Potential gains from regional integration to reduce costs of electricity supply and access in Southern Africa

Abstract

Sub-Saharan Africa has a long way to go to ensure reliable and affordable power for all. Currently, over half of the population lacks access to electricity and many of those with access face reliability issues, affecting their ability to get electricity when needed. Sub-Saharan Africa is also a region confronted with very high supply costs, significantly contributing to the lack of access. Increased power trade has the potential to reduce the cost of supply and hence play a vital role in overcoming the challenges of increasing electricity access. In this paper we analyse the benefits of trade among countries in the Southern African Power Pool, focussing on how international trade can reduce the underlying costs of supply and therefore the costs of providing electricity. Our analysis, based on a least-cost power sector expansion model, shows that the existing interconnection capacity is not utilized efficiently, meaning that countries are forgoing some benefits of power trade in the short term and also benefits of taking a regional approach to power system planning. This in turn increases the costs of supplying existing and new customers. Utilizing the existing interconnectors efficiently and building and using new interconnectors when economically beneficial to do so reduces forward-looking costs of generation by almost 6% compared to no trade. The saving is largely a result of less generation capacity being needed with full trade. Trade can also significantly contribute towards meeting other objectives, such as reducing greenhouse gas emissions. Specifically, with trade less coal fired generation is required, particularly in South Africa and Zimbabwe, and more hydro capacity is developed elsewhere in the region, particularly in the Democratic Republic of Congo and Mozambique.