For the past year or so, I’ve been privileged to lead a team at the Institute for Sustainable Energy at Boston University to develop a synthesized perspective on the current state of and future prospects for the African electricity sector. I’m pleased to announce that our final report is now available to the public, and a webinar presenting a brief summary of its findings can be seen here.
This report became a labor of love for me: although it admittedly took a lot longer to complete than I had expected, the effort in reviewing the ever-growing body of information on electricity in Africa rewarded me by providing additional evidence in support of my hypothesis that the natural long-run state of the sector involves a “grid-of-grids” architecture.
The challenges impeding improvement in the African electricity sector are daunting. Summarizing the main points:
- Nearly half of the continent’s 1.3 billion population has no access whatsoever to electricity. Although nominally connected to the grid, the other half is generally subject to poor reliability of service and frequent outages. Without much broader and better availability of electricity, it will be very difficult for Africa to gain a meaningful place in the digital 21st Century economy.
- Correspondingly, electricity infrastructure in Africa is woefully underdeveloped. Bringing improved energy access to Africans will require extraordinary amounts of capital – on the order of $1 trillion over the next few decades, by our estimates. Alas, low purchasing power in most African economies means that it will be very difficult to attract the necessary capital.
- Moreover, most electricity sector activity in Africa is undertaken by state-owned utilities that are not financially self-sustaining. The governments that control African utilities are often weak and/or corrupt. The resulting risk-reward profile for non-relocatable infrastructure investments in such locations is often insufficiently attractive to induce investment.
- To the extent that sizable sums of capital can be attracted, it is also important that it be invested in a way that is suitable for Africa. Building new large-scale power projects – either generation and transmission – are difficult to make work because they typically require sharing across multiple countries, but cross-border interconnections and coordination is limited in Africa.
- And, if all the required power generation expansion is achieved through the addition of capacity reliant upon fossil fuels, then Africa’s currently minimal contribution to global carbon emissions will quickly rise – just as the rest of the world needs to dramatically reduce emissions to mitigate climate change.
As a result of these observations, the case for small-scale grids based on distributed energy resources (DER) – most prominently, photovoltaics supported by energy storage – becomes compelling for many places in Africa. Not only will such solutions be most cost-effective, but they also help mitigate risks that investors face, for several reasons:
- They can be deployed in modest-sized increments, thus reducing capital outlays and time-to-completion before cash returns can begin to be achieved.
- They are conducive to Pay-As-You-Go business models that improve the likelihood of ongoing financial viability from customer revenues rather than subsidies.
- They often involve dealing with local counterparties – often individual customers – rather than state-owned utilities or national governments where bureaucratic (or worse) forces can stymie progress.
As capital flows to African electricity infrastructure in the coming decades, we see the grid-of-grids slowly emerging, wherein new DER-based small grids tend to serve rural communities while pre-existing grids in urban areas get reinforced. Over time, as economically-viable interconnection opportunities emerge as grids expand, the lattice of electricity delivery infrastructure in Africa can become better integrated, thereby improving the quantity and quality of electricity supply for all Africans.
In our view, this is the pathway to bring power and progress to Africa in a more environmentally and financially sustainable manner.