Nigeria and other countries in Sub-Saharan Africa spend an estimated $20 billion a year on fuel for back-up generators, according to Wood Mackenzie, UK-based energy and intelligence provider that empowers decision-makers with unique insights on the world’s energy resources.
In Africa’s biggest economy, populists are facing persistent power outages, a situation that is affecting households and reducing the productivity of businesses, many of whom are struggling to pour capital into backup generators instead of investing in staff or equipment.
Wood Mackenzie says across Sub-Saharan Africa (excluding South Africa), consumers spend just under $20 billion a year on fuel for back-up generators – around 80percent of what they spend on grid electricity, partly owing to massive underinvestment in electricity infrastructure.
“The average Nigerian consumes less than a third of the electricity used every year by a moderately efficient American refrigerator,” Benjamin Attia, an analyst at WoodMac, said in its latest report.
For advanced electricity sectors, WoodMac admitted that the current global energy transition is triggering a shift from traditional business models of generating, transmitting and distributing electricity to consumers towards an increase in customer-owned, behind-the-meter generation, battery storage, electric vehicles and demand response, in which both customers and utilities bring value to each other.
WoodMac says this evolution has not begun in most under-electrified economies. “But the vacuum left by public utility bottlenecks and far-from-universal electrification is being occupied by private sector firms with a new vision and a new way of generating and delivering power.
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“Distributed energy service companies are using a flexible prepaid service model to take advantage of the increasing affordability of solar and battery technologies in order to align cost, value and energy delivery. They can also manage credit risk directly and digitally outside the bounds of traditional utility cost-recovery mechanisms,” WoodMac report adds.
WoodMac reports that growth in the off-grid market activity beyond the grid will begin to have an impact on future on-grid electricity demand.
“Where centralised utilities and off-grid service providers clash, quality and cost of service will determine where consumer spending flows, especially for commercial and industrial users who suffer major productivity losses from interrupted service.
“As more high-value customers favour cheaper, cleaner, more reliable captive solutions, cash-strapped utilities are likely to see reduced revenues without equivalent reductions in cost, so will face more difficulties in maintaining and expanding their networks,” Attia states.
The report noted that countries in Sub-Saharan Africa including Nigeria would need to invest the sum of $350 billion between now and 2030, to be able to improve electricity generation/distribution and potentially solve the region’s long-standing electricity access problem.
“These investment opportunities work around the fiscal and operational bottlenecks posed by some of Sub-Saharan Africa’s state utilities. Service providers are going straight to the bankable segments of residential, commercial, and industrial electricity demand, typically through distributed, renewable, off-grid solutions where the public utility does not feature,” WoodMac noted.
The report further attributed Africa’s long-standing electricity access problem to massive underinvestment in the region’s electricity infrastructure. It said with the right investments, Sub-Saharan Africa could potentially change the trajectory of electricity demand and supply, not only within the region but globally.
