Africa has huge untapped reserves of fossil and hydro resources that can be used for generating electricity. However, the electrification and consumption levels are low, particularly in the rural areas, as the continent is unable to utilize its reserves due to drought, high oil prices, conflicts and lack of funds. The existing transmission and distribution networks are incapable of supporting the entire power supply to the entire nation and often result in high losses. There is an urgent need to overhaul the entire system, apart from the addition of new lines to bring in more population under the electrified bracket.
To improve the power scenario, countries have introduced reforms such as restructuring of power utilities, privatizing the vertically integrated monopolies, legalized the entry of foreign players and Foreign Direct Investments (FDI) in the power sector and allowing Independent Power Producers (IPPs) into the country.
In order to derive synergies in the power sector, African countries have formed Power Pools. Major power pools include the South African Power Pool (SAPP), the Eastern African Power Pool (EAPP) and the North African Power Pool (NAPP). SAPP is the largest of the power pool with an installed 1,747 MW capacity in the Southern African region in 2008. The main aim of these pools was to stabilize and improve the power supply to all the countries in the region.
Private Public Partnership Increasing Gradually in Africa
The Private Public Partnership (PPP) in Africa is expected to increase going forward as private players gradually show interest in Africa. At present there are plans to increase the installed capacity in Africa through public-private partnerships. IPSA’s (UK based utility company) combined heat and power (CHP) plant in Newcastle is South Africa’s first privately financed independent power plant, which is also South Africa’s first independent gas-fired power station. Artumas Group, a Canadian based company is setting up a 300 MW gas plant in Tanzania which is expected to come online in two years. AES-SONEL is setting up a 250 MW plant in Cameroon.
Power Market in Africa Dominated by Vertically Integrated State Utilities
South Africa is the single largest power generating and consuming market in Africa. Eskom Holding Limited (Eskom), South Africa’s power generating company, is the single largest player in the continent. Eskom accounts for almost 45% of the electricity generated in the continent and 95% of the electricity generated in South Africa. The Egyptian Electricity Holding Company (EEHC) of Egypt is the second largest company in Africa, in terms of installed capacity. However, its installed capacity is almost half of Eskom’s installed capacity. SonelGaz Spa of Algeria is the third largest player, followed by Power Holding Company of Nigeria (PHCN) and General Electricity Company of Libya which are the fourth & fifth largest electricity company respectively in Africa, in terms of installed capacity.
Sluggish or Negligible Growth in Alternative Energy
The growing size of the global alternative energy market is yet to have a significant effect on the African power market. Apart from South Africa, none of the countries have a nuclear power station in operation. Renewable energy is yet to join the mainstream energy grid in most parts of Africa. Many of the top countries that have been covered for this study do not have a stable renewable power generation system in operation, though there are plans for the same but are yet to be implemented. High capital cost and high cost of transmission are the major hurdles for the spread of alternative energy in the region.
Cumulative Installed Capacity in South Africa to Reach 59,858 MW In 2020
The cumulative installed capacity for power in South Africa was 46,296 MW in 2010. Thermal fuel sources – coal, oil and gas were the highest contributors with a combined share of 91.1% or 42,168 MW of total installed capacity. Hydro power came a distant second, with a share of 4.5% or 2,065 MW of total installed capacity. Nuclear power and renewable energy sources (the latter including solar, wind and biomass) contributed 4.1% and 0.4% respectively.
During the forecast period 2011-2020, cumulative installed capacity is expected to grow at a CAGR of 2.6%, reaching a total of 59,858 MW in 2020. Thermal fuel sources will remain the highest contributor and are forecast to contribute 52,032 MW to the cumulative installed capacity in 2020. However, their relative share is expected to decrease to 86.9% in 2020 due to government focus on carbon footprint reduction.