Conference Presentation, Panel, Fireside Chat
Power Play: Closing the Immense Energy Gap in Sub-Saharan Africa
Milken InstituteTodd Moss, Joseph Boateng, Justin DeAngelis, A.B.C. Orjiako, Kate Steel, Robert Stoner, Rob Stoner, Glenn Yago, Miguel Acevedo, Paul Hinks
- Emerging economies require high energy futures to remain globally competitive, as small-scale energy approaches risk causing these nations to fall further behind the global economy.
- Nigeria's population is projected to surpass that of the United States around 2040 or 2045, yet the country currently possesses only 2% of the U.S. electricity generation capacity despite a population of nearly 200 million.
- Sub-Saharan Africa faces a power gap involving 600 million people without access, with over 300 million residing in six specific countries: Ethiopia, Tanzania, Kenya, Uganda, the DRC, and Nigeria.
- The full build-out of the grid in Sub-Saharan Africa was estimated at $835 billion in 2015, a figure not expected to be covered by development banks or U.S. government resources.
- Projections suggest that a third or more of unelectrified people will be connected by microgrids within the next 10 to 20 years, driven by the availability of off-grid solar and battery solutions.
- Off-grid technologies are viewed as practical immediate solutions for populations unable to afford grid connections, though they are expected to integrate with expanding on-grid utilities in the longer term.
- Nigeria's power penetration is currently less than 10% of its population, necessitating the simultaneous execution of off-grid projects and large on-grid initiatives to address hard-stop transmission capacities around 5,000 megawatts.
- Investment capital for these regions requires specific structures, including permanent capital vehicles or public-private partnerships, to align with institutional investors who seek returns of 15 to 18 net or 10 to 15 depending on risk levels.
- A shortage of institutional-quality projects with long-term contracts and guarantees persists rather than a lack of capital, necessitating first-loss credit enhancements to mobilize large pension funds.
- Nigeria's gas-to-power sector has seen investment returns exceeding 15% to 20%, influenced by gas prices fluctuating between $0.50 and $3 per thousand between 2012 and 2015.
- Significant revenue gaps exist in Nigeria, including a $600 million shortfall in collections from power supplied, which has required Central Bank intervention to close.
- Governments are shifting toward holistic planning rather than transactional approaches, anticipating that Africa will be majority urban for the first time around 2040.
- Future infrastructure demands will likely evolve into a "mixed" market character over the next 30 to 40 years, reflecting an "all-of-the-above" solution to meet rising household demand for appliances and air conditioning.
- Countries like Ghana are experiencing high growth rates of 8% but face challenges with IMF support and inconsistencies between growth targets and fiscal space, while blackouts have historically impacted election outcomes.
- Institutional investors in South Africa are adopting more aggressive approaches, and the continent holds $1.1 trillion in untapped institutional assets within national pension plans and social security schemes.
- Successful investment in the sector requires favorable foreign exchange policies in Nigeria to ensure foreign capital can exit, alongside efforts to achieve near 100% tele-density to support off-grid adoption.