The Africa Energy Forum is one of the biggest events in the calendar for power producers and governments throughout the continent. This year in Berlin, a significant proportion of the exhibitors at the conference were temporary power providers – companies that can get a gas or diesel-fired turbine on site within as little as 30 days to alleviate temporary power shortages. This is a reflection of the real need for temporary power in the continent, but their presence also highlights the continuing difficulties some of Africa’s most resource-rich nations are having in turning their energy promise into reality.
Two countries in particular stood out: Nigeria, with its abundant gas resources but pitifully small power capacity for a country of over 150 million people; and Mozambique, home to some of the gas industry’s most impressive finds of recent years, but also a country that struggles with low electrification rates and an underdeveloped power sector.
Both countries have tremendous potential to develop their power sectors, but the sheer size of the investment needed to develop the infrastructure is overwhelming and governments need to be able to guarantee regulartory certainty for investors. Development of the Nigerian power sector remains hamstrung by the need for reform of the electricity market. In Mozambique, government and industry are only in the early stages of a hefty capital expenditure programme to build the infrastructure needed to increase generation capacity and improve urban and rural electricity access.
In both countries, gas is likely to play a significant role in the future energy mix. The fuel was once considered a burden by exploration companies searching for lucrative oil reserves, but technology has opened up new possibilities for gas development. Power and LNG export remain the principle options for making money, but fertiliser production, gas-to-liquids, plastics factories and other chemical processes have all demonstrated their worth as additional sources of revenue. In theory, these additional uses will yield social as well as financial benefits, aiding the development of the local economy through job creation and domestic industrial development.
However, such arguments can get lost in the competing demands made on politicians. Subsidised electricity prices, for example, are an electorally popular policy that put a dent in national budgets and dissuade investors from risking money in the capex-heavy electricity infrastructure needed to boost capacity. To change this political reality without losing office is difficult to say the least, especially in Nigeria, where the vitriolic response to President Goodluck Jonathan’s attempt earlier this year to remove subsidies on fuel prices demonstrated the dangers of taking on the electorate.