12 July 2017

Southern Africa: Industrialisation - SADC Eyes Energy Investment

The energy situation in southern Africa is expected to come under the spotlight when the region convenes a high-level ministerial workshop and investment conference in Swaziland to discuss sustainable energy infrastructure.

The High-Level Ministerial Workshop and a Regional Investors' Conference on Regional Energy Projects to be held on 12-13 July will review the list of priority regional energy projects, assess the preparation of these projects, and discuss capacity building measures to strengthen skills within the Southern African Development Community (SADC) to package bankable projects.

It is hoped that both SADC and potential investors will use the workshop and conference to critically review the chest of priority energy projects, including the adequacy of the existing policy environment to create an enabling environment for investment.

Improvement of security of power supply is essential in the SADC region since peak demand has exceeded installed and operating generation capacity since the end of 2007.

In this regard, the SADC Secretariat in collaboration with the Southern African Power Pool (SAPP) and guided by the Energy Sector Plan of the Regional Infrastructure Development Master Plan 2012-2027 presented, for approval by ministers responsible for energy and the Council of Ministers in 2016, a programme to strengthen generation capacity and transmission facilities for evacuation of power from new plants while reducing congestion on the existing networks.

The master plan identified lack of capacity in preparation and packaging of projects as a major setback in energy development in SADC. The SADC Secretariat and the SAPP are working with International Cooperating Partners (ICPs) to facilitate preparation of projects and ensure there is a pipeline of bankable projects for investment.

According to the SADC Secretariat, a list of priority power generation projects has been developed and will be showcased during the ministerial workshop and investment conference.

The list is informed by a SAPP projects prioritisation mechanism that was approved by energy ministers in 2005, and is based on a list of generation priority projects compiled by the Secretariat in collaboration with SAPP and approved by the ministers based on progress reports from member states.

The priority power generation projects are expected to address power shortage in the short to medium term by 2022, while long-term generation projects are at pre-feasibility and feasibility studies, market studies or detailed designs stage.

The Secretariat noted that power transmission infrastructure in the region is constrained mainly due to growing demand. While member states participating on the SAPP power trading platforms had agreed on deals totalling nearly 2.6 million megawatts per hour (MWh) between April 2016 and March 2017, only 865,545 MWh or 34 percent was traded on the SAPP markets.

The remainder of matched energy volumes could not be traded due to transmission constraints. As a result, the region has prioritised strengthening of electricity transmission infrastructure.

Priority power transmission projects include interconnectors to connect Angola, Malawi and the United Republic of Tanzania to the SAPP grid as they are currently not connected as well as transmission interconnectors aimed at relieving congestion on the SAPP grid.

There is also need to develop new transmission projects aimed at evacuating power from new generating stations to load centres.

The Energy Sector Plan estimates the total cost of additional electricity generation capacity for the region to be in the range of US$114 billion to US$233 billion between 2012 and 2027.

The related transmission investment costs to support new generation capacity are about US$540 million. This transmission investment does not, however, include planned transmission interconnectors and national backbone lines.

The High-Level Ministerial Workshop on 12 July will be followed by the investment conference on 13 July. Both events will be preceded by meetings of ministers responsible for energy and water in SADC, which are scheduled for the same venue on 11 July.

The investment conference will include breakaway sessions to facilitate discussion between project developers and interested investors. It is expected to provide a platform for resource mobilisation for sustainable energy infrastructure development to enable the energy sector to play a vital role towards industrialisation and prosperity of the region.

Efficient and affordable energy infrastructure is a critical input for reducing transaction costs for industry and trade, as well as for improving the economic and social wellbeing of society at large.

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