Africa’s mines should work with utilities to boost energy supplies and infrastructure, says World Bank

In its report, ‘Power of the mine: A transformative opportunity for sub-Saharan Africa” (173-page / 6.19 MB PDF), the bank called on the mining industry to “work more closely” with electricity utilities in the region to meet mines’ “growing energy demands”.

“Addressing Africa’s chronic power problems and lack of electricity access will require major investments in expanding and refurbishing power infrastructure,” the report said.

Rather than supplying their own energy on site, “mines can become major and reliable customers for electricity utilities or independent power producers (IPPs) which can then grow and develop better infrastructure to bring low-cost power to communities”, the report said.

Demand for power by mining companies in sub-Saharan Africa (SSA) “will likely triple between 2000 and 2020 to reach over 23,000 megawatts (MW)”, the report said. “This could be higher than non-mining demand for power in some countries... yet many mining companies are still opting to supply their own electricity with diesel generators rather than buy power from the grid, often because of shortcomings in national power systems in the region”.

According to the report, another 10 gigawatts of electricity will be added to meet mining power demand by 2020 from 2012 levels. A part of this is projected to come from “self-supply” arrangements costing mining companies up to $3.3 billion.

The report said there is an estimated $6bn in “potential public-private partnership opportunities” for new power generation from clean energy sources, including natural gas and hydropower, in Guinea, Mauritania, Tanzania and Mozambique. All four countries have “strong expected growth in power demand from the mining sector”, the report said. 

In the case of Guinea, the report said mining contributes “more than half of the country’s total exports and provides more than 20% of all fiscal revenues, but national electrification rates are among the lowest in Africa”.

However, the report said by “joining a number of mines together and contracting an IPP to generate and transmit electricity to the mines through a high voltage mini-grid, the mining companies would save an estimated $640 million in self-supply costs while bringing affordable and reliable energy to at least 5% percent of Guinea’s people”.

The senior director of the bank’s energy and extractives global practice Anita George said such a move would help countries “benefit from improved competitiveness of the mining companies, greater tax revenues from mines and more job opportunities for local people”.

The report said there are risks associated with power-mining integration, such as falling commodity prices or a shortage of transmission links, but “regulatory and financial solutions can help mitigate these risks…a key element is for countries across SSA to continue with their power sector reforms and create an attractive operating environment for IPPs, including renewable energy developers.”

In March 2014, the African Development Bank welcomed the launch of the African Renewable Energy Fund (AREF) as an example of how private investment can be channelled to a key development sector.

AREF, a dedicated renewable energy fund focused on the SSA region, closed on 12 March with $100m of committed capital to support small- to medium-scale independent power producers.

The World Bank’s vice-president for Africa Makhtar Diop said last year that Africa needs to add 7,000 MW of generating capacity each year to meet the projected growth in demand, “yet it has achieved only 1,000 MW of additional power generation annually”. However, Diop said countries across Africa need to “remove all barriers” to cross-country investments and said the bank would work with its partners to ensure power distribution companies “meet the minimum level of efficiency, financial viability, and good governance”.