[ 2014-08-05 ]

Powering up Africa's Renewable Energy Revolution
As African Presidents, Prime Ministers, and
business leaders arrive in Washington to attend
the first US-Africa Summit, one topic that will be
paramount in their discussions with President
Obama and his Cabinet is: how governments and
families can access affordable electricity across
the African continent.

Consider the facts: one in three Africans, that's
600 million people, has no access to electricity.
Neither do some 10 million small and medium-sized
enterprises. Those homes and businesses fortunate
enough to have power pay three times as much as
those in the United States and Europe;
furthermore, they routinely endure power outages
that cost their countries from one to four percent
in lost GDP every year.

Despite the fact that Africa is blessed with some
of the world's largest hydropower and geothermal
resources (10-15 GW of geothermal potential in the
Rift Valley alone), bountiful solar and wind
resources, as well as significant natural gas
reserves, total power generation capacity in
Africa is about 80,000 megawatts (MW) (including
South Africa), roughly the same as that of Spain
or South Korea.

As Africa enters its 20 th consecutive year of
economic expansion, with the World Bank
forecasting that Africa's GDP growth will remain
steady at 4.7 percent in 2014, and strengthening
to 5.1 percent in each of 2015 and 2016, the
continent needs more electric power. Specifically,
Africa needs to add 7,000 MW of generation
capacity each year to meet the projected growth in
demand, yet it has achieved only 1,000 MW of
additional power generation annually.

Over the last week I visited Cameroon and the
Democratic Republic of the Congo, two of Africa's
so-called 'fountain states.' The resources in
these two countries – along with Guinea,
Ethiopia, and Uganda – can generate enough
hydroelectricity to satisfy the growing demand in
Africa. I saw the range of applications for which
this power is needed, and I saw clear solutions.

In Eastern Cameroon I visited the construction
site for the Lom Pangar hydropower project. Once
construction is complete and the reservoir is
filled in the next couple of years, this new dam
on the Sanaga River will improve the reliability
of power supply and lower the cost for up to five
million Cameroonians. The Lom Pangar project will
also pave the way for developing the full 6,000 MW
of hydropower potential of the Sanaga River by
regulating the flow of the river.


In the Democratic Republic of Congo, last week, I
visited the Inga hydropower site on the mighty
Congo River. DRC's overall hydropower potential is
estimated at 100,000 MW, the third largest in the
world behind China and Russia, yet only 2.5% of
this key resource has been developed. With 40,000
MW of generation potential, Inga is the world's
largest hydropower site. Its proper development
can make Inga the African continent's most
cost-effective, renewable source of energy with an
estimated generation cost of US$ 0.03 per kilowatt
hour with little or no carbon footprint--a
significant added virtue.

As African leaders will undoubtedly tell their
American hosts over the coming days of the
US-Africa Summit, Africa has vast hydropower
potential but it is using just 8 percent of this
untapped water force. Compare that to Western
Europe which uses 85 percent of its available
hydropower potential. What a stunning contrast, 8
percent versus 85 percent!


Abundant hydropower in Western Europe gave many
countries the economic boost they needed to
steadily raise their living standards and power
new chapters in their drive for economic
development. Hydropower gave Europe a powerful
head-start on building affluence and progress.
Like Europe and the rest of the world, Africa
deserves the same opportunity to exploit this
green source of power to improve the lives and
economic prospects of its people.


Beyond building these power generation assets,
they must be connected to the market, which calls
for regional cooperation to build the transmission
network. We are working with African leaders and
their development partners, as part of our broader
initiative of Regional Integration, to create
power pools in Africa's East, West, Central, and
Southern sub-regions. Those countries with
abundant geothermal, gas, hydro, solar, and wind
resources can feed their excess power supply into
a common pool, while neighboring states with
lesser endowments of energy resources and
generation capacity can benefit from this
integrated approach to delivering electricity to
their people. It is incumbent upon the individual
countries to remove all barriers to these
cross-country investments. As noted by both the
World Bank and Power Africa Initiative, the
benefits of these investments in generation can
only be harvested, and transferred to African
consumers, if the distribution companies meet the
minimum level of efficiency, financial viability,
and good governance. The region's electric
utilities – whether they are state-owned or
private enterprises – need to be operating at
full capacity and undertaking the necessary
reforms so as to bring the power to the people of
Africa.


In East Africa, for example, the World Bank has
mobilized $684 million to build the Eastern
Electricity Highway Project (EEHP) to connect
Ethiopia's electrical grid with Kenya, and reduce
energy costs and protect the environment while
paving the way for more dynamic regional
cooperation between the countries of East Africa.


Elsewhere in Africa, as world prices for
photovoltaic equipment have fallen, solar power is
an increasingly affordable option to add the
continent's energy mix. In Mauritania, which is
in the forefront of the renewable energy movement
in Africa, solar energy now powers 30 percent of
Nouakchott's energy use, with 50 percent of the
capital city's energy needs likely to be covered
by solar in the next several years. There is also
significant potential for large-scale concentrated
solar power arrays, as have already been
constructed in Morocco.

In addition to power from two regional hydropower
plants at Manantali and Felou, Mauritania will
commission a 30-MW wind farm in the next 24 months
that will bring the total share of renewable
energy, including hydropower, to about 45% of that
country's total energy demand. The remainder will
be supplied by the Banda Gas to Power Project,
recently approved by the World Bank's Board of
Executive Directors. Not only will the Banda
project produce and convert natural gas from
offshore gas fields in Mauritania into 300 MW of
new electricity generation capacity, it will also
export surplus power to Mali and Senegal, yielding
regional benefits as well.


The Banda project is significant – not only for
its contribution to the energy needs of The Sahel,
but for its demonstration of the range of World
Bank Group instruments that can be deployed to
bring this high-return project to fruition. A
combination of up to $261 million in partial risk
guarantees and $585 million in investment
guarantees has been mobilized to attract foreign
and regional investors to this innovative regional
power project.


Going forward, it will only be possible to attract
these investors – international equity funds,
insurance companies, pension funds (both African
and global) – if power projects are bankable and
well-structured. Institutions such as the World
Bank Group can help to build that financial
architecture through instruments such as Project
Preparation Facilities, guarantees, and
insurance.


Guarantees are essential because the perception of
risk associated with energy investments in Africa
remains distorted and excessive, and do not
reflect the solid macroeconomic realities on the
ground. Furthermore, large-scale infrastructure
investments require long-term capital, yet they
are typically subject to a mismatch of both
currency and maturity. Countries are borrowing on
the global bond markets, for five- or seven-year
terms, when power projects take far longer to
construct and generate revenue streams. Similarly,
as sustained growth in Africa is also reflected in
rising domestic savings, it is imperative to tap
these resources and channel them into productive,
high-yielding investments. By providing guarantees
and political risk insurance, the World Bank Group
can help to manage those risks and, in time,
correct the risk profile of energy projects in
Africa.


Expanding Africa's access to electricity through
grid, mini-grid, and off-grid solutions is a key
element of our efforts to achieve the twin World
Bank Group goals of ending extreme poverty and
creating shared prosperity for all people of the
continent. Furthermore, by meeting electricity
demand with our plentiful renewable resources –
hydro, geothermal, solar and wind – Africa can
grow in an environmentally sustainable manner,
with minimal additions to overall carbon
emissions. Africa is poised to achieve green
growth – a global public good -- while meeting
the energy needs and growth aspirations of its
people.


These are the messages that are likely to
reverberate throughout the US-Africa Summit in
Washington this coming week. I look forward to the
discussions of how we can meet Africa's
electricity challenge. You can be sure that we in
the World Bank Group, with President Jim Yong Kim
in the lead, will mobilize new commitments to
power up Africa's present and future in close
alliance with the US Government and Africa's
political and business leaders.

Source - Makhtar Diop

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