To drive Africa’s elec­tric­ity land­scape over the next five years

The African - - BUSI­NESS FO­CUS - BY ROBERT CROCKER

Power trad­ing agree­ments be­tween coun­tries that pos­sess ex­cess power gen­er­at­ing ca­pac­ity and those bat­tling sup­ply short­ages will be a dom­i­nant theme in the elec­tric­ity mar­kets of south-cen­tral African na­tions in the next three to five years, says Stan­dard Bank.

Mozam­bique, which cur­rently has the po­ten­tial to pro­duce more elec­tric­ity than its econ­omy re­quires at present, is likely to dom­i­nate the sup­ply-side of this trad­ing mar­ket, with Namibia, Zam­bia and Botswana ex­pected to be the main pur­chasers in the re­gion, af­ter South Africa.

The biggest chal­lenge to these ar­range­ments will be re­li­able and sta­ble trans­mis­sion net­works to fa­cil­i­tate the seam­less trans­fer of elec­tric­ity be­tween sell­ers and pur­chasers. These net­works re­quire sig­nif­i­cant co-op­er­a­tion be­tween neigh­bour­ing coun­tries, so the role of the South­ern African Power Pool (SAPP) in en­sur­ing cross-bor­der plan­ning, in­vest­ment and trad­ing be­tween mem­ber states re­mains crit­i­cal.

“Power will in­creas­ingly be­come one of the most trad­able com­modi­ties across the re­gion in the com­ing years given the elec­tric­ity short­age we are see­ing across south­ern Africa,” says Cody Adu­loju, Ex­ec­u­tive in Stan­dard Bank’s Power and In­fra­struc­ture Divi­sion.

“Al­most ev­ery as­pect of a mod­ern econ­omy re­lies on elec­tric­ity to func­tion so the coun­tries that emerge as the ones with ex­cess sup­ply will have sig­nif­i­cant ne­go­ti­at­ing power, so to speak.”

Adu­loju says that Mozam­bique, which plans to dou­ble its gen­er­at­ing ca­pac­ity to 5 gi­gawatts (GW) by 2025, is one of the few coun­tries in Africa that cur­rently pos­sesses an over-sup­ply of elec­tric­ity thanks to the hy­dro power avail­able from the Ca­hora Bassa dam, which has an in­stalled ca­pac­ity of 2 075 megawatts (MW) of power per year or around 73 per­cent of the coun­try’s in­stalled gen­er­at­ing ca­pac­ity.

Mozam­bique has the po­ten­tial to ex­pand the ex­ist­ing ca­pac­ity of the Ca­horra Bassa hy­dro fa­cil­ity by ap­prox­i­mately 60 per­cent pro­vided it can at­tract the nec­es­sary in­vest­ment, he says.

“The biggest chal­lenge that Mozam­bique faces in tak­ing ad­van­tage of this op­por­tu­nity and many other power projects, is that it has weak trans­mis­sion in­fra­struc­ture, which is a key re­quire­ment for ex­port­ing ad­e­quate lev­els of elec­tric­ity to other coun­tries in the re­gion,” says Adu­loju. “How­ever, it has phe­nom­e­nal po­ten­tial for elec­tric­ity pro­duc­tion, rang­ing from coal-, gas- and hy­dropow­ered gen­er­a­tion.”

Mozam­bique has re­cently com­mis­sioned Sa­sol’s CTRG 175MW gas fired project. While small by in­ter­na­tional com­par­i­son, the value of such projects should not be un­der­es­ti­mated in a re­gional con­text. The 118MW gas-fired plant built in Mozam­bique by Gi­gawatt, a com­pany that was awarded a gas power gen­er­a­tion con­ces­sion by the coun­try’s govern­ment to sup­ply elec­tric­ity to the cap­i­tal city of Ma­puto, will add sig­nif­i­cantly to the na­tion’s grid.

Mozam­bique has a strong pipe­line of projects un­der de­vel­op­ment and over the next five years is seek­ing to add circa 600MW of gen­er­at­ing ca­pac­ity. This will come via a range of dif­fer­ent sources such as coal, so­lar and gas.

Im­proved trans­mis­sion line in­fra­struc­ture would en­able Mozam­bique to boost power ex­ports. The coun­try al­ready sup­plies ap­prox­i­mately 1 349MW to South Africa, 100MW to Zim­babwe and 50MW to Botswana each year. Mozam­bique has re­cently be­gun sup­ply­ing 100MW to Zam­bia where there is a short­age of power due to low wa­ter lev­els at Kariba dam.

Namibia rep­re­sents a huge op­por­tu­nity for coun­tries with po­ten­tial over­sup­ply in the re­gion as it cur­rently im­ports about 61 per­cent of its elec­tric­ity needs. Given Namibia’s to­tal power de­mand of 534MW, that would leave an es­ti­mated 320MW in pos­si­ble sup­ply deals up for grabs based on cur­rent peak us­age of 508MW.

Namibia how­ever, has sev­eral plans un­der way to boost its power gen­er­at­ing ca­pac­ity. These in­clude 800MW from the Kudu com­bined gas and steam plant; 44MW in on­shore wind po­ten­tial and 120MW in so­lar PV po­ten­tial.

“The lack of its own size­able power gen­er­at­ing ca­pac­ity means that it is ab­so­lutely im­per­a­tive for Namibia to start en­ter­ing into power pur­chase agree­ments (PPAs) with other part­ners in the re­gion, which is cur­rently hap­pen­ing,” said Adu­loju. “From a fi­nan­cial per­spec­tive, NamPower is prob­a­bly one of the strong­est util­i­ties on the con­ti­nent so it has a lot in its favour in terms of en­ter­ing into these PPAs.” Cur­rent agree­ments are be­ing ne­go­ti­ated and fi­nalised with South Africa and Mozam­bique.

Botswana is an­other coun­try in the re­gion that is likely to re­main re­liant on its neigh­bours for the fore­see­able fu­ture given that the coun­try al­ready im­ports 68 per­cent of its power needs.

SAPP has, since in­cep­tion, fa­cil­i­tated the re­gional power trad­ing frame­work by en­sur­ing re­li­able and eco­nom­i­cal elec­tric­ity sup­ply across the re­gion. Its mem­bers in­clude util­i­ties and pri­vate power pro­duc­ers from Botswana, South Africa, Mozam­bique, Le­sotho, the Demo­cratic Repub­lic of Congo (DRC), Zim­babwe, Zam­bia, Namibia, Swazi­land and Malawi.

Plans are also afoot to de­ter­mine the vi­a­bil­ity of build­ing a multi-bil­lion project to build a power trans­mis­sion net­work link­ing the power grids of South Africa, Mozam­bique, Namibia, the DRC and An­gola.

Hy­dro power has al­ready been iden­ti­fied as a pos­si­ble op­por­tu­nity for An­gola via the pro­posed 2067MW Luaca and 300MW (50 per­cent) Baynes plants. That will go some way to­wards en­abling An­gola to achieve its goal of al­most tripling its in­stalled gen­er­at­ing ca­pac­ity of 9 000MW by 2025.

Adu­loju added that the DRC rep­re­sents per­haps the biggest missed op­por­tu­nity for the eco­nomic growth of any sin­gle coun­try across the en­tire African con­ti­nent. Apart from the fact that the coun­try pos­sesses vir­tu­ally ev­ery min­eral re­source known to man, the Congo river is es­ti­mated to have a po­ten­tial hy­dro-power gen­er­at­ing ca­pac­ity of be­tween 40 000MW and 60 000MW.

“It is un­likely that any coun­try in Africa will have suf­fi­cient power gen­er­at­ing ca­pac­ity in the fore­see­able fu­ture, so it is ab­so­lutely im­per­a­tive that the con­ti­nent con­sider an ad­e­quate power trad­ing mech­a­nism in ad­di­tion to in­vest­ments in gen­er­at­ing in­fra­struc­ture,” said Adu­loju.

“The bot­tom line is that for as long as the elec­tric­ity short­age in Africa per­sists, the ne­go­ti­at­ing power will re­main in the hands of coun­tries that have the ca­pac­ity to pro­duce.”

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