Regional grids: pooling resources
African Review of Business and Technology  April 2000

A joint US/Africa energy conference, Partnership for the 21st Century, has heard how collaboration between American industrial engineers and African utility professionals is leading to more efficient regional planning of electricity resources.  Russ Clare reports.

Partnership for the 21st Century was held in December 1999 in Tuscon, Arizona, and marked the first ever gathering of energy ministers from across Africa.  It was also attended by African NGOs, academics and development organisations who heard a report from Purdue University's State Utility Forecasting Group (SUFG) that explained how computer modelling is being used to develop regional electricity grids, thus securing low cost electricity for SADC member nations.

A reliable electricity supply is a major engine of economic growth in developing economies, and strategic planning of the utility's expansion is clearly essential to meet energy demands from African industry which are rising at around 4% a year.  According to the World Energy Council at the October 1996 launch of its Africa Energy programme, co-ordinated and interdependent regional energy planning, rather than national self sufficiency, is necessary if the goal of a transformed and efficient continent-wide energy system is to be attained by 2020.  In emphasising that point, Frederick Sparrow, Professor of industrial engineering at Purdue, and Director of the SUFG says, "you need electricity to grow, and the benefits from trading electricity - rather than everybody making their own - can be enormous."

Take southern Africa, for instance.  Here, there is a huge undeveloped hydro capacity in Angola, Mozambique, Tanzania and the Democratic Republic of Congo - only 1.7% of DRC's potential hydro capacity is actually exploited.  Yet, South Africa's ESKOM  - which accounts for 80% of generation in the region - relies heavily on more expensive and polluting thermal power from domestic coal.  Trading arrangements between South Africa and the hydro-rich northern countries would be mutually beneficial, providing cheaper electricity for the former with revenue boosting the economies of the latter.

The twelve nation Southern Africa Power Pool (SAPP) was established in 1995 to promote such greater trade and interdependence.  However, implementation of this obviously sound commercial philosophy is a complex problem.  While current trading is based on bilateral contracts, a variety of exchange and auction systems could lower costs.  But to secure that least-cost mix of thermal, hydro and transmission capacity to meet growing demand in a dozen countries, requires consideration not only of their separate economies, political systems, and geographies, but also how these factors interact transnationally - and that is where the Purdue expertise comes in.

Computer modelling
In the mid 1980s, the SUFG started work on a price forecasting computer model for electricity in the State of Indiana to assess demand, expansion, and, especially, the impact of the industry's deregulation.  From this experience, the engineers realised that quantitative modelling using modern computing and software could be applied to the free trade of electricity in other regions, and thus followed the three year USAID funded project with SAPP, now in its closing stages.

The opportunities for improved trade and rational capacity expansion are provided by the emerging southern African electricity grid - nine SAPP countries have had international transmission lines since 1995, and there are extensive plans for further development.

Now, following training with Purdue, SAPP members can model their own utilities with user friendly software designed for a standard, desk-top windows PC.  The model's common framework links the major economic variables of demand, supply, finance, and rates, so the effects of collaboration can be quantified, and, by varying assumptions, the impact of  uncertainties such as economic growth, construction costs and fossil fuel prices can be forecast.

As the SAPP/Purdue group report, engineers in each national utility can use the model simultaneously to negotiate the most mutually beneficial changes, while policy makers can review their options if key factors change - for instance, the consequences of prolonged drought can be fed into the system.  "When you have this sought of modelling tool you can be very methodical," says Brian Bowen, a Purdue industrial engineer, and the co-ordinator of training in Africa, "discussions can be much more substantial, and don't rely on back of envelope calculations."  Roland Lwiindi, Chief Engineer of the Zambian Electricity Supply Corporation (ZESCO) agrees, saying, "the models show what factors affect electricity generation costs so I know what to concentrate on.  Also, the model points out opportunities for short-term trading, especially since drought information can be incorporated."

Trials during development have shown impressive potential savings.  A short-term model of operating costs, produced in the project's first year, forecasts savings of US$80 million per year from multilateral trade.  A transaction agreed in 1998 between ZESCO and ESKOM illustrates the practical outcomes of the model's implementation, as Lwiindi explains: "the short-term model indicated mutual advantages if exporter and importer reversed roles during the day.  It is economically beneficial for the water constrained ZESCO system to import power from the predominantly thermal ESKOM system during off-peak hours with the ESKOM system importing power from ZESCO during peak hours -  ZESCO benefits from improved water utilisation, while ESKOM benefits from reduced peaking power generation costs."

Subsequently, the SAPP/Purdue researchers produced a long-term model to forecast the optimal construction costs for regional expansion of generation and transmission capacity over the next 20 years. Notably, trials forecast capacity expansion savings primarily by South Africa's use of northern hydro capacity instead of expensive and polluting thermal capacity, lending support to this major policy objective for the region.  For the 2000-2016 period, the model estimates a US$13.3 billion cost for meeting the region's electricity requirement when free trade is allowed, and a 3.8% SADC average growth in demand is assumed.  That represents a saving approaching US$2 billion compared to a constraint by individual countries of at least 70% of power being locally generated, which raises costs by about 13%.

Within SAPP, utilities vary greatly in size and needs, and regional consultant to the project, Dr Peter Robinson, an economist of Harare based Zimconsult, considers the work has been especially useful for the smaller countries.  "The project has given smaller utilities access to the sophisticated analytic tools otherwise only available to the larger players like ESKOM," he says.

As the project enters its closing stage, the models are being refined while members complete their training.  Now officially adopted as the SAPP's primary planning tools, the models will be installed at the Harare co-ordinating centre in May.  "I expect to see both short-term trade and co-ordination of long-term investment with substantial economic benefits emerge from the Purdue work," says Robinson.  "Moreover, the actual models apart, the useful debate within SAPP that has taken place during the project should lead to more extensive co-operation in the future."

Meanwhile, the Purdue team are introducing the modelling tools into west Africa in partnership with the West African Power Pool (WAPP), recently established among the sixteen ECOWAS nations.

Electricity shortages are common in the region, and economic growth is being hindered by unreliable supplies, in spite of an energy surplus.  Efficient exploitation is limited by the absence of institutions for co-operative capacity expansion and electricity trade - currently only four countries have international transmission lines.  However, in November 1999 the ECOWAS Energy Ministers Conference at Accra, Ghana, officially agreed the formation of WAPP (Cape Verde Islands excluded).  This venture - in association with the World Bank, and complemented by other energy initiatives, including the development of regional trade in natural gas - should provide a firm foundation for economic development in the region.

Russ Clare

Reproduced by permission of the publisher, Alain Charles Publishing Ltd
www.alaincharles.com   www.opportunityafrica.org.uk

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