Why Hydro Energy is losing glitter in Africa

 A hydro dam: Losing glitter

Every cloud, so the saying goes, has a silver lining. That is true of the electricity generation industry in Africa. Although the continent is blessed with various sources of power generation. It is energy poor. This is because of the tragedy of poverty in the continent. Developing such sources as Hydro, which is the leading source, is expensive and slow to implement and complete.

 Estimates show that the current demand for power in sub-Saharan Africa is about 100GW of which 22 percent or22GW, is supplied by hydro. This means that 78% of electricity in Africa is provided largely by thermal sources including diesel-powered generators and Coal. By 2040, electricity demand will rise to 385 GW, and Hydro will generate only 100GW of this, leaving the bulk of the demand to be supplied by other sources. Hydro, despite being a plentiful resource in Africa, is surely the bottleneck to economic progress in the continent.

One of the causes for the slow growth of hydropower is the high investment outlay required to build a Hydro dam.  The upfront expenditure to develop a hydro dam is beyond the means of many an African government.  The second hurdle is the previous insistence by African governments that only the state-owned operators were allowed to build capacity. Consequently, demand outstrips supply by a large factor.  

A Geothermal plant: Gaining popularity

To meet growing demand, African governments, which for a long time were the only legal investors in hydro generation, relied on expensive fossils generated power. Many deep-pocketed investors in Africa, invested in their own generators making the price of local products expensive and uncompetitive. That is why many factories in Africa operate below capacity, at a range of 45-50%.

This is a recipe for growing unemployment and poverty. According to the World Bank, Energy poverty shaves off four percentage points from economic growth.

 To turn around its fortunes, Africa has opened its power generation sector to the private sector in a bid to attract more investments in the sector and bouy economic and social progress.  This, combined with the declining cost of other potential sources, has rekindled interest in various sources such as wind, geothermal, and Solar.

Wind and geothermal are proving the most popular and are growing into industry within the sector. In just about five years, Wind is emerging as the top industry in the energy sector. So far an estimated 4300MW are already on stream and more are in the pipeline.

South Africa is the leader in the wind industry with 1170 MW already on the grid. Construction for another 700MW is set to begin later this year and come live by 2021. South Africa targets 8GW of wind-generated power by 2030.  Others are; Morocco 920MW; Egypt 750 MW; Ethiopia 320 MW; Kenya 26 MW.  Morocco is targeting 2GW of wind power by 2030.

Kenya, a late entrant in the wind industry, is expected to leapfrog Ethiopia in a Month’s time when the 310 MW Lake Turkana, the largest wind farm in Africa, will connect to the national grid.  This will raise the total wind-generated energy to 336MW. It is the commissioning of this project that will raise Africa’s Wind power capacity to 4300MW. Meanwhile, two other projects with a total capacity of 200MW are in the pipeline.  Kenya’s wind potential is said to be 3GW.

Lake Turkana wind farm:
Green is becoming a Fad

 Apart from wind, Geothermal has also picked up tempo in Kenya which already generates 700MW, placing it at the top in Africa and ninth in the world.  Some 270MW is expected on the grid next year.  That will push geothermal to the number one slot of energy source in Kenya. The geothermal potential in Kenya is estimated at 10GW. Already, green energy is dwarfing hydro in Kenya and the trend could continue elsewhere in the continent.

So why has green energy become popular in Africa? Two factors; wind speed and cost of investment. Utility-scale wind power plants require a minimum average wind speed of 6 m/s (13 mph). This is readily available in coastal regions of Africa. It is then not a surprise to find that the best wind in Africa is located in the coastal regions of the continent. The five biggest markets are also originated from these areas.

The upfront investment to produce a Megawatt of wind power is estimated at US$2 million. Thus five projects with a capacity of 700MW in South Africa will cost US$1.4 billion, Enel, the Italian developer of the projects reported last week. This compares well with the US$700 million invested in Lake Turkana wind to produce 310MW.

 This, experts indicate, is what it will cost to do a feasibility study for a hydro dam project. In addition to the pocket-friendly cost, a wind power construction takes about two years to complete. A hydro dam will take about ten years to complete if the expected duration of the 20MW Thwake dam in Kenya is anything to go by.

One more advantage, Wind farms and solar parks can also provide decentralized or “off-grid” power directly to customers, reducing the load on congested transmission lines.  This will reduce the cost of power to the consumer for it cuts down the loss incurred on transmission lines.

 Innovation in the geothermal industry is also cutting the development period and attracting the private sector. Here, a government agency sinks the Wells and caps them, then invites the private sector to generate power in a PPP arrangement. Kenya has already leased Menengai Wells to the private sector to generate 105 MW. This arrangement lets the agency, Geothermal Development Corporation to focus on sinking Wells, leaving the power generation in other hands.

Africa’s demand for electricity is projected at 385GW by 2040. Hydro will supply only 26 percent of this demand. That says it is a slow-growth industry. Given the slow pace of development and the high sunk costs, for which the private sector has no stomach, hydro development will soon become longer-term investments to supplement other sources that can be developed rapidly to meet growing demand.