Charles Mmasi: Expanding legal frameworks in Sub-Saharan Africa's electricity industry

2024 is turning out to be a year of change for the electricity industry in Sub-Saharan Africa, and all indications are the pace is not about to slacken.

The recent Africa Energy Forum in Barcelona, held on June 25-28, underscored this momentum, highlighting key advancements in renewable energy, investment opportunities, and strategic partnerships across the continent.

Attended by senior executives and government officials, the summit featured pledges to boost sustainable energy projects, enhance collaboration and increase investment in clean technologies.

These developments reflect a strong commitment to Africa’s energy future and support for the region’s transition to low-carbon economies.

Prior to the summit, Sub-Saharan African nations had already started implementing new legal frameworks and policies to promote the development of renewable energy sources and liberalise their energy markets, moving away from the decades-old dominance of debt-laden state utilities.

Among the Sub-Saharan African countries leading the charge to transform their electricity sectors, six stand out: Kenya, Mauritius, Namibia, South Africa, Tanzania and Zambia.

Since the start of the year, these countries have either introduced new policies, laws and regulations for their energy sectors or signalled their intention to do so imminently. Some are picking up where they left off when the Covid-19 pandemic struck.

Kenya gears up for an open market system

Kenya’s new Energy Act came into effect in 2019 to establish energy sector entities to regulate the generation, supply and use of electricity. However, without the supporting legislation and regulations to give it substance, progress was limited.

Those gaps are now being filled – with far-reaching and sophisticated draft regulations.

One of the most significant of these is the draft Energy (Electricity Market, Bulk Supply and Open Access) Regulations 2024. Paving the way for a more efficient electricity sector, these regulations aim to transform Kenya’s current electricity market from a single off-taker to an open market system.

Other draft regulations supporting this shift concern the licensing of power undertakings, mini-grid development, net-metering for the banking of excess energy, electricity tariffs, and regulations setting standards for high-quality electricity delivery.

Kenya has also taken the lead in developing climate change legislation, focusing on reducing carbon emissions and generating tradable carbon credits. following the Climate Change (Carbon Markets) Regulations of 2024 which came on the heels of the Climate Change (Amendment Act) 2023.

Not content with that, Kenya is speeding up the adoption and transition to electric vehicles. In September 2023, the country created a framework for electric vehicle charging and battery-swapping infrastructure, setting the scene for the uptake of electric vehicles.

Climate change tops the energy agenda in Mauritius

Reducing carbon emissions to combat climate change is also high on the energy agenda of Mauritius. The government has pledged to reach 60 percent renewable energy and phase out coal by 2030 and has already put in place some key structures to achieve these goals.

In what is surely one of the first agencies of its kind in Sub-Saharan Africa, the island has established the Mauritius Renewable Energy Agency and the Energy Efficiency Management Office.

Other key regulatory steps to promote the use of renewable energy in Mauritius are schemes for small-scale distributed generation, net metering medium-scale distributed generation and the Carbon Neutral Industrial Sector Renewable Energy Scheme.

The transition to electric vehicles is also likely to pick up speed through the Solar PV Scheme for Charging Electric Vehicles.

Namibia prepares for sweeping regulatory reforms

Namibia’s energy mix for the foreseeable future is likely to consist of gas, petroleum and renewable energy, and this is reflected in both the Electricity Bill and the Namibia Energy Regulatory Authority (NERA) Bill.

Both draft legislations will be tabled in parliament, and will create a national regulatory framework and a single energy regulator. This new regulator, NERA, will have oversight of electricity, downstream gas, downstream petroleum, renewable energy, energy efficiency and energy conservation.

On the renewable energy front, the past 12 months have seen increased activity among independent power producers (IPPs) investing in solar projects for industrial use, especially in the mining sector. This trend has gone hand in hand with an uptick in M&A transactions on the part of developers and IPPs.

An emerging area to watch is green hydrogen where there has been increased due diligence work on investment.

South Africa on course for more change

The energy legal framework in South Africa is the most mature in the region and has undergone significant liberalisation in recent years, with IPPs increasingly targeting the commercial and industrial market. Here, they face both challenges and opportunities as a result of the evolving regulatory environment.

Opportunity lies in the opening of new markets for IPPs. An emerging trend is an increase in the number of private-to-private IPPs, which generate and sell energy directly to commercial and industrial customers. However, these projects mostly involve wheeling through the Eskom and municipal grids, which is public infrastructure.

This gives rise to considerable contractual complexity, mostly because of the need for bilateral negotiated agreements between the IPPs, their customers and the grid operators.

Another challenge for IPPs in South Africa is the recent change in how the national utility Eskom allocates capacity. Under its new grid access rules, it now allocates capacity on a ‘first ready, first served’ basis instead of ‘first come, first served.’ This creates competitive pressure for IPPs to complete their projects quickly. It also raises questions about the bankability of power purchase agreements signed under the previous regime.

More change is coming through the significant Electricity Regulation Amendment Bill 2023, which seeks to create a competitive electricity supply market as well as South Africa’s climate change response, emission trading scheme and carbon offset regime.

Tanzania seeks to speed up urgent PPP projects

A key highlight in Tanzania’s energy legal framework is an amendment to the Public Private Partnership Act, which exempted certain solicited projects from the competitive bidding process. Instead, the government may engage directly with individual private parties which, it is anticipated, should speed up the execution and delivery of PPP projects.

However, this is subject to certain stringent conditions, urgency being one. For the exemption from competitive bidding to apply, there must be an urgent need for the project deliverable, and it must be clear that any other procurement method would be impracticable. Crucially, the circumstances giving rise to the urgency should not have been foreseeable by the contracting authority.

There are also other conditions for exemption from competitive bidding, including that the private party concerned should own the intellectual property rights to the key approaches or the technologies required for the project, or have exclusive rights in respect of the project, with no reasonable alternative or substitute available.

The types of energy projects undertaken in Tanzania vary widely. On the one hand, the Ministry of Energy has committed to implementing large projects based on conventional energy sources, such as the Julius Nyerere Hydropower Project, the East African Crude Oil Pipeline and the Liquefied Natural Gas Project.

On the other hand, there is a strong push for investment in renewables, especially in the past 12 months, where the focus has been on small solar and commercial and industrial solar projects.

Latest legal developments in Zambia

Zambia has been working steadily towards expanding and enhancing its energy sector legislative and regulatory framework.

In a major development, the government has launched the country’s first-ever integrated resource plan outlining current and future energy needs, looking at both demand-side and supply-side resources.

Revised regulations to the Energy Regulation Act and the Electricity Act were issued in 2023, although there is room for more legal development with regulations still be to be finalised on an open-access grid regime, net metering and mini-grids.

Meanwhile, renewable energy is gaining momentum. In the past year, there has been an increased focus on solar projects, especially commercial and industrial projects, as well as in the use of battery storage. Zambia is also exploring other sources of renewable energy, such as biomass and wind systems.

All in all, change may have been a long time coming in the Sub-Saharan African electricity landscape. Yet now that change has arrived, there is no going back.