Sub-Saharan Africa to Spend $835 Billion on Power

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Chinedu Nebo

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Sub Saharan Africa will have to spend $835 billion to provide electricity for its people by 2040

By Anayo Ezugwu  |  May 11, 2015 @ 01:00 GMT  |

COUNTRIES in the Sub-Saharan Africa will require more than $835 billion to fix their generation, transmission and distribution plants by 2040. Nigeria, in particular needs $350 billion to provide uninterrupted power supply by 2030. Mckinsey and Company, a research and consulting firm, made this disclosure in its Electric Power and Natural Gas report which focused on the growth potential of the sub-Saharan electricity sector.

The company stated that the region would require about $490 billion of capital for new generating capacity, plus another $345 billion for transmission and distribution. It identified regional integration, such as power pools, and promotion of renewable generation are game changers that could shape the energy landscape in sub-­Saharan Africa over the next 25 years.

“We found that significantly increasing regional integration could save more than $40 billion in capital spending, and save the African consumer nearly $10 billion per year by 2040, as the levelised cost of energy falls from $70 per megawatt-­hour to $64 per megawatt-­hour. Higher levels of integration would result in larger region l gas options being favoured over some of the smaller in-­country solar and wind additions, leading to an increase in carbon emissions. If sub-­Saharan Africa aggressively promotes renewable, it could obtain a 27 percent reduction in CO2 emissions; this would result in a 35 percent higher installed capacity base and 31 percent higher capital spending (or an additional $153 billion).”

According to the report, by 2040, sub-­Saharan Africa will demand about 1,600 terawatt hours of power, led by growth in industrial and residential demand. “If sub-­Saharan Africa achieves these demand levels, it would represent a fourfold increase in power consumption compared with today, representing about 4.5 per cent yearly”, it added.

Gas is estimated to be able to deliver about 400 gigawatts of power. Over the past half-­decade, gas has become a much more attractive opportunity in Africa. It added that countries with electrification rates of less than 80 percent of the population consistently suffer from reduced GDP per capita. It noted that the only countries that have electrification rates of less than 80 percent with GDP per capita greater than $3,500 are those with significant wealth in natural resources, such as Angola, Botswana, and Gabon. But even they fall well short of economic prosperity.

“Whether people can obtain electricity (access), and if so, how much they are able to consume (consumption) are the two most important metrics that can indicate the degree to which the power sector is supporting national development. From an electricity-­access point of view, sub-­Saharan Africa’s situation is the world’s worst. It has 13 percent of the world’s population, but 48 percent of the share of the global population without access to electricity.

“The only other region with a similar imbalance is South Asia, with 23 percent of the world’s population and 34 percent of the people without access to electricity. This means that almost 600 million people in sub-­Saharan Africa lack access to electricity. Only seven countries, Cameroon, Côte d’Ivoire, Gabon, Ghana, Namibia, Senegal and South Africa—have electricity-­ access rates exceeding 50 percent. The rest of the region has an average grid access rate of just 20 percent. Moreover, even when there is access to electricity, there may not be enough to go around.”

Nonetheless, Chinedu Nebo, minister of power, stated that the sector is not only expensive but also takes time to deliver its projects. Giving an estimation of the total cost of one megawatts, he said this goes for about $1.5 million, approximately N300 million. According to him, projects usually take five to seven years to materialise, adding that the actualisation of such comes with adequate planning, doggedness, determination to make sure that what was planned is realised.

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