Emerging Continental Master Plan sets agenda for Africa-wide electricity reform
African Energy
African Energy is a leading independent provider of insightful news, trusted analysis and exclusive power data
By John Hamilton
African electricity markets are on the threshold of genuine reform in 2024, even if policy-makers’ grandest ambitions are destined to meet with disappointment. African Energy has examined the first data that has emerged from the third development phase of the African Union’s Continental Master Plan and found much to applaud.
The start of the African Union (AU) Continental Master Plan (CMP)’s third development phase is good news for the continent, even though targets for investment and the installation of new generation capacity by 2040 remain far out of reach for many countries.
Even if the headline ambitions are not met, the plan’s modelling process and associated reforms for power trading and infrastructure remain the best chance of bringing sustainable energy to millions across Africa who now lack it.
Over the next two years, the AU Development Agency (Auda-Nepad) will work with the continent’s five cross-border power pools to put in place conditions for a least-cost development model that could carry a price tag of $1.3trn, but which could save as much as $700bn if fully implemented.
Among other things, this would involve building many new power transmission interconnectors.
In parallel, other bodies are making progress on introducing trading regulations for the existing power pools and, in the case of southern Africa, improving transmission infrastructure financing. Taken as a whole, these developments mean the continent’s power markets are on the threshold of genuine reform in 2024.
The initial projections from the CMP were announced at the Africa Climate Summit (ACS) in Nairobi on 4-6 September (AE 490). Since then, African Energy has gathered more detail on what the plan involves and how it will be developed further.
The conclusion that achieving universal access to electricity by 2030 – as per the United Nations’ Sustainable Development Goal 7 (SDG7) – “is unlikely” will not surprise any active participant in the continent’s power markets.
The Africa-European Union Energy Partnership (AEEP)’s most recent edition of?European Financial Flows on SDG7 to Africa also concluded the 2030 date would be missed (AE 479). Produced by African Energy’s publisher Cross-border Information, the AEEP report was launched in March 2023, analysing SDG7 financial flows over the past seven years.
Hitting the target by 2040 looks equally remote, given the CMP estimates that installed capacity across the continent would need to more than quadruple by that date to 1,218GW, from about 266GW today.
A dramatic change of pace and approach – and the addition of almost 60GW of capacity every year from now until 2040 – would be needed to reach the target. The current rate of capacity additions is a fraction of this. According to African Energy Live Data, around 9GW/yr is now added from all types of generation.
Speeding up the time to financial close
The CMP’s team of modellers and consultants has spent five years reviewing existing power pool plans, projects and scenarios, creating common modelling and planning tools and a homogenised database. This has enabled the team to create ‘version zero’ of the CMP and to update the regional masterplans (AE 468).
Over the next two years, more modelling work will take place to create a further version of the CMP with updated data. Although the raw data is protected by non-disclosure agreements with the power pools and utilities and cannot be released, Auda-Nepad is planning to publish the output from its studies in 2024. The CMP model will then be updated every five years.
The next phase also involves capacity building and long-term energy planning among member states and power pools.
领英推荐
In parallel, the aim is to create a pipeline of bankable projects. Auda-Nepad will encourage governments to adopt standard framework agreements for generation procurement, with the aim of reducing the time from project initiation to financial close from eight years to three.
According to one expert close to the CMP scheme, a central benefit of this would be to enable projects to close within a single national election cycle. “Priorities change from one administration to the next, so you need to reach financial close within one administration,” he argued.
No more business as usual
One of the key findings of the CMP modelling is that African nations should move from the current model of power procurement to a least-cost model that includes cross-border electricity trading. This change alone could reduce the cost of installing the power needed from about $2trn to $1.3trn.
“This is expensive, but the cost of doing nothing is also very expensive for the continent,” said the expert. “If we don’t do this, more than 400m people will not have access to electricity by 2040 and a significant number of member states will remain poor.”
Out of the 1.2TW target for installed capacity, the CMP expects 700GW to come from renewable energy, including more than 200GW of solar (compared to 8GW now) and more than 300GW of wind (up from 10GW now). Hydroelectric power needs to triple to about 120GW.
A major role will remain for carbon-based technology, with the CMP forecasting that gas-fired capacity should nearly quadruple to about 390GW, while also notable is the persistence of coal, diesel and heavy fuel oil (HFO) in the energy mix, albeit at relatively low levels.
The plan also envisages about $35bn of investment in transmission infrastructure. African Energy understands the CMP model shows this could create about $135bn of trade between the power pools by 2040.
“It is so affordable for us to create this market, and it will enable us to leverage an extra $1.2trn in power sector investment,” said the expert.
Once the main elements of power trading have been set up, the CMP hopes to introduce three refinements that together could bring in more capital. These are:
More than just a vast modelling exercise, the CMP is setting a blueprint for regional and continental development. Among the central factors influencing its further development is how it will be received in governments and parliaments across Africa, and whether national decision-makers are ready to allow regional power pools to take the initiative.
Also critical will be efforts to upgrade regional power pools to take a leading role. Among signs of progress, the Southern African Development Community is expected soon to launch its Regional Transmission Infrastructure Financing Fund to finance interconnections, the West Africa Power Pool is testing a day-ahead market and the Eastern Africa Power Pool aims to introduce a live market by mid-2024 (see Power pool reforms offer support for CMP).