It is believed that pooling regional power systems with coordinated planning rather than a hodgepodge of individual national plans can avoid duplication and reduce costs to the benefit all the power pool member states. That’s because investment in energy infrastructure development is prohibitively expensive and relies on the economy of scale.
Taking advantage of these economies of scale by pooling resources through joint investment is also expected to help lower the cost of electric power throughout Africa.
“Deepening regional power trade would bring substantial economic benefit by reducing the long-run marginal costs of power compared to a situation without trade,” World Bank’s Phil Hay told AFKInsider. “Given that power is a key production input to the economy any reduction in the reference level of power costs spurs productivity and competitiveness.”
While Africa is seeing a shift away from fossil fuels to renewable energy power generation, a variety of barriers have prevented a number of countries from taking full advantage of their renewable energy potentials due to the slow pace of national and regional power regulatory authorities to harmonize their regulations with neighbor states.
A new African Strategic Infrastructure report – released on May 7 at the start of World Economic Forum on Africa – notes the challenges of such transnational infrastructure programs “are tremendous” due to “the continent’s wide variation in languages, cultures, financial capacities and maturity of public institutions.”
The report notes that “a legacy of mistrust or even conflict can often jeopardize co-operation between participating nations, and many countries lack a tradition of conducive environmental measures, such as enforcement of anti-corruption laws and the availability of stringent regulations on public-private partnerships.”
And in some of the more unstable states, conflicts have resulted in damage to existing power infrastructure.
The African Development Bank also sees politics and local power sector regulatory policies as a stumbling point, noting that state monopolies dominate the power sector in many countries and “across the continent, power supply master plans are still very nation-centric and under the tight control of local vested interests. Moving forward, the challenge will be to convince governments and stakeholders of the benefits of having an Africa-wide power market – which will necessarily require the liberalization of national power sectors.”
“The practicalities of actual cross-border contracts are so difficult,” Simon Gosling, Director of UK-based EnergyNet told AFKInsider. “As long as the cash is there, the obstacles can be overcome in certain areas.”
If the African Clean Energy Corridor successfully plays out, it will forever change the way cross-border collaborations happen in Africa – not only helping to optimize the renewable energy mix and attract more investment, but result in the creation of new jobs.
According to International Renewable Energy Agency’s Renewable Energy and Jobs 2013 report, a broad range of policies influence renewable energy job creation, noting that “cross-border trade and investment flows are increasingly relevant to the renewable energy sector, with implications for employment.”
