Africa’s Energy Security Contingent on Energy Sector Integration

Share |

Jun 24th 2013

By Ken Opalo

According to a recent survey by Ernst & Young, 44% of businesspeople in Africa identified inadequate infrastructure as one of the key constraints to doing business in the region.  This means that as Africa continues to grow in the next two decades, infrastructure development must top the investment agenda. General infrastructure development will be especially crucial as African economies undergo structural transformation from being primarily resource-driven to having bigger manufacturing and service sectors. Indeed Ernst & Young estimates that in 2012 43.1% of investments in capital in Africa went to manufacturing as opposed to 12% that went to the extractive sector.

A key area that will require greater and smarter investment to fuel the region’s economic growth will be the energy sector.

Everyone knows about the energy woes of many an African country - from Nigeria’s infamous generators to the total lack of functional national grids in some African states. A few countries have initiated plans to boost their energy sectors through investment in power generation (Ethiopia’s 6000MW Great Renaissance Dam on the Blue Nile), oil refining (Angola’s planned 200,000 bbl/day refinery in Lobito), and aggressive prospecting for fossil fuels (especially in eastern and southern Africa). Despite these national efforts, for African states to ensure energy security for their growing economies, they must also think regional (and to some extent continental) when developing their respective energy sectors. As intra-Africa trade grows in the next two decades, there will be pressure to integrate energy markets as well.

The reasons for a regional/continental approach to energy sector development are twofold. Firstly, investment outlays in energy infrastructure development are often prohibitively expensive (because their viability relies on economies of scale), thus necessitating the pooling of resources. Ethiopia’s newest dam, for instance, will cost $4.7 billion. Not many African countries can afford such massive investments on one project.

Secondly, there is the issue of markets. With 12% of the world’s population, Africa consumes a meager 3% of the world’s electricity. Of this 75% takes place in North Africa (33%) and South Africa (45%). The remainder is shared out among the rest of Sub-Saharan African states. Furthermore, electricity connectivity on the continent remains relatively low, with rates averaging 43% (North Africa stands at 99%, with the other sub-regions between 12-44%).

This means that for projects like Ethiopia’s to make sense, access to international markets must be guaranteed. A key part of the Ethiopian project is the planned interconnector line linking the power station to the Kenyan grid. Joint investment and taking advantage of economies of scale will also help lower the cost of power in Africa. At present the average tariff per kilowatt-hour in the region is US $0.14, compared to US $0.04 in Southeast Asia. It is estimated that investing in regional grids and hydropower will save the region up to $2 billion annually. This is music to the ears of sugar millers, cement manufacturers and many small factory owners across the continent.

Existing and Planned Power Pool Connections in Africa

Source: Niyimbona, P, UN Economic Commission for Africa

Note: There are additional planned lines connecting Ethiopia to Sudan and Kenya, respectively, not shown on the map.

With this in mind, African states have begun the process of integrating their power sector infrastructure, via regional power pools (see map above of existing and planned power interconnector links). The South African Power Pool (SAPP, established in 1995); North African power pool (COMELEC , 1998); West African Power Pool (WAPP, 2000); the Central African Power Pool (CEAPP, 2003); and the East Africa Power Pool (EAPP, 2005) are all initiatives to establish regional power markets and help harmonize energy policy.

The COMELEC sub-region (27.4 GW, largely thermal, in 2009) has the highest connectivity and the best infrastructure. The region is also linked to the Middle East via the Egypt-Jordan interconnector line and Europe via the Morocco-Spain line (part of the future Mediterranean Electricity Ring, MEDRING). SAPP, with a capacity of 50GW (78.4% coal; 20.1% hydro; 4% nuclear and 1.6% diesel), is next in terms of infrastructure development.  The remaining pools have 13 GW in the WAPP; 29 GW in the EAPP. There is a plan to link the EAPP to states outside of East Africa as part of COMESA. The 19-state COMESA bloc has an installed capacity of 52MW (69% thermal and 30% hydro) and has since 2009 initiated a process to harmonize regulation and energy policy.  In terms of regional (intra-power pool) trade in power, SAPP is ahead with 7.5%, WAPP 6.9%, NAPP 6.2%, EAPP 0.4% and CAPP 0.2%.  Clearly, there is a lot of room for improvement in levels intra-pool trade in power.

All these developments are encouraging. But a lot more needs to be done. For starters African states must work harder to harmonize their energy policies. This will necessarily involve greater liberalization of their power sectors, especially with regard to power generation and distribution. There is also an urgent need to invest in interconnector infrastructure to ensure that power can be transmitted efficiently to market. In the Day Ahead Market (DAM) of SAPP, for instance, trading is limited by between 40-50% of the potential level due to lack of efficient transmission capacity. Lastly, there will be a need to connect the regional power pools. This will reduce their overreliance on regional “anchor” economies (the best example of this is SAPP’s overreliance on ESKOM of South Africa, which has its own integrated resource plan). It will also create even bigger markets, including potentially the Middle East and Europe. 

Ultimately, whether or not the dream of regional and continental power interconnectivity is achieved will depend on politics. Unfortunately, so far things do not look good. Almost a decade after the idea of regional power pools set in, governments are yet to harmonize their power sector regulatory policies. In many countries state monopolies dominate, with attendant inefficiencies. And across the continent power supply master plans are still very nation-centric and under the tight control of local vested interests. Moving forward, the challenge will be to convince governments and stakeholders (private sector and consumers alike) of the benefits of having an Africa-wide power market – which will necessarily require the liberalization of national power sectors. The alternative will be more roundtable discussions and promises of policy harmonization that never get fulfilled.

Ken Opalo is a PhD candidate at Stanford. His research interests include institutional development (African Legislatures); natural resources and the political economy of redistribution; and democracy and governance in Africa. Ken is also a partner at the IPRE Group, an international policy research and evaluation consultancy firm.


Comments

Hadji Beye - 23/03/2014 13:46
Interconnectivity makes sense but we have had so many challenges with coordinating efforts in terms of energy or other Pan-African coalitions.
The mere fact that many African nations are still split by boundaries left by colons does not even really makes sense to this date, we have many small fragmented nations that should unify in more robust and powerful nations...but the individual greed of leaders will help maintain very small states that do not really make sense on their own (Gambia for example).

In the meantime, renewable energy should be adopted in most African nations simply because of the enormous potential in solar and wind power...obviously hydropower also makes sense for regions benefiting of such a resource.

As more nations improve their power supply, more inter-Africans networks will develop with a commercial mindset to sell energy across borders.
The expansion of the private sector is the only reliable means of growth we can expect, we need to stop relying on governments and leading officials because they have not responded to the expectations of Africa.
Viola Egbuniwe - United States 15/03/2014 15:51
Stirs up great hope for the future. Without energy, most African Countries populace will remain in abject poverty; a state that engulfs even the future generations. Thank you.
Chuck Kottke - United States 09/10/2013 04:20
Ken, this makes sense for the present to help build the future, but I wonder if we need to be more forward-thinking about our whole approach to energy and resources. Given all the solar potential in the continent, wouldn't it be wiser to connect the grids across North Africa and the Middle East for long-day power production, and connect from north to south, as well as from south to north with the solar and wind electric generation in those sunny regions, rather than continuing down the fossil fuel path? I think we need a new approach to resources, away from limited ones and towards ubiquitous ones.
Musyoka wakyendo - Kenya 02/07/2013 08:20
Great informative and objective piece. Congrats to the author
*
*
* CAPTCHA
*
 

Explore what we do

Select a country

Explore our
activities