The centrepiece of the evolution of any city is access to electricity. However, this basic element of modern life, and what most of the people take for granted, does not reach a large proportion of the population living in sub-Saharan Africa.
Only 40% of the people in that region have access to electricity. This number gets even smaller in the rural areas, where less than 25% of the population can turn on a lamp at night (Figure 1). This is the third article of the “Urbanisation in sub-Saharan Africa” series, following “City Master Plans” and “Affordable Housing”.
Access to electricity in sub-Saharan Africa: Current situation
Access to electricity has grown at 7.5% per year in sub-Saharan Africa since 2010, which is not rapid enough to significantly overcome the current population growth of 2.8% per year in a short period. Consequently, sub-Saharan Africa encompasses the largest number of people without access to electricity: 590 million people. Nigeria, DR Congo and Ethiopia concentrate one third of the population currently living without electricity in sub-Saharan Africa, totalling 200 million people (Figure 2).
The International Energy Agency (IEA) projects that investments of around US$49.4bn per year until 2030 would be needed to achieve electricity access for all in sub-Saharan Africa. If nothing is done and investments in power generation and transmission lines are not ramped up, more than 670 million people will not have access to electricity in sub-Saharan Africa by the end of the next decade.
Inadequate electricity services pose a major impediment to reducing extreme poverty and constitute a more pressing obstacle to economic growth than access to finance, red tape and corruption. Any business in the modern world requires the use of electricity. Hence, by not having access to this key element of today’s life, local businesses are limited to operate only during day time.
With no electricity, trading of perishable goods become impractical, industries cannot operate, and urban areas become harder to control during the hours of the night, which could likely result in a higher crime rate. The production of any goods become manual and, consequently, such a business will have a significant competitive disadvantage in relation to other businesses that use electricity as it will not be able to scale manufacturing. Full electrification will require an increased investment in the region, including large-scale, on-grid electricity generation capacity and networks. Aside from low access, the region is also facing issues such as low consumption, low reliability, high per-kilowatt cost, and utilities running at a loss.
Making reliable and affordable energy widely available is critical to the development of a region that accounts for 14% of the world’s population, but only 4% of its energy demand. Since 2000, sub-Saharan Africa has seen rapid economic growth and energy use has risen by 45%. Many governments are now intensifying their efforts to tackle the numerous regulatory and political barriers that are holding back investments in domestic energy supply. However, inadequate energy infrastructure risks putting a brake on urgently needed improvements in living standards. Although investment in new energy supply is on the rise, two out of every three dollars put into the sub-Saharan energy sector since 2000 have been committed to the development of resources for export.
Most of the sub-Saharan countries still host an environment where the power sector is controlled by the state. In such a situation, there is little incentive to advance the grid as financial penalties for poor performance are non-existent. The lack of commitment to advance the electricity sector restructuring is predominant and is one of the main reasons that prevents the power sector to reach more users. Political instability, conflict and institutional weakness, which permeate a large number of sub-Saharan African countries, also make any reform or investment in the sector risky.
However, even a state-controlled power sector can be efficient. Setting managerial performance incentives, with targets based on well-designed performance benchmarking, is central to improving the performance of state-owned and municipal utilities. These institutions have an important role in society when working to ensure electricity access for low-income citizens. For this to be achieved, transparent and realistic business plans are needed in addition to input from civil society.
Many countries have introduced some form of competition, reducing the prevalence of fully monopolised, vertically integrated power sectors. However, in most cases the reforms only helped open the generation subsector to independent power producers (IPPs), without much progress in improving the performance of the existing integrated utilities. Vertically integrated natural monopolies remain the norm in over 80% of the countries in sub-Saharan Africa. Moreover, even where IPPs can enter on paper, other barriers, such as lack of assured access to transmission facilities, limit their scale and impact.
Engaging the private sector is important for advancing electricity access in developing countries, where the public sector lacks sufficient resources to undertake costly investments in electricity generation and transmission, and international donor sources are very limited. Although private sector participation has grown in much of the world, in sub-Saharan Africa, 50% of the countries have not engaged the private sector in generation or distribution.
China’s role in renewables in sub-Saharan Africa
Sino-African relations have spanned through a range of economic fronts, from banking to infrastructure and energy. In the period between 2000 and 2015, Chinese contractors were responsible for 30% of the new power generation infrastructure being built in sub-Saharan Africa. Between 2010 and 2020, China is tackling over 200 projects, with a total of 17 gigawatts (GW) of generation capacity in the region, which is the equivalent of 10% of the existing installed capacity in sub-Saharan Africa.
In power transmission and distribution, Chinese companies are active in the entire power-grid chain, from cross-border transmission lines like between Ethiopia and Kenya, to local urban and rural distribution networks, such as in Angola or Equatorial Guinea.
Between 2010 and 2015, foreign direct investment (FDI) from China in the sub-Saharan Africa power sector development, which includes power generation and transmission and distribution, amounted to $13bn, or around one-fifth of all investments in the sector in the region.
Power generation projects led by Chinese companies in sub-Saharan Africa range from coal to renewable energy. One area that has seen growing investments from Chinese companies is solar power generation. China is a lead supplier of photovoltaic (PV) panels for solar projects in Africa. Jinko Solar, the largest manufacturer of solar PV panels in the world, has been active in the continent since 2014 when it opened a PV panel factory in Cape Town, South Africa, with an annual capacity of 120 MW.
More active in the region is JA Solar, another Chinese major solar technology company. Together with two South African partners, Solar Capital and Black Enterprise Empowerment, JA Solar is building the Orange project, a solar farm with 86 MW of capacity. Located in the Northern Cape province, South Africa, the farm will be connected to the grid and will start producing in 2018. The company has also supplied 6.5 MW of solar panels to Namibia.
In Zimbabwe, Chinese company ZTE Corporation is poised to build the Insukamini Solar Project with an electricity generation capacity of 100 MW. The $544m plant will form one third of a 300 MW solar development in the country, comprising Zimbabwe‘s first three large solar parks. ZTE completed the feasibility study for the project in April 2017. However, due to failure from the Zimbabwean government to clear arrears to China Export and Credit Insurance Corporation (Sinosure), the China Exim Bank stopped advancing loans to the country’s energy projects, which may hold back the project construction.
The growing cooperation between the region and China can be observed by the creation of the China-Africa Renewable Energy Cooperation and Innovation Alliance (CARECIA). Launched in August 2017, the initiative aims to boost the clean energy cooperation between China and Africa, helping establishing power supplies and transmission systems in Africa through public-private partnership (PPP) projects, focused on renewable energy options.
In its first month, CARECIA signed a memorandum of understanding (MOU) with the Africa Renewable Energy Initiative (AREI) to formalise the cooperation between China and the African continent with respect to clean energy.
Members of the alliance include finance institutions, smart-grid providers and manufacturers in the renewable energy sub-sector. Initially, the alliance will start with a few pilot projects before expanding its influence across Africa. Pilot projects would include helping build micro-grids in some African households and villages, in combination with large-scale power construction.
Technical innovations, especially in solar power, provide the possibility for faster progress in electricity supply by complementing grid expansion with mini-grids and home-scale systems. Off-grid electricity sources historically have consisted of small diesel-powered generators used to compensate for unreliable grid supplies, and to provide electricity for households and businesses not connected to the grid who can afford them.
All this has undergone considerable change over the past decade or so. During that time, there has been growing interest in solar-charged lanterns and small-scale PV home systems that can provide lighting, access to mass media, and battery charging to households in rural areas. This interest has been spurred by technological advances that have made mini-grids using solar power significantly cheaper than it used to be at the beginning of the decade.
Mini-grids are a very interesting possibility for scaling up electricity availability in areas where grid extension is costly. It also provides a faster way for individuals to access electricity rather than waiting for larger power infrastructure projects to reach their homes. Kenya, Tanzania, Nigeria and Rwanda are some of the countries that have invested more broadly in mini-grids, undertaking regulatory reforms to lower barriers to investment.
Substantial cost reductions from rapid technological improvements from innovations in home-scale solar power production provide the opportunity to improve the quality of life of people without access to electricity in more lightly populated rural and remote areas of sub-Saharan Africa. However, while home systems can provide more and better lighting and other basic household conveniences, they cannot do that much to increase incomes and employment and reduce poverty in those areas, given the limited quantities of electricity they provide compared to the electricity needed for most productive uses.
China’s role in Africa’s power generation in the renewables sphere also extends to hydropower. Among the major hydro projects undertaken by the Chinese in the region, is the 2,172 MW Caculo Cabaca Hydropower Project in Dondo, in Angola. With construction started in August 2017 and completion planned for 2022, the $4.5bn project was a Chinese venture that, at its peak construction, will employ nearly 10,000 people. After completion, the share of the population in Angola with access to electricity is expected to jump from current 40% to 60% of the population.
In Nigeria, a consortium of Chinese state-owned construction firms was awarded a $5.8bn contract to build the Mambila hydroelectric power plant in the state of Taraba, with 3,050 MW of generation capacity. The project will take six years for completion and will be welcomed by the over 75 million people currently living without electricity in Nigeria.
Chinese companies are also carrying out hydroelectric power generation projects in countries such as the Ivory Coast, Uganda, Zimbabwe and DR Congo.
Kenya and Rwanda government-led power projects
Kenya is implementing a Ksh.15bn ($148m) project to extend its national grid. The Last Mile Connectivity Programme has a target of ensuring grid connection to every household within a 600m radius from a transformer. To reduce affordability constraints and increase uptake, connection fees were subsidised, with households paying Ksh.15,000 ($148), financed up to three years. The World Bank estimates that the real connection cost approaches US$1,000.
The project started in April 2015 and is comprised of three stages. Phase one was completed in April 2017, giving 1.5 million Kenyans access to electricity. The second phase launched in April 2018, and the third phase will work on extending the network to connect an additional 2.5 million Kenyans to the national grid.
The project, which is jointly funded by the Kenya government, the World Bank and the African Development Bank (AfDB), aims to connect 100% of the country’s population to the national grid at its completion in 2020. Despite being a very optimistic target to reach within only two years, Kenya’s efforts on expanding its electricity grid is commendable when comparing the share of the population with access to electricity in 2010 and in 2016: a jump from 19.2% to 56.0%.
Rwanda is also tackling the issue of insufficient electricity access in a serious way. The country implemented an ambitious Electricity Access Rollout Programme (EARP) in 2009. Initially, the goal was to increase access to electricity from 6% to 16% of the population over a five-year period. The project far surpassed expectations, meeting that target within three years while lowering the cost of connection.
Rwanda benefits from its lower corruption levels and strong commitment from the government to achieving the goal of universal electricity access. Rwanda’s rapid success was helped by its small size and high population density, which provided the opportunity to spread electricity access to a large portion of the population in a short period. However, even with these attributes, the programme has faced challenges. These include lower than anticipated demand and shaky utility finances.
The next stage of the EARP will extend activities to more remote rural areas with a lower population density. The low electricity consumption of these new clients means that operational costs will not be covered by revenue from sales and therefore subsidies will be required to maintain the supply to rural consumers. Currently, it costs Rwf 56,000 ($65) for a household in Rwanda to connect to the grid, a price that is already subsidised and can be paid in instalments over a one-year period. The World Bank calculated the real average cost per beneficiary over the period 2009-2013 to be $980.
Nine years after the EARP was launched, Rwanda’s electricity consumption levels in connected households and enterprises remain very modest. According to the World Bank, there was no indication of economic multiplier effects from the increased productive uses of electricity at a scale beyond a few small shops and service businesses.
Regionally, Rwanda ranks ninth on the “getting electricity” indicator from the World Bank’s ease of doing business index, but it ranks 119th when compared globally (Table 1). This indicator captures the procedures, time and cost involved for a business to obtain a permanent electricity connection to supply a standardised warehouse. Kenya performs a bit better, ranking third regionally, but 71st globally. Sub-Saharan African countries scored very low in this indicator, with only four countries ranking among the top 100.
Figures from the 2017/18 World Economic Forum’s (WEF) Global Competitiveness Report (GCR) show that only eight sub-Saharan African countries have scored among the top-100 countries on quality of electricity supply (Table 1). Only four in 10 people living in Africa have access to a reliable supply of energy throughout the day, according to nearly 54,000 interviews in 36 African countries in 2014/2015 by research network Afrobarometer.
However, between 2010 and 2016, both Kenya and Rwanda experienced a double-digit annual growth rate of the number of people getting access to electricity: 22.7% and 23.3%, respectively (Figure 3). Both countries still have a significant number of people without access to electricity, but at this pace this reality should be substantially improved in the next 10 years. Currently, Kenya and Rwanda have 21.3 million and 8.4 million people living without electricity, respectively.
Figure 3 also shows the critical situation Nigeria, Ethiopia and DR Congo face with respect to access to electricity. These countries present a low annual growth rate of people getting access to electricity, while currently having tens of millions of people still living without electricity. South Sudan and Liberia show a rapid growth in the number of people getting electricity. However, this steep development is explained by their very low initial population that had access to electricity in the first place. In 2016, South Sudan and Liberia only had 8.9% and 19.8% of their population with access to electricity, respectively.
Electricity transmission and distribution losses
On-grid networks have the potential to provide the larger volumes of electricity needed for developing industrial complexes and high energy-demanding businesses. However, in a vast continent such as Africa, electricity consumers may be located far away from the main power providers.
Hydro power plants depend on a river’s geography and are built considering a trade-off between which part of the stream can be transformed into a dam, with minimum environmental damage, and how far this location is to the main electricity consumers in the region. Wind power needs to be located near the shore or at higher altitudes if it is to achieve a minimum profitable efficiency, and power plants that depend on raw imports, such as coal and liquefied natural gas (LNG), may need to be located near the ports, which are the receiving points for such imports. Transmission and distribution (T&D) lines cover these distances between power generation and consumers. Despite its relative lower costs in relation to power generation, the quality and efficiency of T&D lines across sub-Saharan Africa are far from ideal.
In 2014, 11.7% of all electricity generated in sub-Saharan Africa was lost due to poor quality of T&D lines, while the world average was 8.3% on that year (Figure 4). Nigeria, the DR Congo and Ethiopia, which jointly concentrate 200 million of people without access to electricity – one third of sub-Saharan Africa’s total – lost between 16% and 22% of their electricity output due to T&D inefficiencies. If these three countries could decrease their T&D loses to match the world’s average, an additional 18 million people would have electricity.
The World Bank estimates that Africa’s transmission sector will need between $3.2bn and $4.3bn every year, until 2040, in order to reach optimum T&D standards. This is about three times the current annual spending in T&D on the continent. Currently, almost all transmission investments in Africa are financed by state-owned companies. This was also true for the rest of the world until the 1990s. Of 38 countries in Africa, nine have no transmission lines above 100 kilovolt (kV), and the total combined length of transmission network from these countries do not reach the extent of the transmission network of a country like Brazil, for example, and totals less than half of the United States’ T&D network extension.
Despite its large land mass, Africa also has fewer kilometres of transmission lines per capita than other regions. The length of transmission lines in continental Africa is 247km per million people. If South Africa is excluded, this indicator drops to 229km per million people (Figure 5). Chile, for example, has a per capita length of transmission line almost three times that of sub-Saharan Africa.
Building more transmission lines and upgrading transmission capacity will be an essential part of the overall expansion of the electricity sector. As Africa needs transmission both within and between countries, investments are required at national and regional levels. Inter-country T&D lines have the potential to connect larger sources of renewable energy to multiple electricity demand centres. That is the case of the Central Africa Transmission interconnection. The centrepiece of this project is the construction of the massive INGA Hydro power plant. With over 40 GW, the INGA project will have 85% more power capacity than the current largest hydro power plant in the world, the Chinese Three Gorges Dam. The Central Africa Transmission lines will link Chad to South Africa, cutting through the DR Congo, where the INGA dam will be located. Only this part of the project will cost $40bn.
Africa needs to invest in long-distance lines and to expand local transmission networks at a range of voltages. Besides the Central Africa Transmission project, two other major transmission projects are considered for sub-Saharan Africa: the West Africa Power Transmission Corridor, a 2,000km transmission line connecting The Gambia to Ghana along the shore; and the North South Transmission Corridor, a 8,000km connection crossing the whole continent, from Egypt to South Africa, passing through East Africa. After construction, these corridors will add over 13,000km to Sub-Saharan Africa’s transmission grid.
Off-grid solar power in Kenya
The long-term rationale that justifies expanding electricity access centres on the premise that a high upfront expense on building power generation and distribution infrastructure will be paid back through economic growth in the long-run. However, the dire economic situation of most of sub-Saharan African countries makes it too expensive to provide on-grid electricity to rural areas. The private sector came to help in the form of off-grid solar power panels.
Founded in 2011, M-Kopa’s success has more to do with its understanding of the target market than with the novelty of its product: solar photovoltaic (PV) panels. The company adopted a competitive and accessible financing scheme targeted at people living with less than $2 per day.
The company’s power system costs $200 and includes a solar panel, two LED bulbs, an LED flashlight, a rechargeable radio, and adaptors for charging a phone. M-Kopa sells this kit to the end customer at an upfront price of $35 and a daily payment of $0.50 for a year. After that period, the kit becomes the customer’s property. M-Kopa gives a two-year warranty for the kit and the battery life averages four years.
The solar system uses a control box containing a mobile data chip, through which customers can buy credit for their power using mobile money transfer app M-Pesa, the mobile money system developed by Kenya’s dominant telecommunications company, Safaricom.
The company can process payments, monitor the system’s functionality and tackle problems through its platform called M-Kopanet.
According to the company’s website, M-Kopa has connected over 600,000 clients with its solar PV kit, 80% of whom are in Kenya, with the rest in Uganda and Tanzania. 80% of which make less than US$2 per day.
The M-Kopa system has the potential to tap into a 21.3 million people market only in Kenya. That is the number of people currently with no access to electricity in that country. Of those, 88% live in rural areas, where an off-grid solution would be more practical and will attend the inhabitants with enough electricity to their basic needs.
Waste-to-energy in Ethiopia
A 50 MW waste-to-energy (WTE) plant is being built in the outskirts of Addis Ababa, Ethiopia’s capital, on what is intended to bring huge gains to the city. The WTE plant will provide 30% of the capital’s needs for electricity and it will incinerate 1,400 tonnes of waste every day. The Reppie WTE plant, as it is named, is the result of a partnership between Ethiopia’s government and a consortium of international companies. It is the first of its kind in Africa.
WTE plants are not considered green solutions for dealing with waste since the result of any combustion process involving waste material includes greenhouse gases such as CO2. However, it is a first step in the right direction as landfills are prone to spread diseases and have an immense potential for damaging the environment.
WTE plants are also interesting as they can be easily replicated across the continent and help other major African cities dealing with urban waste problems. It is a better option than building a coal power plant or flooding hectares of land for hydropower generation. The Reppie plant adopts a gas treatment technology so that helps reducing the release of heavy metals and toxic gas produced from the burning.
Broad access to reliable and affordable electricity is key to promoting rapid economic development in sub-Saharan Africa. However, those are not the only pieces of the puzzle necessary to create a thriving urban society. Besides achieving universal access to electricity, sub-Saharan Africa will have to keep working on solving basic infrastructure issues in order to trigger lasting economic growth.
The unmet need for a broader reform that goes beyond just connecting poor households to the grid, but that also includes addressing access to water, roads and sewage system, access to education, to basic health and to finance for small businesses, may have been the reason Rwanda’s EARP project only achieved a modest positive economic impact in that country. The inexorable process of urbanisation, which concentrates an increasing number of people living in proximity, only hastens the pace these basic infrastructure needs become essential. Comprehensive reforms that attack multiple issues of an urban society have the greatest chance to succeed in promoting human integration and economic growth.
According to the IEA New Policies Scenario in the World Energy Outlook, the demand for electricity in sub-Saharan is expected to more than triple by 2040, reaching 1,300 terawatt hours (TWh) under current and proposed government policies and measures. By 2040, the demand from industry will double while residential demand will grow by more than five times the current levels. At a rate of 6% per year, electricity demand growth will therefore exceed GDP growth throughout the next 25 years to 2040.
By 2040, total power generation capacity in sub-Saharan Africa is expected to quadruple to 385 GW. Capacity additions will average 7 GW per year until 2020, and then increase to around 10 GW per year in the 2020s, and over 13 GW yearly in the 2030s. The sub-Saharan power sector is thus expected to expand progressively, though it will remain far behind those of other developing countries.
The author, Otavio Veras, is a research associate of the NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation. Otavio can be reached at [email protected].