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Africa's Hydropower investments opportunities

A gradual process of development has started yielding results for African hydropower, with a swathe of international hydro and associated power export projects under way or planned. It seems that Africa is becoming a more attractive place to invest in infrastructure development, but what has changed?

It is well known that Africa has an abundance of hydropower resources, but it remains in desperate need of development, with the vast majority of the population lacking access to reliable electricity supplies. Africa holds about 12% of the world's hydropower potential, with a technically feasible output of about 1,800 TWh/year. Yet Africa produces only about 3% of the global hydropower and exploits less than 10% of its technical potential, the lowest proportion of any of the world's regions.

Despite this, there is evidence of change in African hydro development, where installed capacity now exceeds 20 GW. In several African countries — for example Mozambique, the Democratic Republic of Congo (DRC) and Uganda — hydropower accounts for over half of all electricity generation and there are numerous large hydropower projects under consideration or in development, too.

Changing face of African hydro

With obvious resources and demand, it is financial and political — as distinct from technical — challenges that have presented the biggest obstacles to African hydropower and all too often stymied much needed development. Perhaps the most obvious is a need for peace and political stability, but in the case of hydro development, strong political — often cross-border — and public support is needed, too. Transparent financial structures and independent regulatory authorities are also a fundamental requirement to attracting investment, as is energy sector reform in many cases.

In addition, negative perceptions of the environmental and social impact of large hydropower projects have lingered.

Alongside structural and political reform, though, there is evidence of a change in the perception of hydropower by institutional lenders and others.

Cross-border cooperation

The International Hydropower Association (IHA) observes in its latest outlook that for much of Africa, the integration of communities into national grids is seen as a stepping stone for development, and the provision of electricity and water services to business and industry remain an investment priority for economic progress. While conditions vary, they note that common challenges are capacity building, transparency and grid integration.

One of the key milestones in African hydropower development is an interconnected regional transmission system, a fact that is being increasingly recognized by African governments, which are now implementing a growing number of cooperative energy projects.

There are many interesting developments under way in this regard. For example, the Southern African Power Pool (SAPP) was the first formal international power pool in Africa, created in 1996 with the aim of providing reliable and economical electricity supply to the consumers of the 12 member states: Angola, Botswana, DRC, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. A key objective is to co-ordinate and co-operate in the planning and operation of electricity power systems.

SAPP says it has made it possible for members to delay capital expenditure on new plants due to the existence of interconnections and the regional power pool. It does, however, note that a number of major challenges remain, including a lack of infrastructure, a lack of infrastructure maintenance, limited funds to finance new investment, insufficient generation and high losses.