The scale of Africa’s power shortage is a damning political and market failure which has dire economic and social consequences. The UK, with a population of 62 million, has more power plants than the whole of sub-Saharan Africa, whose population numbers 854 million. Of the few mostly ancient power plants which do exist, at any one time about one quarter are unable to operate.
Yet the potential exists with large numbers of the population in need of power and vast amounts of natural resources. If the conditions could be made attractive to investors there is much to invest in.
Less than a quarter of the population has access to electricity, fewer in rural areas. Most countries have turned to very expensive, and dirty, diesel-powered generators. As a result the price of power in the region is double that of other developing regions, slowing growth. Nigeria is one of the few countries in the world where more electricity is generated by diesel generators than power plants. The country has electricity demand of 10gw but the grid only meets about a third of it.
Yet Nigeria — along with much of the continent — also has huge gas resources which it either exports or wastes by flaring. Phillip Ihenacho, chairman of Nigerian oil and gas producer Seven Energy, which is building gas pipelines to supply power plants, said: “Nigeria is sitting on a huge gas bubble. It should be using this natural resource itself rather than exporting it.”
But the power sector, dominated by inefficient state run utilities, has been starved of investment. Most utilities barely manage to cover their operating costs and do not have the capital to build new plants. The private sector has only invested an average of $300 million per year for the last decade, a fraction of the estimated $9 billion needed annually to meet national electrification targets for the region.
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Veronika Gyuricza. from the International Energy Agency. says: “The private sector and even the World Bank have not scaled up investment because there is so much political, regulatory and institutional uncertainty. It’s not clear how investments would pan out.”
Governments have a habit of slashing electricity tariffs, particularly before elections, to boost their popularity, reducing plants’ returns. While most countries have enacted energy market reforms, regulation remains weak and unreliable. Privatisation has only occurred at the margins. As a result most companies are unwilling to invest the billions required to build new power plants given the high risks involved.
Nigeria has ambitious plans to increase ten-fold the capacity of its power plants by the second half of this decade and the Government is working on market reforms to attract the investment required.
Ihenacho adds: “The government knows it will have to harness the private sector to fill the gap and will have to come up with a pro-business and private sector regime. If the plans come together it would be one of the biggest opportunities for the power sector in the world.”
Success could also spur other governments to implement similar market-friendly policies. Provided the right frameworks can be put in place, the region’s rapid economic growth provides grounds for optimism.
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But the solution isn’t just building lots of coal and gas plants and big hydro projects, although these are desperately needed. According to the IEA, for 70 per cent of the region’s rural population without electricity, solar and mini hydro projects would be more economical than extending the grid. What is more, as demand for electricity rises, for example for charging mobile phones, renewables are becoming a cheaper solution than diesel generators.
Ben Good, chief executive of GVEP, a not- for-profit electricity contractor, said: “Awareness in Africa about alternative energy is rising among consumers. Consumers are doing it to save money not to be green.”
Case Study: Electricity for Africa is a dam hard nut to crack
Power projects don’t come more ambitious — or harder to pull off — than the giant Grand Inga hydropower dam in the Democratic Republic of Congo.
At a cost of $80 billion to build, it would generate 39 gigawatts of electricity, more than half of Sub-Saharan Africa’s existing capacity and double the size of China’s giant Three Gorges Dam.
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Tapping the Congo river would transform the region’s energy future, providing cheap electricity to neighbouring Angola, Botswana, Namibia and South Africa. Despite repeated attempts, little electricity has previously been traded across borders in Sub-Saharan Africa, pushing up costs.
The giant renewable project would also solve the dilemma faced by the World Bank and other potential investors in Africa’s power sector: how to bring electricity to the region without a surge in carbon emissions.
But despite the signing of countless pacts and memoranda of understanding between the countries involved, the project is no closer to becoming a reality. Last month, BHP Billiton dealt a blow when it scrapped plans to build an aluminium smelter in the DRC which would have bought about 2gw from the first phase of the project. Energy executives say that Grand Inga is particularly complex, and risky, because of the number of countries involved, scaring off potential investors in what is an already unstable part of the world.
All is not lost: the DRC will now revert to its original plan of exporting the power from the first phase to neighbouring countries. But given the slow progress to date, even a slated completion date of 2025 looks optimistic.