Distribution

Private sector to fund distribution infrastructure

There is hope across the continent that private sector initiatives will mobilise the huge investment needed to upgrade Africa’s power networks.

Private investment might be the answer to funding the continent’s power networks.

Despite the flood of new solar and other generation projects popping up across Africa, the continent’s transmission and distribution infrastructure remains poor.

There is a growing movement, however, to see more private involvement as part of plans to modernise the sector.

South Africa is among those looking to bring in more private sector involvement in an area that has long been dominated by state power giant Eskom.

Yet the scale of funding required is considerable, given that half of Africans still have no reliable access to any modern electricity system.

Funding the future

The International Energy Agency (IEA) has estimated that achieving Africa’s electrification ambitions may require investments of US$120bn per year, with the bulk of the money targeting low carbon and grid network projects.

In a paper earlier this year by Ryan T. Ketchum, a partner at law from Hunton Andrews Kurth, the role of independent transmission projects (ITPs) was outlined as a potential solution.

Ketchum described ITPs as a “promising avenue” for private investment in transmission in Africa, followed by a whole lot of network concessions.

Practicing private

There are examples where private investors are already beginning to have influence.

In Uganda, UK-based Gridworks has an agreement with the Government to develop a project to use private investment to support the transmission sector. The deal was announced during the Commonwealth Heads of Government Meeting in Rwanda.

The project – known as Amara Energy Transmission – consists of an upgrade to electrical substations that will solve capacity constraints at four key nodes of the grid: Tororo, in the East, close to the Kenyan border; Nkenda, in the West, at the interconnection point to the DRC Democratic Republic of Congo; plus Mbarara and Mirama, both in the southwest of the country. Each has been identified as a priority by Uganda Electricity Transmission Company Limited (UETCL), the national transmission utility.

Gridworks will develop and finance the project – providing up to US$90mn funding – with Siemens undertaking the upgrade work on the four substations.

Going forward, it is a model that could be replicated to catalyse further investments in the sector, according to Gridwork’s chief executive, Simon Hodson.

“Our pilot project has taken several years to develop and will demonstrate that this model can be used to unlock critcal projects,” he said when announcing the deal in June.

He added it will benefit both households and businesses in Uganda and ensure that high quality renewable power is available to drive economic development.

As well as rolling out improved and extended infrastructure, network operators now face the added challenge of accomdating a vast wave of new, disparate renewable energy projects and technologies into the system.

The investments The Egyptian Electricity Transmision company made between 2014 and 2020 illustrate the scale of the spending that could be required to integrate renewable energy resources. They commissioned more than 3,600 km of 500KV transmission lines. Much of this investment was necessary to connect new renewable energy projects in the South to load centres in the North. ■