Davos 2017 charts course for enhanced energy access in Africa
The recently concluded 2017 edition of World Economic Forum which held in the Swiss Alps region of Davos, Switzerland from January 17 – 20 turned up the focus on Africa as sessions highlighted the need for the continent to harness its untapped opportunities for business and investment. One area that attracted intense focus is energy issues in Africa.
Lack of energy access for the majority of Africans slows growth and development in the continent.
“Across 36 African countries it’s estimated that just two in five people have a reliable supply of energy throughout the day. In some countries less than 10 percent of people have access to electricity at all,” said Alpha Conde, president of Guinea and coordinator of the African Renewable Energy Initiative.
Nigeria’s power supply last week fell below 2,000 megawatts on the back of failing transmission infrastructure. Businesses and citizens depend on self-power generation and this sends operating cost through the roof.
Understandably, it was with keen optimism that the UN Secretary-General’s Sustainable Energy for All initiative (SE4ALL) which brought together Africa’s government and business leaders to form the African Energy Leaders Group (AELG) in 2015 was received.
The objective of the initiative was to drive the reforms and investment needed to end energy poverty and sustainably power the Africa’s economic future.
Daniel Kablan Duncan, the prime minister of Côte d’Ivoire, Tony Elumelu, Nigerian businessman and Donald Kaberuka, president of the African Development Bank (AfDB) expressed their commitment to bring power to the 625 million Africans that do not currently have access to power.
“This initiative is potentially the single most catalytic action of our time toward transforming Africa’s power sector,” said Tony Elumelu at the press conference launching the initiative.
Two years later, the energy problems in Africa persists though there has been remarkable improvement in investments drive, especially in the renewable energy sector.
This year’s World Economic Forum in Davos, highlighted how the continent is missing out on the Fourth Industrial Revolution that has explosive growth in technologies and industrialisation on account of energy poverty.
The “Powering Africa” panel discussion at Davos featured Aliko Dangote, president of Dangote Group, Cyril Ramaphosa , deputy president of South Africa, Rachel Kyte, special representative of the UN secretary-general; Akinwumi Ayodeji Adesina, president of the African Development Bank and Bronwyn Nielsen, editor-in-chief at NBC Africa, highlighted some of the challenges and opportunities associated with closing Africa’s energy gap.
They agreed that increased generation will be required to close the energy gap in Africa. This new base load would power new industries and grow employment, keep hospitals running, light up schools and power Africa’s Fourth Industrial Revolution.
This will require keen cooperation between the various African governments and the private sector. Policy, the panel members stated is important to deepen energy access for Africa.
All too often, the policies of countries in the continent have hindered energy access for its millions of citizens without power. Many hold on to derelict power infrastructure rather than privatise them and see increased investments.
Nigeria, for example in the electricity sector privatisation exercise in 2013 left the transmission aspect in the hands of the government and it remains the weakest link in the power sector value chain.
Countries in West Africa still refuse to integrate their markets so that energy sales can happen across the continent. Power pools established to enhance energy access across countries have not been effective without the exception of the South African power pool.
The panel said that financing is not an issue once you had a credible project but clear policy direction would be mandatory. The South Africa Renewable Energy Independent Power Producer Procurement (REIPPP) was seen as a good model to follow.
REIPPP is South Africa’s energy development policy that incorporates a national development plan that identifies the need for South Africa to invest in a strong network of economic infrastructure.
It is a key vehicle for securing electricity capacity from the private sector for renewable and non-renewable energy sources as determined by the country’s energy minister.
The panel members say the REIPPP is a model of how clear policy certainty can attract private sector investments and solve crucial issues such as improving the energy generation capacity and diversifying the energy mix.
Lena Mangondo, who heads the legal team at the Independent Power Projects Office of South Africa in a presentation, identified enabling environment, investor confidence, grid connection and integration and funding of small projects as factors responsible for its success.
According to Mangondo, to create the correct enabling environment with strong policy & government support, a fair and transparent evaluation and a standard suite of documents that is accessible to all.
“While REIPPPP has been a resounding success, we adopted a similar approach to the Small Projects Programme which was not the right approach. Bidders have found it costly & onerous, so we are embarking on a simplified and light handed approach. Matching requirements with the target audience is key.”
She stated that the design of the IPPPP as a rolling competitive bid window procurement programme established market confidence early on and attracted vibrant investor interest locally and from abroad.
The programme tries to align generation and transmission planning and implementation, making timely funding available for investment in transmission and distribution infrastructure and integrating renewable though it still grapples with intermittency and proper planning.
Mangondo also stated that while smaller projects do not have the same commercial appeal to banks, the programme is working with various development finance institutions to find suitable funding mechanisms to support small developers.
African governments were urged to replicate this model as it represents the key to bringing the necessary base load generation capacity in scale while attracting much needed investments in the sector.
One key element in the success of the REIPPP model besides being an initiative driven by the government with the support of the private sector is that the market is structured to ensure that adequate cost reflective tariff was established.
African countries can longer afford to treat electricity as a social service but as a business and experience has shown that the private sector is better economic managers but they require clear-eyed policy.
The panel members called for new power projects to be done on a commercial basis to ensure that these projects are bankable.
Worldwide, the global industrial revolution is seeing a reduction in the cost of technological advances of renewable energy. Solar power infrastructure costs have gone down by some accounts by nearly 25 percent within the last decade.
The panel members also advocated for a diversified energy mix rather than total dependency on fossil fuels. This they said would help address climate change concerns.
ISAAC ANYAOGU