Independent Power Projects in Sub-Saharan Africa – Lessons from Five Key Countries

by MMC
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Currently, nearly 600 million people in sub-Saharan Africa live without access to electricity, underscoring the reality that the region simply does not produce enough electricity to meet its needs. Given that the needs of Africa’s power sector far exceed the already strained public finances of most countries, it is crucial that governments attract more private investment to increase generation capacity and help deliver electricity. electricity to those who need it most, according to a new report released by the World Bank.

“Independent Energy Projects in Sub-Saharan Africa: Lessons from Five Key Countries” draws on case studies from Kenya, Nigeria, South Africa, Tanzania and Uganda – countries with the most experience with IEPs in the region – to recommend ways to create climates healthy investment opportunities for future projects in the region.

The report assesses the use of EIPs and highlights the challenges facing policymakers and the factors that can lead to increased and sustainable investments in the electricity sector. To attract the private sector, governments must create a healthy investment climate and enabling environment, according to the report.

Favorable factors for an attractive investment climate for IPPs include:

  1. More competitive procurement efforts from sub-Saharan African countries, including encouraging long-term contracts through a competitive bidding process. This can help ensure lower prices and avoid other issues, such as the possibility of a problematic contract. If direct negotiations are carried out, they must be done in a transparent manner.
  2. Clear and enabling policies, structures and regulatory environment for the energy sector.
  3. Systematic and dynamic planning of the electricity sector, including the ability to accurately project future electricity demand, determine the best supply or demand management options, and anticipate the weather will be required to acquire, finance and build the required electricity generation capacity.
  4. The financial viability of the public service is vital. Given issues such as high losses, poor billing and collection, it will be important to mitigate risks through measures including the provision of financial guarantees and security measures to reassure new investors.

There are currently 126 IPPs in 18 sub-Saharan countries, representing an installed capacity of 11 GW and $25.6 billion in investments. But to benefit more countries, the report recommends that these IPPs be much larger and spread across the region.

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