Electricity in Africa and the continent of paradoxesby Christine Heuraux - published by IFRI

Introduction

This text does not claim to be exhaustive, as the continent is plural, on this subject as on others, as the situations of the 53 countries are contrasted by their size, economic weight, their demographic physical, resources and growth prospects. But these differences are naturally reflected in the national energy and power and regional situations before being reflected to those of the continent. Indeed the field of energy, particularly power sector, combines economic, political, social, technical, environmental and climate change which cannot be dissociated with the reflections for the efficient development, competitive, sustainable and acceptable to the African electrification.

Being unable to deliver here a full radioscopy of situations and issues of an entire continent, we will first describe the main characteristics of the current African power sector and its potential. Some figures and comparisons with more familiar benchmarks used to establish a map of reference. Then will be given, to illustrate the paradoxes that are revealed in this map, some explanation of the reasons of the huge gap between a surplus and a potential large deficit offer.

In conclusion, or rather opening on reflection, we propose priority action tracks, even essential, to ensure the necessary expansion of the electrification of Africa.

Taking stock of the African power sector: the continent of paradoxes

In electricity, Africa is the continent of paradoxes: it is both an energy giant by the resources available, and an electric dwarf with the actual capabilities that it can rely today. Indeed, with 10% of economically exploitable global water reserves, with almost 10 % Of global proven oil reserves, 8% of world gas reserves and 6% of reserves World coal, the continent has great potential deposit and energy resource. Not to mention the tremendous solar potential nor the geothermal fields of eastern continent, or the wind resources in coastal areas or, of course, biomass - 60% of the land uncultivated arable land still in the world is lying in Sub Saharan Africa (SSA).

In other words, the resource is available and diversified, both in its geographical distribution in nature, while renewable energy resources offer real prospects for a low-carbon power development. This is a very enviable situation, which contrasts sharply with the power deficit recorded over a large part of the continent.

Current status of production capacity and supply

This deficit reflected so virtually through physical map of transport networks of the continent. Existing lines, reproduced in blue on the map below show the weakness of these infrastructures; and if the project lines, marked in red, point to a strong improvement, they remain modest given the scale of needs.

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Power Sector in Africa or the Continent of paradoxes(Christine HEUREAUX)

published by IFRI

As for production capacity, which are intended to feed these networks, few figures summarize alone the catching up. The installed capacity of all Africa is 114 GW, for one Billion inhabitants, and therefore roughly equivalent to that of Germany, which has 82 million inhabitants. If one considers only sub-Saharan Africa, its installed capacity is more than 74 GW for 860 million people, or roughly that of Spain with its 45 million inhabitants. As to the capacity of sub-Saharan Africa excluding South Africa, it is only 34 GW to 810 million, equivalent to that of Poland with its 38 million inhabitants. Worse, about a quarter of the capacity is incapable of functioning.

Moreover, the share of production capacity with over 40 years of age, will increase by 70% over the six coming years; the average age of transport infrastructure in Southern Africa is currently 44 years, and some have already over 60 years of age, which partly explains the repeated setbacks and failures and important probably growing challenges in the coming years.

Another observation to make is that these capabilities are focused on a few countries: South Africa and Egypt together account for two-thirds of the installed capacity of the continent (respectively 43 and 22% in 2008). In other words, 33 countries out of 48 have to settle for less than 500 MW of power Map of electricity transmission networks in Africa installed - the equivalent of a coal power plant of medium size, - and 11 of them did not even reach 100 MW each. (Sources: EU, NEPAD 2008)

Faced with an annual GDP growth that was maintained on average 5% per year since the beginning 2000s, Africa has seen annual growth of its power generation capacity stagnate about 3% for several years (half of that of other developing regions); yet it should grow on average by 10% to meet demand.

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It is therefore not surprising that more than 30 African countries have suffered severe energy crises these last few years, and the time of power outages reported by manufacturing firms equivalent to 56 days a year. These deficiencies cost averaging 6% of revenues from businesses sector and up to 16% of loss of income in the informal sector with no facilities Relief - the World Bank estimates the economic weight of these cuts to a two-point growth per year.

To remedy - at least partially - to such shortages, many are stake holders who rent Backup capacities as soon as they have the economic means (business, industry) or the obligation (securing their public service mission or economic activity). The World Bank assess these spare capacity to 4000 MW. Very expensive, these means, which are mainly constituted of generators running on diesel, represent a cost to the country GDP between 0.5% (Gabon) to 4.3% (Sierra Leone).

Index of countries experiencing production shortfalls important, and their major causes (source: Eberhard, 2008)

Demand, consumption and market

On the demand side, there is the same imbalance in the allocation of markets and consumption. Regarding infrastructure and electricity markets, there are three main areas:

North Africa, interconnected with Europe and the Mediterranean countries; Southern Africa, the Power lung of continent with South Africa alone which

consumes half of the electricity produced there; Between the two, a large deficit despite disparities.

This distribution means emphasizing another shift: the main energy reserves (hydraulic and oil in particular), widely present in Central Africa are far from major centers of consumption

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(Southern Africa and West, respectively first and second economic Pool continent), accentuating the imbalance in the distribution between production and market centers.

Anyway, these markets remain underdeveloped, as evidenced by the average electrification rate overall population of all Africa: only 40%, while maintaining a downward trend since 2001 under the effect of population growth. But this rate varies significantly by region and confirms the geographical differences observed between the three main areas: greater than 90% in the North, equivalent to 27% in the South, it does not exceed 18% in Central Africa.

Another finding preoccupying, the continent's rural electrification rate is only 23% (and 12% in sub-Saharan Africa) or even less than 5% in at least 17 countries. Electricity consumption per capita and percentage of electrification by region

Consumptionelectricity

kWh / capita / year

% Of electrification

total

% Of electrification

urbanNorth Africa

% Of electrification

rural

North Africa 961 94 97 93West Africa 128 40 64 19Central Africa 92 18 37 6East Africa 351 41 43 30Southern Africa 1010 37 46 16Southern AfricaExcluding South Africa 254 15 36 6France 7500 100 100 100

Sources: Annual report of power utilities 2007;208, 2009. World Bank 2009, World Energy outlook2009

This low density connector is coupled with a very low consumption: just over 500 TWh in 2008, of which two thirds in sub-Saharan Africa. The very low annual consumption of electricity cited by African (490 kWh on average) drops to 305 kWh when excluding South Africa, and 145 kWh Sub-Saharan Africa excluding South Africa, that is to say, in forty countries. By way of comparison Therefore, each inhabitant consumes annually 1900 kWh in China, 7300 kWh in France and 12 200 kWh in the United States.

Another paradox: despite the low consumption, the room for improvement in efficiency are important. Thus, the World Bank estimates that $ 17 billion the savings could be made, including better maintenance of infrastructure or in improving the energy efficiency of buildings and certain industries. Meager compensation in this sequence of numbers, the continent accounts for only 3% to 4% of emissions global greenhouse gas emissions, 15% of the world population. In other words, emissions are lower than those of Japan and only logically focus on South Africa.

Costs and tariffs

Another paradox, not least for a continent richly endowed with raw energy resources deposits: 0.18 USD / kWh, the average cost of production of electricity remains high by the standards International. It is almost two times higher than other developing regions. One of explanations

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due to the predominance of thermal oil (46% against 6% in the world), then that many African countries are net importers of oil (this is particularly the case West Africa). In addition, the hydraulic capacity is relatively underexploited. Finally, do not forget the cost of generators (diesel) of substitution (from 0.35 to 0.40 USD / kWh) already mentioned and of course, poor operational efficiency.

It is therefore not surprising that the lowest prices, including globally, are in Countries like Zambia and Nigeria (about 0.02 USD / kWh) with the resources they have available (hydraulic and oil respectively), while the highest price (up to $ 0.50 / kWh) penalize isolated continent countries (islands), landlocked and without own resources - in short, strongly importers (eg Madagascar, Uganda, Niger and Kenya).

To conclude this overview, we note that the power sector deficiency weighs up 30 to 60% on African productivity, more than the bureaucracy and corruption. In other words, the African power sector "costs" on average 2.5% of GDP (several countries exceeding 4%), a figure that is far from trivial when you consider that with 5% GDP growth per year the continent cannot fulfill the Millennium Development Goals (MDGs), which would require growth Annual GDP of 7.5 to 8% for 10 years. Thence, too weak and current investments made in the sector dig the deficit.

Why this discrepancy? Some explanations

The explanations for these many paradoxes are of course many and vary depending partially on the countries. Beyond the more or less recurring events such as drought (which affects the ability of hydropower production, as was the case in recent years in Kenya), wars and conflicts, high oil and gas prices (which heavily penalizes importers, as in 2008), we can release at least three major causes of families who find themselves in varying degrees according to the economies and countries, but the impact is quite broad.

The weight of history

The areas most electrified today (Northern Africa and Southern Africa) are those where electrification was historically the earliest and most extensive.

In South Africa, we note that the Victoria Falls Power Company in 1923 sold more electricity than that consumed at the same time the cities of London, Sheffield and Birmingham.

North Africa has grown faster electrification from the nineteenth century under the impact of colonization people settlement: Tunis has taken twenty years ahead of Dakar in setting up and development of its access to electricity.

In addition, there is evidence that countries with the highest electrification rates today are those where the state has made the electrification strong national will and entrusted the charge to a national company, while giving it the means for such a policy.

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Too narrow markets, driven by too fragile economies

Beyond historical reasons, a key explanation for the lack of investments that explains the current delays is the insufficient size of the markets and the weakness of the economies of most countries. Indeed, the economic weakness has, for many years and still to this day, prevented Sub-Saharan Africa to dedicate the financing of infrastructure necessary investments.

But electricity infrastructure are particularly demanding in capital. Indeed, the "unity of account "for production facilities associated with adequate networks routinely evaluates hundreds of millions US$, for periods up to a decade or more.

This charge is even more unbearable that most markets are too small and their capacity consumption of too modest to expect quick and attractive returns on investment. While households represent a large majority (sometimes up to 95%) of customer of public utilities, which they account for 50% of revenues, and knowing that their purchasing power and consumption remain very modest (see the aforementioned figures), this customer base will not have a sufficient base for development of the public utilities that finds it so hard to build financial reserves necessary for their investments.

This too modest customer structure is also not offset by cross-border trade, lack of adequately developed transport infrastructure, even if new interconnections put up gradually, and lack of duly constituted regional markets. It is noted that even if regional power pools have been established, they are far from all operational.

Political and economic failures

If the economic weakness of States allows them more often than not to ensure by themselves investment - necessary nor cover the risks linked to high investment, it is recognized that inadequate institutional, legislative and regulatory framework dissuades many private investors to overcome the lack of financial capacity of States.

Yet in the 1990s, following proposals from the Washington consensus conditioning aid to the liberalization of the needy country markets, many countries have begun to open their electricity sector to private financing. The balance sheet, a few years later, is disappointing lows: Apart of IPP, nearly a third of the contracts as a concession to lease contracts or management by private operators to operate or straighten the electrical system Saharan have ended in failure (troubled contracts, interrupted or canceled) (World Bank, 2008).

The most frequently cited reasons for these failures are: lack of financial viability these projects for lack of solvency of public utilities (they charge too low prices that the state cannot not offset); poor governance of the public utilities that are penalized by inadequate results (70% of African power companies report 20% system loss, most of them do not exceed 90% of revenue collection). In addition, since 2008, the crisis and the difficult access to credit and financing have not helped the return of investors.

But beyond economic reasons, deeper structural reasons prevent mobilization for new achievements. The absence of a regulatory and institutional framework, the lack of a competent regulator, experienced and independent, the absence of rigorous tendering process

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and transparent, buyers financially viable and strong power purchase agreements are all persistent disadvantage that discourage or inhibit many potential investors actors in infrastructure or in the electrical sub-Saharan market. These hurdles are both political, institutional and administrative; trade and economic; and finally art.

In addition, all of the electricity sector actors suffered directly the consequences of the lack of overall planning in an industry where it is particularly necessary to set policy on the long term. All the power sector suffers, whether:

• aging equipment, poorly maintained, inefficient, expensive; • chronic underinvestment; • the mismatch between prices and tariffs that benefits the biggest consumers (industrial) and the richest (urban); • non-technical losses (fraud and illegal connections); • vocational training deficits; • of the lack of standardization, standardization, coordination.

We see all the weight and complexity of the equation to solve. The World Bank estimates that 40 billion euro per year for 10 years the amount of investment to be mobilized to catch up and support the growth of demand - yet only 11 billion is currently invested. Overall expenditure required for infrastructure in sub-Saharan Africa (billion per year)

Investment Exploitation and maintenance

Total expenses

Information and communication technology

7.0 2.0 9.0

Water 17.8 7.6 25.4Electricity 26.7 14.1 40.8Transport 8.8 9.4 18.2Total 60.4 33.0 18.2

Sources: World Bank - AFD 2009

To make more tangible this difficulty to mobilize investors, here we will take a figure quoted by UEMOA Between 1990 and 2006, the WAEMU zone attracted only 0.4% of private investment in the power sector worldwide 989 million. Still it should be noted that these investments concentrated over a short period from 1999 to 2000 and on the Ivory Coast alone. How to achieve sustainable development of the African power sector?

Faced with the bleak findings that emerge today from the African power sector, remedies are now well identified by most stake holders and even begin to be implemented in a growing number of countries. We include five that are certainly not exhaustive but which seem unavoidable.

The first expected signal to reassure - and thus attract - investors through strong policies measures that commit the country and are the responsibility of the States: it ranges from the creation of regulatory, legislative and institutional frameworks to provide long-term visibility

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and transparency on investment conditions to the good governance essential to reliability of the industrial and commercial sector development.

No significant developments will be economically possible or sustainable without the addition construction contracts - and thus projects - to mesh regional and interregional. Such regional integration are essential both to pool investments to increase the size of potential markets, streamlining infrastructure deployment, optimize service and secure management through common standards. Using regionalization integration tool would contribute to identify every year two billion economy, according to the World Bank.

While the economic takeoff of Africa does seem to be confirmed, we need more than ever before to strengthen and sustain it by leaning to reliable and sufficient infrastructure. No doubt this consolidation goes through the priority processing of large power infrastructure.

Europe from the late nineteenth century until the period after the war, most recently China and India have not otherwise process beginning with sit centralized power system technically performing and economically competitive, capable of generating new wealth, new capabilities of Investment, which gradually irrigate the various economic sectors and social strata eventually reaching the poorest. However, it is not possible to let the 500 million Africans - mostly rural - without access to electricity or other modern form of energy. So it is urgent to work in parallel on new models socio-economic to their attention by putting whenever possible focus on wealth creation economic, in addition to the well-being and quality of life.

Another hot point, insufficiently treated: some investment must be put massively on staff training and skills transfer across all classes trades from policy makers responsible for energy policies and pricing, to technicians of power companies. These requirements affect almost all national public utilities, and concern primarily the new businesses related to rural electrification programs which must be done. The sustainability of financial efforts and techniques that will be made over the pro-next few years in favor of electrification will guarantee solely if an equivalent commitment is put on human skills.

Finally, it remains to reflect on the technological choices as they will play a key role in the Evolutions of the African power sector. Faced with some sometimes too idealistic or theoretical reasoning (solar energy seen as a panacea, short-term launch of major nuclear programs, electrification of all Africa from the Inga hydropower site in the Democratic Republic of Congo ...), it seems urgent to put in the focus of pragmatic reasoning and realistic lists that are based on the economic performance of the envisaged systems, technical adaptability in a given context (what are the locally available resources? What are the needs in consumption today, tomorrow?), without forgetting the social acceptability, and both environmental and Climate.

Conclusion

The concluding word goes to another key player, who begins to dictate very strict way, as demonstrated by various riots in several countries in recent months and years: the time factor. We have seen, the power sector needs time to build; scale decision making and technological achievements is in the long term, rarely less than five years.

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Or As We know, frustration is growing among people tired by repeated power cuts and cuts as unannounced as durable. In addition, the economic take-off seems to be confirmed for most countries, partly driven by population growth and urbanization supported. All these factors mean that the continent should equipped itself urgently with electrical infrastructure essential to meeting the needs and sustaining this growth.

States are well aware that they no longer have before them 10 or 15 years needed to catch up backlog and prepare for the future. They must at once quickly define energy policies attract investors, prepare the building and succession of skills. It is therefore to combine short-term actions and long-term measures. On Good resolution of this difficult exercise, but unavoidable, depends the success of the takeoff of a whole continent.

Bibliography World Bank - October 2009 - Energy Strategy Group of the World Bank - Summary Sector - Sustainable Development Network. World Bank - May 2008 - Africa Infrastructure Country Diagnostic (AICD) - underpowered: The state of the power sector in Sub-Saharan Africa - Background paper 6. World Bank - Policy Research Working Paper - Vivien Foster, Jevgenijs Steinbuks - April 2009 - Paying the price for Unreliable Power Supplies; In-house generation of Electricity by firms in Africa - The World Bank Africa Region - African Sustainable Development Front Office. Gratwick KN & Eberhard A. - 2008 - "An independent analysis of Power Projects in Africa: Understanding Development and Investment Outcomes ". Development policy review 26 (3). Eberhard A., et al. - 2008 - in Energy Strategy of the World Bank Group Summary Sector - October 2009. IMF Saharan Africa - April 2008 - Regional Economic Outlook. Heuraux C. - June 2010 - Electricity at the heart of the African challenges - Manual on electrification Africa - Khartala Editions. ICA - March 2008 - Update on the production of electric energy in Africa

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NOTES (1) The World Bank estimates the cost of this inefficiency at $ 3.3 billion annually. (2) As an indication, it will be recalled that the average price of electricity in France for a four-person household is 0.09 € / kWh HT and 0.14 € / kWh HT in Britain. (3) IPP independent power producer. (4) The recovery rate is approaching 70% in fact rather the state and administrations are often the worst payers, which making it difficult use. (5) economic and West African Monetary Union. It includes the following eight countries: Benin, Burkina Faso, Ivory Coast, Guinea Bissau, Mali, Niger, Senegal, Togo. (6) Sub-Saharan Africa as a whole totaling meanwhile 2.1%, compared to 41.3% for the Latin American region and the Caribbean and 31.5% by the East Asia and Pacific region. (7) Excluding South Africa, the only country to operate to date this form of energy, the candidate countries will have to overcome many steps before making their operational projects.

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