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Africa in the Rising: Despite financial scarcity and low electrification challenge [free access]

October 12, 2018

The African continent presents an ironic picture of a region rich in energy resources but plagued by a scarcity of financial resources to meaningfully benefit from them. At the same time, Africa’s rising population and expanding economy are leading to a surge in the demand for energy. Lack of access to affordable and sustainable energy is a key barrier to the continent’s continued economic and social growth.

 

The Sub-Saharan Africa region is generally ranked amongst the lowest in terms of access to electricity, with only 42.8 per cent of the region’s population having access to the same, against the global average of 87.4 per cent in 2016. Low access to electricity hampers productivity across all sectors, thereby acting as a constraint to the sustained economic growth and overall development of the region. Accelerating the electrification rates remains a key development issue for Africa.

 

In order to rescue the continent from one of the largest energy and infrastructure bottlenecks in the world, the governments of many African countries have started devoting their attention to the development of necessary policies, backed by far-reaching reforms to lift economic growth.

 

Several initiatives have recently been launched, such as Power Africa by the United States Agency for International Development (USAID), and Light Up and Power Africa by the African Development Bank (AfDB). More recently, the CIGRE-World Bank Africa initiative was launched (in 2017) to facilitate knowledge transfer to the electricity sector and address the problem of lack of access to electricity, particularly in the Sub-Saharan Africa region.

 

Scaling up electricity availability: key initiatives

 

An expansion of grid electrification will contribute to the continent’s economic development in the nearer term. Therefore, several initiatives have been steered in Africa to ensure better grid connectivity and greater electricity access. These include:

 

Regional grid integration efforts: The African continent is divided into five regional power pools: the Southern African Power Pool (SAPP), Eastern Africa Power Pool (EAPP), Central African Power Pool (CAPP), West African Power Pool (WAPP) and Comité Maghrébin de L’Electricité (COMELEC or Maghreb Electricity Committee).

 

 

Figure 1: Geographical areas of various power pools


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Source: Internet

 

Table 1: Distinctive features of regional power pools

 

COMELEC

SAPP

WAPP

CAPP

EAPP

Year of establishment

1989

1995

2000

2003

2005

Countries

COMELEC consists of five countries, namely, Algeria, Libya, Mauritania, Morocco and Tunisia.

SAPP consists of 12 countries, namely, Angola, Botswana, the Democratic Republic of Congo (DRC), Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.

WAPP consists of 14 countries, namely, Benin, Burkina Faso, Cote d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo.

CAPP consists of 11 countries, namely, Angola, Burundi, Cameroon, Central African Republic, Chad, Congo, DRC, Equatorial Guinea, Gabon, Rwanda and Sao Tomé.

EAPP consists of 10 countries, namely, Burundi, DRC, Egypt, Ethiopia, Kenya, Libya, Rwanda, Sudan, Tanzania and Uganda.

Key regional integration projects

The countries are already interconnected with each other.

Mozambique–Zimbabwe–South Africa (MoZiSa) transmission project; Mozambique–Malawi interconnector; and Zimbabwe–Zambia–Botswana–Namibia (ZIZABONA) interconnector

330 kV North Core Project: Nigeria/Niger/Togo-Benin/Burkina Faso; Cote d'Ivoire–Liberia–Sierra Leone–Guinea (CLSG) interconnector project; and 225 kV OMVG Energy Project: Gambia/Guinea/Bissau/Senegal

400 kV DRC (Inga)–Angola (Cabinda)–Congo (Pointe Noire) transmission interconnector; and 225 kV Cameroon–Chad interconnector project

±500 kV Ethiopia–Kenya HVDC interconnector

Notes: HVDC – high voltage direct current; OMVG — Organisation de Mise en Valeur du Fleuve Gambie or the Gambia River Basin Development Organisation member countries

Source: Global Transmission Research

 

The power pools have initiated the development of several cross-border projects to meet the growing energy demand and source surplus power from various countries to match the electricity demand in power deficit nations. These include projects like the 4 GW Central African interconnection transmission line project, initiated by CAPP to interconnect with the WAPP and SAPP countries; the currently under construction Zambia–Tanzania–Kenya (ZTK) interconnector, aimed at linking the EAPP and SAPP regions; and the Tanzania–Zambia (TAZA) transmission interconnector project, which will establish a cross-border interconnection, connecting Tanzania with the SAPP and EAPP.

 

The current initiatives to interconnect different power pools are likely to pave the way for the creation of a pan-African power grid in the future, enabling greater access to electricity for the entire continent. According to Kurt Dedekind (Secretary, CIGRE-World Bank Africa initiative), “An interconnected African power grid is likely to benefit the continent from an efficiency perspective, in addition to addressing the challenge associated with the transmission of power over large distances”. However, he also added, “Even though the region holds a potential for the development of the same, the possibility of it would largely depend upon the political and regulatory support in the region”.

 

Leveraging latest technologies: Rapid technological improvements have facilitated substantial reduction in costs by increasing efficiency. Leapfrogging to a more reliable and efficient grid and achieving the targets of national grid-based electrification will require a combination of different technologies. In line with this, major technologies that are likely to gain a place in the African grid in the future are as follows:

 

 

 

 

 

That said, Kurt Dedekind further revealed, “The continent would also face the challenges associated with the adoption of the correct technology, varying climate, distance and variations in topology/terrain across the region”. Further, as a result of starting late in the deployment of smart grid technologies, Africa will benefit from the past experiences of the technologically leading nations.

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Scaling up electricity availability: major challenges

 

As the electrification initiatives gain momentum across the continent and respective countries set ambitious targets and formulate plans to combat the pressing grid issues, the problem of insufficient financial resources begins to take centre stage.

 

The World Bank estimates that the average annual investment requirement for the expansion of the African transmission network during the 2015-40 period will range between USD3.2 billion and USD4.3 billion. For the power sector as a whole, the estimated investments are pegged at USD33.4 billion to USD63 billion during the 25-year period up to 2040.

 

However, power sector utilities in the continent will be hard pressed to undertake the required investments due to lack of funds and increasing debt levels. In order to resolve this, several alternatives have been explored by the governments across the continent:

 

Multilateral support: The development initiatives across Africa have found financial support in the form of credit and grants from several multilateral donor agencies. Specifically, the transmission expansion across the continent has been majorly supported by the inflow of financial aid from several agencies and development banks such as AfDB, World Bank, Agence Française de Développement (AFD) etc.

 

In the past, countries such as South Africa, Nigeria, Tanzania, Ivory Coast and Mozambique have received funds in the form of grants and loans to cover the costs associated with their grid expansion and refurbishment projects. Recently in July 2018, Eskom signed a loan agreement worth ZAR1.35 billion with Germany’s KfW Development Bank to support the required investments for the expansion of the Northern Cape Province’s transmission network.

 

AfDB, which is a major funding source for the African power sector, recently announced its largest financial support package in 2017—a USD83.64 million African Development Fund (ADF) loan and a USD14.15 million ADF grant—to co-finance Ethiopia’s Addis Ababa Transmission and Distribution System Rehabilitation and Upgrading Project (AATDRUP), which aims to rehabilitate and expand the existing grid network.

 

In addition to domestic projects, the development banks are also funding several interconnector projects aimed at enabling the cross-border exchange of power and creating a regional power market. These include the 330 kV Zimbabwe–Zambia–Botswana–Namibia (ZiZaBoNa) interconnection project, being co-funded by the World Bank, European Investment Bank (EIB), AFD and AfDB.

 

Development banks are also supporting rural electrification efforts. Recently, in 2017, AfDB issued the first Light Up and Power Africa Bond for SEK733 million, supporting the bank’s ambition to help the continent achieve universal electricity access by 2025 with a strong focus on encouraging clean and renewable energy solutions.  The investment requirement under the initiative is estimated to range between USD60 billion and USD90 billion per year, of which around USD12 billion will be provided by AfDB. Recently, in 2017, Japan also pledged its support worth USD6 billion for the same.

 

Need for private investments: Adding to the lack of financial resources is the issue of the rising debt levels of the region’s power utilities, such as South Africa’s Eskom Holdings SOC Limited (Eskom), which has further hampered their capacity to undertake additional investments. Since the inflow of donor aid is likely to further increase the debt levels, the African countries have been strongly encouraged to attract private investments.

 

The World Bank has also emphasised the need for greater private investments in the segment, stating that the existing disproportionately large funding gap affecting the continent’s power sector cannot be met by the limited public finance alone. It has also indicated that private investments in transmission infrastructure could help expand electricity coverage in Africa as well as ease financing constraints on the region’s power utilities. AfDB has also encouraged African governments to incentivise private investment and enable private investors to realise their full potential. For this, it believes that putting in place a conducive and predictable macroeconomic, business, property rights and fiscal environment is a prerequisite.

 

However, bridging the existing gap between the required and existing funds would need a confluence of new business models, financiers and stakeholders to increase the continent’s capacity to generate electricity and to build transmission lines in order to channelise generated electricity to the distribution networks. Private sector participation in the region’s transmission sector holds the potential to be increased if suitable investment conditions are created.

 

The independent power producers (IPPs) are already actively involved in the power generation segment in Africa, with a portfolio of around USD25.6 billion in investments and 11 GW of installed capacity. On the other hand, the transmission segments in all African countries continue to be owned and operated by the respective state-owned utilities. However, in some countries such as Algeria, Egypt, Ghana, Kenya, Nigeria and Uganda, the transmission function is handled by a separate company, though under the ownership of the state.

 

Kenya and Nigeria are amongst the first African countries to embark upon the public-private partnership (PPP) route for the development of their transmission projects. Recently, the Nigerian government announced its decision to go ahead with the contractor finance model for the construction of future projects, wherein private investors will be invited to bid, procure and build sections of Transmission Company of Nigeria’s transmission projects. The coming years are likely to witness around USD200 million worth of projects being auctioned for the first tranche under this new model.

 

The Kenya Electricity Transmission Company Limited and World Bank have identified four transmission pilot projects to be awarded under the PPP model in Kenya. Together, the four projects involve the construction of 541 km of lines and USD157 million in investments. It plans to follow a 20-year build, own, operate and transfer model for awarding transmission projects to the PPP players.

 

Key future developments to watch out for

 

Based on an analysis of the current trends in the African continent, several major developments are likely to garner attention in the near future. These include:

 

Change in power sector’s organisation structure: While almost all the regions have state-owned and vertically integrated power utilities, several countries are introducing structural reforms in their power sectors. Kenya is currently in the process of introducing a law to allow private players in the distribution segment and end the state-owned company’s monopoly. In addition to this, there is a move towards reconsolidation in Algeria’s distribution sector and the unbundling of South Africa’s Eskom.

 

Shift to renewable sources: As a majority of the countries globally are focusing on going green and investing in low-carbon technologies, Africa is also working towards developing a more environmentally-friendly generation mix. This includes Algeria’s ambitious renewable energy development plan of ensuring over 22 GW of renewable energy by 2030, Egypt’s target to generate 20 per cent of its electricity from renewable energies by 2020 and Nigeria’s plans to add around 2,130 MW of solar capacity by 2027. Thus, the coming years are likely to witness the African countries’ shift from thermal-based generation to carbon-friendly generation sources.

 

Move towards integrated grids: As the African countries continue to invest in developing several interconnectors both within the continent and with other continents, Africa is making a shift towards a more integrated grid to balance power demands.

 

Smarter grids: Major African countries have recently started setting targets for a roll-out of pre-paid and smart meters. Besides this, some activity in the electric vehicle and solar plus storage systems space is also expected in the future.

 

CIGRE-World Bank Initiative for Africa

 

A recent interview with Rob Stephen (President, CIGRE), Konstantin Staschus (Chair, CIGRE-World Bank Africa Initiative Work Group) and Kurt Dedekind (Secretary, CIGRE-World Bank Africa initiative) revealed further details about the CIGRE-World Bank Africa initiative. Excerpts are given below.

 

What is the mission of the CIGRE-World Bank Initiative for Africa?

 

In the context of CIGRE’s 2017-2021 Strategic Plan and its new slogan ‘Sustainable Electricity for All’, effective dissemination of CIGRE know-how in Africa deserves special attention:

 

  • Sub-Saharan Africa contains the largest number and largest percentage of people who still do not have access to electricity.
  • Africa is developing rapidly economically and has the highest population growth worldwide, which means electricity system growth will be especially strong. It is in the interest of Africa and the entire world that this growth be sustainable.
  • Different from other parts of the world with large numbers of people still without electricity access, African people without electricity are spread over many different countries whose central institutions often struggle with resource and skill deficits.
  • Different from other parts of the world, current population densities in Sub-Saharan Africa are low and make grid-based electrification expensive under many scenarios.
  • However, Sub-Saharan Africa can benefit particularly strongly from the ongoing energy system paradigm shifts to cheaper renewable energy, digitisation including viable microgrid control, and ever better understanding of the role of markets versus monopolies in electricity systems. African system planning accounts for remote villages with near-term microgrid supply and longer-term grid connection as population density and electric load may increase, and in parallel for application of microgrid market-based approaches to manage generation deficits in rapidly growing metros. Learnings from this dual use of microgrids in Africa can in turn benefit the whole world.
  • The huge hydro and solar natural resources in Africa make international or even inter-continental interconnections seem especially attractive—they could help achieve reliable energy supply with very high renewable energy penetration affordably. This could also positively affect renewable energy integration in Europe and the Middle East.

 

Because all the above reasons affect which infrastructure investments have the best multi-criteria benefit/cost ratios, the World Bank also has a strong focus on developments in the African electricity system. Thus, the World Bank’s investments in Africa can benefit from the understanding gained from CIGRE’s state-of-the-art power system reports. But at least equally important is the know-how transfer to the managers, engineers and planners in Sub-Saharan countries’ energy ministries and legislators, nascent regulators, grid and system operators, generators, industrial customers, city administrations, and microgrid installation and maintenance companies. Universities—including Centres of Excellence—are additionally very promising target partners for know-how transfer to pursue an all-important self-empowerment. For this, the dissemination of CIGRE work results in Africa is crucial, and needs to be systematically stepped up.

 

As a backdrop to the above, the mission of the Work Group activities may thus be described as:

 

"A systematic dissemination effort for Africa via a cooperative effort between CIGRE and the World Bank, focusing on assisting African countries to develop internal expertise by providing access to unbiased, up-to-date technical experience in several innovative ways."

 

When was the initiative formed?

 

The initiative emanates from the strategic intent of CIGRE, which was developed during 2017. The Africa Initiative Work Group was set up towards the end of 2017, and the first meeting was held in December 2017.

 

What are the key objectives of this initiative?

 

The goals of the Africa Initiative Work Group are as follows:

 

  • Transfer of knowledge to facilitate development of the electricity sector and access to electricity in Africa.
  • Establishment of CIGRE cooperation agreements with the World Bank and African electricity associations and of joint collaborative organisational structures to ensure implementation of the agreed actions; this includes working structures focused on dissemination of knowledge and implementation in Africa, e.g. a temporary steering group, regional councils and specific microgrid Work Groups.
  • Knowledge transfer to enable the growth of African CIGRE institutional and individual members who over time organise future dissemination and implementation activities in a more autonomous way.
  • Definition of a financial framework for training, workshops and implementation support consulting, for topics related to CIGRE work products and of World Bank interest, which addresses cost and efficiency concerns of African countries, and of the World Bank.

 

What roles are Eskom and the World Bank playing in the CIGRE-World Bank initiative for Africa?

 

A number of Eskom employees (the current CIGRE president is an Eskom employee) happen to be members of the African Initiative Work Group. Eskom supports initiatives of this nature in Africa. A memorandum of understanding (MoU) was signed between World Bank and CIGRE in Paris during August 2018, which signifies the formal cooperation and partnering agreement that the two bodies have entered into. Consistent with their respective mandates, the parties wish to collaborate in carrying out activities conducive to improving the dissemination and application of state-of-the-art techniques for power system development in Sub-Saharan Africa.

 

Who all are participating in this initiative?

 

The membership of the Work Group consists of present Study Committee chairpersons from CIGRE, World Bank delegates and some CIGRE members that are experts in their field. The president of CIGRE is also an active member of the Work Group.

 

The intent is that CIGRE experts from the various Study Committees will engage with the power pools, government and regulatory bodies, academic institutes and mining and industrial customers in Africa, in an endeavour to facilitate know-how exchange via workshops, tutorials, colloquia sessions and local CIGRE conferences. CIGRE experts are in the process of being identified in their respective fields, which will assist with these interventions.