S11 ATR Oct 2015 - Power 03_Layout 1 28/09/2015 11:23 Page 50
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Genset
Unreliable grid keeps genset market running Desperate shortage of electricity is leading to the rise of power rental market across Africa, including gas and solar gensets
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espite tremendous resource potential, the power sector in Africa is characterised by insufficient generation capacities, inadequate transmission and distribution infrastructure, poor quality of power supply and high reliance on fossil fuel based power generation. The main obstacle to the increase in electricity generation capacity is the high cost of producing electricity. Reducing the cost of generating electricity could significantly improve the overall energy supply in Africa. Sub-Saharan Africa is desperately short of electricity. The region’s grid has a power generation capacity of just 90 GW and half of it is located in one country, South Africa. Excluding South Africa, consumption averages around 162 kilowatt-hours (kWh) per capita per year. This compares to a global average of 7,000 kWh. However, this is good news for genset manufacturers. Unreliable power supply has created a buoyant market in diesel-powered generators. Around 40 per cent of businesses in Tanzania and Ethiopia operate their own generators, rising to over 50 per cent in Kenya. In Nigeria, around four in every five SMEs install their own generators. On average, electricity provided through diesel-fuelled back-up generators costs four times as much as power from grid. Diesel fuel is a significant cost for enterprises across Africa, even in less energyintensive sectors such as finance and banking. According to McKinsey, diesel fuel represents around 60 per cent of operator network costs for mobile-phone operators. Unaffected by lowering oil prices, the global revenue from the installation of diesel generators is estimated to grow from US$41.3bn in 2015 to US$67.5bn in 2024, according to a new report released by Navigant Research. The sales of products in the global generator market have been particularly strong in regions which have an unreliable electricity supply, such as countries in Africa. There have recently been a large number of power cuts across South Africa and Ghana, which have greatly affected both businesses and individuals operating in these countries. South Africa has been particularly badly affected by power shortages in recent months, with its electric public utility Eskom announcing plans this year for rolling blackouts in order to undertake repair work on several of their damaged generators. The global diesel gensets market has experienced continually strong growth in the past, with these generators costing little to install but requiring high amounts of fuel to run consistently. Due to the evergrowing need for businesses to use a reliable power supply, the global generator market is forecast to total US$22bn by 2019 with growth expected to reach a CAGR of six per cent until 2019. The global generator market is seeing a rise in adverse weather conditions and new and improved generator technologies boost its growth prospects. As the energy infrastructure in developing countries remains poor on the whole it is expected that generators will be required for the
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African Review of Business and Technology - October 2015
Around 40 per cent of businesses in Tanzania and Ethiopia operate their own generators, rising to over 50 per cent in Kenya.
foreseeable future. Developing countries have become dependent on expensive diesel back-up generators to ensure that they receive sufficient power supply. The diesel genset market designates the use of internal combustion engines for distributed power production. Today, reciprocating engine-based gensets are among the fastestselling, least expensive distributed generation (DG) technologies in the world. As a source of emergency standby, prime, or continuous power, diesel-fueled gensets are poised for continued growth in most regions and power classes, but face increasing competition from natural gas generators in certain markets. The number of specialised segments within the genset market spanning power classes, applications, and end-use customers offers a rich ecosystem of opportunities for market participants. As a whole, the market has experienced steady growth. However, continued growth in the supply of unconventional gas resources and tightening regulations targeting stationary generator emissions may signal a shift toward cleaner-burning natural gas systems over their diesel counterparts. In the short term, though, countries with strong economic and/or population growth rates that are increasingly burdened by unreliable power grid infrastructure and blackouts will continue to drive diesel genset sales. According to Navigant Research, global diesel genset capacity additions are expected to increase from 62.5 GW in 2015 to 103.7 GW in 2024. Growing need for diesel gensets in Africa In sub-Saharan Africa, it is estimated that there is around 620mn people living without access to power. This is the result of ailing www.africanreview.com