Perhaps more than in any other global region, Sub-Saharan Africa’s economic development remains tied to sustained growth in the power sector. The anticipated economic gains of the 2020s will depend in large part on bringing electricity to over 600 million people in the region that currently lack it, writes Steve Chakerian, a senior analyst at smart infrastructure market intelligence firm Northeast Group.
Fortunately, added benefits will accrue, as the billions of dollars of investment needed to reach these customers will provide a boon to local economies. Further, the resulting modern infrastructure will allow these economies to diversify. Most of the expected $141 billion in investment over the next ten years will come from large-scale generation. Still, there will also be significant investment opportunities in the areas of microgrids, modern transmission and distribution grids, advanced metering, and additional smart grid infrastructure.
Africa’s power sector investment plans could, therefore, be both a direct source of economic development and an enabler of future growth.
Projections remain strong despite some challenges. Most notably, the utilities that will be responsible for carrying out power sector investment are almost universally experiencing financial hardship, dependent on multilateral aid and high-interest debt to carry out their investments. Foreign assistance may help cover the upfront costs of generation, but most utilities are currently not in a position to maintain these investments and sustain growth. One of the keys to financial sustainability is efficient and modern metering.
Many African utilities are under-metered and suffer high non-technical and collection loss rates. Investment in prepaid and AMI meters will be key to sustaining revenues. Smart grid infrastructure will, therefore, be critical in determining whether the power sector is capable of supporting Sub-Saharan Africa’s rapid projected growth.
Electrification and generation growth
With the continent still struggling with low levels of basic electricity generation and grid connections, the most fundamental goal of the power sector in Sub-Saharan Africa remains – reaching full electrification. This is an enormous challenge that will require billions of dollars of generation investment, the extensive buildout of T&D networks, and rollouts of prepaid and AMI meters that will help improve the financial sustainability of utilities. In short, it will require significant investment across every facet of the power sector.
Electrification has improved over the past decade, but at 52% overall, the region remains well behind most of the rest of the world, including much of the developing world.
There is also a significant urban-rural divide that persists, with an 84% electrification rate in urban areas compared with a dismal 29% in rural areas. In line with the UN’s Sustainable Development Goals (SDGs), most governments in Africa aim to reach universal access by 2030. While attaining this goal is estimated to require over 100GW of generation capacity, current growth rates would result in the addition of roughly half that amount.
To help unlock private investment in the sector, several multilateral initiatives have emerged. Most notably, USAID’s Power Africa initiative seeks to enable access to electricity by adding 60 million new connections and 30GW of cleaner, more efficient generation capacity by 2030. Additionally, the World Bank’s Lighting Africa initiative seeks to provide access to 250 million people through off-grid connections by 2030. Much of the new generation capacity will also come from renewable resources, with an estimated 10TW of solar potential, 350GW of hydroelectric potential, 110GW of wind potential, and 15GW of geothermal potential across the continent.
Smart infrastructure will once again be critical to addressing the intermittency of some of these resources, while expansive modernised T&D buildout will be necessary to connect often disparate sources of generation.
While the vast majority of power added will be from on-grid power sources, a significant number of customers in the region – mostly in rural areas – can be electrified only through off-grid power. As such, off-grid electrification has emerged as an essential complement to put the goal of universal access within reach, either via stand-alone systems to power individual homes and businesses or microgrids aimed at providing smaller communities with electricity.
Prepaid and AMI metering
Meters are known as the cash registers of utilities, and prepaid meters (both AMI and non-communicating) have proven to be one of the leading solutions in the region for reducing non-technical and collection losses. Sub-Saharan African utilities will equip millions of customers with meters for the fi rst time: including customers previously without access to electricity and also millions of existing unmetered customers. In doing so, they will improve their fi nancial sustainability by installing prepaid meters to ensure dependable revenue streams.
AMI metering, while still in its nascent stages in the region, improves upon prepaid metering by giving utilities a real-time view of consumption, which can make it easier to track illegal connections. Meanwhile, remote connect/disconnect from AMI metering allows utilities to quickly stem losses, often in areas where security concerns make it more challenging to reach residences. Also, prepaid AMI meters are more convenient for customers, as meters can be automatically refilled from home without the need for a smart card or tokens. AMI metering on a large-scale had previously been prohibitively expensive in the region. Still, costs continue to fall globally, and the recent availability of low cost, Chinese-made AMI meters portends an era of AMI expansion in Sub-Saharan Africa.
The entry of Chinese vendors
As China has taken a leading role throughout African economies, Chinese metering vendors have begun to follow suit. Chinese vendors offer lower prices than most international companies. While some countries have local content requirements, local partnerships and political agreements have allowed Chinese vendors to remain active and share expertise with local African vendors.
Increasingly, utilities are installing low-cost Chinese AMI meters to expand upon the benefits of prepaid metering. There are notable projects in Angola, Côte d’Ivoire, Ethiopia, Ghana, Kenya, and South Africa, among others. The largest AMI projects so far have been completed by Chinese vendors, and while a role remains for Western vendors in the most developed markets such as Ghana and South Africa, Chinese vendors (and local partners) will likely continue to dominate the region overall.
Top markets in Sub-Saharan Africa
The region is highlighted by top markets South Africa and Nigeria, with Ghana, Kenya, and Ethiopia forming a second tier. In South Africa, state-owned utility Eskom faces an uphill battle due to significant financial difficulties and must negotiate major investment plans to relieve strain on an ageing distribution grid. The country remains the largest source of generation in Africa with more than 50GW of installed capacity. It has been a regional leader in deploying prepaid meters, and is now exploring strategies for large-scale grid modernisation projects. The government has also developed a foundational smart grid regulatory framework and has established a target of reaching 100% penetration for large residential customers. But costs have been a concern, with some municipalities still finding deployments financially out of reach.
Nigeria, Africa’s most populous country, is home to a power sector that is at once tumultuous but ambitious for improvement through major investment. Plans are in place to bring electricity access to nearly 70 million residents, which would require in the region of 15GW of added generation capacity. With high numbers of connected yet unmetered customers, Nigerian utilities have developed ambitious plans for deploying both prepaid and AMI meters.
Follow-through on these deployment plans will be essential for meeting non-technical loss reduction targets, as Nigeria continues to suffer from some of the highest loss rates in the world. The national regulator and eleven utilities have drawn up metering deployment plans. Financing the projects remains a big challenge, but expanded metering will be critical to reducing nontechnical losses and enabling overall growth in the Nigerian power sector.
About the author:
Steve Chakerian is a Senior Analyst at Northeast Group. He contributes to the firm’s smart grid country intelligence research and various thematic topics.
About Northeast Group
Northeast Group, LLC is a market intelligence firm based in Washington, DC, with expertise in the smart infrastructure and smart grid sectors. We analyse and forecast how smart infrastructure and the Internet of Things (IoT) will be deployed at utilities and in smart cities. We publish market research studies, datasets and offer custom research services.