Re-energising Africa’s power sector key to growth

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Jeff Kapembwa

Lusaka – Africa’s energy statistics make for worrisome reading: the continent has installed capacity to generate around 170GW of electricity, but requires output of about 250GW between now and 2030.

According to the International Renewable Energy Agency (IRENA), in a working paper titled “Prospects for the African Power Sector”, this this means governments, businesses and households often have to rely on expensive alternatives such as diesel power generation, which costs economies anything between one and five percent of GDP annually.

To reach generation of 250GW by 2030, countries must double capacity growth to “around 7GW a year in the short-term and to quadruple by 2030”.

IRENA says, “The magnitude of the investments required is such that governments will need public-private partnerships in order to scale up investment in generation capacity … Africa faces a unique opportunity as nearly two-thirds of the additional capacity needed in 2030 has yet to be built.”

Didier Tella, the director-general of the Association of Power Utilities in Africa (APUA) says to meet this challenge, governments and energy sector stakeholders “must start to think outside the box”.

“African governments must avoid entering a new round of power sector reforms; there is - rather - a need to reinforce the social service capability of the utilities with good governance. Mobilisation of domestic private funds and bond issuance are key to save the sector finance,” he tells The Southern Times.

The Cote d’Ivoire-headquartered APUA believes the added challenges brought about by the COVID-19 pandemic – which include an anticipated loss of revenue for utilities and disruptions in new generation projects – could also provide an opportunity for stakeholders to rethink the sector and better position it for the future.

With traditional American, Asian and Western energy investors increasingly inward-looking because of the novel coronavirus, Africa should start looking at intra-continental linkages that can boost electricity self-sufficiency.

 

For instance, Tella says there is need for special measures for low-income electricity consumers who may need a temporary exemption from payment of bills but structured in a way that does not hurt the long-term sustainability of energy investments.

The equivalent amount of the exempted bills, Tella suggests, could be restructured as recapitalisation for utilities.

Tella also says energy sector stakeholders should tap into institutions like the African Development Bank.

“The African Development Bank is well positioned to take the lead in the implementation of (energy investments)” within the context of post-crisis recovery policies Tella adds.

And rather than approaching the African Development Bank as individual states, countries should leverage on development of regional power pools that promote greater efficiencies than small national markets that may be unsustainable to invest in.

Countries, particularly those in Southern Africa, can also explore synergies with major investor the Development Bank of South Africa (DBSA), which has over the years shown readiness to guarantee financing of energy projects at both bilateral and multilateral levels.

Specific attention, Tella notes, should be given to investment in renewable energy sources, with the base load coming from hydroelectric generation.

“Hydropower generation is the first renewable energy and should be the primary source of generation for Africa to secure a constant, clean, and cheap baseload. Without this base load, other renewable energy sources cannot secure the power systems,” which can cause grid instability.

Meanwhile, APUA – whose membership covers all 55 African Union member states – has postponed its 2020 congress due to COVID-19.

The congress was supposed to be held in Dakar, where Senegal would take over the three-year chairmanship of the association from Zambia.

Tella told The Southern Times that, “Unfortunately, due to the spread of the coronavirus, we postponed the APUA congress to June 2021.”

 

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