eBusiness Weekly
Martin Kadzere
About half of African businesses today rely on back-up diesel powered generators to keep running when the grids go out and this is despite high and unpredictable costs, a new study has revealed.
Wood Mackenzie, a global research and consultancy business, which provides data, analytics and insights on the natural resource industry said across sub-Saharan Africa, excluding South Africa, consumers spend just under US$20 billion a year on fuel for back-up generators, around 80 percent of what they spend on grid electricity. Even so, generators provide only 7 percent of total electricity service.
“Wood Mackenzie conservatively estimates that 123 GVA of distributed diesel capacity is operational across Africa today, and our findings suggest that at least 17 African countries have more distributed diesel genset (generator set) capacity than they do grid-connected power-generation capacity,” the study says.
Nearly 800 million people globally live without access to any electricity with three-quarters of them in sub-Saharan Africa. The consumption deficit is staggering: the average Nigerian consumes less than a third of the electricity used every year by a moderately efficient American refrigerator, according to the study.
Per capita consumption of energy in sub-Saharan Africa (excluding South Africa) is 180 kWh, compared to 13,000 kWh per capita in the United States and 6,500 kWh in Europe.
Persistent blackouts
Sub-Saharan Africa has a persistent lack of electricity access in part due to massive underinvestment in electricity infrastructure. Most of its public electric utilities are loss-making, with limited ability to maintain existing assets or invest in new ones.
This hampers top-down growth in power supply and improvements in the availability, reliability and affordability. Stalled or partially complete power-sector liberalisation efforts have allowed investments in generation capacity to grow steadily but have left the transmission and distribution segments behind, says the study.
As rapid economic growth piles pressure on electricity networks already lagging demand, alongside population expansion, the deficit is likely to worsen if no substantial investments are made. Three fundamental macroeconomic trends underpin future electricity demand growth in sub-Saharan Africa and these are booming population, rapid urbanisation and structural economic transformation.
By 2050 Sub-Saharan Africa alone will be home to more than two billion people, almost double current levels. While the population of most of today’s largest economies will shrink over the coming decades, in some cases dramatically, sub-Saharan Africa would be the only region where the population would still be growing in 2100.
Studies show some 80 percent of this population growth is likely to occur in urban areas.
The populations of African cities will triple by 2050. By the end of the century, 13 of the world’s 20 biggest urban areas will be in African continent, including the largest three.
“These sprawling cities will spawn booms in industrial production and increase the need for residential services, public lighting, mass transit systems and personal mobility,” says Wood Mackenzie.
In addition, four-fifths of sub-Saharan African economies will double their 2020 gross domestic product by mid-century with countries such as Uganda, Tanzania, Mali, Mozambique, Kenya and Ethiopia to be among the 15 fastest-growing economies.
These growth trajectories have steadily expanded the African middle-class, tripling over the last three decades. They now comprise more than one-third of the continent’s population, in no small part due to new job opportunities from urbanisation.
“Africans are going to need a lot more electricity over the coming decades,” says the report.
Renewable energy
Africa’s energy potential, especially renewable energy, is enormous, yet only a fraction of it is being currently employed, according to the African Development Bank of Africa.
For instance, hydropower provides around a fifth of current capacity but not even a tenth of its total potential is being utilized. Similarly, the technical potential of solar, biomass, wind and geothermal energy is significant. While renewable energy will be prioritized by the bank, fossil fuels will remain an important part of the overall energy mix, as is the case with several developed economies, with the bank financing state of the art technology to minimize emissions.
“Africa is simply tired of being in the dark,” said AfDB. “It is time to take decisive action and turn around this narrative: to light up and power Africa – and accelerate the pace of economic transformation, unlock the potential of businesses, and drive much needed industrialization to create jobs. “The aspirational goal . . . is to help the continent achieve universal electricity access by 2025 with a strong focus on encouraging clean and renewable energy solutions,” the bank added.
This will require providing 160 GW of new capacity, 130 million new on-grid connections, 75 million new off-grid connections and providing 150 million households with access to clean cooking solutions. It is estimated that the investment needed will range between US$60 billion and US$90 billion per year.
The bank will invest US$12 billion of its own resources in the energy sector by 2025.
