Jun 24, 2008 -- Business Daily/All Africa Global Media

African governments must loosen their grip on power utility companies to forestall an acute shortage of energy that could slow down growth in budding economies, experts warned.

A regional energy conference that opened in Nairobi yesterday heard that Africa could fall into a deep crisis in three years if it does not expand existing power generating capacity and diversify from over-dependence on hydro power.

Africa, like the rest of the world, is facing a major energy scare from runaway crude oil prices whose impact has spread to all facets of the global economy.

Despite the huge potential it has to meet its energy needs, under investment in the sector has ensured that the continent continues to suffer acute power shortages.

It is currently being powered by a combined capacity of 110,000 Mega Watts (MW), against the required capacity of 390,000 MW.

Sector players are proposing adoption of alternative and sustainable energy sources ranging from hydro to solar, wind, geothermal, gas and nuclear.

Yesterday, mismanagement of national power utilities was cited as the biggest challenge facing the electricity sector in the continent, dwarfing the often cited problem of inadequate financing.

"Funding should be the least of our challenges," said Edward Njoroge, the managing director of State-owned power producer KenGen and the president of the Union of Producers, Transporters and Distributors of Electric Power in Africa.

"Leadership and good governance have come short of expectations," he said. Mr Njoroge blamed African governments for appointing power sector managers without resorting to merit.

"They have refused to let go the management of these firms and continue to appoint people they can control and manipulate to give contracts and reward cronies," he said.

While governments across the continent liberalised their power sectors in the 1980s and 90s under pressure from the World Bank and the International Monetary Fund, many still have control of the management.

Now, players want the governments to ensure that they provide enabling platforms for the utilities to fulfil their mandates without interfering with the management.

Boards and chief executives of national utility companies were urged to work on long term growth plans for the power sector and to initiate cooperation among utility companies to form regional power pools.

"We have observed a change in thinking about a common African power pool, and more importantly there is progress in enacting regulation that supports this shift," said Vishal Agarwal of PricewaterhouseCoopers (PWC), an audit firm that prepared a report detailing views of senior power utility executives from several countries, including Kenya.

Electricity sector players at the conference said growing demand for power on the continent should not be seen as a problem, but rather as an opportunity to expand generation and distribution businesses. The conference will this morning discuss rural electrification as a means of providing access to power in more African homes.

The subject is in tandem with the Kenya government's energy sector plan that saw Finance minister Amos Kimunya set aside Sh6.5 billion in the budget to fast rack the supply of power to 200,000 rural homes.

Ageing transmitters

The PWC report shows most senior power utility executives believe improvement of capital markets around Africa will provide new opportunities for utilities to raise funds that can be invested in new projects or upgrading existing ones. They are, however, pessimistic about demand-led development of alternative energy sources.

The executives said they expect increased demand for electricity in the next few years to spur both new investment in generation capacity and a return to service of stations that have stalled.

PWC said lower generation reserve margins and ageing transmission equipment are top on the list of challenges facing the energy sector in the continent.

It says shortage of knowledge and skills are becoming a critical issue for utility companies. "Skills development and retention strategies are high on the agenda for most utilities. Utility companies believe that human resource development will be just as important for the future of the sector as funds for expansion and refurbishment," the report noted.

Senior power utility executives expect solar and hydropower, in particular, to have an impact in the future energy development. The report says the potential for Africa is substantial and the big increase in expectations around solar energy, reflects the greater optimism among respondents that technological progress will accelerate the impact of this source of power.

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