Powering Progress: The Potential for Cross-Border Energy Trade in East Africa
Introduction
East African nations continue to strive for better economic performance and increased citizen well-being, endeavouring to address major socioeconomic challenges that have gripped the region for decades. While improvements have been made, with Kenya, Mozambique and Rwanda all experiencing gains on the human well-being index since 2000, systemic shortcomings hinder technological advancement and impede quality of life. Particularly inadequate electricity access. East and Southern Africa account for half of the world’s population without access to electricity. Even for those connected to the grid, bouts of load shedding and frequent blackouts affect not just households, but also essential operations like industries, hospitals and airports.
Electricity generation varies regionally, with some nations– e.g., Kenya, Uganda and Tanzania – producing more energy than they consume, while others – e.g., Burundi, Rwanda, and South Sudan – are in a deficit. It follows that cross-border energy trade would benefit East African, as states with a surplus could profit, while those with unmet energy demands could be supplemented by their neighbours. East African nations could benefit from their neighbours' prosperity, as improved electricity access and subsequent developments could augment trade, transport infrastructure, and regional security.
Presently, nations like Uganda participate in cross-border electricity trade with regional neighbours. Ethiopia, another established electricity exporter, sent over 100 MW of power to Djibouti and Sudan in 2023. Streamlining and maximising this potential for cross-border trade will prove to be a key cobblestone on the region’s path to universal electricity access.
Regional Energy Landscape
The total capacity of the electricity grid across Kenya, Tanzania, Uganda, Rwanda and Burundi was 5,552 MW in 2020, with a maximum demand of 4,022 MW. This implies that electricity production significantly exceeds demand. However, production and consumption vary greatly across states. Burundi, for example, has a capacity of less than 50 MW, excluding imported electricity, despite its 62 MW demand. This deficit is even more alarming considering that Burundi’s electrification rate is an outstandingly low 10%.
From Burundi’s minimal grid access and Ethiopia’s 55% electrification rate, to Kenya’s 76% grid access leading the pack, the region’s electricity demand fluctuates widely and is difficult to accurately assess. While current region-wide production just meets present-day demand, electricity access has multiplied since 2000 and is set to increase exponentially in the coming decades. Therefore, a dramatic increase in capacity is anticipated.
East Africa’s electricity is generated from an array of sources, with substantial reliance on renewables. According to the International Energy Agency (IEA) Ethiopia, the DRC, Uganda, and Kenya rank among the world’s top countries in terms of renewable energy reliance (100%, 100%, 97.4% and 87.7% respectively in 2022). While there is some dependence on fossil fuels – particularly in Tanzania, where 69% of total generation is reliant on natural gas – the region is overwhelmingly powered by hydroelectricity, with small inputs from wind, solar and geothermal projects.
Informal and off-grid electricity production primarily consists of biofuels like wood, charcoal, and organic waste. Existing renewable energy sources would need to be maximised to transition biofuel-dependent populations to grid electricity. Cross-border trade would facilitate this transition, as nations with more developed renewable generation infrastructure could support their neighbours’ grid expansions in line with global net-zero targets.
Existing Cross-Border Infrastructure and Projects
Already, many avenues exist for intra-regional electricity trade within East Africa. The largest of these is the Eastern Africa Power Pool (EAPP), with thirteen member states spanning the East African Community (EAC), the Horn of Africa (excluding Eritrea) and the Easternmost nations of the Sahara. Conceived in 2003 via memoranda of understandings between governments and national utility providers, the EAPP pursues sustainable growth via coordinated decision-making, infrastructure development and efficient power markets.
Additionally, the EAC and the Common Market for Eastern and Southern Africa (COMESA), also foster trans-border electricity trade. COMESA’s “Regional Harmonization of Regulatory Frameworks and Tools for Improved Electricity Regulation in COMESA”, for example, has funnelled $1.5 million towards fostering streamlined cross-border energy trade among the community’s 21 nations.
Of the existing interconnection projects borne from inter-governmental collaboration, the Kenya-Ethiopia Interconnector, opened in 2023 to pool hydropower from the Blue Nile and geothermal and wind power from Kenya’s Great Rift Valley, is one of the major projects in the region. The electricity highway is set to transfer about 2000 MW – 10% of Kenya’s peak grid demand – from Ethiopia and will undoubtedly assist Kenya in achieving its 100% renewable electricity goals by 2030.
Other proposed networks aim to connect the entire EAC, with 220 kV overhead transmission projects in progress, and more under construction or soon to be underway. These projects will support Rwanda and Burundi’s growing electricity demands with excesses from Uganda, Kenya, and the DRC, whose renewable infrastructure is more developed, and generation capacity is much larger.
Opportunities and Benefits
Pooling electricity resources can have bountiful economic benefits within East Africa. Yet, with electricity generation comes the added expenses of transmission, storage, and grid maintenance. Interconnecting transnational power systems can alleviate these financial burdens. Transnational power pooling could bring system costs down to $35 per MWh, compared to their current range of $50 to $60 per MWh for most Sub-Saharan African countries.
The regional distribution of available energy would increase access to grid electricity, facilitating more reliable operation of manufacturing and service industry businesses which run electronic systems. Additionally, stronger electricity grids would reduce unplanned blackouts and load shedding, improving the efficiency and reliability of all electricity-dependent operations, and bolstering economic productivity.
As the world strives for carbon neutrality, electric vehicles will indubitably permeate and eventually dominate the automotive market within the next decade. East Africa must develop its renewable grid capacity to support this imminent increase in electricity demand to achieve net-zero targets. Cross-border power trade is the most pragmatic means of realizing this goal, leveraging the capacity of nations like Ethiopia – third-highest in Africa, and among the top globally for renewable energy.
Widespread electricity access would also improve quality of life. Households are overwhelmingly reliant on fossil fuels like kerosene or biofuel products like charcoal. In Rwanda, for example, biofuels account for a whopping 87% of all energy consumed. However, such fuel combustion poses fire threats and negative health implications. 1 in 7 East Africans grapple with a respiratory disease, much higher than the global average of 7.4%. These numbers are disproportionately high, especially considering the relatively low prevalence of smoking, particularly in Kenya, Ethiopia, and Sudan. Cross-border power pooling would reduce biofuel dependencies, the risk of fire catastrophes and respiratory disease prevalence.
Challenges and Barriers
Undergirding the tantalising dream of an interconnected and 100% renewable East African grid, are the impracticalities that accompany large infrastructure projects and intergovernmental collaborations. The most obvious is the inadequacy of existing infrastructure, and the expenses associated with upgrading or constructing power systems. An iScience study on electricity trading in the EAC highlights some wins; transmission networks surpassed targets by 211%, and infrastructure investment grew by 325%, between 2013 and 2023. Despite a 47% increase in surplus power available for trading, actual electricity exchanges remain minimal due to outdated household infrastructure – leaving new generation and transmission capacity underutilised.
Another barrier to actualising cross-border trade is limited regulatory harmonisation. While the EAPP and COMESA are useful entities for facilitating cross-border trade, they are subject to the whims of transient administrations, each with their own development and geopolitical objectives.
These variables’ unpredictability is compounded by what are often tense regional relations. From the ongoing conflict between Rwanda and the DRC, to the controversies surrounding the infamous dam that facilitates Ethiopia’s remarkable hydropower generation capacity, the road to intra-regional power networks is rife with potholes and potential dead ends. These – and many other – concerns place existing projects like the Kenya-Ethiopia highway and the Rwanda-Burundi-DRC interconnected network on precarious ice and introduce new and higher activation energies for any future regional power pooling ventures.
Funding sourcing and risk allocation between participating countries also presents an issue. Funding for power pooling in the EAC dropped from $809 million in 2015 to $394 million in 2022. With EAC nations’ dependence upon the African Development Fund for cross-border financing coupled with insufficient regulatory bodies and multi-country liability agreements for a joint venture project, East Africa has been reluctant to commit to an interconnected grid.
Outlook and Recommendations
Like numerous development ambitions in East Africa, the idea of power pooling carries with it a seemingly insurmountable ‘what now?’ sentiment. However, short and medium-term prospects, like existing and planned projects, can be an avenue for the region to try its hand at power pooling while making the necessary moves to increase capacity and improve infrastructure.
Blended finance could avail lower-risk investments and entice private investors to fund cross-border projects, while sovereign wealth funds could be especially useful in East Africa’s economies, which generate substantial commodity revenue. Off-grid energy providers, like Tanzania’s ZOLA Electric, could be key collaborators in connecting unreached households to the national grid for maximal and productive use of present and future transborder energy transmission.
These strategies, married with the prioritisation of maximal renewable energy exploitation, may just be the key to cross-border power trade that could buoy East Africa’s economies and transform civilians’ lives.
