Hydro resources offer solutions for industrial power users in Africa

CAPE TOWN - Africa is currently experiencing acute power shortages due to a lack of investment in new capacities and the growing economies in the region. This erratic supply of power is already threatening to stifle the economic gains made in the past decade.

In Nigeria alone, power failures are estimated to cost approximately $1 million per year. Large industrial manufacturers are the most affected by the unreliable power supply and many industrial power consumers have resorted to using diesel generator sets as prime power supply and the national grid as back up.

“In Nigeria, the use of diesel generators has increased the electricity cost to approximately 60 per cent of overall production costs,” says Frost & Sullivan (http://www.energy.frost.com) Industry Analyst Moses Duma. “However, industrial power consumers could benefit significantly from tapping into Africa’s abundant hydro power resources.”

Sub-Saharan Africa is endowed with a tropical climate and a significant number of perennial rivers. The region has the potential to generate 1,750 TWh from its hydro sources, of which only 7 percent is currently exploited.

Hydro power is readily available in many African countries, for both large and small scale hydro projects. This saves the transportation costs encountered in carrying coal, gas or fossil fuel from the source to the location of the power plant. Moreover, hydro power can be effectively explored for potential distributed generation, which is suitable for industrial power consumers.

“The lifetime cost of power from hydro power plants is also significantly lower than thermal power,” notes Duma. “It costs approximately 15 US cents to produce one kWh from oil, whilst hydro power plants’ lifetime charges are expected to average 6 US cents per kWh.”

Hydro power also carries the benefits of being renewable and that it can be can be easily ’stopped and started’. This makes it very flexible and adaptable to demand levels.

“There are a number of ways in which large industrial manufacturers can pursue an uninterrupted supply of power from readily available hydro power sources,” says Duma. “Large industrial power consumers can participate in the development of either large scale or small scale hydro power plants in ways that will guarantee a reliable supply of cheaper electricity to meet their operational requirements.”

Industrial power consumers could become independent power producers themselves, enter into part ownership of a power plant, or engage in long-term power purchase agreements with producers.

“Investing in power plants might appear costly in the short-term but, it is a viable option for large manufacturers with long term investments,” Duma concludes. “The reality is that African governments have limited financial resources to eradicate the current power problems. Large industrial manufacturers therefore need to take the initiative to secure their long term power supply base.”

If you are interested in more information on Frost & Sullivan’s analysis of sub-Saharan African energy markets, then send an e-mail to Patrick Cairns, Corporate Communications, at patrick.cairns@frost.com, with your full name, company name, title, telephone number, company e-mail address, company website, city, state and country. Upon receipt of the above information, more details will be provided.

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