Southern African states seek way out of power cuts

From the newsletter

The Southern Africa Power Pool (SAPP) market has a generation capacity shortfall of 4,509 MW. While some countries in the region have surplus power, their transmission network hampers distribution. This has impacted the electricity market competitive platform trading volumes, which dropped to 7% in the 2024/25 financial year due to generation shortages.

• The region's Deputy Executive Secretary, Ms. Angele Makombo N'Tumba, has called for the urgent need to operationalise the Regional Transmission Infrastructure Financing Facility (RTIFF) to unlock capital for critical projects and fast-track their development.

• The region has some of the continent’s most energy-intensive industries, including mining. They require reliable supply, and their consistent revenues offer attractive payment guarantees that should draw in power developers.

More details

• The SAPP is one of the most developed power pools in Africa, with 12 member countries including South Africa, Angola, Botswana, the Democratic Republic of the Congo, and Zimbabwe. These 12 countries collectively serve a population of approximately 350 million people, with a combined peak electricity demand of 57 GW. However, the region lacks enough generation capacity to meet this demand. 

• The region has about 80 GW in installed capacity, but not all of this is available due to some plants operating below capacity and others being shut down for maintenance. South Africa is the major player in the region, accounting for more than half of the installed capacity. However, recent power challenges at home are making it prioritise domestic demand over the export market. A few countries, like Angola and Tanzania, have a surplus but cannot trade due to a lack of sufficient transmission capacity.   

• Electricity trading volumes in the market have diminished due to economic downturns and prolonged droughts affecting hydropower generation in countries like Zambia and Zimbabwe. The market is, however, experiencing increased dominance in bilateral agreements, which now account for at least 68% of electricity trading volumes.

• This strong reliance on bilateral deals means that national utilities have less incentive to seek out the lowest-cost alternatives available within the regional market, thereby restricting competitive pricing. This often leads to the prioritisation of higher-cost electricity, and limits the overall economic efficiency of regional power distribution. This could potentially result in suboptimal resource allocation.

• Despite the challenges, several opportunities exist to address the region's power market gaps and enhance energy security. The ongoing expansion of the interconnected grid is a pivotal opportunity, with plans to integrate Angola, Malawi, and Tanzania by 2027. This will enable the efficient transfer of surplus power from countries like Angola (with its 3,000 MW excess capacity) to electricity-deficient states. 

• The region is well-positioned to meet its growing demand. In 2024, there was an addition of about 2,885 MW of new generation capacity, and at least 28,000 MW are expected to be commissioned between 2025 and 2027. 

Our take

• There is an urgent need to invest in transmission infrastructure. Operationalising the Regional Transmission Infrastructure Financing Facility will be essential to unlock capital for critical transmission infrastructure. This can facilitate power transfer from surplus countries like Angola to reach deficit areas.   

• The region's energy-intensive mining sector offers a unique opportunity. Its consistent demand and reliable revenues provide attractive payment guarantees for power developers. This stable off-take potential should be strategically utilised to de-risk and accelerate new power infrastructure investments.

• Countries should focus on generating electricity from renewables to attract a larger market. Renewables offer stable prices, unlike fossil fuels, which are subject to volatile global market forces. As many countries enter the competitive market, as opposed to bilateral agreements, they are guaranteed to secure the best market deals.