Alternative power solutions could take the lead in sub-Saharan Africa - WoodMac

It would take investments totalling USD 350 billion (EUR 317.3bn) to electrify the sub-Saharan Africa by 2030, but decentralised energy providers are becoming better positioned to take the opportunity and serve the region compared to traditional public electric utilities, according to the latest analysis by research firm Wood Mackenzie.

“Most of Africa’s public electric utilities are loss-making, with limited ability to maintain existing assets or invest in new ones. This hampers top-down growth in power supply and improvements in the availability, reliability, and affordability of power,” explains Benjamin Attia, a principal analyst with Wood Mackenzie’s Energy Transition Practice.

Declining costs of renewables and the evolution of decentralised, distributed and off-grid energy solutions can help private firms carve out space in the region still struggling with the lack of access to electricity. By virtue of having alternative business and power delivery models at their disposal, decentralised energy providers are also in a better position to fund their efforts and earn healthy returns, according to WoodMac.

“These investment opportunities work around the fiscal and operational bottlenecks posed by some of sub-Saharan Africa’s state utilities. Service providers are going straight to the bankable segments of residential, commercial, and industrial electricity demand, typically through distributed, renewable, off-grid solutions where the public utility does not feature," Attia said.

Those seeking to invest in sub-Saharan African power sector can look at three macroeconomic trends unfolding in the region -- population growth, rapid urbanisation and structural economic transformation. According to WoodMac’s analysis, sub-Saharan Africa’s demand for electricity doubled in the last 15 years, and could grow nearly eight-fold by 2050.

The shift to cheap solar and-storage and customer-owned, behind-the-meter generation will have an impact on future on-grid power demand, but eventually consumers will decide.

“Where centralised utilities and off-grid service providers clash, quality and cost of service will determine where consumer spending flows, especially for commercial and industrial users who suffer major productivity losses from interrupted service,” Attia commented.

The transition happening in sub-Saharan Africa could also have an impact beyond the region’s borders, according to WoodMac’s analyst.

“Decentralised, bottom-up, solar-and-storage grids could not only transform sub-Saharan Africa’s energy future but carry important lessons for the next generation of thinking on utility business models globally. The future of energy may be forged there,” adds Attia.

(USD 1.0 = EUR 0.906)

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