Jeannot Boussougouth,
Industry Analyst,
Frost & Sullivan
13 November 2008 – Cameroon’s vast hydro potential could provide the answer to uplifting the region’s electricity industry although a lot of this could depend on government’s completion of the deregulation of the electricity market and continuing to diversity the country’s energy mix.

According to Frost & Sullivan, Cameroon’s electricity market could grow by 7.2% between 2007 and 2013.

“The Cameroonian electricity industry is projected to generate revenues of about $494.2 million by 2013,” says Jeannot Boussougouth, Frost & Sullivan Industry Analyst . “This growth will be driven by the convergence of factors such as new additional generation capacities in Yassa and Kribi, and the continued robustness of the demand for electricity in the country.”

Challenges facing new and current participants include corruption, revenue collection challenges and inadequate infrastructure.  However, these are challenges which need to be managed in order to benefit from the expected growth of the sector.

In addition, power reform has faced a mixed history with AES Sonel still a monopoly and the main provider of funds to the regulator, calling into question the impartiality of the regulatory environment.

However, with a target of 10 000MW of electricity capacity by 2030, other issues which need to be tackled include cost reflective tariffs and opening transmission and distribution to the private sector.

“There are several challenges that have restricted the entry of private investors into the Cameroonian electricity sector,” Boussougouth says. “The scale of investments required suggests that public private partnerships (PPP) are likely to be the most viable option due to their mechanism of risk sharing.”

AES have a concessionary agreement with the government by which the utility can only produce a maximum of 1 000MW, and indicate that there is huge potential for private participation in the Cameroonian market.  A new electricity generation company, Kribi Power Development Company (KPDC) is indicative of this.

“In addition, Cameroon should explore the possibility of gradually shifting from the single-buyer model, which should be seen as a transition operational model, to a completely deregulated electricity market based on a direct sale of electricity to end users,” advises Boussougouth. “This would limit government interventions, strengthen a market-driven decision-making process and improve productivity and efficiency.”

However, diversifying the countries energy mix is one of the main agenda items which must be pursued.