Electrifying Africa: The challenge of the century

South Africa possesses one third of all electrical capacity in Africa. [Clint Mason/Flickr]

Energy is at the heart of the development and climate debate as the COP 22 in Marrakesh approaches. Economic actors are beginning to focus their efforts on bringing power to the African continent. EURACTIV’s partner La Tribune reports.

The figures are well-known. The African electricity grid currently provides 160,000MW (the equivalent of Germany’s electrical consumption). Two thirds of this capacity is in North Africa and South Africa. The rest of the continent has access to just 53,000MW, which is the equivalent of Portugal’s electrical supply.

The slow rate at which access to electricity is growing has not kept pace with economic growth and is a burden on development. Official estimates state that 600 million Africans lack electricity. But the real figure is probably much higher.

Momar Nguer, the director of marketing and services for Total, and former director for Africa and the Middle East, said, “There are many more people in Africa without access to electricity than the figures show. Living in a city with an electric grid is not enough.

“People still need the money to access the grid at an affordable price. And on top of the issues of access and cost comes the question of the networks’ reliability.”

Allowing access to “affordable and clean energy” is one of the Sustainable Development Goals adopted by the United Nations in September 2015.

The end of centralised networks

PWC recently published a study called Energy Beyond the Grid. It was dedicated to the question of electrification in developing countries, particularly in Asia and Africa.

The report concluded that a purely centralised system could not meet the demands of these countries. This can only be achieved, said PWC, through the development of complementary systems, both on and off-grid, at the scale of individual homes or small communities.

“We estimate that 30% of the demand in rural areas could be met by the extension of the traditional centralised networks,” said Pascale Jean, the head of the energy sector at PWC.

But for Hervé Gouyet, the president of Electricians Without Borders, this is too optimistic.

“When we provide electricity by extending the grid, just 10% of inhabitants gain access to it,” he said at a clean energy conference organised by the Coordinating Committee for the Africa of Tomorrow (CADE). “What is more, it is usually those that were already equipped with electrical generators.”

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Local production up to the edge of cities

According to PWC, large-scale power generating systems and centralised grids will continue to develop.

But “for the cities themselves, given the distances between them and losses of up to 20% that occur during transport across the grid. It is better to develop local, decentralised energy generating facilities,” said Nguer.

“Local power stations close to each city could be fueled by solar energy and equipped with a storage system that would be backed up by gas or diesel generators, for example.”

But what should be developed more broadly are off-grid installations and village mini-grids. However, the management of these grids can be complicated.

Generally speaking, “the need for joint action between public and private partners, the sharing of returns on their respective investments […] make infrastructure projects more complicated,” said Jean.

But this has not doused the optimism of some. “Smart grids are developing more quickly around the Zambeze than in the Corrèze,” said Lionel Zinsou, the president of the AfricaFrance Foundation and vice-president of the supervisory board of investment company PAI Partners.

New actors bring competition

Start-ups that marry solar power and digital technology have grown rapidly in rural Africa. They offer leasing deals that allow people to light their homes, run a television, air conditioning, a refrigerator, etc. The client pays a monthly fee by phone and after a set number of years, becomes the owner of the equipment.

“Telecoms and energy actors must work together to ensure interoperability,” Jean stressed.

Historically concentrated on large-scale installations, few big operators yet offer pay as you go electrical services. “But they could develop in this area by buying startups,” she added.

But for Gouyet, “we have to avoid the temptation of the individual kit that just allows people to generate light. Africa needs an electrician, not a lamp salesman.”

Yet it was through the sale of solar lamps that Total first entered the African solar energy market. “Our clients in the suburbs of the big cities, or even right in the cities themselves, bought them to complete their domestic electrical installation and save money on their bills. We also saw that many people first bought these lamps as a test to see whether they should convert their power supply more broadly,” said Ngur.

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Mobilising finance

Whatever the technologies chosen, finance will need to be mobilised to support their development on a larger scale.

Today’s low interest rates in developed countries mean that even the smallest solar power station in a remote corner of the world can be profitable. This has led to an abundance of liquidity but a lack of projects. And the administrative and financial processes are often long and complex, dissuading companies from investing.

However, not all electrical investments are profitable. Local authorities need to help develop economic models that will bring electricity to public services like schools and health centres.

Providing access to electricity in previously deprived areas can even pave the way for the development of new activities. This in turn will increase demand in the region and increase profitability in the long run.

Overall, as the speakers at the CADE conference all agreed, the real issue is to reduce the risk associated with these investments while preserving an attractive return. Investors and energy companies need to find the right balance between profitability and providing electricity at a price that is acceptable to the population.

The unexpected meteoric rise of the telecoms market in Africa proves that the demand is there.

As William Nkoutchou from Emerging Capital Partners said, “Telecoms benefited from market mechanisms that allowed them to improve their services and cut their prices. It is price flexibility that will allow operators to invest in increasing capacity.”

Need for formalisation and centralisation

Among PWC’s other recommendations was the establishment of a fund dedicated to financing off-grid projects, fed by both public and private donors. For Jean, the electrification of the continent required “top-down plans produced at national or regional level”.

Nguer said, “All the projects should be centralised, for example by the African Union and the African Development Bank (ADB), in order to more efficiently allocate the funds provided by Western public donors.”

“These institutions should be able to explain clearly to their contributors what their money has been used for.”

The up-coming COP 22 in Morocco could provide the boost needed to make the first steps in this direction.

“There is a post-COP 21 momentum. Many countries made commitments. Now they have to honour them,” said Nguer. “Africa must also be able to propose projects and to organise itself to receive the help it needs. The COP 22 should be the occasion for this to happen.”

Concessionary loans can help with financing. And facilitators (like JL Borloo or Power Africa, an initiative launched by Barack Obama) could form the bridge between the two worlds, “to encourage actors to develop renewables or to replace coal-powered electricity generation with gas, which emits half as much CO2, and so on.”

But what Africa really needs is “the emergence of energy leaders that can bring entrepreneurial spirit”. For Jean, this is a development that could bring major progress with the electrification of the continent.

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