A cliché litters the conversations of Englishmen fond of idioms: The Chinese character for crisis is the same one for opportunity. This phrase, while often offering little in the way of substantial inspiration, holds true in almost every industry-wide disruption. A keen mind and a perceptive eye can often detect opportunities where value lies within the depths of chaos. Entire industries have been restructured in the past decade because an individual thought to pose the question: Why, out of every possible choice, do we do it that way?

Kanji characters of all sorts of meanings currently litter a hotbed of crisis: Sub-Saharan Africa. FDI has poured into Africa to develop infrastructure mega-projects, each aiming to tame a wild and unconquerable landscape.  As yen, yuan and dollars pour into the continent, they seek to meet established needs. A 2015 World Bank estimate placed a $93B USD figure on simply growing infrastructure at it’s needed capacity over the next decade. A recent estimate from McKinsey claimed as much as $835B USD was needed for each country to develop needed generation, transmission and distribution infrastructure. As consumer demand grows and industries are increasingly liberalized, the thought is that this money will be used in a manner that it has so often not been – efficiently and with decisive and insightful political backing.

Much of the allotted infrastructure figures focus on developing energy, with an inadequate power supply remaining the single most pressing impediment to growth across the region. With energy outages often costing as much as 1-4% of national GDP growth and only 1 in 3 Africans having ready access to electricity, a focus has shifted in investment toward centralized megaprojects or, more commonly, small-scale electrification focused on producing off-grid power from alternative forms. These range from biofuels to renewables, but often focus upon smaller diesel generators.

Ironically, in an area with 13% of the world’s population and 48% of it’s population living with electricity access, there is a light: Captive power generation, primarily from renewable technologies. Supplying the four-fold increase in demand expected in the region while dodging the traditional barriers to development poses an issue not typically addressed in the current system. Captive power generation, stemming from the installation of small-scale capacity in a facility-by-facility manner, serves as a disruptive idea capable of vastly increasing scale and supplying numerous benefits to the region: increasing energy security by raising the national average, boosting resilience to environmental disasters, reducing susceptibility to political instability, etc.

Beyond a macro-scale, a decentralized grid system relying upon small-scale power generation will boost the reliability and accessibility to energy supply in rural areas. It would also serve a secondary benefit of encouraging greener development – an established priority amongst African leaders. An estimate from McKinsey states that aggressive investment into renewables forecasted a 27% decrease in CO2 emissions, a 35% increase in installed capacity base and an additional $153B USD to be invested into capital spending projects.

The obstacles towards developing a decentralized grid remain high: a lack of educated workers would encounter difficulties maintaining complex technologies, and a lack of established framework to cohesively monitor the working order of individual systems poses a threat towards long-term sustainability. The same issues are seen here that would befall any African infrastructure project: regional instability, local corruption and a lack of high-yield returns on invested capital. But the benefits do exist and a system designed around profiting from installation and maintenance of an entirely decentralized system would be effective if needed reach was achieved; similar to Uber, the key would be achieving scale to mitigate the risk associated with low margins.

Kanji characters found in Africa these days are often found on yuan or yen, invested into projects that have historically failed. So if those haven’t worked, the question bears asking: Why, out of every possible choice, can’t we try something else?

Articles Referenced:

http://www.mckinsey.com/industries/electric-power-and-natural-gas/our-insights/powering-africa

https://www2.deloitte.com/content/dam/Deloitte/za/Documents/energy-resources/ZA_AfricaPowerTrendsReport_EnergyResources_200515.pdf

 

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