Advancing private sector investment option to boost West Africa’s transmission infrastructure
Close to two-thirds of West Africa’s population largely rural and poor have no access to stable electricity supply and this no doubt has adverse consequences on socioeconomic welfare and economic productivity.
While it is no longer news that the power sector’s record of delivering services in the region remains suboptimal as electricity consumption to a large extent remain an exclusive reserve for people who can afford it.
According to a recent report by World Bank, the shortfall in electricity transmission by West African countries like Ghana, Nigeria, Liberia, etc is at odds with the rising aspirations of the international community and national governments to reach every consumer with reliable, affordable, and sustainable energy solutions by 2030.
The World bank report indicates that bridging the gap between where West Africa is and where the region aspires to be will require a combination of new business models, new financiers, and new stakeholders in order to increase its capacity to generate electricity, and to build distribution networks capable of delivering it to consumers, as well as transmission lines to link the two ends of the power supply chain.
In the report, generation and distribution, the two ends of the sector value chain, have received more attention from policy makers and financiers as they experiment with new ways of procuring generation capacity, as well as more efficient ways of delivering service to consumers.
Independent Power Producers (IPPs) have made investments in generation of US$25.6 billion, with an installed capacity of 11 GW. In distribution, new models of harnessing private sector efficiencies have emerged in various forms of private-public partnerships (PPPs), as well as in concessions, management contracts, operations and maintenance contracts, and so on.
Transmission, which has traditionally been considered a natural monopoly, and which contributes a relatively small part of the overall cost of the sector value chain, needs to move in tandem with additions to generation capacity in order to achieve timely transmission and final delivery to consumers.
Transmission lines reduce overall costs by ensuring economies of scale in generation; creating access to cost-efficient sources of generation; reducing the reserves needed to ensure security of supply; Even so, transmission remains a neglected part of the sector value chain.
The average annual investment requirement for the transmission sector over the period from 2015 to 2040 ranges between $3.2-4.3 billion.
The World Bank report therefore calls for increased private sector investment in the under-developed electricity transmission infrastructure.
The report notes electricity transmission infrastructure as a vital ingredient for reaching West Africa’s energy goals.
The Bank further highlights that alongside generation and distribution, improving and increasing transmission infrastructure is key to closing the access gap.
“So far, transmission in Africa has been financed from public sources and new models of financing involving the private sector have received insufficient attention from policymakers or financiers,” the World Bank stated.
Senior director and head of energy and extractives industries at the World Bank, Riccardo Puliti, said: “Private finance has supported the expansion of electricity transmission infrastructure in many regions of the world and the same can happen in the region.
“To attract private sector investment, however, governments need to adopt policies supportive of this strategy and establish the right business, regulatory and legal environment to sustain investor interest,” Puliti added.
KELECHI EWUZIE