Page 34 - Energize October 2021

VIEWS AND OPINION

Energy transition: A new path to power in Africa

Information from Kearney stage over the next years, in which parastatal VIUs are legally and functionally unbundled into
separate entities for generation, transmission and sales”, Hulak remarks.
frica currently sits on the cusp “While European utilities unbundled largely from a position of strength, Africa’s embattled
of a transition into a new energy utilities face a very different reality. The many challenges in commercialising operations and
Aparadigm, one in which technological managing an unbundled power network are daunting and complex. Unbundling won’t be an easy
and commercial innovations are delivering road, but we need to face the obstacles head-on if we want to ensure a sustainable African power
increasingly decentralised power to the sector”, says Hulak.
people of the continent in new ways. Hulak notes that unbundling brings three significant benefits: transparency, competition
A recent White Paper released by and the potential for private sector participation. The increased competition drives production
global management consultancy company efficiencies, as well as services and collection.
Kearney outlines the over-arching strategic In the later phases, VIUs are fully unbundled and there is a vivid environment of private
considerations for African utilities to sector participation in both distribution and sales, giving rise to a healthy competitive wholesale
forge a path to sustainability, amidst the market. These hybrid business models have already been implemented in much of Europe, Asia
backdrop of this global paradigm shift. and the Americas.
Entitled “A New Energy Path to Viability Because of the historical timing of liberalisation in Africa, African states stand to benefit from
for African Utilities”, the paper unpacks the the advent of cost-competitive renewables and are embracing decarbonisation as they embark on
broader macroeconomic trends that are their journeys towards liberalisation.
shaping the transition. “African utilities now have the chance to leapfrog over many of the steps taken by other
Kearney partner Igor Hulak explains the nations on the path towards liberalised energy supply”, explains Hulak. “Technological
dual mandate shouldered by energy utilities breakthroughs, economies of scale, state-incentivised decarbonisation, and a culture of innovation
in Africa, which play an integral role on the are seeing African power producers leverage the continent’s abundant wind and solar resources.
continent. “Availability of power is essential Renewables are fast becoming a prime contributor to Africa’s energy mix”.
for economic growth and, even more Kearney’s White Paper delves into pertinent African utility case studies on South Africa and
importantly, for social development. Utilities Ghana and looks at the lessons that can be drawn from their efforts thus far.
must provide sufficient, affordable power for
both these imperatives”, says Hulak.
He added that adequate electricity
supply prefigures a nations’ overall economic
development. Conversely, insufficient
availability of power has been identified as a
key obstacle facing African businesses, having
been ranked first in sub-Saharan Africa ahead
of other challenges like finance, informality
corruption and taxes.
The three key drivers behind the
transition to the so-called New Energy
World; decarbonisation, decentralisation
and digitalisation, are also facilitating the
historical trend of nations to liberalise their
energy sectors as they grow and develop
economically. In most African states
liberalisation has not yet begun in earnest,
and integrated state-controlled monopolistic
vertically integrated utilities (VIUs) are
still responsible for all of the sector’s main
functions: generation, transmission and
distribution, or sales. Some states like South
Africa, Nigeria, Kenya, Ghana and Egypt are
in the initial phase of liberalisation and have
seen the emergence of independent power
producers (IPPs) whose power and capacity
are being sold to the VIUs under long term
power purchase agreements.
“African leaders are strategically planning
for the natural transition into the more
organic market of the next liberalisation

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