Over the next five years, the African Development Bank (AfDB) aims to help rehabilitate utilities and help national providers become profitable. Power companies across the continent have struggled to keep up with technology that would provide adequate connections to growing cities. Many utilities are also short on cash since they charge under-market prices, often the result of government subsidies.
AfDB Vice President of Power, Energy, Climate and Green Growth Amadou Hott suggested that governments may need to step back from energy generation. “Governments cannot subsidize electricity indefinitely. It’s understandable in the beginning, but they need to move to a path of sustainability for the utility.”
The AfDB is already active in Tanzania, Mozambique and Zambia helping to advise and restructure utilities to minimize technical losses, financial losses and to ensure proper network planning and governance. “Utilities have to run like a private enterprise, even if in most cases, it is run by the government,” Hott said.
Yet with much of Africa’s grid power network overstretched and in need of repair, the AfDB sees off-grid solutions as key to reaching 75 million new households in urban and rural areas, an ambitious but achievable goal, according to Hott. Both rural areas as well as major cities, such as Lagos in Nigeria, could benefit from off-grid solutions. Many people in urban areas there use diesel generators for the majority of their power.
The cost of off-grid solutions has fallen in recent years. Solar technology is now more affordable, and investors are less demanding in terms of return on investments, partly because the perception of risk has improved, Hott said.
A major component to the success of off-grid energy solutions will be the collaboration of off-grid providers and governments, Hott noted. “Most off-grid players are following their own business development path, acquiring customers themselves without certainty they will get customers,” he said. If a government collaborated with an off-grid project serving 2 million people, for example, then scale could reduce pricing.
“If you combine all these interventions, you may reduce the price [of off-grid energy] by up to 50 percent,” Hott argued. These savings would attract further investment.
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