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Africa’s electricity boom seen needing $350bn investment

If it’s to reach all citizens, with off-grid generation accounting for a fifth of the total, according to consultant Wood Mackenzie Ltd.
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An expansion in electricity production across sub-Saharan Africa will require $350 billion of investment if it’s to reach all citizens, with off-grid generation accounting for a fifth of the total, according to consultant Wood Mackenzie Ltd.

The number of people in the region with access to electricity has grown dramatically over the past decade, but about 600 million remain without power. To meet a United Nations goal of universal access by 2030, further progress is needed not only in grid link-ups but in off-grid systems using sources such as solar energy.

“Decentralised, bottom-up solar-and-storage grids could not only reshape Africa’s energy future but carry important lessons for the next generation of thinking on utility business models globally,” Benjamin Attia, an analyst at WoodMac, said in a report on Thursday.

Most public power utilities in sub-Saharan Africa are unprofitable, with limited ability to maintain existing facilities or invest in new ones. South African giant Eskom Holdings SOC Ltd. is a case in point as it struggles to meet demand with an aging fleet of coal-fired stations. Mining companies and other businesses are establishing their own sources of generation for more reliable electricity.

Cleaner, modular power systems will help displace diesel-fired backup generators in many countries, WoodMac said. And as costs for solar and battery storage decline, utilities’ traditional tariffs will lose their competitive edge.

“A wave of grid defection could spell trouble for utilities,” Attia wrote. Some “may fight to keep these customers by lowering tariffs, prioritising their demand, moving to flexible customer solutions” and getting into the solar market themselves, he said.

The projected $350 billion is the “estimated total investment opportunity” for on- and off-grid power if sub-Saharan Africa is to attain access to electricity for all by 2030, according to WoodMac.

With consumption from a growing population set to soar, “service providers are going straight to the bankable segments” of residential and business demand, using “renewable, off-grid solutions where the public utility does not feature.”

© 2022 Bloomberg

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