Powering Somalia’s Progress through Electricity: Challenges and Opportunities

Need for Electricity 

Affordable access to electricity is critical to Somalia’s economic growth as the country emerges from more than two decades of civil war. Most of the people living in rural areas do not have access to electricity and those living in urban areas pay some of the highest price in the world for unreliable service. The limited and expensive electricity forces businesses to limit their productivity and in some cases to move their operations to other countries with reasonably priced tariffs. The financial burden is also felt by households, healthcare facilities and schools.

Investment to improve the electricity service in the country can be a strong economic multiplier. More affordable electricity would create opportunities for the emergence of new businesses while increasing the productivity of existing businesses. This affordable and reliable electricity would also improve critical public services such as hospitals and schools whilst enabling for households to spend their saved money elsewhere in the economy.  

Public vs Private

The transmission and distribution systems are generally viewed as natural monopolies where having more than one supplier would raise costs significantly and as such competition is not viable. Competition in generation systems is feasible though it also requires to make sure that no one is allowed to own enough of the generating capacity to be able to dictate prices. Because there is potential to exploit the monopoly power, governments tend to nationalise public utilities. However, state-owned electricity companies are bloated and inefficient while consumers suffer under artificially high tariffs. As a result, many governments began to seek other solutions which allow providing services on a commercial basis, often through private participation.

When public utilities are privately owned, they are highly regulated so as to ensure they do not exploit their monopoly status. The regulator seeks to protect the consumer’s interests through a set of measures including price control periods where it fixes the maximum amount of revenue the natural monopolies can recover from users. The measures also incentivise the companies to keep costs down, innovate technically and to act in line with the interests of consumers and other stakeholders.

Either the regulated utility model or the publicly owned monopoly could work in Somalia. At the end of the day, it comes down to the quality of the governance. The existing private utilities have neither the financial capacity nor the technical capabilities to build modern, affordable and reliable electric power systems. More importantly, through some interactions I had with some of them, I have noticed that they also suffer from the inefficiencies that are generally associated with government run departments. Both the quantity and the quality of the employees are generally based on non-commercial reasons and the cost associated with this squandering is passed on to the consumer.

The government endures the same difficulty as the country builds itself from many years of conflict. However, in my opinion, this is where any meaningful change can start from. Reforming the industry requires government intervention. The government needs to take the lead in building up the expertise around this critical sector.

The government should set up an independent committee who is capable of providing the industry with a much clearer set of guidance which avoids much of the confusion between commercial and political objectives associated with the industry.

Potential sources of Electricity 

The factors which affect the choice of generation technologies include the availability of primary energy, cost and environmental considerations. Electricity is a capital intensive industry which involves a high level of fixed costs. For this reason, early choices can fix the chosen path and therefore it is essential to take great care in deciding the appropriate route. Different rich countries make different choices. Eighty percent of generation capacity in France is nuclear whereas in Norway similar percentage of its generation capacity comes from hydro. These choices generally arose from the available primary energy source for each country when the industry was developed. Over time, they then built up design expertise, pools of skilled workers, training centres and distribution channels. Today, France is a leader in Nuclear power technology and France’s nuclear companies are seen as star exporters and ambassadors of French technological prowess around the globe.

In East Africa, Ethiopia has seen significant expansion to its generation capacity in the last decade. It is on track to add close to 1 GW of wind power and so far has completed Adama || windfarm (153 MW), Ashegoda windfarm (120 MW) and Adama | windfarm (51 MW). Ethiopia is also currently building the largest hydroelectric power plant in Africa (6000 MW) in the Benishangul region on the border with Sudan. Similarly, Kenya has seen rapid expansion to it generation capacity in recent years mostly through geothermal power in which its contribution to the national energy mix has increased to 51% by 2015. In 2010, geothermal accounted for a mere 13% of Kengen’s power mix.

Technological advances in the last two decades have enabled renewable energy sources to compete with conventional energy sources, particularly in countries like Somalia where there is limited transmission networks or developed fuel transportation hubs. Diesel generators are running across the country and the cost can be as high as $1 per KWh and therefore the debate which exists in established markets about whether renewables at, say, $0.10 per KWh is too expensive does not apply here at all.

More importantly, Somalia has abundant wind and solar resources. Buys et al (2007) found that Somalia has by far the largest on-shore wind energy potential (Figure 3) in Sub-Saharan Africa. The study was based on a technical feasibility study based on technologies available in 2005. A similar study undertaken by the African Development Bank to create wind atlas for Africa also revealed significant potential on Somalia’s wind energy resource (Figure 4).

Likewise, the country has some of the highest solar resource potential (Figure 5). Due to Somalia’s location on the equator, there is relatively little seasonal variation in climate. The country has some of the highest mean annual temperatures in the world. Solar energy can generally be garnered from 6:00 AM – 6:00 PM. The average afternoon high in Mogadishu ranges from 28° C in July to 32 ° C in April.

Therefore, Renewable energy should be the natural choice for the country given its vast available resources. Renewable energy is also attractive as it is relatively quick and cheap to deploy on a small scale compared with fossil fuels. This is particularly true for residential and commercial segments. For example, using autonomous solar rooftops in residential areas would be considerably cheaper than buying power from utilities. Similarly, hybrid renewable electric system would allow commercial businesses to diversify their energy supply and save money.

This form of distributed generation is one of the most promising business opportunities for small investors and entrepreneurs. An important step towards the expansion of distributed generation is to create options which reduce the initial capital cost for the consumer. This can be achieved by either setting up credit facilities through local financial institutions or payment options which could enable pay-as-you-go plans.

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