The future drivers of power projects in Africa
Available data on power access in Africa is really gloomy. Kofi Annan, in his foreword to the Africa Progress Panel Report 2015 said “On current trends, it will take up to 2080 for every African to have access to electricity”. Electricity consumption in Spain exceeds that of all Sub-Saharan Africa (except South Africa). Only one in six persons living in Sub-Saharan Africa has access to electricity. And a whopping 600 million live without electricity completely.
Globally more than 1.5 billion people lack access to electricity and this number is likely to remain the same until 2030 according to the International Energy Agency (IEA). This sad global reality continues to drive research efforts towards improving human access to energy. Although Africa is not leading in the inventive efforts to improve energy and power access, it remains one of the most viable markets for power and energy systems in the world.
Heightened stakeholder awareness has led to closer collaborations between the public and private sectors. African governments are chiseling existing power regulations and policies to reflect new realities. These concerted efforts have lowered the political risks, involved in power investments in many countries; making way for the needed private sector enthusiasm. Recent progress includes President Obama’s Power Africa Initiative and the recent passage of the “Electrify Africa Act” introduced by US Congressman Ed Royce.
Across many energy markets in Africa, investors and consumer alike are increasingly reaching a consensus. There is recognition that three elements are critical for success in Africa’s strides for better power access. The triangular forces of power reliability, affordability and green concerns have emerged to be the framework for success in many power projects.
Reliability
Reliability of power depends on the state of the associated infrastructure, power generation mix and management skills that exist between the plant and the meter. With unreliable distribution assets and poor generation capacity, revenue streams for both the generating firm and the distribution firms (where it is split) is threatened.
Aging transmission and distribution infrastructure in many countries is the major source of unsteady supply and its related revenue losses. Power sector players that are unable to offer reliable supply undermines their very existence. Profitable firms are firms that will be able to build reliable systems through a mixture of the right generation and distribution infrastructure, as well as sterling management skills.
Affordability
Power systems that are not affordable will not be attractive for many African electricity markets. This include all state owned national grids, independent power plants that sell to private or public distribution companies, dispatchable and non-dispatchable mini grids and off grid solutions. Even if these solutions are attractive in other markets (with higher purchasing power and energy consumption behavior) they will often require some cost modification to sell in Africa. Rolake Akinkugbe, Vice President for Energy and Natural Resources at FBN Quest (in a recent publication) made a good example based on Tesla’s Powerwall home-storage battery. Although they can provide renewable power (for 24hrs) above the daily need of an average rural home in Africa (6hrs), their cost at $3000 for a 7 Kilowatt hour (KWh) capacity battery makes it somewhat prohibitive in its current form. They may however appeal to other markets.
And now Green!
Renewable energy is now the word in everyone’s lips. Even prior to the agreement of COP 21 Paris, renewable energy was increasingly contributing to the generated capacity of many developing and developed nations. It is the future! Experts say. But the best has not been seen in Africa, as fossil fuel-fired plants continue to come on-stream throughout Africa.
On renewable energy in Africa, Kofi Annan remarkably noted “Africa stands to gain from developing low-carbon energy, and the world stands to gain from Africa avoiding the high-carbon pathway followed by today’s rich world and emerging markets”. Because significant power infrastructure is yet to be built and majority of Africa’s existing plants are fossil-based; Africa has a compelling need to promote clean energy alternatives.
Africa’s unique vulnerability to climate change means that investors and governments will be tasked for greater environmental responsibility. Non-green energy sources will be increasingly scrutinized, making it difficult for “dirty energy” to be supported.
Some countries in regions outside Africa are making good progress. In Asia, Sri Lanka with analogous economic indices to many African countries has made good success in green energy generation. Of its 2,681MW installed power generation capacity (2010) 50 percent comes from hydropower and conventional renewable sources. In South Africa, combined generation from solar power exceeds 510 Megawatts. Elsewhere in Africa many renewable energy projects are being promoted, from Grand Inga in DRC, to Zagtouli Solar Photovoltaic plant in Burkina Faso with Kenya and South Africa averaging $1 billion Foreign Direct Investment in renewable alone in 2014.
To neglect the trio elements of reliability, affordability and green concerns could significantly spell doom for many projects and initiatives at least in the medium to long term.
CHIJIOKE MAMA
Chijioke MAMA is an Energy Research Analyst, Business Strategy Consultant and Syndicated Columnist in Lagos, Nigeria. Chijioke.mama@yahoo.com