Engineer Hein Reyneke should be very pleased with life right now. He has overseen the building of two mighty wind farms ready to feed clean, green energy into his country’s national grid. The windfarm at Paardekraal, in the Karoo in South Africa’s Western Cape, will generate 110MW; at Kangnas, near Springbok in the Northern Cape, will generate 140MW; two shining power projects that took millions and the best part of seven years to build.
Instead, Reyneke is frustrated. His company, Mainstream Renewable Power, is one of the 37 renewable power projects left in the lurch by Africa’s biggest electricity generator Eskom. Between them they have sunk more than R50 billion (about $ 3.8 billion) into the projects left in limbo for more than two years.
The worst part is that all 37 projects have been signed off by the South African government’s enormous Renewable Energy Independent Power Producer Procurement Programme (REIPPP).
The problem is that Eskom won’t sign the 20-year power purchase agreements that will connect the projects to the national grid and pay their owners for the electricity they generate. Even then, it’ll take these 37 renewable power projects years to recoup their investment. The renewable energy entrepreneurs share the view of many in the industry that Eskom is both referee and player in the power game that guards its turf.
“I think the problem is Eskom can see its role diminishing. In short, it doesn’t want other people selling bread in its bakery,” says Reyneke.
The reality is Eskom can afford to take its time over signing new power agreements. The blackouts that have plagued South Africa since 2008 have receded. This is down to a combination of a massive repair and maintenance operation, the coming online of two new coal-fired power stations, and falling demand due to a sluggish economy. All this has left the national grid with a healthy surplus that could be as high as 5,600MW at peak times. That is nearly twice the output of one of South Africa’s biggest coal-fired stations.
It means Eskom can also afford be picky over price. Renewable energy may be gentle on the environment, but it is expensive to produce. In the first three rounds of the REIPPP process, Eskom was prepared to pay more than a rand per kWh. Now Eskom says it does not want to pay any more than 62 cents per kWh.
“Let us first sign the 62c/kWh bids. We would sign 13 immediately. That would be a move in the right direction. Those that are more than 62c/kWh must sharpen their pencils,” says current interim CEO of Eskom, Matshele Koko.
“The South African Renewable Energy Council (SAREC) counters that apart from legality and the risk of far-reaching negative economic consequence, Mr. Koko does not appear to have thought through the direct power sector consequences of his position. A 62c/kWh ceiling for new generation would be a death knell for other independent power additions. Nuclear is expected to come in at least double this level. Recent coal bids were around R1.03/kWh. Eskom’s own new-build coal stations, Medupi and Kusile, are both well north of a rand per unit,” says SAREC in a statement.
SAREC, representing the owners of the 37 renewable power projects, sought legal opinion. It fears that foreign investors in the industry could be deterred by the impasse with Eskom and claims that the national power producer has no authority to negotiate tariffs with signed-off bidders.
Senior counsel at Webber Wentzel, in Johannesburg, has issued a legal opinion letter, which confirms that preferred bidders are entitled to approach a court to enforce Eskom’s signature of power purchase agreements.
“In our opinion Eskom cannot sidestep the binding determination of the Minister; they are bound by the Ministerial determination, which includes signing the power purchase agreements,” stated Advocate David Unterhalter, Senior Counsel at Webber Wentzel.
“As an origin of state, Eskom cannot raise the reservation of rights in the request for proposal to defeat a claim for substitutionary relief. Nor, can it refuse to conclude a power purchase agreement.”
So, the 37 renewable power producers could have a glorious day in court if they put up the money for the lawyers. The question is will they take on the giant Eskom that could tie them up in a long and expensive court case?
“I think it is an option but not our preference at the moment,” says Reyneke, of the windfarms of Paardekraal and Kangnas.
The bigger question for the South African government is how exactly it will replace coal – which currently generates around 90% of the country’s power – when the coalfields run out and the world demands fewer carbon emissions in the next decade or so. Nuclear is being touted as the answer, but that is likely to be crippling to government coffers.
It appears renewable energy – once seen as the saviour of the national grid and the environment – is on the backburner for now.

A Court Case Is In The Wind

Building nuclear power stations in South Africa could benefit other industries that are in dire need of a leg-up.
South Africa’s cabinet has kicked off the Nuclear New Build Programme (NNBP) to get an initial 9,600MW of nuclear power which, according to President Jacob Zuma and Finance Minster Pravin Gordhan, “will be built on a scale and at a rate the country can afford”.
The cost of obtaining this much power will be around $40 billion to $50 billion over 15 years.
Contrary to the view of naysayers, the nuclear power lifetime cost is lower than most technologies. It is also the leading global baseload renewable energy source, topped up with hydro, clean coal independent power producers (IPPs), wind and solar.
The Department of Energy’s strategy has been to engage with nuclear vendor countries, and not only nuclear power plant (NPP) original equipment manufacturers, as they did in the failed 2007 process. Agreements have now been signed with five nuclear vendor countries – France, Russia, South Korea, China and USA/Japan.
These countries are able to supply modern pressurized water reactor (PWR) NPP technology, funding, construction and localization development strategies. Some offer fuel supply and fuel waste management support. These partnerships will last 100 years if you consider the full cradle-to-grave lifecycle of the modern NPP.
Government intends following a transparent procurement process, which will be placed into the IPP Office. This office is currently responsible for the successful renewable energy, baseload coal, and gas to power IPP programs.
“Only once nuclear vendors had entered their bids would South Africa have an understanding of what are the different cost levels [and] what type of technology is available… So it’s going to be a year, or two, or more before we can definitely say how long, how much and over what period of time we are going to be managing this program,” says Gordhan.
The principle vendor countries, and their own domestic technology companies, will look to share risk through international alliances and to embed a strong local content into their offering. This will provide support and funding for broad-based black economic empowerment (BBBEE), the construction and manufacturing sectors, and black industrialists.
Such Sino-Franco partnerships have been successful in building the Taishan NPP in China and the Hinkley Point C NPP in Britain, so watch this space.
South Africa’s nuclear readiness and localisation is an important issue for the initial 9600MW and could range anywhere from 20% to 40%, depending on how advanced the country’s readiness strategy is and its intentions for developing a flourishing nuclear knowledge economy.
South Africa has a proud heritage in power generation construction across all the primary energy technologies, but is now coming off a 2010 construction boom, with a big coal build now rapidly tailing off. The country’s embattled construction sector will be challenged to prepare for a nuclear build program without a well-thought-out and structured national strategy. We need to keep the momentum gained for the foreseeable future.
An early dialogue between the engineering and construction fraternity, the manufacturing sector, government and labor is therefore crucial to devise an incorporated plan for the NNBP. This plan will need to give South Africa about five years to ready itself to ramp-up into the investment and localization of the NNBP and will have to be sustained for at least the following 10 years.
The potential is for over 20,000 construction jobs to be created and a similar amount in the manufacturing and supply to the NNBP. Without a plan, the opportunity will be lost to foreign jobs and higher imported content for the NNBP.
Many industry players could be activated when the NNBP is announced. Supporting infrastructures will be a great stimulus for the local communities near the selected NNBP sites in the Eastern and Western Cape provinces. Currently the local talent pool is small. Group Five and Lesedi Nuclear Services are the only private sector companies currently fully active in the nuclear industry.
In the public sector, the South African Nuclear Energy Corporation (NECSA), Denel, Eskom and the National Nuclear Regulator (NNR) will have major roles in the establishment of the NNBP and in the supply to and execution of the projects.

Can Nuclear Power Up Other Industries?

Tucked inside Kenya’s Rift Valley are the Olkaria geothermal fields. A mix of a national park (Hell’s Gate National Park) and steam wells, the fields are powering Kenya’s growing electricity demands.
The first steam wells, also known as geothermal wells, in Kenya were built more than 30 years ago. Then, there was little regard for geothermal power – energy generated from natural steam from the earth. It was regarded as one of the many expensive ventures by the government.
Today, the focus on renewable energy has never been greater in Kenya. Several billionaires attended the Global Entrepreneurship Summit in July in Nairobi to explore investing in renewable energy in the East African nation.
“Investors in this initiative have chosen Kenya because the government is ready to listen to ideas and help implement them,” said Sir Richard Branson who led a delegation at the summit.
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Energy demands in Kenya are growing. This is largely due to renewed investor confidence in the country as well as the government’s improving retail consumer connectivity. This has seen the government work on an ambitious strategy to generate 5,000 megawatts (MW) by 2018.
Out of this, renewable energy is expected to take center stage as hydroelectric and fossil fuel generation are cut significantly.
In 2006, Kenya created the Geothermal Development Company to speed up the development of geothermal resources. The firm took shape through funding from the national treasury to offset the cost of drilling steam wells.
However, much of the work has been done by listed state corporation, Kenya Electricity Generation Company, popularly known as KenGen.
“Kenya is taking off and energy is the anchor engine. As a power generating firm, we have now developed a robust strategic plan heavily hinged on geothermal power,” says Albert Mugo, the Managing Director of KenGen.
According to government statistics, Kenya has a total power demand of slightly more than 1,500MW. The installed capacity is 2,000MW. Out of this, geothermal power contributes around 579MW, which translates to 44% to the national grid.
“We have a potential of 10,000MW of geothermal power in this country. We can still do more in terms of contribution to the national grid,” says Mugo.
The challenge in boosting geothermal power is financing. It is estimated that drilling one well costs between $8 and $10 million. To date, Kenya has more than 260 geothermal wells, mostly in Olkaria.
“The greatest challenge in this geothermal business is the perceived risk in exploring the steam wells,” says Mugo.
Apart from KenGen, other geothermal power producers have joined the fray, such as OrPower and Akira.
Kenya is ranked eighth in the world in geothermal positioning and first in Africa.
However, the focus is not only on geothermal energy. There is also interest in wind energy and solar power. While the two are at a nascent stage, Kenya has commissioned its first large-scale wind power project.
The Lake Turkana Wind Power Project (LTWP) farm site covers 40,000 acres and is expected to contribute 300MW to the national grid. When complete, it will become Africa’s largest wind power plant. Another wind project, managed by Aeolus Kenya, is expected to take shape soon. Located in central Kenya, it is expected to feed 60.8MW to the national grid.
The government, through KenGen, is also prospecting on a 400MW wind farm. This is scheduled for implementation in early 2016. Like the abundant geothermal energy sites, Kenya also has an area close to 90,000 square kilometers with excellent wind speeds of at least 6m/s.
Solar power is taking root with a number of companies entering the household market. This has seen many homes, especially in rural areas, replace the national power grid with solar energy.
“This growth in use of solar energy by household is largely attributed to the cost advantage. Solar power is much cheaper than national grid power,” says Robert Pavel Oimeke, the Director of Renewable Energy at the state-run Energy Regulatory Commission.
It seems that Kenya’s green energy growth plan is leading the way in Africa.

Full Steam Ahead

In the last year, the cedi has lost more than 40% of its value and was the worst performing currency in Africa, the third worst in the world, in 2014. It was so bad that the government called in the International Monetary Fund.
To make matters worse, power cuts are plaguing the land. In the gloomy streets of Accra, they call it ‘dumsor’ – a colloquial expression meaning ‘on and off’.
Ghana is suffering from power rationing – a hark back to the dark days of 2007 – where people have to check a load shedding timetable to find out when their lights will go out. In February, the Ghanaian government purchased 80 megawatts (MW) from neighboring Abidjan so the nation could watch the African Nations Cup final between the Black Stars and the Mighty Elephants of Ivory Coast; it was the same story when Ghana celebrated 58 years of independence on March 6.
All of this is a blow to President John Dramani Mahama. When he took power, he promised to end load shedding in three months. Halfway through his tenure the lights are still going out.
One cause is the fall of water levels at the Akosombo Dam on the Volta River. The dam produces 558MW of power, or 20% of the Ghana’s needs, 17% down on the electricity it generates at full tilt.
The Ghanaian Institute of Statistical, Social and Economic Research has estimated that the power crisis has cost between approximately $85 million to $243 million.
Many who run businesses here say the power crisis has been devastating and expensive; as the number of generators sold increases, the rise in the price of fuel piles on the costs. It is estimated Ghana spends $3 million a day on diesel fuel for its generators. To remedy these rising costs, small and medium enterprises have even gone as far as having two price points for their services – a dumsor price and a non-dumsor price. Even if you have power, the rising cost of it is causing uproar among Ghanaians.
The Cocoa Processing Company and Nestle Ghana complain the lack of power has stalled new projects.
The government has made efforts to rectify the electricity shortage with new power plants in the pipeline. Ghana has also seen a new wave of entrepreneurs, in energy, step forward.
A few minutes’ drive from Kotoka International Airport, a meandering road running alongside the famous Accra Polo Grounds, solar powered streetlights light the way. The plan is to do the same on other roads.
Infrastructural development of Accra over the last few years has been immense but has come at a cost with the Electricity Company of Ghana (ECG) unable to keep up.
Despite the economic hardship, the country is still able to attract foreign direct investment and the government has made efforts to rectify the power shortage.
The Atuabo power plant, which will receive gas from Ghana’s offshore Jubilee oil field, has overcome teething problems and is now in operation. It could generate up to 550MW; Ghana’s power shortfall is estimated to be around 400MW.
Another solution could be the numerous thermal power plants scattered across the country, namely the Asogli, Kpone and Aboadze plants. The problem is a lack of maintenance has seen many of these thermal plants either closed or working below capacity.
Then there is the problem of the bureaucratic ECG; many in Ghana have called for it to be privatized. A poor revenue collection system has led to growing debt that is another unwelcome hazard when it is trying to keep the lights on.
Surely, for this to carry on, is dumsor.

The Dumsor Down Of The Economy

At last, Nigeria’s rough ride through the dark tunnel is coming to a slow but steady end. Slightly over 10 years since successfully privatizing its telecommunications sector, the country looks set to repeat the feat in its moribund power sector.
Ongoing power sector reforms have now given birth to lingering pains on the sector’s value chain, generating anxiety, high hopes and renewed expectations from a citizenry that has become accustomed to living in the dark ages.
A few years ago, Nigeria’s investment climate was considered not attractive enough for inclusion in the BRIC (Brazil, Russia, India and China) group of nations. Fair enough. Today, the latest buzz word is MINT, for the grouping of Mexico, Indonesia, Nigeria and Turkey. The target year for MINT is 2050. All of this is fancy talk for most people in Africa’s most populous nation. Why wait for 2050? What matters most to them is the short-term fix. They yearn for the simple bliss of a regular and affordable supply of electricity, as they continue to ask why a resource-rich country should continue to lack light. They reckon that regular power supply would unleash their enterprising spirits and catapult their nation’s fortunes well ahead of the BRIC or MINT states within a decade. And they could be right.
Jim O’Neill, the man who coined the BRIC acronym and the former chairman of the asset-management division of the Goldman Sachs Group, agrees. The size of the Nigerian economy would double in six to seven years if the country’s perennial power outage is sorted out, he says.
Aliko Dangote, Africa’s leading industrialist and president of the Dangote Group, can only imagine what Nigeria could achieve with a consistent power supply.
“Can you believe that this country has been growing at seven percent with no power, with zero power? It’s a joke,” he says.
Nigerians have lived with the ‘no power or poor power’ status, in part due to a lack of political will by previous governments and the Nigerian factor—a euphemism for graft, nepotism, neglect of state-owned assets and underinvestment.
Industrial, commercial and domestic consumers of electricity have therefore resorted to producing their own electricity using gas, generators, solar panels and inverters. The Federal Ministry of Power estimates that these off-grid methods account for up to 6,000 megawatts (MW), against the 4,500MW generated and supplied by the grid. Global Business Intelligence estimated that Nigerians spent around $455 million on generators in 2011. Added to this ignoble expense is the negative impact to health, wellbeing and the environment.
The successful sale and handover, last November, of 11 distribution companies (Discos) and four generation companies (Gencos), formerly owned by the defunct Power Holding Company of Nigeria (PHCN), to Nigerian and foreign investors completed the first phase of the power sector privatization process.
Following the positive market reaction to this, the Nigerian government decided to partially privatize a further 10 Gencos with a combined installed capacity of 5,000MW, located mostly in the Niger Delta region and known as the National Integrated Power Project (NIPP). The federal, state and local tiers of government own these Gencos and have invested more than $8 billion in them through a special purpose vehicle, The Niger Delta Power Holding Company (NDPHC). The sale of an 80% stake of these Gencos is expected to be completed by the end of 2014.
For the Nigerian authorities, the ongoing sale of its power sector assets is expected to rake in more than $10 billion and new regulatory responsibilities, as successor companies struggle to comply with Post Acquisition Plan and budget agreements.
For the new investors, industrial spats, costly infrastructure revamps, bank debts, consumer agitation and hopefully, consumer satisfaction and corporate profits lie ahead.
For consumers, the entire exercise has resurrected hope. Their angst and heightened expectations has now been redirected to the new players.
For starters, the $24.7 million, three-year contract given to a Canadian firm, Manitoba Hydro International (MHI) in 2013, to manage the country’s electricity transmission system is being reviewed by the authorities over allegations of non-performance and over extension of MHI’s management. MHI is expected to upgrade the human and technical assets of the Transmission Company of Nigeria (TCN), one of the successor companies of the unbundled PHCN.
Transmission is crucial to the success of the industry. The last time there was a grid enhancement was in 1987. The Transmission Company of Nigeria (TCN) is the only PHCN company still owned by the government and is considered the weakest link in the country’s electricity network. The network currently has the capability to distribute less than 6,000MW of electricity and covers less than 40% of the country’s land area. Experts have warned that unless the government revamps the transmission leg of the value chain, the entire privatization exercise might end up in a cul-de-sac.
Upon completion of MHI’s work schedule in 2016, Nigeria’s transmission network should be capable of moving about 20,000MW of electricity and cover more than 80% of Nigeria’s land area. The minister of power, Chinedu Nebo, says around $3.7 billion in funding is needed for the transmission system to reach this target.
Alex Oti, managing director of Diamond Bank, says Nigeria’s banks are willing to lend more cash to the industry, notwithstanding the bank’s collective contribution of over $4.5 billion to the sector since the commencement of the privatization exercise.
The government says it needs $2.8 trillion (N464 trillion) for infrastructural development in the power sector in the next 30 years, under its National Integrated Infrastructure Master Plan.
Government has also stated that the energy sector will require $880 billion (N144 trillion) during the period while the power sector will need $10 billion (N1.6 trillion) for generation and distribution in the next five years to add 5,000MW to the national grid. It added that the transmission network needs $1.5 billion (N240 billion) over the next five years.
To overcome investors’ fears about the technical capability and credit worthiness of the PHCN successor companies, government has created the Nigerian Bulk Electricity Trading Plc (NBET), a state-owned independent off-taker, underpinned by an $800-million partial risk guarantee from the World Bank. Capitalized with $550 million and chaired by finance minister Ngozi Okonjo-Iweala, the NBET will purchase power from Gencos before reselling to Discos, thereby avoiding potential defaults. This is, however, meant to be a short-term measure, as successor firms begin to enforce new electricity tariffs driven by their respective investments and market forces.
Adeola Adenikinju, the director at the Centre for Petroleum, Energy Economics and Law at the University of Ibadan says Nigeria is moving into uncharted territory.
“Very few countries have surrendered their power sector to the private sector the way we have done. We cannot afford any regulatory laxity or incompetence. We must learn from some of the regulatory lapses that we currently experience in the telecommunication and airline industries.”
The next three to five years will be the litmus test for the sector. Success will be determined by how well new investors navigate through the maze of gas supplies, gas prices, political risks, the domestic and international economic climate, access to capital, revenue projections, the quality of inherited assets and liabilities, and interest and exchange rates.
Nigeria is expected to benefit from United States president Barack Obama’s Power Africa initiative, a five-year, $7-billion partnership between the US and the governments of Ethiopia, Kenya, Liberia, Nigeria, Tanzania and Mozambique. An additional $9 billion is expected to be added by the private sector. Already, Nigerian businessman and chairman of Heirs Holdings, Tony Elumelu has backed the plan with a pledge of $2.5 billion.
The Africa Development Bank (AfDB) has also earmarked close to $3 billion for Africa’s power sector over the next five years.
In February 2014, the Nigerian government signed a $350 million power financing deal with General Electric to support the construction of small-scale power projects across the country.
The Nigerian power industry may be awash with funds but no one can predict if projections to generate over 10,000MW of electricity by 2015 and 40,000MW by 2020 will be met. The director-general of the BPE, Benjamin Dikki, has given the market a two to three year period before power supply stabilizes.
“Expectations will need to be managed for the public to understand that the power sector cannot be built overnight and that this country is recovering from decades of underinvestment and corresponding crumbling infrastructure,” he says.
“This will be a defining year for this sector and one in which Nigerians will either begin to applaud the emergence of the proverbial light at the end of their tunnel or curse their stars,” says Peju Adebajo, the managing director of Mouka, a Lagos-based manufacturer of foam products.
“Whichever way the pendulum swings, both realities will not be cheap. Billions of dollars will either have been money well spent or lost, and the opportunity to improve the political economy and human development index of a fourth of Africa’s population may also have been either fast tracked or stunted.”

Ease The Power Pain Please

Munhava, an area in Beira, Mozambique, is tense. The protests begin at midday with burning tires and the opening of the first shebeens. Acrid smoke hazes across the sky in the searing heat. By 2PM the mob has resorted to violence
Now, in the humidity of dusk, it is eerily calm as we wait patiently for darkness and the first wheezes of diesel generators from the more upmarket dwellings in the near distance.
The air is rich with fried fish, excrement and kerosene. A vivid stench of poverty framed by the sea. Across the slum, in a small landfill, scavengers rake over debris and waste before burning the rest. The laundry swinging on the line in front of me is trackmarked with soot.
A small riot on the ragged edge of Mozambique’s second largest city may not seem like a big deal but the dispute, aimed at the local municipality, was over what is arguably the most contentious issue facing African slums today—electricity.
It echoes a pattern of unrest we are seeing from Kibera in Kenya to Khayelitsha in South Africa and across the Sahel. Electricity is fought for and fought over in the poorest corners of the world. All around us in Munhava, makeshift cables and wires hang dangerously from tin shacks, so tightly packed they blend into each other. For those without the savvy to misappropriate electricity from the local provider, EDM, there is little option but unreliable and inefficient sources of energy. Somali store-owners pile their wares high with firewood, charcoal, candles, kerosene, battery-powered flashlights and palm oil. The deeper scandal is evident on these humble wooden counters across which the poor hand over the little they have for scant solutions. According to some estimates, the poorest of the world pays 20% of the world’s lighting bill, but receives only 1% of the benefits.
Kerosene and paraffin swallows 25% to 30% of a family’s income in Munhava. There are other costs too. Across from where I sit, the one-room shack, lit by kerosene at dusk, will probably have concentrations of pollution up to ten times the level that is considered safe.
At dusk each day, throughout sub-Saharan Africa, some 600 million people, or around 66% of the region’s population, prepare for the darkness and life without electricity. In rural communities, that number climbs to a remarkable 85%.
Sipping a warm beer from a broken refrigerator, I reflect that darkness has dogged even my recent travels across the world. On the road into Beira, I  reflect on the need for mainstream debate around energy poverty in Africa.
Energy is needed to reduce the world’s greatest child killer, acute respiratory infection. Up to 1.6 million people worldwide die from exposure to excessive levels of smoke in their homes from cooking fires. A quarter of all these deaths occur in Africa.
When I travel across Africa and ask people from all backgrounds what they need from electricity, the answer is often as simple as a light at night or a simple stove.
Yet when I sit in squatter homes in Kinshasa, where power is available but subject to rolling blackouts that can last days and weeks, and ask the same question, I am given insight into the new Africa. There is a need to power laptops, televisions, refrigerators and air conditioners.
No two situations are the same in Africa. But whose needs get priority? It appears the latter, the aspiring consumers. Today, the direct link between economic growth and electricity on the continent is finally placing this issue on the international agenda.
Last year, the United States president, Barack Obama, launched Power Africa, an initiative that will commit $7 billion over the next five years to support the energy needs of Ethiopia, Ghana, Kenya, Liberia, Nigeria, and Tanzania.
The human cost of work productivity in Africa due to the lack of access to electricity cannot be underestimated. If a population lacks adequate access to power it blocks any significant economic progress and in turn stability. It’s an issue that makes me think about the burgeoning youth population. With the competitive edge that technology provides, unreliable access to electricity hinders African youth.
Today, young people in Africa make up almost 40% of the working population, yet 60% are unemployed. Increasing energy access has the potential to boost sustainable development, as well as build human capital on the African continent. Without electricity, hopeful entrepreneurs are not able to gain access to market information and technologies to expand their businesses and schools are not able to prepare students for a knowledge-based economy.
In many ways, Africa has two key energy problems: there are many millions of people who have no grid extended to them, and won’t have in the foreseeable future, and the energy production in most countries is insufficient to meet the demand of those already on the grid, let alone those not yet connected. That is why power failures are so common in developed Africa.
But what are the solutions? Accelerating access to energy, particularly clean, renewable resources such as wind, water, the sun, and biomass among others, is ideal. It reduces pollution that contributes to climate change, while promoting Africa’s productivity and economic growth.
Such initiatives have the potential to make a difference in the lives of millions of Africans but it still isn’t enough. Collectively, the private and public sectors must work together more to strengthen Africa’s technical infrastructure to expand access to energy.
Everywhere, I read of radical solutions, from oceanic wind farms to mass solar power programs in the Sahara and hydropower on the Congo River to a scheme initiated by Harvard University alumni to extract energy from ordinary soil.
Some investors are backing jatropha, a plant whose seeds produce an oil for burning in generators. There is also an effort to tap geothermal energy. The Great Rift Valley, from Eritrea to Mozambique, could produce 7,000 megawatts. Kenya hopes to get 20% of its energy from geothermal sources by 2020.
To understand the existing and realistic scope of alternative energy solutions, I recently visited the Bisasar Road landfill site in Durban, South Africa. I was there to produce a short film around a project that converts landfill waste, a form of biomass, to methane gas and in turn electricity.
In Durban, trash is quietly and effectively making enough energy to sustain 3,800 households. Peter Seagreen, the sprightly 74-year-old mechanical engineer in charge of the Durban site, says converting trash to electricity would have been beyond imagination when he was growing up as a ships engineer. Bounding around the site like a teenager, he marvels at the technology at his disposal but bemoans the lack of knowledge around its potential.
“We are converting rubbish into electricity yet the local community barely realizes we can achieve this. It’s a miracle if you ask me. It also makes me wonder why this is not being expanded across Africa. We are the only ones doing this, yet Africa isn’t short of landfill waste.”
Arguably the most exciting thing about the prospect of creating electricity from gas is the dividend it could provide for gas-rich nations like Mozambique, Tanzania and potentially South Africa. The possibility of gas pipelines powering and empowering remote communities with electricity from similar turbines is attractive. It is a game-changing dynamic that could liberate rural areas.
Of course the argument between robust and pragmatic solutions to energy poverty, and the role gas could play in it, are tempered by the debate around global warming and fossil fuels.
But, time is not on our side. Over the border from Mozambique, in Malawi, the booming charcoal trade is relentlessly damaging the nation’s reputation as an evergreen country. Malawi has the highest deforestation rate in the Southern African Development Community (SADC) region. The disappearance of forest cover has also resulted in massive soil erosion and siltation in low-lying areas, leading to flooding that has been disrupting operations at Malawi’s biggest hydroelectric dam, the Nkula Hydroelectric Power Station.
Then again, in Malawi and elsewhere in the SADC region, charcoal’s attractiveness to impoverished locals is not difficult to understand. A sizable bag in an urban area costs around $7. For an average family of seven, this might last them nearly a week, but if they were to use electricity for all their cooking and heating, they would probably spend more than $15 during this time. Not to mention the high cost of electrical cooking appliances such as hotplates and heaters. A new hotplate costs around $30, beyond the reach of ordinary Malawians, most of whom live below the poverty level of $2 a day. In contrast, charcoal stoves, made in China, are around $2.
What the success of the Durban project shows us is that we should be looking towards expanding energy solutions that are already in place. Landfills, often in the heart of African cities, form a center point for the poorest of the poor. Using them to generate electricity, a proven science, could open the door for other more practical solutions.
Today, the fundamental obstacles to energy have been researched and established. The barriers, while complex, can be overcome, and international co-operation can help. Technology is also on our side. We do know how to build power systems and meet energy demand efficiency. What is required is a political prioritization. Energy access must become a continent-wide priority.
Innovation could provide the best chance we have to transform the energy landscape but it is also sobering to think that around 90% of the world’s designers, our greatest minds, spend all their time working on solutions to the problems of the richest 10% of the world’s customers. What if they were to use their expertise to solve the greater problem in the developing world?
African townships draw in and absorb young people from rural areas. They are also places of unbridled ambition and hope, not necessarily idleness and squalor.
In ‘Shadow Cities’, a book that describes a tour of slums across the globe, Robert Neuwirth recalls that New York’s Upper East Side was once a shantytown. He suggests that all cities start as mud. But, in the modern connected technological world we know, the odds are stacked against the slum dwellers when there is no energy to power ambition.

In Need Of A Miracle

The world’s leading industrial goods manufacturers are turning to resource-rich nations in Africa, Latin America, Asia and the Middle East for their next phase of growth.
Industrial behemoths like 3M, ABB, Alstom SA, Caterpillar, General Electric (GE) and Siemens AG have all built up their presence in these fast growing territories. The economic logic for both countries and companies is simple: development, trade, more market share, more revenue and more profit.
In GE’s case, African countries that produce large amounts of oil, natural gas, metals and other commodities also need electric turbines, oil production gear and other heavy equipment to improve the petroleum, energy, healthcare, transportation and water sectors. Company-to-government and joint venture (JV) agreements have been GE’s preferred method of doing business here. A raft of manufacturing and manpower training facilities aligned to its projects across the continent are expected to benefit from GE’s global research and development spend, which totaled $3.9 billion, $4.6 billion and $4.5 billion in 2010, 2011 and 2013 respectively.
The Connecticut-based company acknowledges that its growing footprint in Africa and other emerging markets is not entirely risk-free but is nevertheless critical to its long-term growth objectives.
John Rice, GE’s vice chairman, has stated on several occasions that GE likes to cast a wide geographic net because orders for its products come intermittently. GE currently generates more revenue from Latin America than in China and India combined.
The company’s order book in Africa may soon rival its Latin America portfolio. Its focus appears to be just in time as African governments search for credible global players with core engineering capabilities to help develop state-controlled assets in critical economic sectors.
Nigeria’s local supplier base is expected to grow from 10 to 100 over the next decade and it is working with the government and private sector to add 10,000 megawatts of power to the national grid. These sectors are also helping to modernize and expand Nigeria’s railway fleet and network. And guess which engines run on most of Africa’s smoky locomotive trains?
“The big change for GE in Africa occurred when we bought a company called Vetco Grey (in 2005), which is the oil and gas equipment business,” Jay Ireland, the president and CEO of GE Africa tells FORBES AFRICA.
“That gave us a footprint in Nigeria and Angola that we didn’t have before. That’s now part of GE Oil &amp; Gas.”
The IMF forecasts sub-Saharan GDP growth of 6% in 2014, up from 5% in 2013. Inflation is forecast at 6.3%, the lowest annual average for the region in 30 years. According to the World Bank, consumer spending accounted for more than 60% of sub-Saharan Africa’s economic growth last year. For the first time in memory, the rewards of doing business in Africa seem to outweigh the risks.
GE’s recent investment in Nigeria reflects its grand ambitions on the continent. According to Ireland, the company’s proposed manufacturing facility in the south eastern coastal town of Calabar will eventually cost the firm $1 billion and an additional $750 million will be pumped into the project over the next five years to galvanize local sourcing of goods, services and labor, including an expansive human capital management and development agenda that will have a positive impact on the host community and country.
Eventually, more than 2,300 direct and indirect jobs are expected to evolve out of the new factories. Calabar is a historic location, known for its annual month-long carnivals. With GE in tow, the calm, rustic town will lose its serene mood. And as the local economy begins to boom, centuries-old agricultural practices will give way to engineering and manufacturing jobs.
“We want to be in Nigeria… we will be part of a duty-free zone in Calabar… where we can attract employees and impact the community and the environment positively,” says Ireland.
These are grand ambitions. GE’s work on the continent is cut out and the competition to repair Africa’s decrepit infrastructure is fierce. But, Ireland is a laconic but thoughtful man. This trait may be what the company needs to tackle the difficulties of doing business on the continent. It is an interesting time to be in Africa.

Renewed Focus In Africa

In just 18 months, a few modest farms on the plains of the Eastern Cape, South Africa will transform into the third largest wind farm in sub-Saharan Africa. The Dorper Wind Farm will produce 100 megawatts (MW) of energy a year.
For the owners of Rainmaker Energy Projects, it’s hard to imagine what 40 towering wind turbines will look like, but Luke Callcott-Stevens and Gavin James are spending R2.5 billion ($274 million) to find out.
“You build a wind farm in 18 months… after four or five years of hard work,” says Callcott-Stevens.
It was New Year in 2009 when James and Callcott-Stevens—friends since university—decided that they were tired of their jobs and wanted to make it on their own.
At the time Callcott-Stevens was looking for wind farm sites for Australian outfit Macquarie Capital, and James was a lawyer. Shortly after—with a third partner in tow, former Macquarie engineer, Doug Jenman—Rainmaker breezed into the market with government tenders in mind.
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That year, the South African government declared its intentions to buy renewable energy at favorable tariffs through its Renewable Energy Feed-In Tariff (REFIT) program. The program gazetted wind energy, promising R1.24 ($0.14) per kilowatt-hour (kWh).
“When we started this out, we couldn’t tell anyone what we were doing and who we were. We were all competing for sites, if you want to go into wind farms now you would have to go and buy it from someone else. But at that point in time we were in frontier country,” says Callcott-Stevens.
The rush to the wild wind of the west had begun with the force of a Californian gold rush. Many companies were looking for coastal sites near Cape Town in the Western Cape and Port Elizabeth in the Eastern Cape, where wind is strong. Rainmaker went its own way inland into the Eastern Cape.
“I racked up 100,000kms driving in a year, just looking for different sites but we couldn’t find another that was as ideal as Dorper,” Callcott-Stevens says.
The site has 10,000 hectares of flat grassland on top of an escarpment flanked by a mountain range, which channels wind to Dorper.
“The whole escarpment is windy, but this is a particularly windy part of that windy escarpment because of this funnel,” he says.
Along with strong wind—which, coincidentally, is at its strongest in winter, when South Africa demands most of its electricity—a wind farm needs to be close to a distribution line to connect to the national grid, South Africa’s national power generator Eskom.
Unlike other companies, Rainmaker is in the unique position that if it wins more phase bids it does not have to look for new sites. With its space, Dorper Wind Farm simply has to construct more 125-meter-high turbines. It has the planning permission to put enough turbines to generate 560MW
Rainmaker has permission to use a 400kV transmission line, which could revive the Canadian Alcan smelter, in Port Elizabeth, which was abandoned because of the country’s power crisis in 2008.
This means that they have the capacity to feed over 1,000MW of energy into the grid.
All seemed lovely in the wind farm industry. In two years, the company struck a deal with an equity partner, Sumitomo Corporation and secured huge bank loans. The Japanese company, says Callcott-Stevens, is a good partner since it helped build one of the largest onshore wind farms in the world: Shepherd’s Flat Wind Farm in Oregon, in the States.
Then in February 2011, disaster struck when the government scrapped REFIT. It was declared an unfair and uncompetitive tender process. This meant a lot of people who had procured loans and deals with renewable energy companies were left high and dry. Government officials mooted a new tariff of 99c/kWh ($0.11/kWh), which meant for many the cost of building farms was just not feasible.
There was a lull for nine months. Rainmaker carried on acquiring loans and negotiating deals with wind turbine companies. Other companies were throwing in their towel at this point.
“We were committed, we were in, we had put our lives on the line,” says Callcott-Stevens.
In June 2011, the wind picked up. The South African Department of Energy (DoE) announced that R47 billion ($5,17 billion) would be thrown into the Renewable Energy Independent Power Producers Programme (REIPPP). The six-phase program picked up where REFIT left off. The government announced it was starting a new bidding process for private business investors to apply for tenders. Investors could procure spots to sell electricity back to the government, not at one set rate, but at a bid price of lower than 115c/kWh ($0.13/kWh).
Eight wind energy projects were chosen, Dorper Wind Farm was one of them. After 2015, REIPPP aims to provide 3,625MW of renewable, clean energy for the country. The largest coal plants in South Africa, like the under construction Medupi coal plant in Limpopo, will generate 4,800MW.
“The next round, we could see a further R7 billion ($700 million) in development and going forward you could theoretically have R30 billion ($3,3 billion) going into infrastructure development in this area in the coming future,” says Callcott-Stevens.
Renewable energy could be a game changer. Ninety seven percent of South Africa’s electricity grid, which has capacity to provide 43,000MW, relies on coal. Even then, it is struggling. Eskom has warned that with overdue maintenance this will be at 33,000MW. This winter could see rolling blackouts; during peak demand periods South Africans can use up to 38,000MW.
A coal plant is able to produce 40 times the amount of energy a wind farm can but new coal power plants will produce power at a higher cost than wind, particularly in South Africa.
According to Ayanda Nakedi, Eskom’s general manager in Renewable Energy, the cost of the rollling blackouts of 2008 was R75/kWh ($8/kWh). This is 84 times the cost of wind power today.
But people should be cautious with wind energy, especially when it comes to solving blackouts, according to Chris Yelland, director of EE Publishers.
“Let us just say that you build a 100MW wind farm. So when the wind is blowing flat out, the wind is going to generate its peak of 100MW&#8230;. The reality is it very often generates at an average of 20 to 25 percent. Although it may generate on average 25MW, for a considerable amount of time it’s producing below 25MW. And this makes wind a big problem, so when you may want the power, you may not get it, and when you don’t want the power, you might get it,” Yelland says.
Currently, South Africa lies near the bottom of the global wind power league. In three years according to Nakedi, it will have climbed to fifteenth. A large slice of this could come from the windswept optimists of Dorper Farm.
It may look easy but risk stalks a wind farm. Bids are not guaranteed.
“For every guy constructing a wind farm there are 20 guys who spent a lot of money, who are nowhere, who don’t have a project,” says Callcott-Stevens.
“We could be hit by a strike onsite, or maybe our turbines could sink in the sea, or we miss our dates when we have to be connected to the grid by, and we stand to lose a lot of money. That could significantly affect our returns over the long-term. There have been projects, in America, where blades have cracked on a wind farm. But these risks get less and less once you have been awarded status under the REIPPP up until the point when you have finished construction,” says Callcott-Stevens.
Further costly delays stem from the administration of REIPPP.  According to Yelland, the DoE needs to be cautious when signing 20-year long contracts under the REIPPP.
“Look at long-term supply contracts, like Eskom with BHP Billiton. It now turns out 10 years down the line that Eskom is locked into selling energy that they now regret. If we buy into these energies on a long-term basis the same could happen,” he says.
So far all phase bids have been delayed at sometime or other. But Callcott-Stevens says that the system has been merely ironing out its wrinkles.
“There have been problems and there are still problems but if you look at where we are coming from, South Africa was a totally regulated power market. It takes a long time to deregulate a market. They did this, relatively quickly; we signed our PPAs [Power Purchase Agreements] last November. Effectively power was deregulated in South Africa,” says Callcott-Stevens.
So, if you want to be a wind farmer, all you need is R2.5 billion ($278 million), an open desolate plain to put your mills on, a few years of patience to win over your investors and a bit of luck, from then on, it’s a breeze.

Tag: Megawatts

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