Has anyone ever imagined an entire country without power? Probably not. Another question: would you believe that about 570 million people have no access to electricity? Plausible. This is the story in Sub-Saharan Africa where the number of people without power (almost 60% of its population) are more than the entire population of the European Union. While the numbers could be alarming, as they should be, it does not do enough to appreciate the significant levels of progress that has been made in terms of powering the continent. According to the World Bank’s Sustainable Energy for All (SE4ALL) database, only 16% of the population had access to electricity in 1990 compared to about 43% in 2016.
A booming population has exacerbated the energy deficit with a projected 400% increase in demand per capita in about two decades if present growth rates are sustained. In addition, this demographic trend has impeded the ability of governments to finance large scale infrastructure projects including in the power sector which would require about $14 billion annual investment, a whopping amount of money by any standards and approximately Tanzania’s annual budget, if it must achieve a 70% electrification by 2040. But it is not impossible.
The ideal scenario would be to focus on low hanging fruits which are up for easy grabs. Doing this would make a significant difference in the energy landscape and provide the much-desired success story and impetus for change. Currently, Africa will be able to increase its electricity output by about 20 to 25% if it Is able to cut out technical and commercial transmission and distribution losses. In some countries these losses get as high as 50%, compared with the accepted averages of between 7% to 10% in most of the rest of the world. These losses could be attributed to three major factors: First — ageing transmission and distribution networks which provide inadequate coverage of rural areas, Second — theft and vandalism, and Third — a poor maintenance culture of its existing infrastructure.
Digitisation, Decentralisation and Decarbonisation
Technological advances in the electricity sector including digital and smart grid solutions such as self-healing grids offer the continent the opportunity to leapfrog and accelerate change. These technologies have addressed some of the most critical issues affecting the sector in the countries — including the lack of real time or accurate data.
Real-time distribution data can be used to detect and isolate faults and to reconfigure networks to minimize customer impact and downtime. Utility companies like ZESCO in Zambia have achieved remarkable results, where they deployed the first digital sub-station in Africa using GE Grid solutions. ZESCO upgraded its Muzuma Air-insulated substation (AIS) to a digital Gas-Insulated substation (GIS) with 330KV transmission lines to solve the problems of increasing maintenance and repair of conventional equipment, costs, limited grid information and visibility among others. This has led to reduced incidences and duration of power outages for the consumers, increased revenue because of cost savings from lower equipment maintenance, and more transaction volume due to improved billing accuracy.
SSA must ensure that it improves grid reliability and efficiency as well as expand the existing grid to the 63% of the region’s population who live in rural areas. This is critical to unlock its manufacturing and job creation potentials. To make this work, a decentralised and digitalised approach to electricity must be employed. New innovative business models such as virtual power plants (VPPs), demand response, distributed generation, digital sub-stations and microgrids help to improve and stabilise electricity supply and at the same time increase the customers’ control over their energy usage— helping to save money and raise energy efficiency.
Malawi is another significant reference, where funding from the Millennium Challenge Corporation (MCC) ensured that the Electricity Supply Corporation of Malawi (ESCOM) improved its transmission network by installing GE’s latest Energy Management System (EMS) e-terra platform solution and Remote Terminal Units with telecommunication upgrades across 15 substations. This has resulted in a modernised grid, allowing for real-time remote monitoring, planning and optimization of ESCOM’s transmission systems nationwide, and paving the way toward increased economic growth for the country.
The region must also consider decarbonisation as a matter of priority. It needs to expand its renewable energy sources to provide cleaner and more accessible energy as it is vital for improved stability and security of its electricity mix but also the safety of its people and environment. Majority of the regions power supply is from hydro and fossil fuels, but this must change as renewables are becoming more cost effective than they have ever been. The region is also a hotbed of opportunities for large scale clean, renewable energy installations based on its needs and environmental potentials. In West Africa, countries like Nigeria, Ghana and Niger have shown huge solar power prospects while there is significant wind power potential in Cape Verde, Senegal, and the Gambia for investors to explore. This energy shift is an important area of focus for the West African Power Pool, an interconnected electricity market of about 14 countries in the ECOWAS region that holds a current power capacity of 8GW.
Localization – beyond skills transfer
For power investments to be sustainable, African countries must develop and implement smart localization strategies for talent, partnerships and supply-chain. The development of local African talent with the most in-demand commercial and technical skills would lead to the creation of the next generation of engineers, technicians and specialists working in the sector. Many OEM’s are investing in one form of skills or talent development programs, but Africa will need to move beyond this singular strategy. Developing a strong network of indigenous partners including power and infrastructure developers, contractors and operators allows for stronger more diversified project consortiums. This ensures more efficient project execution and higher certainty of timely delivery of projects. Several OEMs have also strategically invested in local supply-chain. A good example of this is GE’s multi-modal service, repair and manufacturing facility in Calabar Nigeria. This facility brings several advanced technical competences for the Oil & Gas and Power industries for the West African market. This allows GE to operate much more efficiently, more competitively and more compliantly with local regulation, while ensuring that West Africa is intimately plugged into our global supply chain. Several other firms are investing in a localized supplier network as a key strategy for building and supporting a sustainable infrastructure framework across the region.
Diversifying financial sources
Latest estimates of financing activities show that loans from Chinese lenders accounted for more than 40% of all infrastructure finance in Sub-Saharan Africa in 2017 and its policy banks made more than the four-fifths of lending by Development Finance Institutions (DFIs) in the region. Mambila Hydropower Plant (Nigeria) valued at $5.8 billion; Lamu Coal-Fired Power Plant (Kenya), a $2 billion PPP; Medupi Coal-Fired Power Plant (South Africa), worth $1,5 billion; and Kafue Gorge Lower Hydro Power Plant (Zambia) in 2015, worth $1.5 billion are some of the recent examples of large power deals in Africa where at least 50% of the finance was provided by Chinese lenders. These funding commitments are much welcome but concentrated in generation projects. European DFIs are among the largest funders of transmission projects in Africa, notably AFD and UKEF. Recently, the African Development Bank announced about $30BN in overall spending over the next 2+ years while the Islamic Development Bank and Indian Exim have shown interest in financing grid projects which the World Bank has assisted by financing preparatory studies.
While China currently leads the global initiative to finance projects in the region, it is important for countries to look towards flexible and broad financing solutions that encourage effective ecosystem partnerships for it to raise the required capital. It is known that diversified funding helps to accelerate project closure. One of such models to embrace is the EPC+ financing model, one which requires the contractor to deliver the project from design to handover and be responsible for financing the project. This means that project delivery risk is more efficiently distributed across stakeholders inclusive of governments, financiers, developers and construction managers. Similarly, driven by over-capacity in the supply-chain of some countries’ energy sector, many global EPC companies are expanding their EPC+F offerings to include Operations & Maintenance and strategic equity for majority control of distribution and generation assets. This can be a win-win collaboration model for African utilities and power value-chain operators and investors.
Bureaucratic bottlenecks in the deal making process have resulted in fewer projects and speed of delivery of the projects relative to current demand. One of the most recurring issues observed in several countries is usually a palpable disconnect between ministries involved in ensuring the project closure most especially the Ministry of Power or Energy and the Finance Ministry. The regional governments should commit to providing an enabling environment in their countries by significantly accelerating the procedures involved in availing payment guarantees to project lenders, enforcement of existing land use regulations or modifying the same for provision of priority infrastructure such as transmission lines and substations, and improving community engagement arising from land acquisition issues — a major factor that has derailed several projects from obtaining ECAs/DFIs financial backing.
If Sub-Saharan Africa will thrive, it should ensure that its people get the energy they require, and this would mean that it must embrace new alternatives.
Lazarus Angbazo
Dr. Angbazo is the President & CEO, General Electric Nigeria & GM, GE Grid Solutions Sub-Saharan Africa. He is also the President of American Business Council in Nigeria.
