Twenty-one of 48 Sub-Saharan countries have less than 200 megawatts of generation capacity, well below the minimum efficient scale. So they pay a heavy penalty: costs reach $0.25 per kilowatt-hour, compared with $0.13 per kilowatt-hour in the region’s larger power systems.
Although Africa is well endowed with hydropower and thermal energy resources, only a small fraction of its potential has been developed. Some of the region’s most cost-effective energy resources are far from major centers of demand in countries too poor to raise the billions of dollars needed to develop them.
The goal of pooling energy resources to achieve scale economies in power sector development led to the formation of regional power pools in Southern, West, East, and Central Africa. If pursued to its full economic potential, this system of regional power trading could save the region around $2 billion a year in energy costs. The saving would be achieved by increasing the share of hydropower in the continent’s power portfolio from 36 percent to 48 percent, displacing 20,000 megawatts of thermal generation in the process and eliminating 70 million tons each year in carbon emissions (8 percent of Sub-Saharan Africa’s anticipated emissions through 2015).
If regional trade is fully pursued, some 16 African countries (mainly small countries that now rely on thermal energy) would end up importing more than half their power, thereby saving between $0.02 and $0.07 per kilowatt-hour. Their power needs would be met largely by exports from major hydro-based producers: the Democratic Republic of Congo, Ethiopia, Guinea, and Sudan. However, to fully develop their power export potential, each of these countries would have to make massive investments on the order of $1 billion per year over the coming decade. In addition, some 22,000 megawatts of cross-border transmission capacity would be needed to underpin regional exchanges (see figure).
Missing links in the regional power transmission network