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Aug 19, 2014 | 09:41 GMT

Southern Africa Looks to Develop Its Great Potential for Power Production

Southern Africa's cluster of power grids is established in regard to transmission and generation infrastructure and the trading mechanisms that help balance localized shortages. South Africa is among the most stable and largest electricity producers in sub-Saharan Africa. Power grids in Southern Africa developed in large part due to the early influence of demands from the power-intensive copper mining industry in the Democratic Republic of the Congo and in Zambia.
(Stratfor)

Southern Africa's cluster of power grids is far more established than that of West Africa, both in regard to transmission and generation infrastructure and the trading mechanisms that help balance localized shortages. This does not mean that electricity supply is necessarily more reliable throughout the cluster, but South Africa, the most important node in this network, is among the most stable and largest electricity producers in sub-Saharan Africa.

Power grids in Southern Africa — and especially electricity trading between countries — developed in large part due to the early influence of demands from the power-intensive copper mining industry in the Democratic Republic of the Congo and in Zambia. The first sub-Saharan power-trading infrastructure was built between colonial-era Congo and Zambia (then known as Northern Rhodesia) in the 1950s, when a bilateral agreement to trade electricity prompted the construction of a 1,700-kilometer (1,050 miles) high-voltage line. 

Power generation infrastructure geared to support mining operations was later linked to national power grids, enabling surplus generation to be more efficiently distributed. State support to electricity for industrial development in South Africa also extended to Rhodesia (now known as Zimbabwe) and Zambia.

The South African government extensively supported the mining industry, allocating considerable subsidies to electricity generation and the provision of coal feedstock. Power plants were located alongside mining nodes, and electricity was deeply subsidized so as to develop the mining (and later manufacturing) sector. State support to electricity for industrial development in South Africa also extended to Rhodesia (now known as Zimbabwe) and Zambia, and the extensive integration of these economies during the colonial era compelled sharing and development of power. Southern Africa stands out from East and West Africa because of its intent and capability to foster an industrial-scale electricity power plant base that eventually grew farther into the region.

Power generation infrastructure geared to support mining operations was later linked to national power grids, enabling surplus generation to be more efficiently distributed. South Africa had a surplus of electricity until the mid-2000s, by which time subsidies to support the historically excluded black South African population reduced the surplus as consumption ranged precariously higher than output levels. Eschewing the apartheid government's narrow focus on supporting the industrial base, the African National Congress had to redirect the priority of electricity generation to address broad consumer demand. 

Limits to Industry

The rate at which this electricity production infrastructure has developed, however, has also capped electricity consumption by the mining industry, causing African countries to lose out on some sector revenue. Limitations on power production capacity mean that a good amount of ore processing is not performed in the countries where minerals are mined. Congo, for example, has attempted to encourage mining companies to move more of their processing activity back into the country. But processing is an extremely power-intensive activity and would require a much higher capacity for power generation than Congo can assure, and this has quashed plans for local processing. Zimbabwe has the same problem.

The mining industry has also directly influenced the Southern African Power Pool, which was established in 1995, by making coal production prevalent throughout the region. Coal-fired power plants account for 80 percent of the region's power production capacity, most of it located in South Africa. Coal is a very potent source of electricity, but the costs incurred by transporting it over long distances limit coal-fired electricity generation in Africa to coal-mining regions. In most cases, coal-fired electricity generation is limited to power plants directly connected to coal mines. 

The southernmost section of the Southern African electricity infrastructure cluster depends heavily on coal, while the northern parts, reaching into Congo and Zambia, lean more toward hydropower because of its broad availability and the lack of fossil fuels in the region. While hydropower requires larger initial investments, the return and sustainability of this renewable energy source make it highly efficient. The largest project to further develop hydropower-based electricity generation is the Congolese Inga Dams project, which according to plans would produce as much as 44 gigawatts of electricity upon completion — an immense amount considering the Southern African Power Pool has a total available capacity of 51 gigawatts. 

Despite the sheer size of the Inga Dams project, there are serious constraints on finding regional uses for the energy produced there. Long transmission distances limit the project's effectiveness, while fears of making the whole pool overly dependent on one source could limit the impact of the Inga Dams project. While from an engineering point of view the project is feasible, the investment needed — estimates run from $50 billion to $80 billion — is an obstacle to the project's completion. So far, dams I and II of the Inga Dams project are online and have a capacity of about 1,775 megawatts, while efforts are still under way to begin construction on Dam III, which would have a capacity of 4,500 megawatts.

While hydropower requires larger initial investments, the return and sustainability of this renewable energy source make it highly efficient.

Zambia also draws its electricity primarily from hydropower projects, many of which are state-owned. The country's current production capacity stands at about 1,845 megawatts, but Zambia could draw an estimated 6 gigawatts of power from hydropower sources. The lack of initial investment needed to translate production potential into actual power generation has limited Zambia, which has developed only one-third of its potential so far. Zambia is pursuing a broad expansion of hydropower development for the first time since colonial rule, though most of this is still in the planning stages. 

South Africa's Imperatives

While hydropower has great potential to increase electricity generation throughout the Southern African electricity network, for the time being the center of gravity continues to be South Africa, with its production capacity of more than 41 gigawatts. Within South Africa, 85 percent of electricity generation originates from coal-fired power plants, with an additional 1,800 megawatts of installed capacity from the Koeberg nuclear power plant, the only commercial nuclear power station in Africa. South Africa also uses hydropower, but geographic constraints and the projected expiration of renewable water resources by 2025 limit its reliability. This does not mean that South Africa will physically run out of water, rather that more water will be withdrawn than is replenished each year, which results in environmental degradation and makes what water remains less usable.

This makes other options to develop additional production capacity, such as natural gas and nuclear power, more viable alternatives as water resources become strained. This is especially true of shale gas and natural gas in general, which can replace water-intensive coal production and older coal-fired power plants that are eventually shut down. Similarly, South Africa wants to build and operate another nuclear power plant but has not been able to secure the financing. It remains an option, though, and politically backed nuclear power firms from Japan, France, Russia and China are pressuring Pretoria to approve plans for another plant.

Renewables such as wind or solar power could also be useful in an environment of limited water resources, but South Africa has only nominally developed such sources. In 2013, South Africa spent $33 billion on 17 renewables projects that would combine to produce 1,456 megawatts. The projects are part of the third stage of a larger plan that already saw 47 projects for a combined 2,400 megawatts completed in the previous stages. This expansion is rather limited, considering the total installed capacity of these projects makes up less than 10 percent of South Africa's existing power production capacity. South Africa is more likely to continue to favor its nuclear and thermal options. 

Addressing Production Shortfalls

Despite the great potential for power production in some of the countries that make up the Southern African Power Pool, the network as a whole cannot ensure enough power production to meet demand at all times. A regionwide peak demand of 54 gigawatts leaves the Southern African Power Pool with a 4,284-megawatt shortfall. Unlike West Africa, the infrastructure throughout Southern Africa is relatively well developed and interconnected, however, meaning the shortfall can be overcome by increasing production capacity.

Southern Africa stands out from East and West Africa because of its intent and capability to foster an industrial-scale electricity power plant base that eventually grew farther into the region.

Of the 12 countries that make up the Southern African Power Pool, nine are operational (with Angola, Tanzania and Malawi being the exceptions) and take part in the short-term trading mechanisms that seek to maximize the use of localized surplus production. These trading mechanisms started with the organization of Short-Term Energy Markets, a system that allows members of the Southern African Power Pool to trade daily and hourly contracts. The network is currently trying to develop a more competitive energy market, rather than a cooperative market. Leaders envision a situation where countries would anonymously trade short-term contracts on the Day-Ahead Market, which would enable buyers to react to short-term fluctuations, increasing efficiency across the grid. This evolution toward a competitive market is expected to draw increased competitive investments, resulting in a general increase in capacity.

The Southern African Power Pool has a plan that should address the regional shortfall over the next three years. Across the cluster, projects with a combined production capacity of 19,266 megawatts are scheduled for completion in that three-year window. Projects accounting for 14,237 megawatts are located within currently operational members of the power pool, and 7,893 megawatts would originate from South Africa. Taking into account the expected growth in demand over the next three years, the current 4,284-megawatt shortfall should become a 3,059-megawatt surplus. This dynamic illustrates the pressure on African electricity markets to continue increasing production capacity within project completion times to keep up with growing industrial demand.

Editor's Note

This is the second installment in a three-part series looking at sub-Saharan Africa's electricity generation and transmission capabilities and analyzing opportunities for growth.

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