By Claire Volkwyn, Spintelligent

8 October 2012 – With global demand for power estimated to be growing by more than 50%over the next 30 years, demand is increasing at an unprecedented rate worldwide. Africa’s infrastructure lags behind the rest of the developing world, with services being more than twice as expensive in some cases as elsewhere.Power is Africa’s largest infrastructure challenge and more than 30 countries across the continent regularly experience outages.

Lack of sufficient generation capacity, either due to lack of generation appropriate fuel, or lack of installed capacity, forces utilities toobtain power from expensive generation sources such as emergency power (power generated by diesel or heavy fuel oil) at a cost which has to be subsidised for it to be affordable by the local population.

It is estimated that about US$93billion a year is needed to deal with Africa’s infrastructure needs, a third of which is required just for maintenance and operational expenditure. Some 40% or US$40.8 billion is associated with power infrastructure. However, operational inefficiencies of power utilities – distribution losses, under collection of revenues, and over- staffing − cost US$3.3 billion a year,negatively influencing investment in electrification and new capacity, while under-pricing of power translates into losses of at least US$2.2 billion a year. Existing annual spend on power by utilities and governments across the continent is estimated at around US$11.6 billion. However,even with efficiency savings and the current spend, in order to bring Africa up to parity with other developing countries, a funding gap of more than US$23 billion a year still exists in the power sector.

In many countries, backup generators represent a significant proportion of total installed power capacity: 50% in the Democratic Republic of Congo, Equatorial Guinea, and Mauritania, and 17% in West Africa as a whole. The cost of backup generation can easily run to $0.40 per kilowatt-hour or several times higher than the utility’s costs of generating power.

The economic costs of power outages are substantial. The immediate economic cost of power shortages can be gauged by looking at the cost of running backup generators and forgoing production during power shortages.These costs typically range between one and four per cent of GDP. Over time, the lack of a reliable power supply is also a drag on economic growth. From the early 1990s to the early2000s in Cameroon, Côte d’Ivoire, the Democratic Republic of Congo, Ghana, and Senegal,inadequate power infrastructure shaved at least one-quarter of a percentage point off annual per capita GDP growth rates.

Lack of adequate supply impacts significantly on the economy and outages in Senegal average 25 days a year, Tanzania, 63 days and Burundi, 144 days. Each day of outages impacts on production and productivity across the economy.

A common response to the immediate crisis is to tender short-term leases for emergency power. Unlike traditional power generation projects, this capacity can be put in place in a few weeks, providing a rapid response to pressing shortages.