Poor cross-border infrastructure hampers West Africa power sector growth

A report by the Institute for business in the global context indicates that West Africa suffers from a dearth of electricity as a result of low rates of grid access, low consumption levels, and frequent blackouts.

According to the report, the region’s low access and consumption rates stand in stark comparison to both developed countries and peer developing countries, with access rates ranging from 4 to 40 percent and per-capita consumption rates around 155 kWh/year.

A cursory look at the situation shows that a fundamental issue facing the West Africa electricity sector is the lack of significant cross-border infrastructure; there are significant cost and reliability advantages to regional system integration, which are not being realised by countries in the region.

Industry close watchers observe that the various electrical grids largely operate as non-interconnected electrical islands reflecting political borders, saying that significant savings could result from more rationalised regional planning and electricity trading.

Experts indicate that increased electricity trade, power pooling, and collective regional approaches to new generation and transmission projects would provide a 30 percent reduction in total costs for the period 2000 to 2020 in West Africa.

Industry analysts say three fundamental problems afflicting the bulk power sector in West Africa are a vicious cycle related to a lack of cost -reflective tariffs; incentivising international transmission, and a challenging fuel supply outlook for thermal plants in countries depending on Nigerian natural gas.

“Perhaps the most intractable problem in West Africa has been a vicious cycle related to tariffs and investment”. They added.

In their various summation, analysts maintain that issues around tariff represents a basic pattern that has replicated itself in country after country, adding that although the phenomenon is by no means limited to the region. Most countries have parastatal vertically integrated electricity utilities ultimately responsible to the federal government; various forms of socio-economic and political pressures have kept electricity prices very low for decades.

The problem is that persistently low prices are often a warning that an infrastructure system has fallen into a “low level, stable equilibrium that is characterised by low levels of investments, quality, service, and customer support and appreciation.

According to experts “The cycle begins when electricity tariffs must be approved by regulatory bodies in each country; the commissions usually claim to balance technical and financial concerns with concerns about quality service for the public”.

The Institute for business in the global context report shows that as population in all of these countries are quite poor on a per-capita basis, the political pressure is always to deny the higher rates that utilities say they need to cover their costs. Regulatory commissions often end up splitting the difference and approving non-cost reflective tariffs which leads quite directly to financially weak vertically integrated utilities, or if the sector is unbundled, distribution companies.

“The financial weakness of these entities is reflected in their poor credit quality. Since these entities are the off-takers or purchasers of power from any existing or potential generation company this leads to a lack of investment in generation capacity as well as in distribution networks”. The report adds.

Over time, a lack of sustained investment in both new and existing assets leads to deterioration of the system; this is often reflected in high system losses at the distribution level and unreliable supply which stem from a lack of available Mws well as transmission or distribution problems.

“Regulatory bodies are loath to approve higher electricity tariffs when the quality provided by current systems is so bad, as such a move will be politically unpalatable”. Experts said.

KELECHI EWUZIE