A new World Bank report released on Wednesday has called for increased private sector investment in Africa’s under-developed electricity transmission infrastructure, a vital ingredient for reaching Africa’s energy goals.
Africa lags behind the rest of the world when it comes to electricity, with just 35 percent of the population with access to power and a generation capacity of only 100 GW. Those who do have power typically consume relatively little, face frequent outages and pay high prices.
Transmission infrastructure is a crucial middle part of the electricity value chain. Alongside generation and distribution, improving and increasing transmission infrastructure is key to closing the access gap. So far, transmission in Africa has been financed from public sources and new models of financing involving the private sector have received insufficient attention from policymakers or financiers.
The ‘Linking up: Public-Private Partnerships in Power Transmission in Africa’ report examines private sector-led investments in transmission globally and how this approach is applicable in sub-Saharan Africa. The private sector has participated successfully in transmission networks in many countries in Latin America and Asia, and this approach could be replicated.
“Private finance has supported the expansion of electricity transmission infrastructure in many regions of the world and the same can happen in Africa. To attract private sector investment, however, governments need to adopt policies supportive of this strategy and establish the right business, regulatory and legal environment to sustain investor interest,” said Riccardo Puliti, Senior Director and head of Energy and Extractives Industries at the World Bank.
Estimates of annual investments required from 2015-2040 to expand the transmission network range from US$ 3.2 billion to US$4.3 billion. These investments are critical to delivering cost-effective power to households and industries.
The report examined independent power transmission projects (IPTs) in five countries (Brazil, Chile, India, Peru and the Philippines) where major power sector reforms were undertaken to privatize the sector. The use of privately financed transmission lines in Brazil, Chile, Peru and India, for example, collectively raised over US$24.5 billion of private investment between 1998 and 2015. This resulted in close to 100,000 km of new transmission lines.
The study provides a set of recommendations for countries to adapt to specific local conditions and lists 10 steps to get there, including the right legal and regulatory framework, new models for concessional lending, competitive tender processes, adequate revenue flow and credit enhancement for projects, or tailored IPT projects to attract international investors, to name a few.