Energy Watch

Light at the end of Africa’s energy tunnel

Sun rising for Africa electricity

Presently seriously constrained and hampering social and economic growth, Africa’s electricity generation and supply will quadruple from 2020 to 2040 and go ‘green’.

That is the view of the first Africa Energy Outlook, published late last year by the International Energy Agency (IEA).

While electricity presently comes at a huge environmental cost, the new capacity giving access to electricity to nearly a billion people will be clean, as Sub-Saharan Africa starts to unlock its vast renewable energy resources.

The report is the first of its kind to provide a comprehensive picture of today’s Sub-Saharan energy sector and its future prospects in a global context. Although the picture varies widely across the region, in Sub-Saharan Africa only 290 million of its 915 million people have access to electricity. And the number of those without access is rising as efforts to promote electrification, while gaining momentum, are outpaced by population growth.

South Africa

Nowhere are the present constraints and problems of insufficient power generation more visible than in South Africa with its energy intensive, sophisticated economy that includes heavy industrial manufacturing and mining operations.

The country’s state-owned power utility, Eskom, ran into trouble in 2008 as its ageing power generation and distribution infrastructures could not keep up with demand and reserve margins became insufficient. A series of rolling blackouts, badly affecting the manufacturing and mining sectors, resulted.

Much of the problem resulted from the fact that domestic consumption had shot up since 1994 when five million new households connected to the national grid, increasing to 12 million additional households by 2004, without additional power stations being built.

Since the 2008 crisis Eskom has been battling to maintain a workable balance between keeping its ageing, crisis-prone grid infrastructure operating while supplying power to a significantly increased consumer base. At the same time both planned and unplanned maintenance meant less available power, while embarking on a ambitious and multi-billion dollar new-build programme increased stress on the system.

Many large industrial consumers, citing expensive electricity as one of their biggest cost factors – for some mining operations as high as 30% – have since 2008 improved their energy efficiency, contributing to some decreases in electricity consumption.

But for some time now unplanned outages have increased in frequency and magnitude, says South Africa’s Energy Intensive User Group (EIUG) which represents the largest industrial consumers of electricity.

Another emergency struck in March 2014 when Eskom’s spare capacity came down to a margin of about 500MW, or less than 1%. The international norm is 15%.

The next crisis came in December 2014 when Eskom was forced to resort to load shedding – switching off power supply to parts of the country on a rotating basis.

This is not South Africa’s only problem. To beat its current electricity problems, two massive coal-fired power stations, Medupi and Kusile, with each an eventual approximately 4,800MW capacity, are being built. But already heavily dependent on coal-fired power, it is Africa’s biggest emitter of CO2 emissions and among the worst ‘offenders’ globally.

Government’s goal, in terms of its Integrated Resource Plan for Electricity 2010-2030 (IRP2010), is to drastically reduce South Africa’s reliance on coal-generated electricity of between 85% and 90% to below 60% by 2030.

But some local experts believe coal will be South Africa’s biggest primary fuel for electricity generation for several decades.

Continental outlook

At the continental level the IEA says Sub-Saharan Africa is rich in energy resources, but very poor in energy supply.

“Making reliable and affordable energy widely available is critical to the development of a region that accounts for 13% of the world’s population, but only 4% of its energy demand. Since 2000, Sub-Saharan Africa has seen rapid economic growth and energy use has risen by 45%,” states the IEA report.

“Many governments are now intensifying their efforts to tackle the numerous regulatory and political barriers that are holding back investment in domestic energy supply, but inadequate energy infrastructure risks putting a brake on urgently needed improvements in living standards.”

Investment in the energy sector is rising, but not enough. There is a severe shortage of essential electricity infrastructure and supply is often unreliable, necessitating widespread and costly private use of diesel- or gasoline-run back-up generators.

Electricity tariffs are among the highest in the world and losses due to poorly maintained transmission and distribution networks are double the world average.

But reform programmes are starting to improve efficiency and to bring in new capital, including from private investors, to such an extent that the IEA predicts that grid-based generation capacity will quadruple in the period to 2040, albeit from a very low base of 90 GW at present, half of which is in South Africa.

The IEA scenario holds that by building on successful examples of electrification programmes such as in Ghana and Rwanda, the number of people in Africa without access will start declining in the 2020s and 950 million people will gain access to electricity by 2040. However, more than half a billion mainly rural inhabitants will still be without electricity by 2040.

Going Green

For environmentalists the good news is that the IEA foresees Sub-Saharan Africa unlocking its vast renewable energy resources. Almost half of the generation growth to 2040 will come from renewables.

“Hydropower accounts for one-fifth of today’s power supply, but less than 10% of the estimated technical potential has been utilised,” it says.

Restraints like political instability, limited access to finance, small market size and weak regional transmission connections have all held back exploitation of hydro resources. But these are gradually alleviated in part because of greater regional co-operation.

The emergence of China as a major funder of large infrastructure projects, alongside traditional lenders, is also playing a positive role.

The IEA foresees that new hydropower capacity in the Democratic Republic of Congo, Ethiopia, Mozambique and Guinea, among others, will play a major role in bringing down the region’s average supply costs, reducing the share of oil-fired power.

Other renewables, led by solar technologies, will also make a growing contribution to supply. A successful auction-based procurement programme in South Africa is already showing how this can be cost-effectively achieved.

The IEA also believes geothermal sources will become the second-largest source of power supply in East Africa, mainly in Kenya and Ethiopia. By 2040, it foresees some two-thirds of the mini-grid and off-grid systems in rural areas powered by solar photovoltaics, small hydropower or wind.

“As technology costs come down, the attraction of renewable systems versus diesel generators grows (although they are often used in combination), especially where financing is available to cover the higher upfront expense,” it says.

But massive use of bioenergy sources in sub-Saharan Africa will continue and a 40% rise in demand for bioenergy to 2040 will exacerbate strains on forestry stock.

Almost 30% of global oil and gas discoveries made over the last five years have been in Sub-Saharan Africa. Natural gas resource-holders can power domestic economic development and boost export revenues, says the report, but only if the right regulation, prices and infrastructure are in place.

Three essential actions in the energy sector, if accompanied by more general governance reforms, could boost Sub-Sahara’s economy by 30% in 2040:

• An additional US$450-billion in power-sector investment, reducing power outages by half and achieving universal electricity access in urban areas;

• Deeper regional co-operation and integration, facilitating new large-scale generation and transmission projects and enabling a further expansion in cross-border trade; and

• Better management of resources and revenues, adopting robust and transparent processes that allow for more effective use of oil and gas revenues.

(With acknowledgement to the IEA’s Africa Energy Outlook report.)

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by Stef Terblanche

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