Power play in West Africa
The countries in the region would all receive an economic boost if a regional power market can be established
Roughly half of the population of West Africa have no access to electricity. Of those who do, the quality of service is often so low that predicting when grid power will be available is a national pastime. Solving this challenge will allow business to flourish and boost economic growth. It is also a priority of politicians—providing stable power is one of the most visible signs that a government is delivering.
In part this is an operational challenge, but it is also one of investment. Most utilities in the region struggle with the consequences of insufficient power—such as the need to load-shed, rely on costly oil-based generation or both. Others face the challenge of surplus generation capacity and the prospect of making huge payments over the coming years for generation capacity that is stranded or under-utilised.
Increased interconnection of the power systems in the region offers part of the solution. Billions of dollars are being invested to connect the countries in the region, presenting opportunities for countries to import and export power, and paving the way the way for increased investment in the region’s power systems and a transition away from costly and environmentally harmful oil-based generation.
Our recent West Africa Power Trade Outlook, developed in partnership with USAid’s Power Africa initiative, identified c.$30bn of potential savings through the trading of power in the region over the coming decade. These savings will come from both replacing expensive power, such as that generated from diesel or heavy fuel oil, with lower cost imports; and serving otherwise unmet demand. These trade opportunities will, in turn, open-up opportunities for new investment in both renewables and natural gas.
“Achieving these benefits will require governments and utilities in the region to lift their gaze from their own national systems”
Large scale hydro projects, that may have proven unfinanceable without interconnection, become viable. We recently supported the finalisation of a power export contract from Guinea to Senegal, Guinea Bissau and The Gambia, by providing confidence to the lenders—to both the regional transmission line and a large hydro project in Guinea—that there is a market for the power, a prerequisite to advance further finance. Looking forward, the recently concluded West Africa Power Pool Masterplan sets out plans for around 2GW of solar investment over the next decade, as intraday trading is set to allow the vast solar potential of the Sahel countries to be exploited.
Gas, too, will play a major role. While Nigeria, Ghana, Senegal and Cote D’Ivoire continue to develop their domestic gas resources, a further set of countries are examining gas imports through either LNG terminals or the existing West Africa Gas Pipeline. Securing sufficient gas resources would save the region around $120bn over this decade.
These investments, along with increased power trade, could all but eradicate the need for utilities to produce power from liquid fuels in the region, saving around 23mn t of diesel and fuel oil by 2030. Achieving these benefits will require governments and utilities in the region to lift their gaze from their own national system to understand the opportunities regional integration can deliver.
Financiers and development partners will also need adapt. Many of the barriers to trade governments cite—exporters worrying about getting paid, importers worried about getting supplied, and both worrying about transmission costs and availability—have been addressed to facilitate private investment in generation. For the benefit of the people of West Africa, the environment and the private sector the same level of creativity and energy is needed to jump start the West African market.
Gareth Walsh leads the energy practice at the Tony Blair Institute for Global Change, which provides embedded support to 14 governments across Africa including advisory support to the energy sector. The Institute’s energy work on the continent is undertaken in partnership with USAid’s Power Africa programme.