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Neill_58630 Jun 18

AFRICA REGULATORS ROUNDTABLE SERIES - MEETING #1

AFRICA REGULATORS ROUNDTABLE SERIES - MEETING #1 image
REGULATION FOR GROWTH

A two-hour session that took place on 8th June 2021 which catered specifically to the Heads of Regulators in Africa. The meeting was a closed-door working group of CEOs and CFOs seeking answers to the pressing challenges resulting from the pandemic.
 
Amid the welcome news that South Africa will allow companies more self-produced electricity, up to 100MW, there has been something of a wider, continental introspection on how regulation needs to pave the way for private impetus in Africa’s energy sector.

There were predictions in South Africa that as much as 5,000MW of “pent-up” independent power projects could be built in the country over the next five years, even if the limit had risen to 50MW – half of the final allocation. It’s a signal of intent from the regulatory side of the court, who are now batting the ball over to prospective investors by serving up a more attractive sector to enter.

More generally on the continent, there is a consensus that there has been a lack of potent alignment between these two strands, which has negatively impacted project materialisation times, new projects, approval processes, routes to bankability, and – ultimately – universal access to electricity among consumers.

Events over the past year haven’t aided this concern, either. The COVID-19 pandemic shone light on the need for better power access to greater swathes of the population. But also, it exposed the often fragmented or unstable nature of countries’ financing, generation, transmission, distribution and payment protocols.

On the positive side, however, the past year’s challenges have also given decision makers a renewed perspective. And in countries like Uganda and Ghana we’re already seeing improved collaboration, flexibility and understanding across regulators, utilities, investors, and the consumer base.

Primely, this period has highlighted the need for greater innovation. And, aptly, more productive regulatory frameworks to encourage such innovations across the chain.

A more proactive and dynamic regulatory climate

Worryingly, according to the African Development Bank’s 2020 Electricity Regulatory Index (ERI), 43% of utilities perceived critical innovations such as demand side management as a threat to operations. 50% also cited net metering and other smart grid technologies as a similar threat to the status quo. If that pressure is transferred to those setting the regulatory frameworks, then the continent may end up creating its own bottlenecks to progression.

Moreover, a lack of forward-thinking around innovation could also stunt recovery after such a challenging year. And to this end, banks, the private sector, and even regulatory bodies themselves are calling for a more connected, and agile, approach.

There is a need to treat recovery and progress as a regional issue, not just a national one. But this needs to be recognised with a caveat that all countries will have different starting points, frameworks, energy source potential, socio-economic environments, and sector trajectories.

Rather, where regional connections can come to the fore is through knowledge sharing. By letting science and data drive decisions, and to inform new regulatory decisions, countries can learn from each other’s successes and challenges, before cherry picking the most applicable roadmaps.

The pressure on regulators to this end is to be proactive, dynamic, and quick to the punch. When the environment changes so quickly – as we continue to see through the transition from fossil fuels to a renewables-based mix – years-long strategy development is likely to render initial discussions redundant by the time they’re pushed through.

It’s time for regulators to get ahead of the game and ramp up the pace of progress. In doing so, they can help Africa keep up with technological solutions, to be more resistant to crises such as those experienced this year, and to become more attractive and conducive to private investment in the years to come.