Of the world’s 1.5 billion people living without electricity, 80 per cent live in sub-Saharan Africa, where only one in four has access to modern energy sources.
If current trends continue, less than half the population of sub-Saharan Africa will have access to electricity by 2050.
No doubt, challenges exist to changing this reality: regulatory structures are complicated and difficult to navigate; large investments are needed; and long-term financing can be difficult to secure. But the opportunities are enormous. According to the African Development Bank, hydropower represents 45 per cent of sub-Saharan electric power generation, but only four per cent of its commercial potential has been tapped.
“The majority of African utilities today have very low coverage rates and strengthening the power infrastructure is a priority of most African governments,” says EDC’s chief representative for Africa Patricia Bentolila, “so there are huge opportunities for Canadian suppliers in the power sector, particularly in countries like Nigeria, Ghana, Angola, South Africa, Mozambique, Tanzania and Kenya.”
“The power supply potential is very diverse across Africa, including hydro, gas, coal and geothermal. And with oil prices as they are today, we’re starting to see renewable energies being thrown into the mix, so that’s another encouraging development, given Canadian expertise in the field.”
Power in Nigeria, for example, is a priority for the current government. Production reaches less than 30 per cent of the current demand, due principally to lack of investment and poor condition of the infrastructure. But the government is now privatizing six generation companies and 11 distribution companies, which could spell many opportunities for Canadian firms. CPCS and Manitoba Hydro are already active in Nigeria’s energy sector.
represents 45 per cent of sub-Saharan electric power generation, but only 4 per cent of its commercial potential has been tapped.
Like Nigeria, “many governments are looking to partner with private investors in the power sector. And while the regulatory environment in some African countries can be a challenge, because they have not been tested, the business environment is generally improving,” adds Bentolila.
Ghana: Leading the way
Ghana is one of the fastest growing economies and a leading democracy in sub-Saharan Africa. It recorded double digit growth in 2011, boosted by oil revenues and strong exports in traditional sectors, such as cocoa and gold; its communications network is one of the best and most affordable in Africa and its roads and transport system, although still a work in progress, have seen some massive expansion in recent times.
Critical to supporting Ghana’s growing economy is the country’s power sector, a fundamental catalyst to any country’s rapid industrialization and subsequent development. While Ghana achieves one of the highest electrification rates in sub-Saharan Africa, the rapidly rising energy demand from the sector’s residential, commercial and industrial customers has created a need for improvements in the country’s electricity generation performance and reliability. With a total installed capacity of about 2,000 megawatts (MW), national access is currently about 66 per cent, but closer to 30 per cent in the northern regions.
Ghana’s power plans
But the nation has ambitious plans: by 2015, it hopes to increase power generation to ensure reliable power supply and become a net exporter of power in the West African sub-region; by 2017 it hopes to achieve a total installed capacity of 4,000 MW; and by 2020 the government is aiming for universal access.
The state-owned Volta River Authority (VRA) manages electricity generation in Ghana and maintains its generation facilities. VRA operates the Akosombo Hydro Power Station, Kpong Hydro Power Station and the Takoradi Thermal Power Plant at Aboadze. Bui Power Authority (BPA), another state-owned entity, is charged with the implementation of the Bui Hydroelectric Power Project.
Last year, EDC helped 32 Canadian companies doing business in Ghana. For the past few years, EDC has been developing a good relationship with VRA, and is working to match Canadian expertise to VRA’s projects.
Magellan Aerospace brings generators to Ghana
Mississauga-based Magellan Aerospace is one of Canada’s largest aerospace companies. In the early 1960s, the company designed and built primarily flight turbine engines. Since then it has evolved its turbines for power generation and other mechanical applications through Orenda Aerospace, a division of Magellan that has produced over 4,400 gas turbine engines. Many of them have been converted to industrial applications ranging from oil and natural gas pipeline pumping to emergency backup power in nuclear power plants.
About three years ago, Ghana had an urgent need for power generation and Magellan negotiated with the government to supply 260 MW through an electric power generation plant near the port of Takoradi. The plant is expected to help meet Ghana’s staggering projected load growth and provide grid backup for seasonal shortfalls in hydroelectric power. Under the contract, Orenda procured four gas turbines with a dual fuel capability to run on light crude oil or on natural gas.
“Ghana was our first successful project in Africa,” says Magellan vice-president and general manager Frank Button. “The business environment is obviously much different in Africa; negotiations can go on long after a contract is signed and there can be questionable pricing tactics from local suppliers as well as a local skills gap. So you need to understand the culture and the unique requirements for each country in the region. And projects of this size often take a long time, so insuring against risk is critical.
Ghana at a Glance
- One of the more stable nations in sub-Saharan Africa
- One of Africa’s fastest growing economies and newest oil producer
- Canadian exports to Ghana grew almost 60% in past 5 years
- Aiming for universal access to electricity by 2020
“In Ghana the financing was hard to find. Our bank had been working in the country for a number of years and was ready to lend the money to the government of Ghana for this project – but they were not ready to take on the entire risk. Through EDC’s sovereign debt insurance, our bank was able to take the risk, and we were able to complete the negotiations and the project.”
Button adds: “There are huge opportunities around the world, particularly in developing countries where they need more access to electrical power. Without power, their economies can’t grow and the standard of living can’t increase.”
The Takoradi plant is expected to be operational by the end of this year, and Orenda is now under contract for a second facility. The success of this project brought the company recognition in the region and it is now pursuing opportunities in Kenya, Tanzania, Mozambique, Rwanda and Uganda.