Power still money

Frost & Sullivan’s latest energy industry analysis says that despite the global economic downturn, sub-Saharan Africa’s electricity industry is still expected to grow.
This is due to strong fundamentals that include an improved investment climate, a high demand for electricity, robust economies, the pursuit of the reform of the power sector and feedstock availability.
“The sub-Saharan African electricity sector will be largely unexposed to shifts in global economic conditions,” says industry analyst Jeannot Boussougouth. “In times of depressed economic conditions, investors will need to direct their investments to sectors with strong fundamentals, and the region`s electricity sector certainly offers robust growth prospects.”
“As vertical sectors across the world start to feel the effects of the global recession, investors and project developers willing to invest in the sub-Saharan African electricity industry will need to be aware of the challenges that they could face and the subsequent mitigating strategies they could employ,” adds Boussougouth.
Research Analyst Moses Duma adds the region`s focus on the available hydropower potential is opening up a potentially lucrative market for hydro turbine suppliers. Equipment suppliers need to partner with EPC contractors to be able to supply the turnkey projects African customers desire.

A new analysis by the company finds that the hydro turbine market in sub-Saharan Africa earned revenues of $120.0 million in 2007 and is estimated to reach $425.0 million by 2013.

Duma says Africa is turning to hydropower sources to avert the rising cost of thermal power production. The fluctuating international prices of coal and oil are making electricity generation in Africa an expensive proposition. As a result, a majority of African governments are expediting their hydropower projects to diversify their energy mix.
“The hydro turbine market in Africa has embarked on a high growth trajectory owing to the region`s new focus on refurbishing existing plants and building new hydropower plants,” notes Duma, who is based in Cape Town. “This strategy has been aimed at reducing the region`s reliance on coal and oil power generation.”

Sub-Saharan Africa is expected to build additional hydropower generation capacity of at least 20,165 MW by 2014. The region has the potential to generate 1,750 TWh of energy, of which only 7 per cent has been explored. African governments are taking advantage of the readily available hydro resources to broaden their energy mix and reduce their over dependence on thermal sources, which are susceptible to international commodity prices.

However, the sizeable initial capital required to build new hydropower plants as well as the stringent requirements for environmental assessments are tarnishing the attractiveness of hydropower projects, especially for cash-strapped state utilities.

This factor is significantly affecting the growth of the hydropower market. For instance, building a new hydropower plant with a capacity of 1,000 MW would cost approximately $2 billion as compared to $1 billion for a similar sized thermal power plant.
“Equipment suppliers should explore the market for both small and large hydropower plants as well as the opportunities to refurbish existing old plants in sub-Saharan Africa,” advises Duma. “A majority of state utilities view plant refurbishment as a quicker and cheaper way of getting additional capacity and hence are focusing their resources on this market.”