Africa energy investment needs shift from generation to transmission

By David Whitehouse
Posted on Friday, 1 July 2022 06:00

Electric power lines are pictured outside Egbin power plant in Ikorodu on the outskirts of Nigeria's commercial capital Lagos
Electric power lines are pictured outside Egbin power plant in Ikorodu on the outskirts of Nigeria's commercial capital Lagos December 4, 2015. REUTERS/Akintunde Akinleye

Energy investment in Africa needs to give transmission networks a higher priority and avoid concentrating solely on power generation, Chris Flavin, head of business development at Gridworks in the UK, tells The Africa Report.

A heavy focus on generation in energy investments on the continent is a sign of “multiple policy failures,” Flavin says. Generation investments are “pointless” without equivalent investment in transmission.

Investment in African electricity transmission is largely to get off the ground. According to the World Bank, between 2010 and 2020, only 7.5% of electricity infrastructure investment went to sub-Saharan Africa. From that amount, 98.2% was for electricity generation projects, and less than 0.3% for transmission. That leaves transmission in sub-Saharan Africa with a negligible share of global electricity infrastructure investment over the 10-year period.

  • Even where they exist, networks are often unreliable. According to the Ghana Institute of Management and Public Administration, sub-Saharan African power lines lose $5b worth of power per year.

Gridworks, set up in 2019, is a development and investment platform owned by UK’s development finance institution British International Investment (BII). “Just generating renewable energy does not fix the problem,” Flavin says. “You have to get it to people and displace what they are using already,” which in Africa may often be charcoal or self-generated diesel, he adds.

That logic, however, is not yet reflected in energy project funding criteria. According to a paper from the Climate Compatible Growth (CCG) programme and a working group of the COP26 Energy Transition Council, less than 40% of the grid investment needed in 2030 in emerging and developing economies would qualify as climate finance under current criteria used by financing organisations.

  • “Directly tying the climate finance eligibility of grid investments to the emissions profile of the power generation fleet, whilst fairly simple and transparent, is not necessarily the most accurate way to reflect grids’ systemic role in the low carbon transition,” the CCG paper says.
  • Climate finance classification rules, for example those of the EU, need to be revisited, Flavin argues. “We are in favour of a much broader definition” to remedy the “funding mismatch.”

Uganda investment

In June, Gridworks agreed to invest $90m to upgrade four substations in Uganda, its first African transmission investment. The money will be used to improve substations at Tororo in the east of the country, Nkenda in the west and Mbarara and Mirama in the southwest. The upgrades will be used to transmit more hydro generated power and other sources in the Ugandan energy mix, and is expected to improve supply to large industrial users.

According to Uganda’s Electricity Regulatory Authority (ERA), the transmission network more than doubled in length between 2017 and 2021. Despite that, the ERA said in June that only 1.7 million out of 8 million Ugandan households are connected to the national grid. The country is aiming for universal access to electricity by 2040.

  • Uganda, Flavin says, is a good example of a country that has good resources for generation but inadequate transmission.
  • “The capacity isn’t there. The constraint is the scale of the infrastructure. This project removes bottlenecks in the network.”
  • Flavin hopes that the private sector will start to invest in African transmission, particularly as fiscal constraints make it hard for African governments to do so.
  • Gridworks has a pipeline of possible future transmission investments in Africa. “The need exists across the continent.”

Bottom line

Many Africans will miss out on the benefits of improved energy generation unless investment in transmission is increased.

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