Africa is simply tired of being in the dark. It is time to take decisive action to 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.
Akinwumi Adesina, President of the African Development Bank
In our last blog post, we mentioned that the twin challenges of power supply and internet access are crippling digital solutions in Africa. This post takes the baton by discussing power supply in Africa – the status quo, challenges and possible solutions.
Access to electricity
The electricity access rate in Africa is just over 40 percent, the lowest in the world. About 640 million Africans have no access to energy. According to the African Development Bank (AfDB), per capita consumption of energy in sub-Saharan Africa is 180 kWh, compared to 13,000 kWh per capita in the United States and 6,500 kWh in Europe.
Digitization is not the only aspect of the economy impeded by epileptic power supply. Health and education too. Lack of electricity handicaps the operations of hospitals and compromises the standard of education. The cost of doing business is more without access to electricity. Furthermore, the cost of doing business has a direct relationship with investor interest and job availability.
Therefore, an important task for African policy makers is to address the persistent lack of access to electricity and the unreliability of electricity supply which are ruining the continent’s development. Countries like Kenya, Ethiopia, Ghana, Senegal and Rwanda are recording progress. However, efforts to provide access to modern energy are still behind population growth. Reports indicate that by 2030, 530 million people would still lack access to electricity and 90% of them will be in Africa.
Nigeria is the largest economy in Africa and is endowed with large oil, gas, hydro and solar resources. Yet, limitations in the power sector constrain growth. Nigeria already has the potential to generate 12,522 megawatts (MW) of electric power from existing plants, but most days is only able to generate around 4,000 MW, which is insufficient. The current access rate is 45%. There are 20 million households without supply. Challenges include macroeconomic forces, lack of creditworthy utilities and lack of a strong, transparent regulator.
Nigeria has privatized its distribution companies, so there is a wide range of tariffs. Recently, the government approved an increase in electricity tariffs recommended by the Nigerian Electricity Commission (NERC). The increase is a consequence of its decision to operate a cost-reflective tariff regime.
South Africa, through Eskom Holdings, remains the biggest power supplier to a number of countries in the Southern Africa Development Community (SADC) region. However, Eskom Holdings has lately fallen into dire operational and financial challenges resulting in load shedding within South Africa itself. Much like other utilities across the region, an aging fleet of power plants has led to this energy deficit.
However, the private sector is increasingly taking the lead in advancing renewable energy projects. FirstRand Bank recently secured a USD 225 million loan from the International Finance Corporation. The loan aims to enable financing and technical support for nascent and established energy efficient projects.
The AfDB also found that Africa’s energy potential is enormous and underutilised. Especially renewable energy. 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.
The advent of renewable energy is a promising alternative and environmentally sustainable energy source. The buck lies squarely with African governments to provide impetus for swift renewable energy rollout, through practical policy interventions and the creation of enabling investment climates.
Africa’s population and economy are growing, especially in the urban cities. These will have implications for the energy sector. African policy makers and business communities must now be dynamic. They can exploit the falling costs of renewable technologies for innovation and growth. The ultimate goal is providing universal access to reliable, modern, affordable and sustainable energy.
According to the World Bank, for Africa’s power sector to work for utilities, steps have to be taken to minimize losses related to transmission and distribution of electricity, ensure customers pay their electricity bills, and raise tariffs appropriately.