Private sector invests over $4bn yearly in power – AfDB

Over $4 billion annually is now devoted by private sector investors to independent power projects (IPPs) across sub-Saharan Africa, with South Africa taking the lead in IPPs for renewable energy with close to $14 billion in expected investments, from wind to solar energy.

Akinwunmi Adesina, managing director, African Development Bank (AfDB), made this disclosure during the bank’s Energy Week where he also lamented the level of energy paucity in Africa in spite of her great potentials in renewable energy.

Lack of energy is the most critical challenge facing Africa today as over 645 million Africans do not have access to energy, he said, saying Africa has the largest energy poverty in the world.  The situation, he said, “has been like this for so long to the extent that we forget that lack of energy is not normal. The abnormal has become the normal.

“As part of the New Deal on Energy for Africa, we should accelerate the use of risk sharing and mitigation instruments, development of Africa-based political risk insurance systems and power purchase agreements to drive greater investments by the private sector.”

Political will, he stated, is crucial to light up and power Africa, saying that the task is immense, but the benefits will be huge.

The AfDB boss said by reforming utilities, ending subsidies that promote reliance on fossil fuels and ensuring cost-reflective tariff structures, Africa will be able to mobilise investments to solve its energy challenge – at scale. But for this to happen, we all must work collectively together, he said.

According to him, small businesses languish for lack of power; children underperform for lack of electricity, as over 90 percent of Africa’s primary schools lack electricity. Lives are at risk in our hospitals for lack of electricity, as life saving hospital equipment and services lie unused because of lack of electricity.

Africa must go far and solve its energy challenge by 2025, and for this to happen it must move together, he said. “This is why at the bank we have proposed the formation of the Transformative Partnership on Energy in Africa. Under this, we will pull together to drive the needed reforms in Africa’s energy sector to achieve the universal access to energy by 2025. Success lies just ahead of us,” he said.

An economy that has no electricity, he stated, is only dying slowly, and saying that Africa’s growth and prosperity depends on solving the crisis on energy.

Africa has the potential for 11 terawatts of solar energy, 350 gigawatts of hydropower, 110 gigawatts of wind power, and an additional 15 gigawatts of geothermal potential. Yet, the continent generates the same level of electricity as Spain or Belgium.

“With these immense resources, Africa should accelerate investments in technology, innovations, policies and regulations to speed up a renewables revolution. Africa cannot power its homes or businesses with potential. Africa must unlock its huge renewable energy potential and combine this with conventional energy to light up and power Africa.”

This, according to him, the continent requires a greater level of commitment than ever seen before, for its present and future depends on it, as it cannot simply be content with small ambitions on energy in Africa.

Africa he explained must act differently, by building strategic partnerships on energy that allows us to reach a greater level of ambition and delivery.

Not having energy in Africa he said pains as it costs Africa about 2.4% in GDP loss annually. “It pains that over 600,000 women and children die every year from the impacts of indoor pollution, simply cooking for their families. It pains to watch a young African child, desperate for an education handicapped simply because of lack lighting in their home. It pains to see our agricultural fresh produce rot on the streets, because of lack of refrigeration. It pains even more when we have the capacity to change the situation, yet that capacity remains untapped” he said.

He said a lot of financing will be needed to build the required energy saying that Africa must close the $55 billion financing gap for energy in sub-Saharan Africa and raise her level of commitment to meet the $22 billion needed to support universal access to energy in the region.

“ If Africa only uses 10 percent of the total amount of $500 billion in tax revenues collected every year on energy, will we not solve this problem? If we end the over $60 billion annually in illicit financial flows out of Africa, will we not solve this problem? If developed countries meet the 0.7 percent commitment for Gross National Income for development assistance, over $178 billion can be generated. Will we not solve this problem.’’