Africa risks future power shortages due to crisis

Africa may face greater power shortages once the financial crisis ebbs because of underinvestment in new power generation capacity during times of economic distress, a power consultant says.

Francois Nguyen, senior policy advisor at the International Energy Agency, told a power and electricity conference in Johannesburg this morning the economic recession was deterring investors in the power sector across the continent.

“Investments are put on the shelf, there is the risk of underinvestment … when the world recovers, the shortages may be even more serious,” he said.

Reuters notes Africa sits on huge energy resources, but lights still go out in parts of the continent as inefficient utilities battle with a lack of funds and direction.

Foreign investors are wary of putting money in the continent due to political risks in some areas and a lack of a proper regulatory framework for new power producers to come in.

This has increased as the financial crisis has made it difficult for independent power producers to source international funding for their projects.

“You have low prices which affect profitability of the projects and you have the prospect of weak demand … that creates some uncertainty in terms of when demand will recover,” Nguyen said.

Countries including South Africa are plagued by power shortages that have shut industries and mines and cost economies billions of dollars, even though resources of hydro, oil, gas, coal and geothermal power are abundant on the continent.

Nguyen said demand for power on the continent will rise by 150,000 megawatts (MW) between 2007 and 2030, based on an annual demand growth of 3-4 percent, driven by a rise in the continent’s population and per capita growth.

The country will need to invest $448 billion in power generation, transmission and distribution during the same period to support that demand, he said.

While the financial crisis may have an impact on these projections in the short term, he sees them as accurate in the long term.

The countries on the continent still rely on fossil fuel for a large portion of its power generation. South Africa alone, the continent’s largest economy, derives nearly 90 percent of its power from coal.

Nguyen said while the IEA forecasts a rise in the use of renewable power in the continent’s energy mix, it would still remain small over the next 20 to 30 years. That needed to change to help deal with the increasing global carbon footprint.

African countries should also benefit from advanced technologies in fossil fuel generation developed by largely Western countries to increase their energy efficiency, he said.