RES4Africa and PwC published a new study Participation of the private sector in the development of the African network. The study identifies the underfunding, inefficiency and insufficient extension of electricity grids as the main obstacles to Africa’s access to energy.
African power grids are characterized by poor infrastructure, inefficiency and limited coverage, preventing universal access to electricity and hampering the development of the continent.
The analysis covers ten countries (Algeria, Ethiopia, Ghana, Kenya, Morocco, South Africa, Tanzania, Senegal, Uganda and Zambia) and was presented during a virtual event organized as part of RES4Africa’s strategic program, Grids4Africa. The gathering benefited from the participation of important representatives of African and international entities from the private and public sector (Enel, PwC, Umeme, EPRA, Ghana Energy Commission, IFC, ARM-Harith Infrastructure Investment, Schneider Electric and MIT / Comillas / FSR).
Did you read?
On the brink of despair, we need smart grids
Virtualize the national T&D network to promote the energy transition
The transmission and distribution networks on the continent require major improvements and are likely to become the real bottleneck of sustainable development in Africa. Electrification efforts risk being overtaken by the continent’s population growth and, where access to electricity is available, losses are high (up to 29%) and reliable electricity supply tends to be substandard.
The study highlights a chronic lack of investment as the main reason for this status quo: public services suffer from staggering quasi-fiscal deficits (implicit subsidies), representing on average 1.5% of GDP in the ten countries of the ‘sample. In order to compensate for these problems, many utilities resort to higher tariffs, resulting in reduced customer base and, ultimately, finding themselves trapped in a vicious cycle.
According to the analysis, the solution to breaking the cycle is to expand private participation, which is currently an exception in the overall African energy panorama. Increasing the role of the private sector will also reduce structural imbalances and maximize returns from new business models.
Did you read?
Analyze how COVID-19 has changed access to finance in Africa
Mini-grid business model shows utility and developer can collaborate
The recommendations resulting from the study are oriented towards major regulatory reforms to be promoted by an independent energy authority, guaranteeing market fairness and transparency. Additional interventions are targeted regulations, adequate remuneration for private public services, unbundling and liberalization and, finally, institutional commitment and support.
The Participation of the private sector in the development of the African network study is available online.