Exclusive interview with Lovemore Chilimanzi, Technical Director at Africa GreenCo and an Advisory Board member for African Utility Week. Africa GreenCo proposes to increase private sector investment in energy generation in sub-Saharan Africa by mitigating the current lack of creditworthy off-takers.
POWER MARKET INTERVIEW: “My ambition is to be able to prove Africa GreenCo’s concept and for it to work as a functional concept and to roll out the concept in Zambia and then in the other Power Pools.”
Let’s start with the new model that you are introducing in Zambia.
No-one has successfully addressed the issue of creditworthiness of energy off-takers and the lack of a viable power market to sell production; both of which present serious obstacles to increasing the much needed investment in new generation capacity.
There is a presently a deep pool of international capital looking for investment opportunities with appropriate risk-adjusted returns but the majority of these potential investors still view a long-term investment in the African power sector as a highly risky venture.
Currently, blending of public and private focus on the financial instruments is required to compensate for the lack of off-taker creditworthiness and of a viable power market. Whilst these financial instruments are very necessary, they alone do not address the underlying structural and market weaknesses that make private sector investment in infrastructure so challenging.
In order to access the necessary capital, new structures need to be developed to create lasting, scalable changes in how power markets operate. Such new structures should be focused on a programmatic approach to energy deployment and planning, rather than the prevailing project-by-project approach.
African GreenCo recommends an innovative solution to this problem by proposing the establishment of an independently-managed creditworthy intermediary off-taker and power services provider to sit between renewable electricity generation companies on the one hand, and both state-owned and private sector off-takers on the other.
We operate as a member of the African regional power pools, aggregate off-taker credit risk and diversify both supply- and demand-side risks on a regional basis. In case of a utility defaulting, Africa GreenCo will rely on various risk mitigation tools, which include the right to exercise an option to sell power to other utilities or bulk power purchasers via the power pool. Essentially we are forming an entity that is able to offer cheaper power.
What in your view are the main challenges in the sub-Saharan power sector right now?
The cost of electrification is a big issue and will remain so for a while. The sector will continue its focus on attracting investment in Africa. Also, the promotion of renewable energy in the off-grid sector has increased. Paired with the growth of the off-grid sector, is the challenge to find a way for off-grid operations to work with the grid.
Where do you see the market going within the next two years?
There is excess capacity in southern Africa because there is a lot of generation being utilised, so interconnectivity between the Power Pools, especially between EAPP and SAPP. Power pool trade is on the increase between the East and South. As some of the major hydropower projects are due to be competed or are near completion, the power should be available for trade in the East and South soon. I also see the establishment of a functional Power Pool occurring between the East and West within the near future.
There will be quite a bit of focus on renewable energy technologies in all the areas that we have discussed. Although it doesn’t sound new, the technologies to make things better are continuously being introduced. In renewable energy, there is an explosion in solar, wind and biomass. In the solar power sector, the most interesting fact is that prices are coming down fast. Contribution to the grid is going faster but we need storage solutions on a grid-scale level.
What are your ambitions for your company?
My ambition is to be able to prove African GreenCo’s concept and for it to work as a functional concept and to roll out the concept in Zambia and then in the other Power Pools.
Visit the Transmission and Distribution Track at African Utility Week 2018 to:
- Discover the who, what and why of each Power Pool and ask the experts the questions that you need answers to.
- Unlock private sector participation in the transmission and distribution sector by exploring how to build an independent power transmission model.
- Optimise your knowledge of the grid landscape and learn about the critical aspects of grid flexibility, reliability and safety.
- Update your know-how on the latest storage advancements that will reduce possible inefficiencies in the future.
About Lovemore Chilimanzi
Lovemore Chilimanzi is a power systems operations specialist with over 20 years’ experience in the fields of power system primary and secondary responses and control; power pooling and economic dispatch; disturbance investigations and analysis; power purchase agreements as well as cooperative and competitive market operations in Zimbabwe and Botswana.
Chilimanzi is a founder member of the Southern African Power Pool interconnected operations and is on the Transmission and Distribution conference track advisory board for African Utility Week 2018.