Options for harmonising West Africa’s energy policies, regulatory frameworks

Energy experts have long called for the integration of the region’s energy policies and legal frameworks. It was the subject of a workshop held at the African Union Commission (AUC) headquarters in Addis Ababa, Ethiopia, over two days, from February 23 to 24, 2016. The workshop was held in the margins of the Joint AfricaEU Strategy “Reference Group on Infrastructure”, and it featured bridging policies and strategies for energy development at the continental level.

The conference organisers say their objective was to launch cooperation of regulators to formulate a continental strategy and set up an action plan for necessary reforms. The ultimate goal is to create an enabling regulatory environment for electricity market development in Africa. The European Union agreed to fund the initiative. A release by the EU after the event stated that the workshop brought together high-level officials from stakeholders strongly engaged in the energy arena of the African continent, including the regional economic communities, regulators’ associations or regional power pool representatives.

Existing regulations and best practices at national, regional and continental levels were discussed, and a common approach towards harmonization of energy legislations was developed. “Policy and regulatory reforms are a prerequisite to facilitate investment from both public and private sources. Policy and regulatory frameworks should ensure stability, transparency and a degree of predictability, while balancing macro-economic and consumer interests,” Anna Burylo, Head of Cooperation of the EU Delegation to the African Union, said during the opening session of the workshop.

The African Union in its release after the workshop said that continental and regional integration, in particular through the development of regional infrastructure and markets, is one of the key components in the vision of the African Union Commission, of an ‘integrated, prosperous and peaceful Africa, driven by its own citizens and representing a driving force in the global arena.’

According to Aboubakari Baba Moussa, director of the department for infrastructure and energy of the AUC, the “harmonized continental regulatory framework for the energy sector in Africa” is one of the fundamental requirements for creating conducive environment for private sector investment in the energy projects and creation of vibrant energy market. He reiterated that this was one of the flagship projects of the Agenda 2063 of the African Union and is being implemented by the AUC in collaboration with the European Union.

Having a harmonized regulatory framework will go a long way to support the INGA Project (Congo DPR’s massive 4,800MW hydropower scheme) which is another flagship of Agenda 2063 and the extension of transmission lines to the Eastern, Southern Western and Northern Africa regions. This will put the cornerstones in establishing regional/continental energy markets, and connecting Africa together.

The director highlighted also the importance of sharing energy information and data among African Countries to accelerate the development of the continent’s energy market. Creating value through harmonised regulatory framework As intra-Africa trade grows, there is persistent pressure to integrate energy markets to deliver greater value. Ken Opalo, a partner at the IPRE Group, an international policy research and evaluation consultancy firm stated that the reasons for a regional/continental approach to energy sector development are twofold.

“First, investment outlays in energy infrastructure development are often prohibitively expensive (because their viability relies on economies of scale), thus necessitating the pooling of resources. Ethiopia’s newest dam, for instance, will cost $4.7 billion. Not many African countries can afford such massive investments on one project. “Secondly, there is the issue of markets. With 12 percent of the world’s population, Africa consumes a meagre 3 percent of the world’s electricity.

Of this 75 percent takes place in North Africa (33 percent) and South Africa (45 percent). The remainder is shared out among the rest of Sub-Saharan African states. Furthermore, electricity connectivity on the continent remains relatively low; with rates averaging 43 percent (North Africa stands at 99 percent, with the other sub-regions between 12-44 percent),” he said. The closest thing to an integrated energy market in Africa is the presence of power pools. African countries have developed the process of integrating their power sector infrastructure, through regional power pools.

The South African Power Pool (SAPP, established in 1995); North African power pool (COMELEC , 1998); West African Power Pool (WAPP, 2000); the Central African Power Pool (CEAPP, 2003); and the East Africa Power Pool (EAPP, 2005) are all initiatives to establish regional power markets and help harmonize energy policy. WAPP is a cooperation agreement between nineteen national electricity companies in Western Africa under the auspices of the Economic Community of West African States (ECOWAS) and mandated by the governments of its fourteen member states.

The members of WAPP pledged to work together to establish a reliable power grid for the region and a common market for electricity. The World Bank is the lead infrastructure consortium member for WAPP. In 2011 it provided funding of over $100m for the first phase of the Inter-zonal transmission hub project of the WAPP (APL3) Programme. The World Bank has provided substantial funding to date, while supporting WAPP Secretariat’s efforts to coordinate other finance sources such as the European Investment Bank (EIB), African Development Bank (AfDB) and others.

According to a paper presented by Pancrace Niyimbona, energy expert and member of United Nation Economic Commission for Africa, major constraints to operation include in WAPP include lack of trust and confidence among pool members, underdeveloped transmission networks and tie lines and inadequate generating capacity and reserve margin. Other problems included difficulties in mobilizing investment for power projects, lack of legal framework for electricity trading, lack of rules for access to the transmission grid, including setting wheeling charge, and lack of regional regulation and appropriate mechanism for dispute resolution.

To contend with this problem, Opalo observed that across the continent, power supply master plans are still very nation-centric and under the tight control of local vested interests.

“Moving forward, the challenge will be to convince governments and stakeholders (private sector and consumers alike) of the benefits of having an Africa-wide power market, which will necessarily require the liberalization of national power sectors,” he said.

A recent ECOWAS Regional Electricity Regulatory Authority publication said the agency has sought the buy-in of Nigeria’s National Electricity Regulatory Commission (NERC) in the gradual establishment of the ECOWAS regional power market through harmonisation of national electricity markets.

The plan also provides for a regional market design and market phases, open access to the regional transmission network and access by eligible customers. Ghana, Nigeria and Cote D’ Voire has already given support for the initiative and more of this kind of support will be required to harmonise energy policies and regulatory frameworks to deliver value to over 600million people in SubSaharan Africa without power.