EAST AFRICA’S INFRASTRUCTURE: A REGIONAL PERSPECTIVE Deepening regional integration would save the EAPP/NB area $1 billion in annual energy **Table 3.3. Annualized costs of system expansion in EAPP, 2015** costs. Table 3.3 compares the cost of meeting growing regional power demand over the next Trade stagnation decade in the trade stagnation and trade Trade Low US$ billions expansion Base growth growth expansion scenarios. Overall, under trade New Investment expansion, the total annual cost of producing and Generation 4.4 2.6 4.2 distributing power decreases from $16 billion to $15 billion, saving the region $1 billion each Interconnectors 0.1 0 0.1 Distribution 1.1 1.1 1 year. Under the trade expansion scenario, countries would have to make larger investments Refurbishment 0.5 0.5 0.5 of $1.8 billion per year in capital-intensive Variable cost 6.8 9.7 5.6 hydropower generation as well as investments of **Total cost 15 16 13.5** $100 million per year in the development of Source: Rosnes and Vennemo 2009. cross-border transmission capacity. These higher investments of $1.9 billion per year are more than compensated by reduced variables costs of $2.9 billion per year, which is essentially the annual reduction in the fuel bill associated with reduced reliance on thermal generation. The net savings are therefore $1 billion per year.

|||Trade stag|nation<br>|
|---|---|---|---|
||Trade||Low|
|US$ billions|<br>expansion|Base growth|<br>growth|
|New Investment||||
|Generation|4.4|2.6|4.2|
|Interconnectors|0.1|0|0.1|
|Distribution|1.1|1.1|1|
|Refurbishment|0.5|0.5|0.5|
|Variable cost|6.8|9.7|5.6|
|**Total cost**|**15**|**16**|**13.5**|
|Source: Rosnes and V|ennemo 2009.|||

To make trade expansion possible, significant additional investments would be required. Ethiopia and **Table 3.4 . Additional infrastructure requirements for trade expansion (MW)** Sudan—and to a lesser extent Rwanda, Tanzania, and Uganda—would have to make sizeable investments to Additional MW Interconnectors hydropower develop their hydropower potential. Ethiopia, in particular, would need to develop more than 6,700 megawatts of **EAPP/NBI 27,755** additional hydropower capacity to supply export markets in Burundi 78 neighboring countries. Sudan would have to develop 3,100 Egypt 10,000 megawatts of additional hydropower capacity. All countries Ethiopia 2,997 in the EAPP region would need to invest significantly in Kenya 266 developing a total of 27,755 megawatts of new cross-border Rwanda 120 interconnectors to allow power to flow more readily around Sudan 13,491 the region (table 3.4). The heaviest transmission Tanzania 266 investments would need to be made in Egypt, Ethiopia, and Uganda 537 Sudan, which would need to develop a combined 26,488 megawatts of interconnector capacity—95 percent of the total required for the region. Egypt and Sudan would need to develop 10,000 and 13,941 megawatts of interconnection capacity, respectively.

**Table 3.4 . Additional infrastructure requirements for trade expansion (MW)**

|MW|Interconnectors|Additional<br>hydropower|
|---|---|---|
|**EAPP/NBI**|**27,755**|**10,968**|
|Burundi|78|0|
|Egypt|10,000|0|
|Ethiopia|2,997|6,766|
|Kenya|266|0|
|Rwanda|120|236|
|Sudan|13,491|3,136|
|Tanzania|266|279|
|Uganda|537|551|

The EAPP region would have to spend a sizable portion of its gross domestic product (GDP) to meet its power needs. <mark>For</mark> individual countries, the impact of adopting trade can substantially influence the burden of power sector development on their national economies. Under trade stagnation, three EAPP countries (Burundi, Egypt, and Ethiopia) would need to spend between 7 and 12 percent of GDP per year for 10 years to meet their power sector needs, an extremely tall order. Kenya, Tanzania, and Uganda would all have to spend close to 5 percent of their GDP to meet their power sector needs—also a rather high share of GDP.

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