Africa Progress Panel: Boost Investment in Africa’s Energy Infrastructure

TV: Steady electricity brings with it a mix of work and play. Photo credit: Kennedy Fosu/World Bank

December 19, 2017//-More than 600 million Africans still do not have access to electricity, and the number is set to grow in the coming years. If current trends continue, universal access will not be achieved until 2080, Kofi Annan’s Africa Progress Panel (APP) has warned in its latest report.

The implications are huge. This situation is simply unacceptable. We have to electrify Africa faster. Every year, energy-sector bottlenecks and power shortages cost Africa between 2 to 4 per cent of its GDP, with power cuts causing factories to stall in production and businesses to close their doors after dark, increasing costs and harming the productivity needed for Africa to compete.

Every year 36,000 women die in childbirth in Africa, with potential life-saving medical care hampered by the lack of electricity.

Every day, as many as 80 per cent of primary schools in certain parts of the continent operate without electricity. Children then return to darkened homes, forcing them to use kerosene lamps or to sit under street lamps at gas stations to do homework and revise for exams.

Every day, African women must collect firewood or buy charcoal to use for cooking, leading to 600,000 deaths per year from air pollution caused by the fumes, with women and children as the primary victims.

On a continent that frequently faces food insecurity, a lack of electricity means that food cannot be stored in refrigeration facilities – causing one-third of all food to be squandered.

Africa is home to 33 per cent of the world’s poor, yet inefficient utilities and faulty grid networks – too often staffed by corrupt officials and designed to serve mainly the urban rich – result in Africans paying among the highest prices for electricity in the world, especially in rural areas.

A woman in rural northern Nigeria pays 30 times more per kWh than the average resident in Lagos, and up to 80 times more than the average resident in Manhattan. Access to reliable and affordable electricity fundamentally changes people’s lives – from creating jobs and economic opportunity to improving education and access to health care, from preventing deforestation to improving food security and access to safe cooking facilities.

But the efforts to meet current energy needs present another problem which affects us all: climate change. In seeking to provide universal access to reliable and affordable electricity, we risk setting ourselves on a collision course with our planetary boundaries.

Climate change demands that we rethink the relationship between energy and development. Like every other region of the world, Africa must face this challenge squarely and work to break the link between energy and emissions as quickly as possible.

However, instead of being a hindrance to progress, a move toward greater energy efficiency, low-carbon technologies and renewable energy sources presents real opportunity for the continent today.

Harnessing innovative business models and technologies, Africa can leapfrog current systems and develop low-carbon energy, ensuring universal energy access. The future will be dominated by renewables and energy efficiency.

In fact, renewables and their associated technologies are already in serious competition with traditional high-carbon energy sources.

Africa can be ahead of the curve. Its rivers, deserts and mountains provide it with enormous natural potential for renewable energy production. Renewables could also allow Africa’s rural communities to bypass slow and expensive grid-extension projects, managed by utility companies that often lack the incentive to fast-track development.

Off-grid and mini-grid solutions could be the answer here. African entrepreneurs and community leaders have begun to harness that potential, demonstrating creativity and initiative in providing reliable access to affordable and sustainable electricity for Africa’s poor, and achieving rapid progress.

Renewables not only offer business opportunities but also can positively affect people’s lives. Solar power energy systems combined with innovative business models have proved to be particularly successful.

In Uganda, the use of solar-powered radios to contact birth attendants has led to a decline in maternal mortality rates by 54 per cent.

Access to solarpowered electricity for primary and secondary schools in Sudan and Tanzania has improved completion rates, raising them from below 50 per cent up to almost 100 per cent.

In Burkina Faso and Kenya, off-grid solar power has been made affordable to thousands of small businesses and homes using an innovative pay-as-you-go system, managed through mobile technology.

Energy is the golden thread connecting growth, equity and sustainability. Africa and the world stand to benefit from all Africans having access to reliable, affordable and sustainable energy.

The Sustainable Development Goals (SDGs) were adopted in 2015 in a spirit of global responsibility. SDG 7 calls for universal access to affordable, reliable, sustainable and modern energy by 2030.

We believe this is possible, but Africa and the global community must demonstrate bold leadership, creativity and foresight as they work toward this aim.

Three interconnected vectors will be essential:

i. Push for innovation and investment

 African governments must take primary responsibility for Africa’s energy transformation, both as repositories of wealth and expertise, but also in their regulatory role.

 African governments have the potential to promote a vibrant private sector, attracting local and foreign investment, where much of the innovation and drive for transformation has already begun, and will continue.

Financing of US$55 billion per year is required until 2030 if Africa is to succeed in attaining SDG 7. To meet this gap, African governments will need to spend 3 to 4 per cent of their GDP on energy development projects.

Public spending could be supported by improvements in tax-to-GDP ratios, and transparency initiatives that rein in losses from illicit financial flows, which reached US$69 billion in 2012 alone.

But this injection of capital should also be maximized through the use of public-private partnerships and the fostering of a reliable and transparent regulatory environment that decreases risk and promotes local and international investment in sustainable energy development projects.

Part of this transformation will require overhauling how Africa’s existing utilities are regulated, with the creation of independent regulatory bodies that can hold these utilities to account, along with the establishment of new regulatory processes in line with the goal of creating a transparent regulatory environment for off-grid and mini-grid projects.

Africa has the potential to lead the world as a hub for new sustainable technologies and innovative business models, with the continent’s entrepreneurs and business leaders working closely with their governments and with investors and experts from the international community.

But this will require an enabling, transparent and reliable regulatory environment, an innovative private sector, and increased international investment.

ii.Focus policy changes on benefitting the poor and disconnected

 Investments in the power sector should not only focus on improving efficiency and creating profits, but also on bringing energy access to all at a speedy rate and supporting the broader development agenda.

As it stands, the policy environment in many African countries largely benefits the rich at the expense of the poor.

Governments should begin by cutting the US$10 billion spent every year on subsidizing kerosene and other oil-based products, and the US$11 billion spent to cover utilities losses, subsidies that benefit mainly urban citizens. This money should be redirected to connections for the populations that lack access in rural areas.

 iii. Invest in infrastructure to boost intra-regional energy trade

Political leaders should commit to developing significant regional energy markets in Africa. Where continental and sub-regional political commitments to boost regional infrastructure already exist, today’s leaders must strive to show consistent leadership in promoting the agreed implementation agenda.

Regional trade in electricity offers economies of scale and opens up larger markets, linking supply to demand, stimulating investment, and lowering the cost of electricity for Africa’s people.

But as it stands less than 8 per cent of power is traded across borders in sub-Saharan Africa. Changing this will require streamlining investment and regulatory climates throughout the region, and significant investment in crossborder energy transmission infrastructure – efforts that could bring tremendous benefits.

Some estimates suggest that an investment of US$17 billion in developing regional transmission lines could save Africa up to US$40 billion otherwise spent on increasing generation, simply through increased efficiency.

The International Energy Agency estimates that such efficiency gains could reduce average electricity costs by 8 per cent, with some regions seeing reductions of up to 60 per cent.

Such integration could also provide opportunities for exploiting big hydropower, geothermal, wind, solar and biomass projects that require large and reliable commercial markets, and significant initial investment.

With major players recognizing this potential, many such regional integration projects are in the pipeline, but efforts must be redoubled to make them a reality.

The 15 energy-sector projects in the Priority Action Plan of the Programme for Infrastructure Development in Africa, including the North-South Power Transmission Corridor, the West African Power Transmission Corridor and the Inga III Hydro Project, must be under way by 2020.

East and Southern Africa should look to the development of a regional gas grid, which will require careful and dedicated coordination, but could have a profound impact on reducing energy prices in the region, and curbing emissions.

The Africa Clean Energy Corridor, developed by the International Renewable Energy Agency, is also a step in the right direction, but its scope must be widened. African leaders should also collaborate strategically to harness the political will behind the new G20 Compact with Africa to help boost these initiatives.

African Eye Report with additional files from Africa Progress Panel report 2017

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