A new World Bank report draws from experiences in five African countries to explain why independent power projects (IPPs) are crucial to help deliver electricity to the 600 million people without it in Sub-Saharan Africa. The report highlights the challenges policymakers face and factors that can lead to scaled-up and sustainable power sector investment.
Africa’s power sector needs far exceed most countries’ already stretched public finances, making it crucial for governments to attract greater levels of private investment to scale up generation capacity. To reach the scale required, governments must provide a sound investment climate and enabling environment, the report finds.
“Independent Power Projects in Sub-Saharan Africa – Lessons from Five Key Countries” draws on case studies carried out in Kenya, Nigeria, South Africa, Tanzania and Uganda – countries that have the most experience with IPPs in the region.
“Independent power projects now constitute the primary vehicle for private investment in the African power sector,” said Makhtar Diop, the World Bank’s Vice President for Africa. “The objective of this report is to identify key lessons that can help African countries attract more and better private investment.”
Currently, there are 126 IPPs in 18 Sub-Saharan countries, accounting for an installed capacity of 11 GW and $25.6 billion in investments. But to benefit more countries the report recommends these IPPs should be much larger and spread across the region.
The report also finds that renewable energy IPPs are becoming more promising and can be viable if procured competitively.
The report concludes that all sources of investment need to be encouraged and for IPPs to flourish, countries in Sub-Saharan Africa need dynamic, least-cost planning linked to the timely, competitive procurement of new power generation capacity. This must be accompanied by effective regulations that encourage distribution utilities that purchase power to improve their performance and prospects for financial sustainability, thereby widening access to electricity.