Would this year’s Africa Energy Forum have the same stories of promised projects? The “Africa is open for business” message? The same sense of pent-up desire for electrification mirrored only by frustration and a lack of movement?
Thirty six interviews later, talking to ministers, investors, regulators and financiers on and off the record, here is our view.
The electrification of Africa will be tipped by renewables and distributed generation. Transmission and distribution infrastructures are woefully behind the curve. Speed of project execution is hampered by inadequate frameworks and non creditworthy offtakers - usually national utilities.
Independent regulatory frameworks are there or thereabouts in a lot of countries but have yet to take hold. Energy ministries and governments are playing an active role, talking openly about transparency and dealing with corruption.
More projects and the Golden Age of Renewables
More projects, renewables in particular, have reached closure reflecting the speed to market for this type of power. A reduction in the cost of solar panels makes this fuel source come close to attaining grid parity, particularly when deployed at scale.
In this sector there is also a particular interest around rural electrification, where the requirement is simple: The lights on for a bit longer or a charging point for the mobile phone, creating local micro economic upticks. We were party to talks on innovative approaches, with one company electrifying villages using microgrids and showing real human economic impact.
Large scale renewable power is also taking off, led in large part by the well run South African IPP programme. In the ECOWAS region (Benin, Burkina Faso, Cabo Verde, Côte d’Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo) renewable energy technologies account for an estimated 28.8% of the region’s total installed capacity of grid-connected electricity.
Concentrated Solar Power (CSP) is also finding a revival in Africa, with the inauguration of the Kaxu Solar One plant in March of this year. CSP is attractive due to its inherent storage capacity, allowing it to produce power a few hours after the sun has set.
The World Bank also released figures showing that Nigeria's renewable power production posted the world's fastest growth at 15% a year.
Temporary to permanent power - The evolution of a sector
At the Africa Energy Forum 2014 we had discussions around the theoretical interplay between renewables and temporary high ramp power. This conversation advanced considerably at this year’s Forum with projects on the ground using a hybrid approach blending power sources to create the most efficient mix.
“...microgrid hybrid systems are smaller distributed systems through a network, whether that is for rural electrification or the build out of a city, and I think that is a fundamental change..” said one participant.
Karpowership, part of Turkish consortium Karadeniz Holding, will be delivering their first powership, powered by heavy fuel oil, to Ghana ahead of schedule this September. In fact the company is building a 500MW powership for an as yet unknown offtaker, showing a very buoyant temporary power sector in Africa.
A recent report by the Africa Progress Panel led by former United Nations head Kofi Annan predicts that grid electricity may require investment of as much as US$55 billion compared to the current levels of US$8 billion. With such an investment gap, the speed of renewables and temporary power trump more traditional power plants.
Africa the leapfrog continent?
Many believe that Africa will grow into a blended power infrastructure. Microgrids will be commonplace, especially around large industrial needs. The mining industry in Africa is particularly poised to drive this trend, due to remote locations and the high cost of energy.
These industrial players will become an interesting part of the future energy mix, with the financial clout to invest in local generation and circumvent national power structures.
“...combinations of solar, battery hybrid and traditional high speed engines in combination offer really interesting economic advantages because you can run different sources at different times of the day to match customer demand..”
The challenge of creating a blended power mix is to ensure that the power islands are grid ready. This will help these ‘power pockets’ to not just play an immediate role but one in the future too.
It is too early to tell if there will be a ‘leapfrog,’ as sometimes erroneously compared to the telecoms sector. However Africa is uniquely positioned to have an energy mix which may be between 40%-80% renewables in some regions.
Transmission and Distribution – The Chicken or the Egg
Despite a huge focus on the power generation, this power will need to be evacuated to take it to where it is needed. In some cases this means transmission lines from remote hydro plants to cities or industrial areas.
While the building of transmission lines is a (relatively) simple component to add to an IPP contract, what is less easy is the strengthening of the distribution grid. Here a number of challenges abound.
Energy theft is by and large a distribution grid problem and a significant factor to revenue losses. It is a leaking bucket which needs to be plugged. Many feel this is where smart meters will come into play however the cost equation simply does not stack up for many of the use cases in the African economic context.
We believe new advanced distribution analytics will be a better panacea for the problem, complemented by governance and control through strong and robust management within the distribution utility.
“What Europe did was to privatise the transmission lines so everybody was able, though a licence, to build their own transmission lines or use existing capacity… if we can do the same in Africa we will solve our problem”
The control of energy theft is a cornerstone to progressing the African power landscape. Strong and creditworthy utilities will do much to clear the power project logjam. The privatisation under good management of transmission and distribution will get the power to where it's needed.
With so much focus on generation, the time is now to strengthen and make ready the distribution infrastructure. Particularly if we see speeds of delivery of renewable ‘farms’ in 6 to 12 month timescales.
Governance and Regulation and the big C
Much encouragement can be taken from both ministerial and regulatory ‘actors’ citing the need to remove regulation from politics, to create independence and transparency. We also addressed for the first time the issue of corruption and the steps many countries represented at the Forum had taken to significantly reduce if not eradicate this.
“You need to have some regulatory regime which will allow for fair play for all the participants….. in the absence of that it becomes very difficult.”
However this is not enough - more needs to be done to drive governance and regulation throughout the power sector. It needs to be a mantra which goes all the way through to the end consumer.
“I can't help but think that the countries that really need power haven't got [it] because there isn't necessarily the administrative, political or financial framework in place”
A further challenge lies in introducing cost reflective tariffs into a socially diverse constituency. This is a key tenant to a healthy power sector, especially where huge investment is needed. It will give confidence and result in the reward of reliable power in areas where it is needed most and help build creditworthy utilities.
“...The biggest cry of all investors in the world has been cost reflectivity of the off taker..”
Africa Power Overview
According to The World Bank, shortages of electricity across sub-Saharan Africa are holding economic growth back by 4% a year. Other figures are equally staggering, with over 600m people without access to grid electricity, leading to innovative social enterprises like Shake Your Power to try to fill the gap.
Africa is uniquely poised to embed and pioneer a modern sustainable power infrastructure, and it can and should become a world leader in this area, exporting home grown technology and innovation. This will require long term vision and leadership finance and technology are not the issue.