The supply of collective electricity is being destroyed by weak legal frameworks and regional competitions
It is estimated that 580 million Africans do not have access to electricity, which is three-quarters of the world’s total. The International Energy Agency (IEA) expects this number to rise as the COVID-19 pandemic stops efforts to keep up with growing demand. Before the coronavirus struck, the continent was slowly advancing towards Sustainable Development Goal 7 – Ensuring access to affordable, reliable, sustainable and modern energy for all – but there is now little chance of reaching this target by 2030.
Despite extensive petroleum reserves, high solar radiation levels and great potential for hydropower, according to the IEA, Africa receives only 4% of the global investment in energy supply. This is largely due to foreign investors’ fears that short-term political considerations will outweigh the long-term policy goals, which will make the master plans for energy obsolete. Investors’ main concerns include sudden changes in the policy environment, unsustainable low electricity tariffs due to unaffordable government subsidies, and the poor governance and creditworthiness of state-owned utilities. About 95% of the African energy industry is failing to recover its costs, according to the Energy for Growth Hub, which deters potential investors.
Regional cooperation on energy promises potential solutions in three key areas. First, cross-border partnerships increase market size, making projects more likely to attract foreign investment. Secondly, regional connections enable countries with surplus electricity to share it with the neighbors who are experiencing shortages and thus make power supply more reliable. Third, a regional market can help reduce costs for consumers if utilities are given a mandate to buy the cheapest power. All three trends help promote a shift in the energy mix by exploiting the potential of new renewable sources at the expense of older and inefficient thermal generators.
Africa’s regional economic communities have already taken steps to integrate through power pools, enabling national utilities to plan and operate their joint electricity supply and transmission in the most reliable and economical way, given their load requirements. These power plants have the potential to boost investment in new hydropower capacity, reduce the operating costs of power systems by $ 2.7 billion a year, and emit carbon dioxide emissions by 70 million tons a year, according to World Bank estimates.
The Southern African Development Community (SADC) was the first local economic community to connect the national electricity networks and form a common market for electricity. The establishment of the Southern African Power Pole (SAPP) was established in 1995. Increasing power demand in South Africa and energy-intensive mining projects elsewhere in the region have helped attract foreign investment. This led to the establishment of Copperbelt Energy Corporation, a private Zambian electricity generation, transmission, distribution and supply company, in 1997, and Motraco, a joint venture between Mozambique, South Africa and Swaziland to provide cross-border upgrade transmission lines in 1998.
This early progress encouraged the signing of bilateral contracts between Member States, followed by the development of a short-term electricity market in 2001 and a day-before-market in 2009. By 2010, 7.5% of the power generated in the region raised, trades across the SAPP, according to the Infrastructure Consortium for Africa. However, this early progress in trade did not receive comparable attention to the institutional environment. SADC has not been able to set up an independent regulator that oversees compliance with technical codes, regulates pricing and promotes competition. The weak legal framework and the absence of an autonomous body for dispute resolution have undermined the prospects of the pool, according to a report commissioned by the World Bank.
Regional rivalry also undermined SAPP’s prospects, with SADC energy ministers failing to agree on a list of priority projects, thus missing out on opportunities to secure new investments in power generation during the 2000s. Uneven development left members too dependent on Eskom, the utility company in the local hegemony in South Africa, which both had the most installed capacity and was the top buyer of surplus electricity. A wave of power outages has forced South Africa to implement load shedding from other members of the pool since 2008. Rather than addressing this challenge, President Jacob Zuma mismanaged Eskom and empowered and broke the utility company, undermining his ability to fulfill contracts through SAPP.
The Economic Community for West African States (ECOWAS) was more pragmatic than the SADC when it set up the West African Power Pool (WAPP) in 1999. Recognizing the chronic energy shortages plaguing the region’s economic engine, Nigeria, WAPP has adopted a more pragmatic, two. level approach. Where reliable connections exist, steps have been taken to establish a common market for electricity. Bilateral power agreements have enabled Ivory Coast to export excess energy to neighboring Ghana, which has struggled with power outages, and further to Benin and Togo, which as small countries have struggled to secure investment in their networks. According to the Infrastructure Consortium for Africa, by 2010 6.9% of the power generated in the region had been traded on this block.
Where reliable connections are lacking, the focus has been on connecting the interior to more developed coastal countries. This inland Burkina Faso gained access to power from Ghana and Ivory Coast, while Niger was linked to Nigeria. But a number of smaller economies are lagging behind, with backward Guinea, Liberia, Mali and Sierra Leone still working to align their systems in hopes of acquiring cheaper energy supplies from elsewhere in the WAPP. Other countries have struck their own path. Senegal initially collaborated with Mali and Mauritania to share hydropower from the Manantali Dam, but President Macky Sall has since focused on upgrading his country’s installed capacity and net, taking into account abundant gas reserves abroad. It threatens to leave Senegal’s smaller neighbors Guinea-Bissau and Gambia in the dark.
Although the WAPP approach exacerbates regional inequality, it has at least developed a more robust framework, including a stronger and more autonomous secretariat that can promote priority projects and finalize decisions rather than wait for national governments to act, according to a report commissioned by the World Bank. ECOWAS has also taken the critical step of setting up a local electricity regulating authority (ERERA), which came into operation in 2011, addressing the lacuna identified in the SAPP.
In the middle of the continent, the Economic Community of Central African States (ECCAS) failed to follow the dynamics of ECOWAS through the Central Africa Power Pool (CAPP) which it established in 2003. Very ambitious plans to build new transmission lines needed to unlock the great hydropower potential of the Congo River have not yet moved beyond the drawing board, and neither donors nor the private sector are prepared for countless political, regulatory, macroeconomic and address security risks.
Greater hope lies in the East Africa Power Pool (EAPP), which was formed in February 2005 by seven members of the Common Market for East and Southern Africa (COMESA). Although less than a decade ago the World Bank downplayed regional energy trading as ‘negligible’. , is investing in new dams and transmission lines to make Ethiopia and Kenya major exporters of electricity. While Kenya has mastered geothermal power from the Rift Valley, Ethiopia is doubling its installed generation capacity thanks to the 6,000 MW Grand Ethiopian Renaissance Dam (GERD), which is expected to be fully operational in 2023. The World Bank and Africa Development Bank have such great potential to finance a new 2000 MW transmission line between the two countries, which was completed last year. The GERD promises to reduce electricity costs, transform the energy mix and make power supplies more reliable throughout the EAPP.
COMESA has also begun to establish common legal, regulatory and institutional frameworks. In 2012, the EAPP set up an independent regulatory board that oversees the pool, compliance with electricity codes and technical standards, and regulates the use and price of transmission lines. The regulator also plays a role in enforcing standards and resolving disputes, which helps to encourage private investment and thus gradually promote competition in the pool. The focus is currently on the Day-Ahead Market, but the EAPP aims to move towards a centralized trading regime in the next five years, according to the Infrastructure Consortium for Africa.
However, Francois Pienaar, business development manager at ESB International and a former utility consultant in Ghana, Liberia and Tanzania, is concerned that ‘billions spent on interconnections will be wasted’ without further attention to regional integration. Too many African governments focus on short-term goals, such as subsidizing electricity to key constituencies to retain their political support, rather than considering how to address the contingent financial obligations of national utilities. In addition, the energy sector needs to pay attention to competitive industries, including the transportation sector, beloved among politicians looking for visible projects.
The prospects are also hampered by COVID-19. ” A crisis can often predict policymakers to venture more political reforms in the energy sector ”, as Alan David Lee and Zainab Usman remarked in their World Bank remarks, A Scoping of the Political Economy of Power-Based Reforms in Developing countries. Yet Dr Usman told Africa in Fact that “the coronavirus pandemic has dramatically increased fiscal pressure so that African governments can make electrification projects subordinate to more urgent priorities.” The strengthening of Africa’s power pools therefore appears to be among the many victims of the current public health emergency, which is increasing the number of Africans deprived of access to electricity.
NICK BRANSON is a senior researcher at the Africa Research Institute (ARI), a British think tank, where he analyzed oil and gas legislation and constitutional reform in Tanzania. Prior to joining ARI, he advised political parties, governments, legislators and civil society organizations in English, French and French and Lusophone. He is currently a part-time PhD candidate at the School of Oriental and African Studies (SOAS), University of London.