The power sector in Africa, Challenges and prospects (Part 1)
Africa faces a huge electricity demand challenge. Existing infrastructure is insufficient to meet current requirements, let alone the growth of the coming decades. Installed power capacity is expected to rise from 2012’s 90GW to 380GW in 2040 in sub-Saharan Africa.
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Nonetheless, 530 million people, primarily in rural communities, are expected to remain without power. But difficulties such as investment barriers facing the sector are being addressed. An era of rapid technological change is also coming at a pivotal time in the expansion of African power infrastructure.
Megatrends – growth and infrastructure
Africa continues to provide a bright spot in global economic growth. Current growth remains ahead of many other parts of the world and Africa is forecast to remain one of the world’s three fastest-growing regions in the coming years.
In the International Energy Agency’s central outlook for energy in Africa, the sub-Saharan economy is projected to quadruple in size in the period to 2040.
All over Africa, governments are looking to the power sector for improvement and expansion. The under-electrification of much of the continent is a constraint on growth.
In North Africa, access is very high (more than 95 per cent) while in rural areas elsewhere, it is only 12.9 per cent. Across sub-Saharan Africa only 31.8 per cent have electricity access.
Alongside economic growth, population pressures are adding to energy demand. More than half of global population growth between now and 2050 is expected to occur in Africa. This is set to add to the pressure on urban areas. Africa has at least 120 cities of over half a million residents and 47 of over a million, spread out among 54 countries.
All of these trends pose a major infrastructure challenge to the power sector. Not surprisingly, many of them are top of mind among the power sector executives and stakeholders that we interviewed.
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Heading the list (figure 1), over two-thirds (70 per cent) anticipate that climate change and water scarcity will have a high or very high impact on the power sector. Increased exploitation of the continent’s dormant natural resources potential, with its associated power requirement, was rated as having the second highest impact on our list. And more than half of those interviewed also felt that population growth (57 per cent) and megacities (53 per cent) would have similarly high impacts.
Not surprisingly, given that around two-thirds of the population in sub-Saharan Africa live without electricity, security of supply tops the list when we turn to the challenges faced by our survey participants (figure 2).
Nearly three-quarters (73 per cent) rated security of supply as a high or very high concern now and nearly the same proportion (70 per cent) felt it would still be running at the same high level of concern in five years’ time. Part of the problem is that the tariffs for electricity typically do not reflect the actual cost of its generation and supply, thus inhibiting investment.
The issue of cost-reflective tariffs ranked alongside security of supply as a concern, although there was a degree of optimism that this would not be quite such an issue in five years’ time.
Security of supply problems are exacerbated by the lack of availability of many existing generation assets due to ageing, disrepair or poor asset management. It’s again not surprising then that two-thirds (67 per cent) of our survey participants cited ageing or badly maintained infrastructure as a high or very high concern.
There are other near-term bright spots as well, with the level of concern about skills shortages and, to a lesser extent, market reforms easing in the next five years. However, other pressing concerns are not set to change.
Affordability and access to primary energy resources were the other two issues among the top issues mentioned, highlighted as high or very high concerns by around three-fifths of those surveyed and with very little change expected in the near-term future. — GB