The punishingly low price of crude oil dampened the mood at the annual Africa Energy Indaba trade show in Johannesburg on February 16-17, where some 700 delegates mulled over the challenges and opportunities in the continent's energy sector. Indaba is an indigenous South African word, meaning important conference.
Progress has been uneven on the power-stressed continent. While there was widespread agreement that the infrastructure that is being built doesn't match Africa's energy needs, enthusiasm on the part of investors was absent.
"There was a reticence and a reluctance that I hadn't seen before," said David Wright, Secretary General of the South African National Energy Association and a member of the annual indaba's steering committee. "Africa's growth has slowed, the global economy is uncertain and the global energy sector even more so, and one could feel the impact of all that this year." Perhaps for those very reasons, a number of core issues were flagged to help close the gap between demand and supply, regional integration being foremost among them.
Visionary leadership needed
Zambia's new Energy and Water Development Minister Dora Siliya gave the example of the Zizabona electricity transmission interconnector, the project designed to facilitate power trade and sharing between Zambia, Zimbabwe, Botswana and Namibia and de-congest the existing transmission corridor. She called for greater support to help complete the multi-million dollar initiative, which she said has the potential to generate new capacity in the years to come.
"Unless you can take a regional view, you cannot go very far," the minister said.
This sentiment was echoed by Dr. Wolsey Otto Barnard, Deputy Director General of Energy Programs and Project at South Africa's Department of Energy, who said, "We should be planning our electricity future based on the region, not on South Africa.?The concept is not a new one. In the mid-1990s, South Africa's utility Eskom called for the establishment of a regional grid, which led to the formation of the Southern African Power Pool in 1995. Granted, its successes have been uneven, "but it was started on the back of visionary leadership,?said South African businessman Reuel Khoza, a former Chairman of Eskom and currently Chairman of energy firm Globeleq. "That is what investors are looking for on the continent today. That and a regulatory framework to enable power purchase agreements."
Yet one of the major projects in the regional pipeline, a nuclear procurement plan announced some years ago by the African National Congress-led South African Government, seemingly defies regional integration. Over the next 20 years or so, South Africa intends procuring 9,600 mw from the nuclear power project estimated to cost over $64.9 billion. But while nuclear power, by its very nature, is designed for large grids such as South Africa's, other countries in the region simply do not have the demand to warrant such a project.
However, Dr. Yves Guenon, Managing Director of Areva South Africa, the French nuclear vendor, was of the view that it is not necessary to build nuclear reactors around the region to achieve regional integration. Instead, he suggested, neighboring countries could invest in the costly project for a guaranteed supply of electricity.
But a regional approach, as mooted by Guenon, has not formed part of the design. The South African treasury is still estimating the cost while potential bidders court President Jacob Zuma's government.
Nuclear energy bids
Two years ago, it emerged that Russia was the preferred candidate in informal behind-the-scenes discussions and though the South African Government has refuted this, the perception persists.
Speaking at the indaba, Viktor Polikarpov, Vice President for Sub-Saharan Africa at Russia's state atomic energy corporation Rosatom, said he was confident his team has what it takes to win the coveted contract. But he was also expecting China and France, the two other main contenders, to present strong bids. So until the selected contractor was announced, the nuclear power project must be talked about in terms of a project and not a "deal," he said.
Polikarpov said China's absence from the nuclear discussion at the indaba should not be interpreted as a sign that they have left the bidding process.
This year, China's presence at the indaba was cut back drastically with neither speakers nor delegates at the event. They were also absent in the exhibition hall. Wright attributed this to the slowing down of the Chinese economy, though the Chinese continue to be an important partner in key infrastructure and energy projects across Africa.
At the indaba, the low oil price gave added prominence to renewable energy, which was identified as an area of immense opportunity. Debates around natural and unconventional gas were also headline events.
There was a keen sense, however, that Africa's energy sector cannot move forward with a focus on one source of energy at the expense of another.
"We are not going to solve Ethiopia's challenges by focusing only on mega projects in hydro," said Arthur Hanna, Senior Managing Director for energy strategy at Accenture, a multinational management consultancy. "We need to incorporate renewables and off-grid solutions, as much as anything else. The ambitions are enormous and the solutions have to be broader based."
"Resilience" was the new buzzword at this year's indaba. A relatively new concept in energy parlance, it emanates from the World Energy Council's message to think resiliently, rather than big, to ensure that there are alternative options in the energy design process. It's about being able to weather the effects of drought, withstanding the challenges of the water-food-energy nexus - synergizing the use of water and energy use and food production, or more unexpected challenges such as the crippling oil price. And according to Wright, "It is catching on."
"Now put all of that together, and what we, in the private sector, are asking for are the catalytic elements to develop energy on the continent,?said Globeleq's Khoza. "This is a difficult period and the investor community might be subdued but they haven't gone away. They are just looking for more assurances than before."
(Reporting from South Africa)