Africa Finally Embraces Private Power

African countries are realizing that that private power and investment will improve their electricity access significantly.
Published: Thu 14 Aug 2014

There has never been a better time to invest in Africa’s power sector. This is the opinion of Mikael Karlsson, CEO, Globeleq, who spoke to Engerati at the Africa Energy Forum.

He points to South Africa and Nigeria as the biggest and most attractive markets for investment as they are finally embracing private power as a concept. South Africa has just procured 3600 MW of power and mobilized US$15,000 in private funds. “They had very clear procurement rules and contracts and had a very level playing field”, he explains. He says that Nigeria has a big need for power and they have been privatizing their assets. But, this opportunity is being picked up mostly by locals and not overseas investors. Karlsson says that Nigeria will need to find a way to attract the international community for additional capital.

Growing power demand in africa

Africa has the fastest growing demand region in world. Currently, four out of five Africans do not have access to electricity. This need, as well as the continent’s growing industrial development, will require more power. Karlsson suggests that on the supply side, domestic gas is a real winner in order to meet these growing needs. He says, “Domestic gas supplies should eventually replace pricey imported fuels.”

Domestic gas is very well-priced in comparison to other imported fuels. For instance, Tanzania produces its gas at 5.5 cents per kwh. As a result, Tanzania’s government has saved 4.5 billion dollars in imported fuels.

While community energy and rural electrification is useful, these power sources are too small to have any kind of impact on large-scale economic development, explains Karlsson. “Africa still needs large-scale grid connection. It is more cost effective to build a large power plant instead of a small plant. I see distributed power as being complementary only. It is the large infrastructure that will help economies grow on a larger scale and countries will be able to interconnect and share their energy resources.”

Clear rules of power procurement

Opportunity and demand certainly exists in Africa, explains Karlsson. Private power is opening up throughout Africa and there are many pioneer countries including Kenya, South Africa, Nigeria, North African countries (especially Morocco), and the Ivory Coast, amongst others. In order to harness this potential, governments across Africa must come up with clear rules of procurement, as well as clear contracts. Tariffs must be set in order to attract private investment to the private power sector.