Solving the Power Generation Puzzle in Africa

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Power generation all over the world is a lifeline to every economy. Developed countries all over the world are setting great paces with power generation. For example, the German utility companies in December 2017 paid their citizens to consume power as the wind energy generated more output than was needed for consumption. It was forecasted in October 2017.

Whereas in Africa, simple tasks for home and businesses suffer from a lack of power supply. This has caused an increase in cost of production and running businesses in Africa. The erratic and unpredictable nature of electricity supply has engendered a deep and bitter sense of frustration that is felt across Africa.

The truth remains that Africa cannot industrialize its economy without improving power generation capacity as nearly 79% of Africa’s population currently live without power.

Africa can potentially be the largest power market in the world, based on available resources and demand for electricity.

Power Generation in Africa VS Power Generation in Developed Countries

Across Africa, investors joke about living in a “bring-your-own-infrastructure” continent, in which firms must provide independent generators, water purification and even sewage treatment when building a factory or hotel.

Of these the costliest is often power. Nigeria, which has a population three times larger than Germany, generates less than a tenth as much electricity.

Power from private generators costs $0.35 per kilowatt-hour or more, ten times more than electricity from the grid in most other countries.

Even India’s ramshackle infrastructure looks good by comparison. Nigeria may produce roughly as much output per person as India, but it has only one-fifth the generating capacity per head, according to McKinsey, a consulting firm.

China, on the other hand, is building new power plants so rapidly that it is adding the equivalent of an Africa to its grid every two years.

Changing the Narrative – Power Generation Boom Anticipated

After a drought in investment in new generating capacity lasting almost three decades, blooms of new power plants are now sprouting across sub-Saharan Africa like acacia seeds after a rainstorm. A tally by The Economist of announced power projects (under construction or at an advanced stage of planning) suggests that the region’s electricity-generating capacity will increase by more than half by the end of the decade.

That’s good news for investors!

South Africa, which already generates about two-thirds of the region’s power, is adding about 15,000MW to its grid about as much as the rest of sub-Saharan Africa produces now.

Alternative (cleaner) sources of energy are being sought.

South Africa has approved 64 renewable-energy projects ranging from fields of wind turbines and solar cells to generators that burn sugarcane.

Ethiopia is building Africa’s largest hydroelectric and geothermal plants. Between them the two projects will triple the country’s power production. Kenya is drilling holes deep into the Rift Valley in Hell’s Gate National Park to build what will ultimately be the world’s largest single geothermal plant. At Lake Turkana, a particularly windy spot farther north in the Rift Valley, private investors are building Africa’s biggest wind farm.

The anticipated boom in power generation depends largely on the following factors:

Increase in private investment & better government policies

For instance, South Africa had long insisted that new capacity should be built only by the state-owned generator, Eskom. But in 2008 the country experienced crippling power shortages that forced mines and factories to cut production and sent millions of South Africans to bed early. The government reversed its decision and encouraged private investment in renewable energy sources.

Nigeria has privatized state-owned distribution companies, while Kenya, Ghana and Tanzania are all attracting foreign investment.

Falling cost of renewable energy

Africa has some of the world’s best potential sites for wind, solar and hydropower. Investors are proving readier to test the market by putting up a few windmills than by committing to big power stations. Wind farms and solar parks can also provide decentralised or “off-grid” power directly to customers, reducing the load on congested transmission lines. Given the high cost of power from diesel generators in Africa, investing in renewable energy can be an attractive alternative.

Ahmed Heikal, Chairman of Qalaa Holdings, an investment firm with holdings in several power producers, thinks that in Africa a “new model [of renewable energy]that bypasses the government is emerging”.

It is one in which firms are able to offer competitively priced renewable power without the hefty government subsidies needed to encourage investment elsewhere, such as solar parks in cloudy Germany or offshore wind farms in the rough waters of the North Sea.

Africa has the potential to jump from being the world’s electricity laggard to a leader in renewable energy in a few years.


Southern Africa

Southern Africa has 90% of all of Africa’s coal reserves and 70% of the nuclear/uranium resources in Africa. Southern Africa follows Central Africa closely in hydro resources; hydroelectric potential can particularly be found in the Congo DRC, Mozambique, Zambia, Cameroon, Ethiopia, Sudan, and Nigeria. Mozambique in particular has joined an international initiative to develop an energy action plan, to contribute to Sustainable Energy for All.

Energy sources in Southern Africa include solar, wind, hydropower, wave energy, and bio-energy which can be used to generate electricity.

East Africa

The East Africa Society portrays that promotion of sustainable use of natural resources is occurring in Kenya and in Uganda; Kenya and Uganda are tourist-based economies and are looking for ways to generate energy that also supports forestry and wildlife management, i.e green energy alternatives.

In Tanzania, the goal is to conserve biodiversity. The USAID supports local actions in the Pangani, Bagamoyo, and Mkuranga districts that promote sustainable coastal and marine resources management through co-management for near-shore fishery areas, small-scale enterprise development, marine culture, and coastal tourism.” There is also an essential push for geothermal power in East Africa, given the arid climate.

Norway also supports the replacement of kerosene lamps with alternatives facilitated from solar power in Kenya, access to energy in Ethiopia’s rural areas for job growth and a better standard of living, and Liberia’s implementation of a climate plan.

West Africa

Electricity access in Ghana increased 500% between 1991 and 2000, but per capita consumption actually fell over the same period, suggesting electricity usage was unaffordable. Ghana was also one of the primary countries to develop an energy action plan, in response to the initiative for Sustainable Energy for All.

The Rural Electrification Agency (REA) disclosed that its study on Nigerian mini grid electricity development potential revealed an annual investment opportunity of $9.2 billion. Its Managing Director, Mrs Damilola Ogunbiyi, disclosed this while making a presentation at the mini-grid action learning event in Abuja.

The event was organized by REA in collaboration with the World Bank Group, Department for International Development (DEFID), Energy Sector Management Assistance Programme (ESMAP) and Climate Investment Fund (CIF).

“We believe that Nigeria is the biggest and most attractive off grid opportunity destination in Africa, and one of the best locations in the world on developing mini-grid and solar home system.

“Our population of about 180 million is very attractive, even though we have also part of our population with limited and low energy access.

Central Africa

Central Africa has abundant hydro-electric resources due to the multiple rivers that run through this region. The publication Energy Economics estimates that replacing South African coal power with hydroelectric imported from the Democratic Republic of the Congo could save 40 million tons of carbon dioxide emissions annually. Africa is protecting forest resources. “USAID will contribute approximately $48 million to partnership through its successful Central African Regional Program for the Environment (CARPE)…goal is to improve forest governance, develop sustainable means of livelihood for 60 million people who live in the Basin, reduce the rate of forest degradation and loss of biodiversity through protected area management, improve logging policies, and achieve sustainable forest use by local inhabitants.”

Impact of Stable Power generation

Constant electricity supply will ultimately result in overall growth, peace and simultaneous progress throughout Africa as it is the common denominator for sustainable economic growth.

With improved electricity supply, this will simultaneously put money in the pockets of all Africans, since most Africans currently rely on self-generation that cost more than grid-supplied electricity, in terms of dollar/kWhr.

The direct effect of providing constant and sustainable electricity will be that Africans are assured of having sufficient supply of electricity to their homes and places of work. The ample supply of electricity would stimulate the creation of additional jobs. This could be via the construction and operation of power plants across Africa, as well as the construction of facilities needed to supply fuel to these power plants. In addition, the infrastructure required to evacuate electricity from the power plants and distribute the electricity would also have to be developed.

During the construction stage of these facilities, thousands of additional jobs would be needed. Afterwards, there’ll be the need for maintenance post-construction.

The direct jobs will be drawn from all parts of Africa for skilled jobs and mainly from communities hosting the power plants, for semi-skilled jobs.

The indirect effect will be a ripple effect of job creation within the African economy.

These indirect jobs will be created by the suppliers of goods and services used in the construction and operation of power plants, transmission, and distribution facilities. Also, it will trigger efficiency of services due to increased productivity and increased material demand, created by consumers spending their wages on local goods and services.

This is lead to an overall improved quality of life for residential and commercial individuals/families residing/working in single-family houses and multi-family housing.

Power Generation Needs/Challenges

Stakeholders at the World Economy Forum on Africa, recently held in Kigali, Rwanda, have identified inadequate financing, policy inconsistency and bureaucratic bottlenecks as some of the major problems confronting power supply in Africa.

Proper maintenance of complex power plant equipment is also a challenge in this industry. There is a need for training for personnel who operate these plants and have a system for routine checks.

Overload of already existing stations: This is as a result of an inadequate power supply and so the current facilities suffer greater wear and tear as a result of overload.

With adequate funding and the creation of mini-grid stations in communities, there will be a decongestion of the National grid. This will, in turn, reduce the demand for power output from it and increase the number of hours of electricity distributed to the communities

Next Steps to Investing In the Power Sector

To invest safely and profitably in Africa, you need assistance from a professional and seasoned African investment company.

At Footprint to Africa Investor Service, we act as a bridge between global investors, African business owners, and government agencies. We help intra-African and foreign investors find the right partners and opportunities, form joint ventures or partnerships, and to establish presence through public-private partnership

Our deep understanding of the African business environment enables us to carry out thorough due diligence on private companies and government agencies in Africa, for foreign companies who want to make a foray into the African market.

So if you are an international investor or you’re looking to leverage the ever-expanding African Market, or an African brand looking to extend into other African markets? Become a part of the African success story.

Footprint to Africa has just facilitated a $1.7 billion power generation project that will add 1050MW of electricity to the Nigerian national grid between Cambridge Securities and Cross River State. At the interim, a land based 40MW will be deployed to support businesses in Cross River State. We are still calling on investors to embrace power generation in Africa. The return on investment is huge and nearly 90% of all sub Saharan African countries are open to different forms of public private partnership to generate the required energy. The time to get in is now.

Contact Us Today!

Remember, if you are not in Africa, you are not in business yet.




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