Page 2 >> Two approaches >>

By Steven Minnihan

 

Business in the electric industry of developed nations is a slow, incremental process. Adoption of truly disruptive technologies is slowed by conflicting interests between the

utilities, customers and governing bodies. Since stakeholders have conflicting interests, it is difficult to convince all parties that any investment in an emerging technology is worthwhile. Simply put, you rarely encounter a "win-win" scenario in today's electric industry that satisfies the utility and customer.

 

Contrast this picture with the electric industry in developing nations, where the dismal state of the industry often creates highly unfavorable conditions for all parties involved. Simply put, the current electric industry in developing nations can present a "lose-lose" solution. The African country of Zambia presents an extreme example of issues that are common throughout sub-Saharan African countries.

 

A 2010 report from the World Bank states that only 20% of Zambia's population has access to the national electric grid, while a mere 3% of the rural population enjoys grid access. While connectivity may effectively be higher in densely populated areas due to illegal interconnections or shared interconnections between multiple households, the rural population remains in the dark largely due to the high cost of interconnection. Furthermore, the growth of the electric grid is stagnant, with the growth of the population with access to electricity only increasing 0.3% per year. This growth rate is especially slow given that the country's gross domestic product (GDP) has grown between 3% and 7% year-over-year from 2000 to 2010.

This poor connectivity can be attributed to the fact that the national utility, Zambian Electricity Supply Company (ZESCO), is only able to recover 39% of its costs through the sales of electricity. In other words, ZESCO loses money with every kilowatt-hour that it sells to the residential market, thereby disincentivising the utility to expand its grid coverage. ZESCO's losses may be attributed to theft, unsustainably low electricity tariffs imposed by regulators, and an inability for many customers to repay their debts to ZESCO. Simply stated, the utility loses money while the population lacks affordable and reliable electricity access. When all parties suffer under the status quo, there is potential for emerging technologies and novel investment vehicles to offer a partial solution to both parties, while tariff adjustments or regulatory action address the core issues. Lux Research briefly outlines two approaches on page 2.

Page 2 >> Two approaches >>

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Thanks for the Article.

Having traveled in Africa in 1981, I've been loosely following topics of communications and electrification in Africa on and off over the years. While this is not within my professional domain, I appreciate that SmartGridNews.Com perceives the global issues as being of value to bring to readers, and I appreciate Steven Minnihan's article here. Thank you! -Pete

Peter Bella - 03/14/2012 - 06:52

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