Twenty-one of 48 Sub-Saharan countries have a generating capacity of less than 200 megawatts, well below the minimum efficient scale. Due to the small scale of most national power systems and the widespread reliance on expensive oil-based generation, the average total historic cost of producing power in Africa is exceptionally high, at $0.18 per kilowatt-hour. The average effective tariff is $0.14 per kilowatt-hour. Compare that with tariffs of $0.04 per kilowatt-hour in South Asia and $0.07 in East Asia.
Africa is well endowed with cost-effective energy resources on a large scale, chiefly hydropower; however, these tend to be located far from the major demand centers, and their development is often beyond the means of the countries where they are found. Regional power trade is the solution. Regional trade would make it possible to harness these more attractive sources of energy, producing savings of as much as $2 billion each year. The development of additional hydropower resources through regional trade would also save 70 million tons of carbon emissions annually.
But making regional power trade work is a considerable economic and political challenge, in part because of the many missing links in the continental power-transmission network. For more details on regional power trade, see our treatment of regional integration.
Missing links in Africa’s cross-border transmission network