A new report issued by the Rocky Mountain Institute provides recommendations on how countries in Africa can save up to $110 billion in the energy industry over the next decade.
The study Creating a Profitable Balance states that the lack of planning can cost the energy industry in Africa up to $180 billion, more than double the gross domestic product of Kenya in 2016, over the next decade.
However, better planning could save the region up to $110 billion.
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Better planning would include the use of demand-side management and consumer energy efficiency solutions.
The report also states that better planning would improve access to affordable and reliable energy by the 600 million people currently living in energy poverty.
Governments and their partners should develop well-planned electricity systems in which investments in generation and transmission align not only with each other but also with people’s demand.
Two factors were cited as key contributors to capacity imbalance:
1. A fragmented, project-focused approach that does not consider whole power system dynamics, including bottlenecks in transmission and distribution
2. Overly optimistic demand forecasts not matched with strong programs to create productive demand for power.
Energy poverty and how to address it is a hot topic set for discussion at African Utility Week and POWERGEN AFRICA conference. Click here to register to attend or for more information about the event.
Key recommendations for investors
- Challenge project developers to clearly articulate how their project fits into the overall system need and what steps they are taking to reduce risk in addition to securing government guarantees and/or take-or-pay contracts.
- Encourage and support governments in developing a transparent, collaborative and regular planning process if none exists or if those that do exist aren’t informed by on-the-ground realities.
- Diversify investments in the power sector to include critical transmission and distribution and enablers of regional trade and integration, and encourage governments to do the same.
Eric Wanless, Africa Energy Program Senior Director at RMI, said: “Procuring power is a necessary element of increasing energy access and driving economic development, but it is far from sufficient. Holistic planning and implementation that includes the full range of supply and demand-side solutions, their interactions, and critically, productive use programs that allow homes and businesses to realize the full benefits of electricity, is critical.”