The African Development Bank’s NEPAD Regional Integration and Trade Department (ONRI), has published the Energy Sector Capacity Building Diagnostic and Needs Assessment Study.

This report focuses on addressing the “soft infrastructure” challenges that hamper the efficient operation and financial performance of the energy sector in Africa. Such soft infrastructure issues include legal and regulatory reforms, energy sector restructuring (as partly envisaged in countries like Angola, Kenya and Tanzania), power planning and support for enhanced regional power trade. Addressing these challenges would boost capacity for regional energy trade across the four regional power pools of Sub-Saharan Africa, which in turn would enhance energy security whilst bringing economies of scale in energy sector investments.

Africa’s energy sector is undergoing an exciting period of transformation with a gradual shift away from purely national energy planning and investments towards more integrated regional approaches. This is evident from the emergence of various regional energy master plans, regional interconnection/grid codes, plans for regional market operations and efforts towards harmonization of standards. A critical milestone will be the full implementation and operationalization of regional guidelines for systems operation and platforms for regional energy trade. It is opportune, therefore, to ask what sort of technical reforms and skills would be required to serve the emerging interconnected energy sector in Africa.

On the physical infrastructure side, the investment needs to achieve interconnected regional energy systems in Africa are well documented. As the most energy poor region in the world with some of the highest prices per kilowatt hour, it is estimated that Africa needs more than US $40 billion worth of annual investments if it is to double current levels of energy access by the year 2030.

Increasingly today, the Bank and other development partners are being called upon to provide resources to improve the technical and financial performance of the energy sector to complement physical infrastructure investments. This report provides a useful guide on how the Bank can package such resources using regional and national approaches. Using interviews, surveys and literature reviews of technical documents the diagnostic assessment covered 88 stakeholders in the electricity industry that included the four regional power pool secretariats in Central, East, Southern and West Africa, energy utilities, regulators, policy-makers and energy training centres.

Energy sector reforms across Africa have not always translated into improved financial performance and operational efficiency. However, the entry of private sector players and the establishment of inter-connected regional power pools have renewed interest in sustained sector reforms in order to improve the enabling environment for investors. Key prerequisites include establishing a sound regulatory framework and institutions, achieving financial viability amongst the energy utilities, and developing high-level skills to ensure optimal operational performance.

Not surprisingly we find that the four regional power pools still face challenges in achieving the full benefits of regional power integration as a result of national electricity sectors being at different stages of reform, development and financial capability. This results in differences in regulatory environments (including lack of technical and regulatory harmonization), weak regional and national institutions, occasional misalignment in national and regional power investment decisions and so on. However, all four regional power pools have clear objectives to develop technical harmonization and competitive regional power markets.

To support these ambitions of deepening integration and energy trade within and across the regional power pools, the report places emphasis on five critical areas, namely: (i) improving the legal and regulatory framework governing the energy sector; (ii) improving performance amongst the energy utilities that constitute the regional power pools; (iii) strengthening capacity in systems operations and dispatch; (iv) supporting reforms to nurture a conducive enabling environment to attract energy investments; and (v) upgrading energy sector skills through targeted energy Centres of Excellence.

Already, the Bank has started to take on board some of the recommendations from the report and is exploring ways to incorporate energy sector reforms and capacity building within future energy infrastructure operations. The report consists of two (2) volumes. Volume 1 presents results of the SSA power sector diagnostic of technical needs, while Volume 2 presents the proposed technical assistance programme, an implementation plan.