Building capacity to help Africa trade better

The future of electricity in Africa: Liberalisation


The future of electricity in Africa: Liberalisation

JB Cronjé, tralac Researcher, discusses the future of electricity in Africa

The energy sector provides essential backbone support to almost all economic activity and its cost, quality and availability have an impact on the competitiveness of economies. According to the International Energy Agency’s World Energy Outlook 2011, global primary energy demand will increase by 40 percent over the next 25 years. Over the next 25 years, 90 percent of the projected energy demand growth will come from non-OECD countries with China alone accounting for 30 percent. By 2035 it will consume 70 percent more energy than the second largest consumer, the United States. China’s per-capita energy consumption will by then still be less than half of that of the United States. The demand for all fuels, including fossil fuels, will increase but the share of fossil fuels in global primary energy consumption will slightly decrease from 81 percent in 2010 to 75 percent in 2035. However, the share of natural gas in the global energy mix is set to increase. The outlook for natural gas, both on the demand and supply side looks bright with prospects of a ‘golden age’ for natural gas. The share on non-hydro renewables in power generation will increase from 3 percent in 2009 to 15 percent in 2035 whereas the contribution of hydropower will be stagnant at around 15 percent. Even nuclear power output is predicted to rise by more than 70 percent over the period to 2035.

Sub-Saharan countries have varying levels of electrification but most have an electrification level of less than 30 percent. Currently Sub-Sahara Africa has a total power generation capacity of 68 GW. It is equivalent to that of Spain. South Africa accounts for two-thirds of Sub-Sahara Africa’s current generation capacity of which 90 percent is generated by coal. South Africa’s power infrastructure stands therefore in stark contrast to the rest. With a population of 49 million, it has a total generation capacity of about 45 000 (megawatts) MW. In contrast, the second largest generator, Nigeria (with a population of 150 million) has a total generation capacity of less than 6 000 MW.

Hydropower accounts for almost 70 percent of electricity generation outside of South Africa with the remainder divided among oil and natural gas generators. The potential for hydropower generation in the continent is enormous, particularly in the Democratic Republic of the Congo. Natural gas reserves are concentrated in Nigeria but significant discoveries have been made in Angola, Mozambique, Namibia and Tanzania.

The integration of energy infrastructure is necessary to promote regional economic integration and enable industries to reach economies of scale. Few countries have sufficient demand to justify large enough power plants to exploit economies of scale. For example, thirty three countries have national power systems that produce and consume less than 500 MW. Operating costs in countries with small national power systems are also much higher than countries with large national power systems.

Four regional power pools in Southern, Eastern, Central and Western Africa have been established to promote cross-border trade of electricity. The regional power pools could create economies of scale, diversification of the power generation mix, increased system reliability and security of supply. The Southern African Power Pool and its members (the members consist of the state-owned power utilities of the different member states) aims to increase interconnectivity between the SADC countries and to facilitate cross-border electricity trading and power pooling. Several transmission grids in the region have been interconnected since its establishment in 1995, but limited trading has taken place mainly due to lack of power supply in the market and bottlenecks in the transmission lines. Many electricity markets in the region are still vertically integrated with government owned generation, transmission and distribution entities. This situation makes it less attractive for private power infrastructure investment. The liberalisation of the industry through unbundling and reregulation is therefore necessary in light of the insufficient capacity in the region to supply electricity demand.



International Energy Agency, 2011. World Energy Outlook 2011 Factsheet. Available at: http://www.worldenergyoutlook.org/resources/factsheets/

Eberhard, A., Rosnes, O., Shkaratan, M., Vennemo, H., 2011. Africa’s Power Infrastructure. The World Bank, Washington. Available at: http://elibrary.worldbank.org/doi/book/10.1596/978-0-8213-8455-8

KPMG Global Infrastructure and Projects Group Africa Team, 2011. Sub-Saharan Africa Power Outlook.

Comments received:

Klaus Schade, 24 May 2012 09:42 AM:

“Thanks for your Hot Seat Comment on the future of electricity in Africa. I fully agree with your final statement on deregulation and the stronger role of Independent Power Producers. Two aspects, however, have not received the attention they would deserve: We have an abundance of other natural resources that have not been exploited for energy generation yet – wind, solar, biomass, wave power, etc. besides fossil fuels. Moreover, the focus is exclusively on the supply side. I strongly believe that we need to address the demand side as well, employ more energy-efficient technologies (such as solar water heaters rather than electric geysers) in our production systems as wellas in private households. Energy / electricity audits could go along way in raising awareness among private households and producers about their energy consumption and alternative means. Keep up your good work.”

Vladimir Chilinya, 29 May 2012 11:20 AM:

”I would like to add my comment to the earlier analysis of the future of electricity in Africa. The author brought out the traditional sources of energy in Africa. however, the potential of energy in Africa is not only on hydro and gas, solar energy is a good alternative considering the climate of the region. It would be good for the region to invest more in solar energy. further to to the low cost benefits to users it is good for environmental protection.”

Gbadebo Odularu, 04 June 2012 11:46 AM:

“The discussion touches on vital issues which relate to energy supply, regional integration and liberalization. Other related elements in this regard are rural development, food security, improved livelihoods, smallholder farming, et cetera. As rightly stated, is the grave and critical situation for South Africa, which relies on non-renewable to about 90 per cent. There is a need to re-focus on the prospects of renewable energy as the 4 sub-regions promote cross-border trade in energy, thereby creating economies of scale, diversification of the power generation mix, and increased energy security. What prospect does this hold for the EAC-COMESA-SADC Tripartite agreement, as well as the Continental Free Trade Area (CFTA).

The world’s current transportation systems are highly dependent on petroleum, a resource that is concentrated in relatively few countries. This has left the global economy at risk of disruption, particularly with oil supplies as tight as they are now. Biofuels promise to bring a much broader group of countries into the liquid fuel business, diversifying supplies and reducing the risk of disruption. And because biofuels can be produced in most region of the globe, the risks inherent in transporting fuel over long distances will also be reduced. Of the world’s 47 poorest countries, 38 are net oil importers, and 25 of these import all of their oil. In many smaller and poorer nations, 90 per cent or more of the total energy used comes from imported fossil fuels. In some cases, a large share of the foreign exchanges goes to pay for oil, and much of the government revenue is used to subsidize kerosene and diesel fuel. Yet many of these same countries have substantial agricultural bases and are well suited to growing sugar cane, palm oil and other highly productive energy crops. Some of these countries even have the potential to become net exporters of liquid fuels. In the face of rising oil prices, more attention is being given to finding alternatives to conventional oil, as in the form of new energy sources, and as new technologies for production of liquid fuels. For investment business, technological cases, and development of energy strategies, Africa must be able to evaluate and compare various energy sources and technologies of fuel. African countries can play a vital role by reducing their dependence on crude oil. Both the developing and developed countries should encourage the use of non-conventional sources of energy, in all areas. More research and development is also required to make industry less dependent on petroleum products and to develop organic alternatives. A large part of this article deals with the aspects of ‘What we can do and how’, focusing on the aspects of sustainable development and its uses.”


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