Addressing delegates at the 18th edition of African Utility Week, Eskom’s CEO Phakamani Hadebe called on Africa to unite on energy issues. “Africa has a common purpose, which we all have to pursue,” he said. “The question then is how to create the infrastructure needed for growth and create opportunities.”
The three-day conference proved best placed for industry stakeholders to discuss, debate and challenge the status quo.
According to the report Lights Power Action, published in 2017, the Africa Progress Panel states that although renewable energy – specifically solar – has become the preferred choice for clean power generation across the continent, it is still prudent that countries have an energy policy mix in order to meet their short-term energy needs, while introducing renewables in a more “phased and realistic” manner.
Daniel Njoroge Butti, energy economist at Karatina University in Kenya, echoed this sentiment during an African Utility Week technical workshop: “Energy sources, like renewable energy, have relatively low initial costs and periodical costs involved in operation which eventually become very high. Therefore we need a decent conversation of how energy sources can complement each other. The conversation on energy has to be approached holistically.”
Butti stated that the “balance” between baseload energy and renewable power needs to be understood. “There are various studies underway in an attempt to understand this. This is a technical challenge that can be solved through understanding and analysis.”
Although renewables are seen as cost effective in terms of a solution to Africa’s energy needs, the “right energy mix” is one that meets demand requirements at all times, he added. “This means that peaking, mid-merit and baseload stations need to be optimised for lowest cost and availability.”
A flexible energy mix
The sharp decline in the cost of clean renewable energy globally has made it the obvious choice for African countries to generate new capacity, but a more nuanced approach is needed, taking an appropriate energy mix, costs, the variability of renewables and energy demand into account, experts argue.
Ted Blom, partner at Mining and Energy Advisory, warns that renewable energy costs are significantly more than energy generated from coal-fired power stations. “[In South Africa] coal power from the old fleet costs less than 40c/kWh, while the average cost of the renewable bid windows, already approved as at 1 January 2018, is more than R1.88/kWh,” Blom says.
Blom is highly critical of the South African government’s recent signing of 27 renewable energy independent power producer (IPP) projects. He warns that the new IPP projects will lead to significant losses to Eskom, as the national power utility will be forced to buy and distribute this additional renewable power.
One way to address the cost matter would be to revisit power purchase agreements that governments and utilities enter into. Dan Klinck, CEO of East African Power, calls for a “new set of requirements” for power purchase agreements. “The power purchase agreements are currently very rigid,” he says. “Flexibility would work well for bigger projects. The current structure does not work, neither is it feasible for smaller projects.”
Finance is one of the challenges that keep project developers awake at night, but also government-led programmes. A lead specialist from the DBSA’s Product Innovation Unit, Jonathan First, spoke with ESI Africa about the role of blended finance in overcoming the enormous infrastructure development shortfall in Africa.
The DBSA lead specialist explained that blended finance is the strategic use of concessional finance provided by government to crowd in or catalyse private sector funding that results in infrastructure development and has developmental impact. According to First, the financial market predicts that in 2020 funds under management – such as pension funds – will exceed 1.2 trillion dollars in Africa. However, he stresses that almost none of this is currently being used to finance infrastructure or is being invested in Africa.
In comparison, this figure is close to $111 trillion in assets under management globally at low interest rates. The question is how to access these funds to finance development on the African continent, which according to First can be achieved through blended finance.
Keep bio-energy in the mix
South Africa’s successful uptake of renewable energy resources has seen operational projects comprising mainly wind and solar energy, leaving bio-energy in the cold. But according to Crescent Mushwana, the lead researcher at the Council for Scientific and Industrial Research (CSIR), not all hope is lost for this clean energy technology. “Bio-energy seems to be lagging behind because there is no proper mapping of the resources in sub-Saharan Africa but in South Africa that exercise has been completed.”
Mushwana admits that the resource is unlikely to provide bulk power; however, the CSIR specialist says it could be used as a backup resource during special times such as peak hours. Bio-energy can help to preserve the environment: “In subSaharan Africa we know that there is a lot of waste that is being produced and that waste just goes into dumping sites and it’s not sustainable. So bio-energy can help us environmentally and produce electricity,” he explained.
When asked about the kind of technologies that can be used to reap the benefits that this resource presents, he said: “The generators that we will be looking at are called flexible generators, which are able to switch in and out as fast as possible; as and when they are required to operate.”
Boosting ICT infrastructure
Namibia’s electricity distribution company, Erongo RED, has established a working partnership with the Africa Utilities Technology Council (AUTC) to bolster their ICT infrastructure. On the side-lines of the African Utility Week conference, the utility company’s ICT manager, Dunston Kawana, explained to ESI Africa what this partnership means for the distribution utility.
In terms of knowledge, Kawana said: “We’ve now got a lot of knowledge that we can tap into when it comes to our partnership with the AUTC.” This knowledge spans “from cybersecurity to the network infrastructure and also smart cities, and also the smart grid”.
He further explained: “We have basically looked at our ICT infrastructure and started there and gradually built that up. We’ve tapped into each vicinity with regards to our infrastructure including radio communications, excess network, looking at how that can work together to basically forge a secure reliable network.”
According to Kawana, Erongo RED’s customers have noticed the difference with regards to the reliability on their prepaid vending. “The uptime has been good so far. In terms of access to information, we are still busy working on that,” he said.
Intra-regional trade and cooperation paramount
Although the establishment and expansion of off-grid and mini-grid systems will go a long way to address chronic energy shortages and unreliable electricity supply on the continent, many energy experts also believe that more extensive cross-border power trade and inter-country collaboration are needed to ensure the viability of new energy generation and bring down Africa’s electricity prices.
Says Butti: “One way in which tariffs can be reduced is by leveraging the various power pools on the continent, such as the Eastern Africa Power Pool and the Southern African Power Pool. Henceforth there is a need to have a continental energy master plan if we are to make Africa the frontier of choice.”
His views are echoed by Omar Vajeth, Head of the Project Advisory Unit and Senior Transaction Advisor at the Southern African Power Pool. “Regional grid integration will bring further benefits for reducing cost and stimulating economic activity between countries,” he says.
By 2040, Africa’s population will grow from 1 billion to 1.8 billion – an increase of nearly a billion – and to ensure economic growth continuity, sufficient energy capacity is essential. This can only be achieved through addressing all of the above mentioned channels. Through platforms such as African Utility Week, leaders at the helm of change can gather to deliberate the way forward. ESI