hope that this dynamic continues until the conflict is somehow resolved.

This is not the time to be complacent. It is somewhat surprising that the global oil markets have been so resilient for half a year. If the conflict continues for months, at some point oil prices will surge.

In the future, the Strait of Hormuz will lose some of its importance. Even if the world continues to avoid a 1970s-style oil crisis, the warning was stark enough to draw government and industry attention. Oil producers in and outside the Middle East are working hard to develop resilient supply routes. Oil importers are looking for ways to reduce demand, from electric vehicles to heat pumps and industrial electrification.

To be sure, none of this means the Strait of Hormuz will become irrelevant. Fully replacing 20 million barrels a day of the least expensive oil on the market is very difficult. It will take decades to reach a point in which the Strait is no longer a critical supply chokehold.

But as the global energy transition continues, countries around the world will become less and less vulnerable to oil supply disruptions. The direction of travel is clear, even if the pace is slower than ideal.

In this post, I describe and analyze the energy solution of the house. To summarize, a large array of solar panels on the roof charged a battery during the day, typically eliminating the need for any grid supply. If the solar system did not function or weather conditions did not allow a full charge, the house used grid electricity.

Checking out the solar panels on the roof. I greatly appreciate my hosts for showing their energy solution to me. You can book their wonderful AirBnB here.

1. The basic setup

Before discussing the solar and storage system, we need to discuss the conditions in Kigali. The city receives abundant solar radiation throughout the year because of its location near the Equator and its relatively high elevation of over 5,000 feet. Daily global horizontal irradiance is typically around 5–6 kWh/m²/day, with only modest seasonal.

The two rainy seasons, March–May and October–December, bring increased cloud cover that temporarily reduces insolation. This combination of consistently high solar resource, limited seasonal fluctuations, and moderate temperatures makes Kigali well suited for photovoltaic electricity generation and solar water heating.

As for grid electricity, it is available for 24 hours on most days. But the quality of the electricity supply is not ideal. When the house relies on grid electricity, the voltage fluctuates, resulting in flickering lights and appliance malfunction.

The house itself is of medium size. I am not sure about the exact square footage, but I would put the main house somewhere between 1-2 thousand square feet. The AirBnB apartment itself is a small studio, of a few hundred square feet.

Everything except cooking runs on electricity. The temperature in Kigali is moderate, and air conditioning is not required. However, fans are used for air circulation.

2. The system

The solar and storage system is provided by Jinko Solar. Solar panels provide electricity that is stored in the battery. There is also a separate system for solar water heating. Everything works very well.

The system capacity is 9.4 kilowatts and the batteries can store up to 20 kilowatt-hours. Given the large capacity of the system, the battery is fully charged by 11 AM on a typical, sunny day.

If the cloud cover is heavy, the charging may take till late afternoon. However, it is very rare that the system would not be able to charge the battery during the day. According to the hosts, the house does not use any grid electricity on 95% of the days.

The system was not cheap, however. The total cost was 22 million Rwandan francs, or USD 15,000.

The solar system’s inverter converts DC electricity from the solar panels into AC for the household appliances. It also controls battery charging.

3. Explaining the size of the system

Does such a large system make sense? If the house has access to 24 hours of grid electricity on most days, what is the point of a system that is self-sufficient 95% of days?

The most compelling explanation lies with the quality of grid electricity. Even though Kigali’s grid performs very well in avoiding outages, the voltage of grid electricity supply is a problem. When the solar system is not on, the flights flicker and electric appliances sometimes malfunction.

I experienced this challenge myself. During my stay, an electrical problem required maintenance. At that time, the solar system had to be switched off. I noticed immediately that the flights were dim and flickering. I did not charge my own electric appliances during that time because I was concerned about the effects of voltage fluctuation.

In contrast, the solar system provided excellent quality throughout. Except for the maintenance issue, which required only a few hours to fix, I did not face any electricity outages or other problems. Similarly, the solar water heaters worked well. I had access to hot water whenever I needed it.

Given that the house has an AirBnB attached to it, paying some extra for quality electricity makes sense. The AirBnB listing has excellent reviews, including my 5 stars. If the electricity supply was frequently problematic, I would imagine the reviewers would be a lot less forgiving.

By using solar power with battery storage in a system that would normally be considered oversized, the hosts have solved an important problem and created an excellent guest experience. This results in more demand, and the extra cash flow helps with paying for the system. As a bonus, the hosts have excellent electricity quality at home, too.

4. Solar and batteries in urban Africa

The Kigali experience is insightful when compared to my similar experiences in Togo and Nigeria. In Togo, prepaid electricity was expensive but reliable. This approach mostly removed the need for rooftop solar in urban areas, but the cost of electricity – higher than the average in the United States – was a real problem for anyone except the wealthiest households.

In Nigeria, solar and batteries were necessary because of constant outages and very expensive diesel. In this context, solar home systems were a no-brainer because the avoided diesel costs would pay back the solar capital expenditure quickly.

In Rwanda, the situation was different. A household could choose not to use solar and batteries, accepting some voltage fluctuation. But this approach is not possible for a small business that needs reliable electricity at almost all times.

Solar and batteries are a breakthrough in urban Africa because they solve many different problems. They avoid outages, stabilize voltage, and save money on diesel. And as electric transportation continues to grow, mobile batteries will be readily available.

The country went through the tragedy of a genocide in 1994, as a million people of the Tutsi minority were killed. Since then, the country has been ruled by President Paul Kagame. His supporters praise his centralized, effective governance as “consensus democracy” and aspire to be the Singapore of Africa. Detractors criticize him for authoritarian rule.

Rwanda’s power system is small but rapidly growing. With about 470 megawatts of capacity but electricity consumption growing by 10% a year, the country is racing against the clock to power its economic growth. But Rwanda does have a number of advantages that result in an overall positive outlook. Whether these lessons transfer to other African contexts is a lot less clear.

1. The Rwandan power system

Rwanda’s current generation capacity is about 470 MW. The most important types are hydropower (34%), peat (27%), methane gas (26%), diesel generation (9%), and solar energy (4%). About 9% of electrical energy is imported from neighboring countries.

Of these sources, peat, methane gas, and diesel generation are fossil fuels. As such, Rwanda has a relatively high fossil fuel share. But given the low energy use overall, Rwanda’s carbon dioxide emissions from energy are only 0.14 tons – one of the lowest on the planet. As such, emissions reductions are not a critical concern for the country.

Current electricity peak demand is about 250 MW and it is growing at 10% a year. Total annual consumption is about a terawatt-hour, split between commercial/public (46%), industry (32%), and residential (22%).

Rwanda’s power sector policy and regulation are mostly centralized and vertically integrated, apart from independent power production. The Rwanda Energy Group (REG), through its subsidiaries, the Energy Utility Corporation Limited (EUCL) and the Energy Development Corporation Limited (EDCL), dominates generation, transmission, and distribution. The Rwanda Utilities Regulatory Authority (RURA) is the regulator. Independent production is allowed, but transmission and distribution

Rwanda has made significant progress with energy access, especially basic household electricity. The national electrification rate has risen sharply over the past decade, reaching about 85 percent of households in 2025. Of these, almost one-third are using off-grid solar, mostly home systems.

2. Drivers of electricity demand growth

Rwanda’s electricity demand is growing fast for a number of reasons.

The first is industrial growth. Rwanda’s economic strategy has prioritized moving up the value chain into light manufacturing, agro-processing, and services. These are significantly more electricity-intensive than subsistence agriculture. Special Economic Zones, particularly around Kigali, are drawing in energy-hungry industries, and the hospitality and ICT sectors add further load.

Second, urbanization and grid extension against the backdrop of rapid population growth are playing a role. Kigali is one of Africa’s fastest-growing cities, and Rwanda’s overall population continues to expand, adding new households and commercial premises to the grid each year. As grid extension pushes into peri-urban and rural areas, newly connected households and businesses increase their consumption over time.

Finally, Rwanda is increasingly embracing new end-uses, notable electric mobility. The government has set targets for electrifying public transport and motorbikes. Several operators are already deploying electric two- and three-wheelers with local charging infrastructure. With gasoline prices over USD 2.00 per liter in June 2026, electric vehicles are also in demand.

3. Present challenges

Rwanda does face a few challenges that require attention.

First is quality of electricity supply. Outages are frequent, voltage fluctuations are common, and many connections, especially outside Kigali, operate at capacity levels too low to support productive use. The AirBnB where I was staying had almost 10 kilowatts of solar and 20 kilowatt-hours of storage capacity. When that system was shut down for maintenance, the grid supply was of poor quality, with flickering lights and voltage fluctuation throughout the day.

Second, the generation mix has a lot of fossil fuels, which could cause problems through trade and investment restrictions. The combination of peat, methane gas, and diesel generation results in a high share of fossil fuels. But note that the overall emissions are still tiny. Blaming Rwanda for climate change would be factually incorrect.

Third, the regulatory framework has gaps, particularly for commercial and industrial (C&I) consumers. Today, there is no framework for legal self-generation beyond a minimal level of 50 kilowatts. According to interviews with local officials, wheeling regulations are being developed now. But much work remains to be done in this sector. Allowing self-generation, and perhaps even net metering, could remove supply constraints if properly structured.

Finally, Rwanda’s electricity market remains nascent. Competition, price signals, and private participation are limited. The dominance of REG across generation, transmission, and distribution leaves little room for market-based incentives that drive efficiency and innovation.

4. Reasons for optimism

My evaluation of Rwanda gives several reasons for optimism. I expect Rwanda to continue outperform its neighbors in power sector development, laying the foundation for economic success in the long.

First, Rwanda’s small territory and neighbors mitigate many transmission issues. Because Rwanda has a small total system size – about 470 MW at this time – it can balance by importing electricity from its larger neighbors, such as Uganda or DRC.

Second, Rwanda has a significant opportunity in expanding solar generation with battery storage. Rwanda has relatively good insolation. Average solar radiation ranges from about 4.3 to 5.2 kWh/m² per day across the country, with the higher end found in the Eastern Province. Rwanda’s rainy seasons are relatively mild by African standards, reducing seasonal fluctuation. And rainy seasons are great for hydro, providing an automatic balancing mechanism. As battery costs decrease and the battery storage business grows in Africa, starting with South Africa, Rwanda can combine solar and battery storage for inexpensive power generation.

Third, Rwanda can also expand its methane generation and electricity imports from neighbors. Lake Kivu still has plenty of potential for additional methane generation, though financing is a challenge because of the associated carbon dioxide emissions. Electricity imports from Uganda or DRC can be expanded, though Uganda faces transmission capacity constraints and DRC is an unstable, conflict-ridden country.

Finally, Rwanda’s government is competent and can focus on cost minimization instead of putting out populist fires. Whatever one’s view of President Kagame and his heavy-handed ruling style, the results are indisputable. Rwanda’s power sector development is generally based on sound economic policy and regulation. Given the country’s small size and political stability, power sector planning is easier than elsewhere in the region.

Lessons from Rwanda’s power sector might not travel easily to other African economies. The combination of unique generation resources, larger neighbors for imports, robust economic growth, and decades of political stability is not found in many African countries. But at the very least, Rwanda shows what an African country can achieve with good planning and execution.

But Kenya faces a significant challenge in meeting rapidly growing power demand. Electricity consumption grew by 8% in 2025. As the demand for electric mobility expands and Kenya’s population and economy grow, this trend is set to continue.

A geothermal plant in Menengai, Kenya. Photo credit: African Development Bank.

1. Energy in Kenya: the basics

The Kenyan power sector is characterized by a heavy reliance on two key sources: hydro and geothermal. In 2025, hydro was responsible for 24% and geothermal for about 40%. Other important sources include wind (13%), imports from neighboring countries (11%), and diesel generators (9%).

Kenya’s distinct advantage is the geothermal resource. With 40% of current consumption covered by nearly a gigawatt of geothermal capacity, Kenya has a powerful baseload source. Furthermore, the total potential of geothermal is about 10 gigawatts. That means Kenya could become a net exporter of electricity on geothermal alone over time.

The levelized cost of a kilowatt-hour of geothermal in Kenya varies between USD 0.05-0.10, with no need for battery storage because of the steady supply profile. Even though this cost is higher than new solar, and soon new solar with short-duration storage, the ability to produce 24 hours a day means the value is also much higher.

Besides electricity, the Kenyan energy system uses oil, mostly for transportation but also power generation (diesel) and cooking (LPG). Kenya imports about 5 million tons of petroleum products annually.

About 80% of Kenyan households have access to electricity, either through grid connections or solar systems. Kenya aims for universal electricity access by 2030. Clean cooking is a much bigger challenge, as only about 30% of Kenyan household have access to cleaner fuels like LPG or electric cooking.

As elsewhere, the future of Kenya’s energy system is end-use electrification. Kenya can save large amounts of money by investing in electric cooking, e-mobility, and industrial electricity use. Kenya’s strong geothermal resource combined with smaller hydro, wind, and solar can meet growing electricity demand for decades to come. To take full advantage of this opportunity, Kenya needs to reduce technical and commercial losses, which together account for over 20% of all electricity supplied.

2. The aftermath of a moratorium on power purchase agreements

In 2018, the Kenyan government imposed a moratorium on new power purchase agreements (PPAs) between the state-controlled Kenya Power and Lighting Company (KPLC) and independent producers. The objective was to address concerns about excess contracted capacity, rising electricity costs, and allegations that some PPAs had been procured on unfavorable terms.

The moratorium froze new development of power generation for the grid by private players. Several planned utility-scale projects were delayed or cancelled, particularly in renewables. At the time of the moratorium, 54 PPAs with a total capacity of over a gigawatt were at different stages of negotiation.

During the moratorium, some other investments continued. Developers shifted attention to projects serving captive power markets. Projects that had already reached advanced stages before the moratorium proceeded. Geothermal development by the state-owned Kenya Electricity Generating Company continued. Transmission and distribution investments moved forward.

Was the moratorium justified? On the one hand, the concerns about pre-moratorium PPAs were justified. Kenya had accumulated significant reserve margins, electricity demand growth had underperformed earlier forecasts, and fixed capacity payments contributed to high consumer tariffs even when plants were underutilized.

On the other hand, a complete moratorium was a radical and costly option that plays a key role in Kenya’s current power sector problems. The blanket freeze created regulatory uncertainty, discouraged private investment, and delayed the development pipeline for least-cost generation. As electricity consumption and peak demand grew, Kenya found itself in a difficult situation, with insufficient reserve margin and poor system performance.

The moratorium was lifted by Kenya’s National Assembly in November 2025. The lifting of the moratorium was accompanied by reforms to address the concerns that had prompted the freeze in the first place, including greater transparency regarding independent power production, increased parliamentary oversight, and a stronger emphasis on competitive procurement mechanisms rather than negotiated bilateral contracts. The policy shift marked a return to private sector participation in generation.

3. Opportunities in the Kenyan power sector

The good news for Kenya is that opportunity abounds in the power sector. If Kenya can develop a robust framework for developing and managing clean power, it can meet the growing needs of its population without increasing its carbon dioxide emissions.

Geothermal is Kenya’s most significant domestic power-generation opportunity. Additional geothermal development could provide reliable, dispatchable electricity that complements variable renewable resources and reduces dependence on imported fuels. The main constraints are the high upfront cost and risk of exploration drilling, coupled with the need for transmission infrastructure. Still, geothermal is likely to remain the backbone of Kenya’s power sector expansion over the coming decades.

Kenya has strong solar resources across much of the country. Solar is attractive because it can be deployed relatively quickly and at a wide range of scales, from mini-grids to large utility projects. As solar penetration increases, batteries become increasingly important to manage variability. Solar paired with battery storage will play a growing role in Kenya’s power system. It can help meet daytime demand growth, reduce losses in remote areas, and improve resilience. However, it will probably not replace geothermal as the primary source of firm power.

To exploit these opportunities, the Kenyan government needs to improve the investment environment and develop a more robust power market. The PPA moratorium saga has created a perception of elevated risk among developers.

Kenya’s power system does not have a robust market as an alternative to a PPA, so the utility’s unwillingness to sign take-or-pay contracts is a major problem for the private sector. Recent wheeling regulations do allow developers to sell power to specific consumers through the grid by paying a fee. That is a step in the right direction, but Kenya is still far from a genuine power market. Establishing such a framework would significantly reduce project risk and improve the badly needed power development pipeline.

Overall, Kenya stands out as a clean power giant in Africa. A growing population, an expanding economy, and a relatively stable political system have enabled Kenya to become a development success story in East Africa. Access to a world-class geothermal resource has allowed Kenya to power economic growth with reliability and low cost. Much remains to be done, but Kenya’s power sector development is impressive so far.

A view of Kibera. I am grateful for my guide, Jack Williams, who himself lives in Kibera with his wife and two children. If you are interested in touring Kibera, whether for professional reasons or for tourism, you can find his tour business here.

1. Kibera: the basics

Kibera is a sight to behold. With an area of less than three square kilometers (1.2 square miles), the informal settlement holds half a million people. The typical family has five children. Because the informal settlement – largest in Africa – is bounded by other neighborhoods of Nairobi, it cannot expand. Yet the population grows at a furious pace.

The families living in Kibera earn their meager living from menial labor. Many of the men have a moto taxi. Women often do laundry or clean houses in wealthier neighborhoods around Kibera. Success in Kibera is owning a small shop.

Life is hard in Kibera. Families live in small rooms and pay rent to absent landlords. Roofs are made of metal, walls of metal or mud. The wealthier families have brick walls.

The rooms do not have water connections or attached toilets. Water is available from taps for a fee. Using a toilet also costs money.

As for energy access, I am going to divide my analysis into the usual categories: electricity and cooking fuel. Each category shows the reality of energy access for Africa’s urban poor.

2. Electricity in Kibera

In Kibera, people cannot afford government connections. As a result, local “electricians” connect houses and shops to government power lines and charge a monthly fee of about two dollars for use. The informal connections are of poor quality and have no safety standards.

An important side effect of the informal connections is the virtual absence of solar panels. Because the monthly fee is relatively low and outages not a daily bane, the local population prefers to pay the modest monthly fee. If a small solar panel costs about USD 60 in Kenya, that would be 30 months of monthly fees for the informal connections.

Electricity connections in Kibera. Informal “electricians” connect houses and shops to government power lines and charge a monthly fee of about two dollars for use. Outages, accidents, and fires are common.

3. Cooking fuel in Kibera

The people in Kibera cook their food using three primary fuels: liquefied petroleum gas (LPG), charcoal, and electricity.

In general, LPG is the most economical choice. If a household has an LPG cylinder and a stove, it can cook all of its daily meals using this source. The cooking fuel to prepare three meals a day – a luxury that families can rarely afford – would be somewhere in the USD 0.15-30 range.

In Kibera, LPG is distributed provided by private entrepreneurs. They buy the fuel from a government shop, transport it to a distribution point, and sell it to households that can afford it.

The problem is the initial cost of the cylinder. The first payment for a new cylinder is about USD 25, above or equivalent to a month’s rent. Very few families can find such an amount.

As a result, they use charcoal. Cooking with charcoal is more expensive than cooking with LPG. One day’s charcoal may cost as much as USD 0.75 in Kibera.

But because charcoal can be bought in small quantities, many families are forced to use it. When they can afford food to cook a meal, they buy a little bit of charcoal. The cost per meal is high, but the family does not need to save for months.

Charcoal for sale on the street in Kibera. Local families use charcoal because it can be bought in tiny quantities, unlike LPG.

The distinction between affordability and liquidity is important in the study of energy access. LPG is relatively affordable, whereas charcoal is not. But charcoal can be sold in small quantities, so it solves the liquidity problem.

Finally, there is electricity. Because the electricity is paid in monthly fees, a household with an electric plate can cook rice and other meals using it. Of course, very few households can afford an electric plate. We are back to the problem with LPG.

4. Energy access solutions

Kibera highlights the fundamental truth about household energy. The problem is not availability of energy, given the tiny quantities consumed by low-income households. Rather, the problem is a lack of income.

In Kibera, future improvements would come from two primary sources. The first is government programs. If the Kenyan government can help households secure LPG cylinders, this will result in significant savings over time. Unfortunately, the Kenyan government has limited resources and Kibera has many other problems, from sanitation to fire safety.

The second source is higher incomes. Nairobi is a growing city and opportunities for work have improved over time. But the population growth in Kibera is so fast that these opportunities are not enough to support the next generation.

July 2026 futures for Brent crude oil trade around USD 100 per barrel. This is far higher than before the conflict but far below where they would need to be to trigger a global recession.

While the impasse continues, the oil shock has already accelerated the global energy transition. To understand these changes, it is necessary to analyze each region separately.

In this post, I focus on the three centers of global GDP: East Asia, Europe, and the United States. The effects of the Hormuz oil shock are very different in each.

East Asia and Europe are facing a macroeconomic shock that encourages investments in electrification, renewable energy, and reduced fossil fuel use. The United States does not face such a shock because it produces enough fossil fuels for its own consumption, but inflation from higher oil prices casts a shadow over an otherwise resilient economy.

I paid USD 4.59 per gallon for about 3.5 gallons of gasoline in Frostburg, MD on May 14, 2026. Fortunately, my rental car was a hybrid with excellent energy efficiency. Many folks in this area drive massive trucks and are feeling a lot of pain right now.

1. East Asia: the dangers of fossil fuels dependence

In East Asia, we begin by distinguishing between China and the other major East Asian economies, specifically Korea and Japan. China has spent the past two decades investing in clean technology for energy security and economic growth, while Korea and Japan have struggled to do so.

China has been systematically investing in clean tech and energy security for decades. China has built one of the world’s largest and most integrated clean technology industries. Areas of strength include solar panels, batteries, electric vehicles, wind turbines, grid infrastructure, and critical minerals processing. In 2023 China produced 98% of solar wafers, 92% of cells and 85% of panels globally.

As a result, China today is far less vulnerable to a Hormuz oil shock than without these investments. Today, 30% of China’s end-use energy is electrical and renewable capacity additions meet new electricity demand. In April 2026, over 60% of new cars sold in China were electric, either plug-in or hybrid.

Still, the Chinese economy faces challenges. About half of China’s oil imports and one-third of LNG imports came from the Middle East before the onset of the Iran conflict. China is making progress toward reduced fossil fuel dependence, but it is still decades away from completely cutting off oil, natural gas, and coal.

China’s clean tech exports provide relief. In March 2026, China exported USD 26 billion worth of clean technology, setting a record. The Iran conflict has once again shown the risks that fossil fuel dependence carries, resulting in surging demand for solar panels, batteries, electric vehicles, and related technologies.

Unlike China, Korea and Japan have struggled to move forward with the energy transition. Japan remains heavily dependent on imported fossil fuels after the Fukushima nuclear disaster disrupted its nuclear sector, and its renewable energy expansion has been slowed by limited land availability, grid bottlenecks, and relatively cautious industrial policy. Japan also made a strategic error in focusing on the hydrogen economy instead of end-use electrification.

Korea has globally competitive firms in batteries and electric vehicles, including LG Energy Solution and Hyundai Motor Group. However, it also relies heavily on energy-intensive exports and imported fossil fuels, and large industrial conglomerates tied to traditional manufacturing. Limited land availability constrains renewable energy growth.

The Hormuz oil shock is a stark reminder for Korean and Japanese policymakers that fossil fuel dependence is dangerous. Both countries are exploring ways to promote renewable energy, battery storage, nuclear power, and energy efficiency.

2. Europe: one shock after another

For Europe, the Iran conflict follows the energy shock triggered by Russia’s invasion of Ukraine in early 2022. Before Russia’s 2022 invasion, the EU relied heavily on Russian pipeline gas, with Russia supplying more than 40% of EU gas imports. As the war broke out, gas prices surged sharply. After Russia cut pipeline deliveries, wholesale gas and electricity prices reached record highs in 2022.

Following the Ukraine conflict, European policymakers attempted to reduce their dependence on Russian natural gas. European countries increased imports of LNG especially from the United States, Norway, and Qatar.

Europe has made some progress toward reducing natural gas use, but it is still vulnerable. Various policies to encourage reduced natural gas use in industrial, commercial, and residential sectors have helped with reducing EU gas demand by about one-fifth between 2021 and 2024.

Disruptions around the Strait of Hormuz and fears over Gulf oil and LNG supplies pushed European gas prices up roughly 50% in early March 2026, while oil prices rose above $100 per barrel at times. Eurozone inflation climbed back to about 3% in April 2026. The European Commission estimates the EU has already paid roughly USD 32 billion more for fossil fuel imports because of the conflict. Higher energy costs have especially hurt chemicals, manufacturing, aviation, and other energy-intensive sectors, raising recession fears and putting pressure on the European Central Bank to delay interest-rate cuts.

First, the European economy depends heavily on industrial performance. In 2024, 38% of EU natural gas use was in the industrial sector. Replacing natural gas in industry is harder than in electricity generation, where modern renewables offer a cost-effective and rapidly deployable alternative.

Second, the European project itself is facing serious headwinds. While Europe was dealing with the energy crisis triggered by Russia’s invasion of Ukraine, the bloc also dealt with a rapidly aging population, a lackluster economy, right-wing populist challenges, and after November 2024 an increasingly hostile United States led by President Trump.

These challenges complicate the European calculus. While the long-term case for moving away from fossil fuels is strong, the EU faces many conflicting demands. Weak industrial performance underscores the difficulty of moving away from natural gas fast. Worsening demographics and a stagnant economy raise concerns about growing public debt. Squeezed between Russia and the United States, collective European defense is an urgent and expensive need.

But the very real benefits of electrification and clean energy are also appealing to European policymakers.

3. The United States: understanding energy independence

American politicians love to talk about “energy independence”. Thanks to the shale gas and oil revolution, the United States today is a net exporter of fossil fuels. This status protects the United States from the macroeconomic shocks that threaten East Asia and Europe.

But it does not mean the United States is completely shielded.

To understand this logic, let’s look at how surging oil prices affect the United States. For most Americans, the most obvious effect is a higher price of gasoline. Because oil markets are global, an oil supply shock in the Middle East increases oil prices in the United States. The same goes for refined products, such as gasoline or diesel.

If the United States was truly isolated from the global economy, the Hormuz oil shock would not have any impact on gasoline prices in the country. But we are very far from an autarkic world. If international oil prices are significantly higher than American oil prices, then American producers will sell abroad. As a result, the prices converge.

The American consumers will face inflation. Higher oil prices percolate through the entire economy. Everything from driving and flying to heating and food production will become more expensive.

Moreover, American companies will be less profitable if other countries struggle. In 2024, large American companies in the S&P 500 earned slightly over 40% of their income from abroad. This revenue is at risk even if the American economy weathers the latest storm coming from the Middle East.

But the effect on U.S. growth is muted because American oil producers gain. When global oil prices increase, American companies and workers in the oil economy gain a windfall. Some of this windfall is invested or saved, but much is also consumed. This consumption offsets the growth drag from inflation.

It is also notable that while the United States has not reduced its dependence on fossil fuels through decades of systematic policymaking, the economy itself has changed a lot. Today, the American economy is about three times as energy efficient in terms as it was in 1973.

4. Implications for the energy transition

In an earlier post motivated by President Trump’s election, I predicted that the energy transition will become increasingly regionalized. The Hormuz oil shock supports this prediction.

East Asian and European policymakers face strong pressure to move away from fossil fuels. After decades of technological improvements, the moment of clean technology has arrived. The Iran conflict shows that investing in electrifying the economy and then generating that electricity with renewable sources mitigates fossil fuel shocks and enhances energy security.

In the United States, the Hormuz oil shock drives fossil fuel consumers and producers away from each other. For states that produce a lot of oil and gas, higher energy prices are evidence that investing in domestic fossil fuel production is smart. For states that do not produce oil and gas, higher energy prices drive home the need to reduce dependence on oil and gas.

As a result, the United States itself may increasingly become two different energy systems. Traditional oil and gas producers keep going because why not. Everyone else tries to capture the opportunity afforded by clean technology. This is not easy to do without a supportive federal government, but it is not impossible either.

While this apartment is hardly decisive for the global energy transition, this journey offers some insights we energy transition warriors face in electrifying and decarbonizing the world.

As such, it might be of interest to those readers who want to get something done, instead of just talking about getting things done.

I replaced this gas stove with an electric stove in January 2026. That decision did not yield immediate gains, as I still need gas for the water heater. But I am one step closer to removing natural gas altogether from the apartment.

1. The basic setup

The apartment is attached to an old 4-bedroom house. I bought this setup with two partners back in 2022, before Papa Powell crushed my dreams of becoming a real estate tycoon with historically fast rate hikes.

The house and the apartment are listed on AirBnB and other short term rental sites. Although the real estate is a little run down, the house was not very expensive. As a result, the operation continues to be profitable.

I have already bought out one of the partners. The other partner is on his way out by the end of 2026. All that remains is paying off the mortgage, a goal I expect to achieve in 2027.

At that point, the house and the apartment are under my control, with no lender to worry about. I still need to pay property tax, but that is not a huge headache in the very red state of West Virginia.

As for energy, the house itself is heated with natural gas while the apartment is heated with inefficient baseboard heating. We also have air conditioning in both, not that much energy is needed for cooling in the cool mountain air.

The house is somewhat efficient for an old building. The apartment is an energy efficiency disaster, resulting in hundreds of dollars of heating costs in the winter months.

2. The plan

The business plan is to continue operating both the house and the apartment as short-term rentals. Together, they form a powerful combination. Between the university, the hospital, and the football weekends, demand is strong. Ours is not a premium operation, but we can accommodate large groups – and people sure pay a lot of money for that.

To improve the financial and ecological sustainability of my operation, I plan to execute the following changes over time:

• Insulation of the basement apartment. This alone will save hundreds of dollars a year. I hope to start the insulation process in 2026 or 2027, depending on cost estimates from my contractor. The scope of the operation could range from simple sealing to a complete insulation of the walls and the floor.

• Electrification of the basement apartment. Today, the only appliance running on natural gas is the water heater. As it ages, I plan to replace it with an electric water heater and disconnect gas. Avoiding the monthly fixed fee alone will save hundreds of dollars a year. Unfortunately, I may need to pay for some electric work to fit the water heater. Based on preliminary investigations, the electric work will cost more than the heater itself.

• Replacing baseboard heating with a heat pump. Here the plan is to observe electric bills after insulation and then calculate the return on installing a heat pump. The biggest problem here appears to be the outrageous soft cost. Heat pumps are cheap but installing them is highway robbery in the United States.

• Eventually, I will install solar panels on the roof of the house. This is not cheap without the federal tax credits that just expired, but I am willing to accept a low return for ecological sustainability and to remove electricity price volatility. In West Virginia, grid electricity is produced with polluting coal, so that is not something I want to rely on in the long run.

These changes should eventually save me somewhere north of a thousand dollars a year. That is not exactly life-changing money, but a modest profit for advancing the energy transition is acceptable for me.

3. Life in West Virginia

As a lifelong catastrophizer, I sometimes daydream of leaving everything behind in an emergency and retiring in the apartment myself. What a life that would be.

By my calculation, the income from the house on AirBnB – or even as a conventional rental – would be enough to support a minimalist bachelor lifestyle along the lines of Jacob Lund Fisker’s early retirement extreme. My material needs are minimal, the house is profitable, and a cup of coffee in Morgantown every now and then is not going to break the bank.

And if I need more space, I can always move into the house and rent the basement as a furnished unit to some other minimalist bachelor. That income alone would cover all my housing costs in that big house.

West Virginia is not the easiest state for sustainable living because its electric grid depends on coal. But the energy transition continues to advance, and I am confident the tide will turn eventually.

I am a big believer of learning from different cases. Considering their small populations and economies, neither Lesotho nor Eswatini has any significance for the global energy transition.

But from their cases we can learn something about how small countries navigate the energy transition.

A rainy morning in Mbabane, Eswatini. The conditions for hydropower are solid here.

1. Lesotho and Eswatini 101

Lesotho’s airport is a sight to behold. A crumbling monstrosity, the airport has none of the modern facilities. Nothing works and the immigration procedures are done manually, with pen and paper.

Lesotho’s nominal GDP per capita is only $1,100. Corrected for purchasing power, it jumps to $3,400. In the Southern African region, only Mozambique is poorer than Lesotho.

With a population of about two million and completely surrounded by South Africa, Lesotho is an isolated mountain destination. Lesotho’s primary industry is textiles, though the country also mines diamonds and exports water to South Africa. The country is a constitutional monarchy.

Eswatini is in many ways the opposite of Lesotho. Beginning with my scientific observations regarding the airport, it is sleek and absolutely massive for a country with about 1.3 million people. Curiously enough, it is located an hour from the country’s biggest city, Mbabana. But at least it’s only about 5 miles from the royal residence. And that turns out to be significant.

Eswatini’s nominal GDP is $4,610 but jumps to $14,000 when corrected for purchasing power. This is roughly comparable to South Africa or Botswana, making Eswatini relatively rich by African standards.

Eswatini’s economy benefits from a few factors. First, the country is situated between South Africa and Mozambique, providing multiple trade routes to the ocean. Second,t he economy is quite diversified. Besides textiles, Eswatini exports sugar, citrus fruit, and chemicals.

Eswatini’s politics are a blast from the past. The country is the last absolute monarchy in Africa. King Mswati III has ruled the country since 1986. Even though the country has a constitution, a parliament, and a judiciary – in practice, the monarch has no limits to his power. He is the big boss.

Maybe that’s why the airport is so inconveniently located for everyone except the royal family, which consists of the king and at least 11 wives, 39 children, and 13 grandchildren.

2. Energy problems of small countries

Both Lesotho and Eswatini face a similar energy situation. Households use biomass for cooking. Most families do not have cars, but those found on the roads run mostly on gasoline, with few electric vehicles. Besides imports, hydropower plays a major role.

In Lesotho, domestic generation is based on hydropower. The ‘Muela hydroelectric facility has three units with a total capacity of about 75 megawatts. Smaller dams also exist, but these have a combined capacity of less than 10 MW. Lesotho generates about 60% of its electricity at home and imports the rest from South Africa.

In Eswatini, hydropower is also an import form of generation, with about 60 MW of capacity. But co-generation of electricity from biomass used in the sugar industry has over 100 MW of capacity. Additionally, Eswatini already has almost 30 MW of solar capacity. Despite all this, imports from South Africa and Mozambique account for over two-thirds of electricity demand, as Eswatini’s total demand is about twice that of Lesotho’s.

Overall, imports from South Africa (Lesotho and Eswatini) and Mozambique (Eswatini) are affordable. Estimating the wholesale prices for both countries is challenging, but World Bank data suggest that Eswatini paid about USD 0.11 per kWh for South African imports. In a regional power market, prices for Lesotho or from Mozambique would be comparable.

This is much higher than the marginal cost of domestic hydro production, but still quite affordable compared to many other African countries. However, dependence on other countries for power is always a risk.

If something goes wrong in South Africa, isolated Lesotho in particular would be in serious trouble. Eswatini’s more diversified generation profile and access to electricity from Mozambique help, but a regional power crisis would hit these two countries very hard.

What can Lesotho and Eswatini do?

Lesotho has two potentially transformative opportunities. One is Phase II of Lesotho Highlands Water Project, which could add over 200 MW of new hydro capacity. If the project succeeds, Lesotho could become a net exporter in the next 3-5 years.

Moreover, Phase II of the Ramarothole solar project would add 50 MW of capacity with 8 MWh of battery storage by 2030. For a country as small as Lesotho, this would be a significant increase.

Eswatini is going for an even more diversified approach. The country has a national solar project with 75 MW of capacity in the pipeline. The country is also expanding biomass co-generation, drawing on the country’s competitive sugar industry.

More controversial is the Lubhuku coal-fired power plant and mining complex. In November 2025, the Eswatini government gave a permit for the project. When finished, it could have thermal capacity of up to 1.5 gigawatts, many times over the domestic demand. If developed, Lubhuku would lock in fossil fuel generation for decades to come.

3. In Southern Africa, South Africa is the only game in town

An important conclusion from my Southern African tour is that everything here revolves around South Africa. Despite decades of lackluster performance, starting with the international sanctions and domestic turmoil in the apartheid end game, South Africa remains the region’s economic superpower. All the other countries are heavily integrated and structurally dependent on South African infrastructure, technology, and demand.

For both Lesotho and Eswatini, this structural dependence is particularly significant. Lesotho has no way around South Africa. Eswatini depends heavily on South Africa, too, and Mozambique is not exactly a reliable alternative.

In this situation, adding solar and battery storage can help Lesotho and Eswatini reduce vulnerabilities. Hydropower and biomass already provide a strong foundation. By adding solar capacity combined with storage, Lesotho and Eswatini can reduce their sensitivity to Eskom’s ups and downs, or political developments in politically unstable Mozambique.

If Eswatini builds a massive coal-fired power plant, the country trades in import dependence for a stranded asset problem. Eswatini’s mega coal project depends on exports to South Africa, which may be uncertain as solar and battery storage continue to expand rapidly.

My advice would be to stop the project, but I do not have a direct line of communication with the king. If anyone has a contact, let me know.

Make no mistake, Southern Africa’s future depends on whether South Africa can get its act together. The smaller countries of the region can reduce their dependence and create alternative structures, but Southern Africa cannot grow if its main economy continues to struggle.

In a previous post, I investigated South Africa’s energy transition. I found that decades of mismanagement in the national electric utility, Eskom, resulted in a power crisis that almost destroyed the economy. But rapid expansion in solar, wind, and battery storage capacity has since shown the country a way out.

In Namibia, the entire power sector depends on imports. About half of Namibia’s electricity is imported from the Southern African Power Pool, led by South Africa.

For Namibia, being a small fish in a big pond creates a specific set of challenges and opportunities in the energy transition. In what follows, I argue that Namibia’s import dependence allows rapid solar expansion but calls for grid enhancements and storage additions.

Namibia uses the Van Eck coal-fired power plant to meet peak demand. In the future, some of this challenge could be met more sustainably and cost-effectively with renewables and battery storage.

1. The Namibian power system

Namibia’s power system is structurally tied to South Africa. Before Namibia gained its independence in 1990, the country was South Africa’s “fifth province”. At that time, Eskom ran the entire system.

Electricity generation in Namibia is mostly based on hydropower. The Ruacana hydro station has a capacity of 332 MW, but supply is seasonal and depends on water flow from upstream dams in neighboring Angola. As such, Namibia’s hydro supply is quite variable over the year.

The country has developed several utility-scale solar photovoltaic (PV) plants, such as the Omburu (20 MW) and the Hardap (45 MW) solar power stations, alongside a growing number of smaller independent power producer projects and distributed rooftop systems. Solar capacity now plays a meaningful role in Namibia’s generation mix, particularly during daylight hours. However, the variability of solar output and limited grid infrastructure, notably transmission constraints and lack of storage, remain key challenges.

The rest is mostly imported from neighboring countries. NamPower, the state utility, uses both long-term contracts and short-term market. South Africa is the largest supplier, but both Zimbabwe and Namibia also play a major role.

Namibia does have some flexible thermal capacity. The coal-fired Van Eck power station near Windhoek and the diesel-fired Anixas power station provide flexible capacity that NamPower uses to meet peak demand when hydropower is not available and trading partners cannot fill the gap.

Namibia’s import dependence is a double-edged sword. On the one hand, a power crisis in South Africa could have serious ripple effects in Namibia. As a small country, Namibia does not have much leverage over Eskom’s decisions.

On the other hand, imports also provide flexibility. Because of Namibia’s small size, domestic demand fluctuation itself does not create much of a problem. Most of the time, South Africa and other suppliers can meet Namibia’s power demand without difficulty.

2. The energy transition in Namibia

Namibia is at the very early stages of the energy transition. Until very recently, the country relied on its limited hydro capacity and regional imports. But over the past years, the energy transition has gained momentum.

Solar capacity is growing, but from a low base. As noted above, Namibia has developed both grid-scale and rooftop solar capacity. With a very low population density (3 people per square kilometer) and solar irradiation of over 2,100 kWh per square meter annually, Namibia has the perfect physical conditions for solar resource development.

Wind could play a role, too. On Namibia’s long Atlantic coast, strong winds provide an opportunity to develop wind farms. Today, Namibia has very limited capacity, with a handful of small wind farms active. But the construction pipeline is at least 100 MW.

Battery storage is almost non-existent, but as solar and wind capacity grow, the value of adding batteries becomes evident. Similar to South Africa, I expect battery storage to start growing rapidly in the coming years.

Electric vehicles have not yet conquered the Namibian market. At one of my interviews in Windhoek, I learned the exact number of EVs on Namibian roads – ninety-eight. Namibia does not yet have a policy or regulatory framework to enable charging infrastructure or make EV purchases affordable to the country’s small middle class.

3. Energy transition under regional electricity trading

Given Namibia’s dependence on electricity imports, adding renewable capacity requires careful planning. While most countries must integrate variable renewable generation to their existing supply profile, Namibia’s primary challenge is expanding renewables while managing imports.

This is where battery storage really shines. Without battery storage, Namibia can only respond to variation in power demand through the small thermal power plants, as the Ruacana hydro station depends on water flows from Angola. In this situation, Namibia might be forced to buy expensive electricity when solar and wind generation is low.

But in the ideal scenario, Namibia could use battery storage to regulate imported electricity. With enough battery storage capacity, Namibia can use its exceptional renewable resources to charge the batteries and then release electrical energy when imports are expensive. Considering that battery storage is improving fast and prices are collapsing, this scenario could be feasible in just a few years.

In the long run, Namibia could even become an importer of electricity. Namibia has some of the best renewable resources anywhere in the world. If Namibia can set up policies and regulations that enable large-scale investment, the country could export electricity to neighboring countries when hydro supply is limited or South Africa’s capacity is stretched.

Namibia has also developed plans for green hydrogen. But as loyal readers of this newsletter know, the global demand for hydrogen remains highly uncertain because of technical challenges and high transportation costs. As such, I am not optimistic about green hydrogen in Namibia. It may play a small role in decarbonizing fertilizer production in South Africa and regionally, but I doubt it will become a major export product for Namibia.

4. What Namibia can do now

The way forward for Namibia is relatively straightforward.

First, invite private investment in solar and battery storage, building on Namibia’s exceptional combination of abundant land and excellent solar insolation. Successful policy and regulatory models are now readily available from other African countries, including South Africa, and elsewhere in the world.

Second, prioritize grid improvements sooner rather than later. One lesson from virtually every country case study that I have conducted is that transmission tends to fall behind as renewable generation surges. Investing in the power system should be done years before enhanced capacity is needed.

Third, develop local technical and planning capacity. One challenge that many African countries face is their dependence on foreign technology and human capital. Similar to power system improvements, developing a competent local workforce takes years. For Namibia’s young population, job creation is critical.

Finally, develop a road map for electric vehicles. As the destructive war on Iran has shown, the global energy system is still vulnerable to supply disruptions. Electric vehicles can help Namibia reduce the cost of importing oil and suppress volatility in energy prices.

As a small country, Namibia will need to adapt to developments in the region’s dominant power, South Africa. But the Southern African power pool can be a major opportunity if Namibia’s government makes the right moves.

During the 20^th century, the country led the continent in technology, infrastructure, and economic growth. But the racist white regime did not share the wealth with the black majority and instead used violence to suppress resistance as long as it could. Since then, the promise of a truly equal society has largely failed, as decades of mismanagement by the new political elite have left most South Africans in poverty and victims of everyday crime.

South Africa’s power sector is an insightful example of this dysfunctional political economy. The country’s state-owned quasi-monopoly, Eskom, went from massive coal overcapacity to frequent power outages. This downfall stemmed from corruption, mismanagement, and avoidable mistakes.

The Arnot thermal power station in South Africa has an installed capacity of 2.1 gigawatts.

1. Autarky in apartheid: The origins of South Africa’s coal overcapacity

South Africa’s coal overcapacity originates from the country’s apartheid era. The country’s economic future seemed bright before the international community placed sanctions on the apartheid regime. Mining and heavy industry were growing, and the country needed power to support these critical sectors of the economy.

Coal was the obvious choice at the time. Modern renewables were not yet economically viable. South Africa’s hydro potential was limited and mostly tapped. Natural gas had not yet been discovered. Oil was too expensive for power generation.

In contrast, South Africa’s coal resource is among the best anywhere in the world. The country holds tens of billions of tons of primarily bituminous thermal coal. Much of it is easy and cheap to mine.

Furthermore, South Africa’s regional and international isolation grew toward the end of the Cold War. For obvious reasons, the apartheid regime had hostile relations with other African countries. As time went by, international criticism of apartheid expanded. Different countries imposed sanctions. This pressure turned South Africa toward autarky, as successive governments prepared for an extended struggle to defend the apartheid regime.

As a result of these forces, South Africa moved into the post-apartheid era equipped with a huge coal-fired power fleet. Eskom built massive coal-fired power plants near the coal mines, laying the foundation for a coal-dependent, heavily centralized power system.

By 1994, South Africa had 38 gigawatts of generation capacity, of which about 90% was coal. With a population of about 44 million, capacity per capita was about 0.86 kilowatts – far ahead of other African countries. Only about half of the population had electricity at home.

2. Early success after apartheid

The 1990s were a time of optimism in South Africa. After Nelson Mandela claimed the presidency through free elections, the African National Congress promised to improve the living standards in South Africa through redistribution and continued economic success.

In the power sector, the early achievements were substantial. In just a few years, between 1994-2000, the country’s household electrification rate went from about 50% to 65-70%. Electricity was so affordable that South Africa even became an African leader in electric cooking, with almost 50% of households using electricity for cooking.

Sadly, this beneficial situation did not last long. Partly because of the rapid growth in electrification, demand for electricity grew fast in the early 2000s. Eskom’s spare capacity was now fully utilized, and the utility failed to invest in maintenance and capacity expansion.

3. State capture and mismanagement: where Eskom went wrong

Eskom’s downfall in the new South Africa stemmed from corruption and mismanagement. In the past Eskom, had operated behind a firewall that kept the politicians away from key management decisions.

But in the early 2000s, the South African government began emphasizing loyalty over competence in recruiting and senior executives and board members. Eskom hit rock bottom during Jacob Zuma’s presidency, as business interests captured the South African state and rent seeking replaced governance for economic growth.

During that time, massive contracts were given to politically connected businesspeople, notably the influential Gupta family. As a result, both system maintenance and investments in new coal-fired power plants like Medupi and Kusile suffered. Unable to pay the bills, Eskom was bailed out by South African taxpayers. In turn, the same taxpayers received electricity outages that made life difficult and hurt the country’s energy-intensive economy.

To put it bluntly, political interference destroyed Eskom. One of the world’s most efficient utilities went from technical competence and low debt into a spiral of worsening finance, mismanagement, and technical problems.

For South Africa, this was a devastating loss. A country that had built its economic success on mining and heavy industry was no longer able to keep the lights on.

4. A new beginning? Replacing coal with renewables

Since South Africa’s electricity crisis, renewable energy has paved the way forward. As of early 2026, South Africa has over 10 gigawatts of solar capacity installed, with 1.6 GW added in 2025 alone. Wind capacity is around 4 GW.

The country achieved early success with renewable energy auctions. Since 2011, the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) has added over 8 GW of solar and wind capacity. And even though REIPPPP has recently faced challenges, such as failing to attract financially sustainable bids in recent auctions, it has brought down the cost of both solar and wind substantially.

South Africa also has plenty of distributed generation. Rooftop solar and distributed generation for commercial and industrial use are common. While exact capacity numbers are not available, today such solar capacity is probably closer to 10 gigawatts, amounting to most of total capacity.

All this growth runs parallel to the demise of South Africa’s coal-fired power plants. In the coming years, South Africa needs to replace tens of gigawatts of outdated coal-fired power generation capacity. This is a massive challenge to Eskom and requires using all available options.

An important new opportunity for South Africa is battery storage. While most projects have started recently, South Africa already has a pipeline if 11gigawatt-hours of battery storage. Adding battery storage is critical to replace the country’s crumbling baseload coal-fired power plants.

As usual, South Africa’s main problem is not technical or economic, but political. The South African economy has the capital, technology, and talent to replace Eskom’s old coal-fired power plants with a modern system built around solar, wind, and battery storage.

But will the South African leaders have the discipline and patience to see through this energy transition? Time will tell.

I went to Ethiopia for the coffee, food, mountains, and history instead of energy transition research. After leaving West Africa, I wanted to take a few weeks off. Ethiopia was an obvious choice for a coffee-loving history buff who loves mountains.

But while I was there, I ran into a lot of excitement about electric vehicles (EVs). In a somewhat surprising turn, Ethiopia has become an African EV leader, with over 100,000 electric cars on the roads. That was enough to pique my interest.

In this post, I discuss the argument that Ethiopia has “leapfrogged” over conventional cars with internal combustion engines. I conclude that Ethiopia is a rare example of leapfrogging, but with some important caveats.

At the Blue Nile Gorge north of Addis Ababa. Ethiopia is a very interesting African country. I recommend visiting it, but do consult with me first. Thriving in Ethiopia requires making a few specific moves.

1. What is leapfrogging?

In the energy industry, leapfrogging refers to skipping conventional fossil fuels and moving directly into modern electrical energy based on clean sources, notably solar power. It is an idea that has captivated the imagination of many energy transition warriors.

But leapfrogging turns out to be rare.

Most countries have embraced renewable energy alongside growing fossil fuel consumption. This is a topic for another post, but the idea is that countries invest in renewable energy when their economies are growing. And since renewables cannot yet completely replace fossil fuels, that means more demand for fossil fuels, too.

2. The Ethiopian EV market

At first glance, Ethiopia is leapfrogging conventional cars. Before the EV boom, the country had only 290,000 registered cars in 2022, mostly in the capital city of Addis Ababa. For a population of about 130 million, car ownership was basically irrelevant.

Against this backdrop, leapfrogging did not require all that many EV sales. In 2025, the country had over 100,000 EVs on the roads, again mostly in the booming capital city. The government aims to increase this number to 500,000 by 2030. The market leader is China’s BYD.

3. How did Ethiopia get there?

Ethiopia’s push for EVs reflects the country’s difficult energy import dependence. First, Ethiopia produces a tiny amount of coal and no oil or natural gas. As a result, conventional cars running on gasoline or diesel would create an energy security problem and result in capital outflows.

Second, Ethiopia’s ability to import fossil fuels is compromised. Ethiopia is a landlocked country with a volatile relationship with neighboring Eritrea. The country pays vast sums to import goods through Djibouti, resulting in high costs.

In this situation, the Ethiopian government has implemented policies to promote EV adoption. A key decision in 2024 was to ban the import of fossil fuel-powered vehicles and reduce trade tariffs on EVs. Moreover, the government is supporting local manufacturing, with tax incentives for domestic production.

4. A success story, with some caveats

Does all this make Ethiopia a rare success story in leapfrogging? Yes, with some caveats. Ethiopia’s ability to build a domestic EV market from scratch is impressive and leaves other African countries behind. But a few challenges remain.

First, Ethiopia has very few cars and they are mostly in Addis Ababa. The rest of the country has very limited infrastructure, with only 55% of the households electrified and roads in disrepair. Driving and charging an EV outside the capital region would be very difficult.

Second, Ethiopia’s high import costs and weak currency make automobile ownership difficult to achieve for most households. While Ethiopia’s elites may continue to expand EV use, the median Ethiopian has no realistic pathway to EV ownership in the coming decade.

As such, Ethiopia’s leapfrogging example shows that even a low-income country can push EV adoption in a small domestic market. But it does not address the far bigger problem that the country faces, which is low per capita income.

The Middle East has always been central to global energy markets. In 2024, about 30% of oil and 17% of natural gas were produced in the Middle East. As such, the many conflicts in the region have historically had significant effects on global energy.

The conflict in Iran will have a large negative effect globally and a smaller but not trivial effect on the United States. For those readers who are exhausted with President Trump, there is hope – worsening energy affordability will help the Democrats as we approach the midterms.

1. Iran and global energy markets

Iran is a significant producer of both oil (3%) and natural gas (6%). The country exports oil to China and global markets, while natural gas is exported to neighboring countries, notably Turkey, via pipelines.

But Iran’s importance goes beyond production. About one-fifth of global oil and LNG shipments go through the Strait of Hormuz, a narrow passage between the Persian Gulf and the Gulf of Oman. Iran can cause major disruptions in global energy markets by targeting tankers in the Strait.

What is more, Iran can target regional production capacity. Any attacks on oil fields, refineries, and other infrastructure can drive energy prices higher, with global repercussions. Qatar has already announced a production stop on LNG because of Iranian attacks.

2. Energy market responses so far

Unlike the usual, I am writing this commentary amid the action. Today is Tuesday, March 3 and I am writing this around 05:40AM Eastern Time – greetings from Johannesburg, South Africa.

The markets have already reacted to the conflict. Oil prices in the European Brent hub have risen above USD 82 per barrel, up from about USD 71 on February 26. Natural gas futures in the Netherlands are up 85% from February 27.

The United States itself is somewhat isolated, especially for natural gas. While oil markets are global, natural gas markets remain mostly regional despite increased shares of LNG exports and imports. As such, natural gas prices in the United States are up only slightly.

Stock market reactions align with the energy impacts. European and Asian markets have turned down sharply with the Vanguard Total International Stock Index Fund ETF down 6% since Friday’s close – brutal, brutal, brutal.

Meanwhile, S&P 500 in the United States actually recorded a slight gain on Monday, March 2. Premarket trading is down almost 1.70% from Monday’s close as I am writing this.

The Iranian crisis highlights a structural advantage that the United States enjoys. It produces large quantities of oil and gas. On top of that, neighboring Canada is also a major producer. As such, the United States is not nearly as vulnerable to energy shocks from the Middle East.

But because oil markets in particular are global, the United States will also suffer if oil prices remain elevated. The price spike will contribute to inflation and undermine affordability of everything, from gasoline to airfare and food.

These price shocks will hurt President Trump’s Republican Party in the midterms and provide the Democrats a stronger position to reclaim the House and possibly even the Senate.

3. Forward with the energy transition

The Iranian crisis is another painful reminder to European and East Asian leaders that fossil fuels are a devil’s bargain. Their high energy density has played a central role in industrialization and globalization, but they are largely produced in vulnerable and unstable regions of the world.

The Iranian crisis provides a strong justification for continued investment in alternatives, notably electrification of end uses, around the world. Countries that do not produce their own fossil fuels are economically vulnerable to Middle Eastern politics, which show no sign of stabilization.

As for the United States, the pressure is not as immediate. Although the U.S. economy will slow down because of higher fossil fuel prices, the effects are going to be smaller than in other major economies. Moreover, many U.S. states will benefit from higher fossil fuel prices because they produce oil and natural gas.

Much depends on how long the conflict lasts and whether it continues to grow. This is beyond my expertise, but I will say that I am somewhat surprised by Iran’s vigorous response. The scale of the response and the vigorous public rejection of President Trump’s calls for negotiations suggest that the Iranians are ready to double down. But don’t quote me on this – I am way out of my lane.

Looking ahead, I expect European and East Asian policymakers to intensify their efforts to move away from fossil fuels. The high-flying South Korean stock market crashed 7% on March 3^rd and Japan’s Nikkei decreased by over 3%. As I am writing this, the British FTSE is down 2.7% and Germany’s DAX is down almost 4%.

These are massive decreases. They show that European and East Asian economies remain vulnerable to energy shocks.

In the spirit of transparency, the findings reported here are based on field research in Nigeria, Togo, Senegal, Mauritania, and Côte d’Ivoire. In each country, I spoke to local experts and practitioners. I also explored the use of renewable energy – mostly solar – in the cities that I visited.

I found that each of these countries faced somewhat different challenges. In Nigeria, decentralized solar helps businesses and households deal with intermittent power supply, improving reliability and reducing generation costs. In Togo and Côte d’Ivoire, grid-scale solar capacity boosts domestic generation and supports economic growth. In Senegal and Mauritania, solar power replaces expensive oil-fired power generation in conjunction with wind and natural gas.

The Nigerian company Ecotutu provides an efficient, solar-based cool storage solution that helps local businesses reduce food waste. This site is in Lagos.

1. Small is beautiful in Nigeria: improving reliability and avoiding diesel costs

Nigeria’s power system is a mess. The initial design was based on centralizing all generation and then using the transmission system to serve different areas of the country.

But the system failed, as the income from generating and distributing electrical energy was not enough to cover the system cost. In this situation, centralization was a critical weakness. Congestion in the transmission system resulted in daily outages, often for hours at a time.

But decentralized generation has rapidly overcome some of the power system’s limitations. Low-cost solar panels are readily available in Nigeria. Battery costs are falling. As discussed in an earlier post, small businesses and households everywhere are installing solar systems.

The benefits are substantial. Besides enhanced reliability, solar home systems reduce energy costs because the diesel generator is running less during the day. Based on today’s diesel and solar costs, the payback time of a simple solar system can be 6-12 months. Warren Buffett himself would be impressed with such an investment.

To be sure, decentralized solar is not a substitute for power sector reform. Decentralized solar remains a lot more expensive than grid-scale solar. As is often the case, solar power exhibits clear economies of scale. If Nigeria could build massive solar parks and distribute electricity through a reliable system, solar would be even more useful for the country.

But that is not possible unless Nigeria’s government enacts and implements deep reforms. According to local power sector experts, that is not likely any time soon.

2. Togo and Côte d’Ivoire: grid-scale investments support economic development

By West African standards, Togo and Côte d’Ivoire have somewhat reliable power supplies. Both countries price electricity roughly in line with the production and distribution cost. Electricity is not cheap in either country, but the service is quite reliable.

In these two countries, grid-scale solar capacity makes the most sense. In Togo, solar capacity is growing. The country is on track to install 100 megawatts of solar capacity by 2028.

In Côte d’Ivoire, the government is aiming to have 600 megawatts of solar online by end of 2026.

Each country benefits from different ways. In Togo, reducing the cost of importing fossil fuels is critical. In the past, Togo has imported both its electricity and fossil fuels. By investing in grid-scale solar, Togo can reduce spending on imported fossil fuels. The money saved can be used to develop the country’s infrastructure.

In contrast, Côte d’Ivoire is a net exporter of electricity. But even in this context, solar power is economically valuable. By investing in solar power, the country reduces the amount of natural gas diverted to domestic power needs. The natural gas saved can be either exported for hard currency or redirected to industrial uses, where clean alternatives are still years or decades away from competitive pricing.

3. Senegal and Mauritania: escaping oil-fired power generation

Senegal and Mauritania have a lot in common. Both are lower-income economies with lots of desert land and Atlantic coastline. Both have also paid a heavy price for relying on oil-fired power plants to meet their electricity demand.

Both Senegal and Mauritania use solar power to meet growing electricity demand while reducing the need for expensive oil-fired power generation. In both countries, the population and the economy are growing. In the past, their respective governments invested in oil-fired power plants to avoid outages, but these investments resulted in extremely high electricity prices that make life difficult and undermine economic development. Now that solar power is affordable and readily available, burning petroleum makes a lot less sense.

Given that these countries have excellent solar resources, they can generate renewable power at a very low cost in the future. Land prices are very low because desert land does not have competing uses. Almost every day is sunny from sunrise till sunset, resulting in a stable generation profile.

The development of solar power in Senegal and Mauritania coincides with massive offshore natural gas development. By building solar capacity, the two countries can use less natural gas for domestic power generation and instead use the fossil fuel for exports or industrial applications.

4. Limitations: what solar power cannot do

Based on the above experiences, solar power has significantly helped West African economies develop. The region has many suitable sites for solar power, supply of grid power is not reliable, and previous generation capacity is expensive to run.

However, solar power has its limitations. First, the cost and reliability of electricity are just two of many obstacles to economic growth. With or without solar power, West African countries face a long list of challenges: civil conflict, ethnic fragmentation, political instability, corruption, poor infrastructure, unemployment, lack of education… it is a long list.

Second, the region’s largest economy, Nigeria, needs power sector reforms to take full advantage of solar power. The main reason why solar has taken over in Nigeria so fast is the sad state of the country’s power sector. Without power sector reforms, Nigeria will be limited to decentralized solar generation, which is much more expensive and less useful for economic development than competently managed grid supply.

These limitations notwithstanding, solar power has already made a meaningful contribution to West Africa’s growth trajectory. Each country in the region faces a somewhat different set of challenges. A flexible and widely applicable form of power generation, solar has met an important need and will continue to grow in the coming years.

Until recently, about two-thirds of Mauritania’s electricity was generated from petroleum. The rest was mostly hydroelectric.

Similar to Senegal, which I covered in another post, Mauritania has only recently begun developing its domestic electricity resources. A combination of offshore natural gas, wind power, and solar power provides Mauritania the opportunity become a regional electricity exporter.

Mauritania’s national museum, photobombed by a weary professor. It is not the most interesting museum ever, but I do recommend it for friends of institutional isomorphism.

1. Offshore natural gas

Mauritania’s natural gas industry is only a decade old. In 2015, the country discovered the Grande Tortue Ahmeyim (GTA) field on the maritime border with Senegal. Production began in early 2025, with an initial target of 2.5 million tons of liquefied natural gas per year.

Mauritania is developing other natural gas fields, too. The government signed exploration and production contracts for the Banda and Tevet fields in 2024. The gas from this project would be used to power the domestic economy through a 180-MW power plant north of the capital, Nouakchott.

Natural gas has given Mauritania’s economy a boost. Real GDP growth was 6.8% in 2023, 6.3% in 2024, and 4.0% in 2025 despite a decrease in gold production. Besides the income from natural gas exports, the development of energy production boosts the productivity of Mauritania’s industrial and mining sectors. As a result, Mauritania is now one of the most dynamic economies in Africa.

2. Wind and solar power

Besides natural gas, Mauritania has excellent wind and solar resources. Beginning with wind, Mauritania has a lot of wind power potential, particularly along its long Atlantic coastline. The country’s flagship project is the 30 MW Boulenouar Wind Farm near Nouadhibou, which supplies electricity to the national grid and supports mining operations in the north. In 2023, about 6% of Mauritania’s electricity came from wind.

Solar power has much to offer in Mauritania. Early utility-scale development includes the Sheikh Zayed Solar Power Plant in Nouakchott, a 15 MW photovoltaic facility that was Africa’s largest of its kind when commissioned and contributes to the city’s electricity supply. Smaller PV installations in rural communities — totaling over 30 MW — have improved access and cut diesel use in areas off the national grid.

An important feature of Mauritania’s renewable resource is the complementarity of wind and solar power. With a huge desert area and a windy Atlantic coastline, Mauritania can take advantage of hybrid generation. While the sun is relentless during the day, the wind often blows the strongest at night. Add some battery storage to the mix, and good things happen.

A major hybrid solar-wind plant with up to 160 MW of solar capacity and 60 MW of wind capacity is being developed to bolster national generation and reduce reliance on fossil imports. This effort is part of Mauritania’s strategy to increase clean power production and expand reliable electricity access while supporting economic growth.

Based on these resources, green hydrogen developers have expressed interest in Mauritania. During the peak of the hydrogen hype in 2021, Mauritania launched an ambitious strategic plan to become a leading green hydrogen producer.

But the hydrogen outlook is clouded by uncertain demand. Hydrogen projects around the world are failing because the demand from offtakers remains tepid. As such, Mauritania may not be able to capitalize on the green hydrogen opportunity any time soon.

While I am skeptical of Mauritania’s hydrogen ambitions, the country’s power sector benefits from an unusually strong mix of wind and solar resources. Given that many African countries struggle with chronic electricity shortages, Mauritania’s renewable resources give the country a strong foundation to develop mining, industry, and commerce.

3. Challenges ahead

Mauritania’s energy future is bright, but the country does face certain challenges. The regional context is the main risk.

First, some of the neighboring countries are politically unstable. The West African region has recently seen a number of coups: Mali, Burkina Faso, and Niger – all now military dictatorships backed by Russia. Nigeria remains politically unstable, and Algeria is an isolated petrostate.

In this context, Mauritania’s aspirations to export electricity face challenges. While Senegal and Morocco both would be possible importers, they also have excellent renewable resources and are developing their own wind and solar power.

Second, the flagship regional power development project, the African Development Bank’s Desert-to-Power Initiative, has suffered major setbacks and delays. Started in 2018, the project was supposed to develop 10 gigawatts of solar power for the impoverished Sahel region. But in reality, the project has developed almost nothing because of political instability, COVID-19, financial barriers, and management problems.

Because of these challenges, it is uncertain how much Mauritania can earn from regional power exports. While natural gas exports are already adding to economic growth, power exports are constrained by regional complications.

But overall, Mauritania’s energy future is bright. In only a decade, Mauritania has gone from being stuck with expensive oil-fired power generation to a robust electricity mix based on natural gas and modern renewables. This progress enables Mauritania to develop its economy and bring a better life to its people.

In this post, I will briefly describe how I use AI in my own work as a professor. The work itself consists of research, teaching, and administrative duties.

I use AI in three main ways: finding information, as a writing aide, and to learn new skills.

I consider myself a somewhat but not very sophisticated user of AI. I never made a specific effort to improve my AI use.

Rather, I learn as I go. When I encounter a new challenge, I see if an AI tool could help me. Almost always, the answer is yes.

1. Finding information

The most important way I use AI is to find new information.

In the past, finding new information was a major challenge. I could either do an extensive online search or delegate the task to a human research assistant. The first approach requires a lot of time. The second approach costs money and requires a lot of waiting, as humans do not work fast.

Now, much of the basic information can be found by a simple AI query. My university, Johns Hopkins, has a suite of professional AI tools. Sometimes I don’t even bother to log into the system but instead use the free version of ChatGPT or Claude.

This somewhat boomerish use of AI has been a game-changer for me. In practice, much of my work consists of going to different countries for a two-way exchange on the energy transition. Preparing for those excursions is much easier and faster than in the past.

I do note that using AI to find information about a topic you don’t understand is a bad idea. I have found that AI tools frequently make little errors. Because my searches are in my area of expertise, I can detect those errors quite easily.

2. Writing aide

I am usually a fast writer. When I need to write something, such as a new post for this rapidly growing newsletter, I can get it done quickly.

The part that takes a lot of time is basic background information. Using AI, I can write those background sections much more easily.

I am not saying that I just tell AI to write for me. That would be counterproductive, as the purpose of my writing is to offer an authentic voice on the energy transition and other important topics. I doubt anyone would read these missives if they were generic AI slop.

Instead, I ask AI to produce some basic text that I then rewrite carefully.

The other day, I was writing about the Senegalese power sector. I told AI to give me a few paragraphs on why Senegal uses so much oil. I then checked the sources and confirmed that the AI’s narrative is based on good research. Finally, I edited the text so that it was in my voice.

To me, this approach strikes the right balance between efficiency and authenticity. I am still the captain of the ship, but thanks to AI we are moving a lot faster than in the past.

3. Learning new skills

I am always looking for opportunities to develop my skills, whether it is for innate curiosity or to make a profit.

AI has allowed me to learn some new skills at a fast pace. For example, I have recently spent a lot of time learning mathematical finance.

I started by reading a textbook on the topic and studying the theorems, just like an innocent graduate student would. It was a lot of fun and I now regret not going into finance as a young man. It is a truly fascinating field.

But when I started applying those concepts, I often spent hours sparring with various AI tools. I asked them to criticize my ideas from various perspective, ranging from risk-reward calculations to margin requirements.

Without these tools, it would have taken me a lot longer to learn the basics. I would have also made mistakes that would have cost me a lot of money.

I estimate that getting to basic competence took me about 3 months instead of the usual 6-12 months. That is simply incredible.

4. AI and the future of work

I am convinced that AI will result in significant productivity improvements over time. I can barely remember how work was done before AI, and it has only been a few years since ChatGPT showed up.

The pace of innovation is only accelerating. I am sure that my own use of AI is quite primitive compared to what the cool kids are doing these days. But I will continue to learn and improve. These investments will continue to pay off by making my work easier and by making my career, business, and investing more profitable.

But AI is already causing major challenges for young people looking for entry-level jobs. In the past, entry-level jobs were based on simple tasks that could not be automated. With AI, so much more can be automated.

In the future, the pipeline from a college student to a renowned expert may look very different from today. Corporations and institutions may need to dedicate specific resources to upskill junior hires because AI is doing the basic work that enabled working-by-doing in the past.

Or perhaps AI will eventually replace all of us, including plumbers and heart surgeons. At that point, socialism may finally have its moment. Capitalism works because people need strong incentives to overcome our innate laziness. But if AI does all the work, that no longer matters.

In other words, Senegal is the perfect country for both solar and wind power.

And yet, most of Senegal’s power generation is based on imported oil. In 2024, over 80% of Senegal’s electrical energy was generated with oil.

As loyal readers of this newsletter and my students at Johns Hopkins University know, oil is not an ideal fuel for power generation. Besides the pollution, oil is a very expensive way to generate electricity.

Why is Senegal, a relatively poor country, burning oil and spending over USD 0.17 per kilowatt-hour?

This monstrosity is the KARMOL LNGT Africa, a floating storage and regasification plant. It is anchored right outside Dakar.

1. Move fast and break things: Senegal’s rush to generate power

Senegal’s unfortunate power sector profile stems from past decisions. For decades, burning oil was the fastest and cheapest way to add capacity in a country with limited domestic energy resources, weak grids, and urgent demand growth from urbanization and industry.

Senegal had no proven gas production, hydropower potential was modest, and coal raised political and environmental concerns. Chronic underinvestment, aging infrastructure, and the need for flexible generation all drove the country toward oil.

For political economists, this pattern does not come as a surprise. Power outages are some of the most visible signs of government failure that citizens can see. Back in those days, solar power was still prohibitively expensive.

The results are easy to see. In 2024, oil-fired power plants generated 5.5 terawatt-hours, or about 75% of total generation. Electricity price across all consumer groups was USD 0.20 / kWh, making electricity very expensive for the typical household.

2. The escape plan: liquefied natural gas and renewables

Senegal’s plan to escape oil is a familiar combination of natural gas and renewables. Senegal has recently begun production of offshore natural gas, notably from the Great Tortue Ahmeyim (GTA) field shared with neighboring Mauritania. Senegal already produces 2.4 million tons of LNG per year. President Bassirou Diomaye Faye aims to allocate about 20-25% of this production for the domestic market.

With limited infrastructure, Senegal today is relying on a floating storage and regasification plant, KARMOL LNGT Africa, to generate electricity from offshore natural gas. Electricity supplied through KARMOL LNGT Africa is expensive. While I was not able to find exact figures for the plant, typically a kilowatt-hour from a power ship costs at least USD 0.25-0.30.

Over time, the cost of natural gas generation will probably decrease as Senegal’s infrastructure improves. With appropriate investments, domestic natural gas will be a lot less expensive than imported oil.

But renewables offer a more cost-effective approach. Senegal is a very sunny country, with 3,000 hours of sunlight per year. The country already has 670 megawatts of solar power. Out of this, 310 megawatts is utility-scale and the rest decentralized. Under the National Energy Pact, Senegal aims to have renewables cover 40% of the electricity capacity by 2030.

Wind energy is already playing an important role in Senegal. The country has a good wind resource in the coastal areas between Dakar and Saint-Louis, with wind speeds in close to 6 meters per second. The country has about 160 megawatts of wind capacity, mostly from the Taïba N’Diaye wind farm, a flagship African wind project.

3. Practical challenges

Senegal’s escape plan is off to a good start. While the country has a long way to go, the government has set its sights at a mostly renewable power sector, exactly as cool people would in the year 2026.

But many challenges remain.

First, Senegal’s grid infrastructure is out of date. The same problems with grid capacity that resulted in the oil misadventure back in the day are now holding back renewable investment. After all, renewables generate variable electricity.

Second, Senegal needs to invest in battery storage. Without battery storage, solar electricity is only available during the day. This results in a situation where fossil fuel capacity stands idle during the day and then needs to ramp up at night. As battery costs decrease, Senegal can further reduce its dependence on oil and natural gas.

Finally, Senegal’s business environment complicates matters. Senegal has import duties on technologies such as inverters and batteries. Government agencies are slow to approve projects. In the capital city of Dakar, decentralized solar is not very common despite ultra-expensive electricity and endless sunny days. This is a striking contrast to Nigeria’s Lagos or Abuja. Unfortunately, Senegal has yet to see the kind of decentralized solar boom that I encountered in Nigeria.

In the Senegalese context, it is important to remember that 10-15% of the population still does not have access to any kind of electricity. Decentralized solar can help the country reach universal electrification, an important goal for a developing country with ambitious goals for the future.

4. Senegal’s future is sunny and windy

Senegal dug a hole for itself by relying on expensive oil to generate power. But modern renewables are now coming to the rescue.

If Senegal can accelerate investment in wind, solar, and grid infrastructure, it can save a lot of money in avoided fuel costs. This money is then available for other badly needed investments to promote economic growth and improve the quality of life.

Overall, I would consider Senegal’s future both sunny and windy. The country’s geography is ideal for modern renewables, and generation costs are so low that moving forward with investment is an obvious choice.

At least on paper, Togo should face more challenges than Nigeria. A small, French-speaking West African nation of 10 million people, Togo does not produce any fossil fuels. It imports oil and natural gas. As per usual, oil is mostly used in transportation while natural gas is used in the power sector.

Togo is also significantly poorer than Nigeria. While the two countries have similar nominal GDP’s at about $1,100 per capita, price levels in Nigeria are so much lower that the average Nigerian has 2-3 times the purchasing power of the average Togolese.

But my experience in Lomé was very different from Nigeria’s Lagos or Abuja. During my week, the power went off only twice.

How did Togo achieve a reliable supply of electricity?

The notorious electricity meter at my apartment complex.

1. Electricity distribution in Togo

To begin with, Togo’s electricity distribution is prepaid. When I arrived at my apartment, the host told me that she had spent 3,000 West African Francs to buy 25.2 kilowatt-hours of electricity for me. According to her, this would last for 24-36 hours, depending on how much air conditioning I would use. The price of electricity is USD 0.22 per kWh.

While prepaid electricity is a hassle, it has a number of useful features. First, it greatly reduces theft and corruption. Unless the consumer pays money for kilowatt-hours, the electricity simply goes off. This actually happened to me after those initial 25.2 kilowatt-hours ran out.

Second, prepaid electricity means the power company, Compagnie Energie Electrique du Togo, does not need to worry about collections. In a typical postpaid setup, the power company would first need to produce and distribute the electricity, before being paid. This is not a great situation because consumers might not pay, perhaps because a populist politician is promising free electricity in the elections.

The Togolese power sector is centralized, but the country does allow independent power production. For example, ContourGlobal operates a critically important 100-megawatt natural gas plant since 2010, while AMEA Power runs a 50-megawatt solar plant since 2021.

2. Electricity generation in Togo

Togo is a very small country with an electrification rate of 60-70%. To meet its modest electricity demand, the country mostly (73% in 2024) relies on natural gas imported from Ghana and Nigeria. The total generation capacity of the country is only 400 MW.

Recently, Togo has also invested in renewable power generation. Most importantly, AMEA Power’s 50-megawatt solar plant in Blitta is fully operational and an extension with more capacity plus battery storage is being planned.

But the way Togo invests in solar power is very different from Nigeria. In Nigeria, decentralized solar power dominates. Nigeria’s dysfunctional power sector has not managed to secure utility-scale solar investments, but individual businesses and households are buying solar panels and batteries as fast as they can.

In Togo, solar power is more centralized. In Lomé, I only saw solar panels at some institutions, such as government offices. Very few houses had any kind of rooftop solar.

3. The Togolese trade-off

Unlike Nigeria, Togo has managed to avoid daily power outages. A Togolese middle-class household does not need a diesel generator or solar panels, provided they are willing to deal with a short electricity outage here and there.

But electricity in Togo is expensive. At USD 0.22 per kilowatt-hour, the cost of electricity is higher than in many U.S. states. Given Togo’s low per capita income, this price puts electricity out of reach for almost everyone in Togo.

I can only speculate about the reasons behind Nigeria and Togo’s differing paths, but a few things stand out. First, Nigeria’s political system is far more volatile than Togo’s. Nigeria sees a lot of leadership turnover and intense competition, while Togo has been ruled by the same family for decades. This is not to say that authoritarian rule is better than a fragile democracy, but Togo’s leadership can afford a longer view than Nigeria’s.

Second, Nigeria’s fossil fuel riches may have contributed to the perception that electricity should be heavily subsidized. When I was in Nigeria, many people told me that it is a common expectation that government provide energy to the people. In Togo, such expectation clearly does not exist.

4. What next for Togo?

Togo’s power sector future is promising. The country’s economy continues to grow at a brisk pace, with recent annual rates in the 5-6% rate. This growth creates demand for electricity, which enables investment.

Because Togo never went for distortionary subsidies, the basic setup for buying and selling electricity is efficient. And although Togo has no fossil fuels, it does have plenty of sunshine – the heat is brutal – and a proof-of-concept courtesy of AMEA Power.

I expect Togo’s primary challenge to be politics at the highest level. Large investments in the power sector can be efficient if procurement is competitive, but Togo’s leaders always face the strongman’s temptation – to put money in their own pockets instead of focusing on cost-effectiveness.

5. Bonus advice for tourists

Lomé is not exactly a tourist destination. It doesn’t have a wide range of sights or activities. But if you find yourself in Lomé, here’s a few pointers:

· Togo’s top attraction is Palais de Lomé. A renovated mansion, it hosts wonderful African art and the tour is incredibly interesting.

· Choco–Latté is a great spot for breakfast and coffee. West Africa is tragically not a coffee region, but this charming little coffee shop can help.

· From Friday to Sunday, the beach turns into a massive party zone. Check it out either as a curiosity or to dance away the night.

Next I will be reporting from Dakar, Senegal.

At Palais de Lomé – absolutely fantastic.

The picture that you see shows the instructions provided to me regarding electricity supply at my AirBnB in Lagos, Nigeria. As the instructions show, this building has both solar panels and a diesel generator.

This case study turns out to be quite useful in understanding what increasingly affordable solar home systems can (not) do to support business development and job creation in urban Nigeria.

Let’s dive in.

1. The context: a chronic crisis of power

Lagos is Nigeria’s largest city and commercial center, yet it suffers from daily electricity outages. The power can go off here at any time without warning and stay unavailable for hours. This is true in all neighborhoods, including the upscale ones.

Nigeria’s electricity pricing uses a band system that links what customers pay to the quality and duration of supply they receive. Consumers are grouped into Bands A through E based on the minimum hours of electricity per day they are delivered. Higher bands with longer guaranteed supply face higher tariffs per kilowatt-hour, while lower bands with less supply pay less.

Nigeria’s power sector problems have a long history. Generation capacity often falls short of demand due to aging plants, gas supply constraints, and hydropower variability. Transmission networks are limited and prone to bottlenecks, causing widespread outages.

Distribution companies (DisCos) face poor revenue collection, high technical and commercial losses, and debt accumulation. Regulatory challenges, tariff shortfalls, and reliance on government bailouts further weaken the sector, leaving most consumers with unreliable electricity, frequent load shedding, and dependence on costly alternatives like generators.

2. Chinese solar to the rescue

Given this context, access to affordable Chinese solar panels has made everyday life in Nigeria a lot easier. All residential consumers, including the top income earners, face hours of outages every day. During the day, solar panels can supply electrical energy at near zero marginal cost.

A typical solar panel with 530-watt capacity costs about 100,000 naira, or USD 70. When generating at full capacity, one such panel would be enough to run a large fridge with a freezer – and more.

Compare this to the cost of running a diesel generator. According to a recent Ember report, diesel costs about USD 0.66 in Nigeria. If USD 70 buys 106 liters of diesel, that will generate less than 400 kilowatt-hours of electricity. In contrast, the 530-watt solar panel can generate over 600 kilowatt-hours.

In this context, it is not surprising that Nigerians are buying solar panels. Frequent power outages necessitate the use of backup power, and during the day solar is the more affordable choice, even if you already own a diesel generator.

3. What solar can and cannot do for Nigeria’s hospitality industry

Based on my AirBnB experience, it is clear that solar can significantly help the hospitality business in Lagos.

If an AirBnB host or hotel manager wants to charge a reasonable rate per night, they need to provide reliable electricity service. Nobody is going to pay more than a minimum if electricity is unavailable for hours on end.

Before solar, this meant that diesel generators were running for hours every day. As I showed above, generating electricity from diesel is very expensive. Until the Nigerian power system becomes a lot more reliable, demand for backup power is a sure thing.

In my AirBnB, the rooftop had 16 standard solar panels, for a total capacity of about 8 kilowatts. This would be enough to generate to generate about 10 megawatt-hours. That is a cost saving of over one thousand dollars a year.

Yet there are significant limitations. First, the power supply is not quite enough to support reliable air conditioning during the day. Depending on the conditions, air conditioning for a small apartment can require anywhere between 2-4 kilowatts of power. With three apartments, the system would not be able to cool the entire compound, even when generating at full capacity.

Second, without battery storage, solar cannot provide backup power outside the daytime. After the sunset, diesel generators remain the only viable backup solution.

Finally, in the rainy season, days can go by without much sunshine. At this time, the solar panels will have low capacity utilization.

As a result, the diesel generator remains a necessity that is used daily. Solar panels do not replace diesel generators – they reduce their utilization and allow fuel savings. A hospitality business still needs the diesel generator, but that generator now runs only at night and during very cloudy days.

That is a significant difference.

4. The future of decentralized solar in Nigeria

Decentralized solar is an important opportunity for Nigerians. In urban areas, it enables significant fuel cost savings for households, businesses, and institutions that already have diesel generators. In rural areas, solar panels offer access to off-grid household that cannot afford diesel.

But decentralized solar cannot replace a functioning power grid. From hospitality to industry, businesses need reliable power. As long as the grid is not able to provide the energy service, diesel generators will remain a costly, noisy, and polluting reality.