Industrial consumers and their immense demand for electricity will be key to unlocking the potential of the Southern African Power Pool (SAPP) to become a fully-fledged electricity trading market, able to ensure the region’s energy access and power security.
This is according to minister of electricity and energy Kgosientsho Ramokgopa. He told Business Times this week the SAPP aimed to harness the generation potential of each member country to meet collective regional energy needs.
The UN estimates 600-million Africans have no access to electricity.
“If we were connected as a continent, you can see we are able to balance [the regional needs]. And in fact, we are going to negate the share of coal’s contribution to the mix, because we would have had the Grand Inga [dam in Kinshasa, DRC], even Mozambique could do gas-to-power, but the economy is so small there is no incentive to do that,” he said.
The SAPP was established in 1995 at the Sadc summit in Kempton Park by 12 member countries. In 2001, it established the short-term energy market to create a competitive electricity market for the region.
“South Africa has been, and continues to be, the major powerhouse of the region. That has both upsides and downsides,” said Ramokgopa.
“The upside for South Africa is that it is a dominant player, able to generate electricity and revenue, with no stranded electrons. You are able to build your own economy on the back of revenues that are earned. The downside is the period we’ve just come out of. There’s an overreliance on one player.
“So if one player fails, it drags the whole region down with it from an electricity balance point of view. As a region, if we had access to generation, they would have been able to help South Africa during its time of need.”
The minister said the SAPP sought to balance energy generation and demand in the region, and derisk its economies through polycentric generation from multiple energy sources, including gas-to-power in Mozambique, hydro in Lesotho, the Inga Dam, and solar in Botswana.
Ramokgopa said South Africa’s ability to electrify poor households was historically built on supplying power to private industries, and the catalyst for the SAPP’s vision is likely to achieve greater regional energy access in the same way.
“In many parts of the region, other countries’ demand is driven by industry. We have situations where, for example, in Zambia, it’s the copper belt that buys from the Power Pool. So, they come in, not at the sovereign level, but as a commercial party that wants to buy from them.
We are also starting to see a lot of activity, not just in South Africa, but the region ... I think the African energy landscape is flush, and we are seeing increasing activity.
— Judy Kobus, head of infrastructure sector solutions at Rand Merchant Bank,
“What we are seeing increasingly is that poor households are unable to get access to that ... You are going to find that the first generation of projects or demand that is going to catalyse the prospects of the Power Pool is private consumers with a credible track record in various countries, so it’s really mining houses, big industries, and international brands that you know will meet their obligations.”
Judy Kobus, head of infrastructure sector solutions at Rand Merchant Bank, said the SAPP takes the vision of an electricity market in the region to a new level. She said RMB had small projects in countries such as Namibia in the order of 10 to 30MW and two utility-scale projects in Botswana.
“We are also starting to see a lot of activity, not just in South Africa, but the region. I think the African energy landscape is flush, and we are seeing increasing activity,” she said.
As seen in South Africa’s energy sector reforms, the private sector is known to move quickly into a trader market when the right incentives are introduced, she said..
“The private power market was led by the energy-intensive user groups as the initial off-takers ... large mining companies. So, then they came out and went to procure power from independent power producers. The reasons behind them were energy security, power certainty and decarbonisation.”
Johan Koorts, principal in the resource and project finance team at Absa CIB, said the bank saw a lot of interest in parties looking to build projects that sell into the SAPP.
“We see quite a lot of interest, specifically in places like Botswana, to develop renewable facilities to sell into the SAPP. So the electrons could be wheeled or sent across the border into countries like Zambia to alleviate their power challenges.”
“We see quite a lot of interest and activity in that space that will not necessarily focus on the power needs of a specific jurisdiction but, rather, is aimed at alleviating the power shortage across the region.”
He said the SAPP’s grander vision was in its infancy but was increasingly becoming topical with countries looking to evacuate power from resource-rich areas to power-hungry areas.
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