By Zelalem Girma
About 600 million people live without electricity in sub-Saharan Africa. Recognizing that Power Africa cannot achieve energy access goals through the use of large grid extension projects alone, the U.S. Government has recently launched a new sub-initiative focused exclusively on unlocking investment and growth for off-grid and small-scale energy solutions on the African continent.
Power Africa, declared by President Obama in June of 2013, is a unique private-sector focused initiative with over 100 private sector companies, U.S. Government agencies, the World Bank, the African Development Bank, the Government of Sweden, the United Nations’ Sustainable Energy for All initiative, and the African Union’s New Partnership for Africa’s Development (NEPAD).
Power Africa reflects the U.S. government’s commitment to mobilizing diverse financial resources to help build sustainable and inclusive economies and well governed societies that are accountable to deliver the promise of sustainable development and inclusive prosperity for their citizens.
Recently, on the sideline of the Third International Finance for Development Conference, The European Union and the United States’ Power Africa Initiative pledged to increase access to electricity in sub-Saharan African countries. Thus, Secretary of Treasury Jacob J. Lew and EU International Cooperation and Development Commissioner Neven Mimica signed a Memorandum of Understanding (MoU) to support power generation and access to electricity in sub-Saharan Africa at Hilton hotel.
The MOU intended to enhance coordination between the European Union and the United States’ Power Africa Initiative that will deepen their ongoing long-term engagement with partner countries and the private sector and thereby to assist developing countries increase access to electricity for over 600 million people in sub-Saharan Africa. Commissioner Mimica said,”Today’s agreement is a clear sign that the European Union and the United States are ready to pool their efforts and resources in helping partner countries in Africa to fight energy poverty. Increased access to sustainable energy sources will be essential if we really want to empower those most in need.”
USAID’s Acting Administrator Alfonso Lenhardt explained, ” The United States and the European Union share a strong commitment to narrow the electricity gap, one of the greatest barriers to economic growth on the African continent. In addition to further strengthening our partnership with the E.U. and African governments, the MoU signed today will help achieve Power Africa’s goals of adding 30,000 megawatts of new, cleaner power capacity and 60 million new connections throughout sub-Saharan Africa and bring us closer to ending extreme poverty.”
Moreover, the MoU further confirmed the joint commitment to partner and coordinate efforts and is intended to provide the foundation for collaboration at the country level in Sub-Saharan Africa.
As outlined in the MOU, collaboration will occur on five key areas across sub-Saharan Africa: expanding small-scale and off-grid efforts, coordinating technical assistance mechanisms, aligning policy dialogue and reform efforts to improve the business enabling environment for energy investments, exploring opportunities for blended finance facilities and other types of financial support and improving energy efficiency.
Similarly, the European Commission has put in place a comprehensive set of actions to combat energy poverty. From now until 2020, the EU budget alone will allocate more than EUR 2.5 billion (approximately USD 2.8 billion) in grants to support sustainable energy in Sub-Saharan Africa, with an estimated leveraging of up to EUR 20 billion in financing and investment.
With these investments, the EU expects to bring electricity to more than 100 million people in Sub-Saharan Africa by 2020. This would contribute to reaching longer-term common goals of bringing access to electricity to 500 million people by 2030. It would also help to provide a durable solution to the shortfalls in energy infrastructure, and to power businesses, schools, homes and hospitals.
Ethiopia, under its Growth and Transformation Plan (GTP), envisions becoming a regional renewable energy hub in East Africa. Ethiopia has roughly 2,300 megawatts (MW) of installed generation capacity to serve its population of around 90 million people and has little prior experience with private sector-led energy projects. Energy constraints limit growth in key areas of Ethiopia’s economy, including the agricultural and industrial sectors.
In addition, Ethiopia is endowed with abundant renewable energy resources, including 45,000 MWs in hydro power potential, more than 10,000 MWs from untapped geothermal resources, and significant wind and solar generation opportunities throughout the Rift Valley. By 2037, Ethiopia aspires to have a total installed generation capacity of 37,000 MWs and become a major power exporter. Private sector investment will be critical to supporting this development vision.
Hence, the Government of Ethiopia is committed to increasing private sector energy participation, expanding transmission and distribution networks to deliver additional power to customers, maintaining a creditworthy off-taker, reforming tariffs to allow for full-cost recovery, and reducing inefficiency in the sector.
Power Africa is supporting Ethiopia’s energy development strategy through technical assistance to the Government of Ethiopia in negotiating its initial landmark Power Purchase Agreement (PPA) and facilitating financing of private-sector led geothermal, solar and wind projects. The 1,000 MW Geothermal Power Purchase Agreement (PPA) is in the last stage of negotiations for its first 500 megawatts. Power Africa is also supporting the installation of 2,000 meters in Addis Ababa and manufacturing of two million smart meters in Ethiopia to improve electricity service and reliability for millions of Ethiopian customers. Use of smart meter technology in Ethiopia has the potential to reduce power losses significantly.
While the Eastern Africa Power Pool (EAPP) is based in Ethiopia, it seeks to facilitate the cross border trading of renewable energy power supplies to the region at the lowest possible cost. The EAPP is working toward efficiently managing the integrated system. Power Africa will assist the EAPP to develop common grid codes and structure transmission interconnection projects that facilitate the integrated development and operations of national power systems in East Africa.
A unique private sector led model, Power Africa draws on the combined expertise and abilities of 12 U.S. Government agencies, the World Bank Group, the African Development Bank, the Government of Sweden, African governments, and private sector partners. Power Africa’s “Toolbox” approach offers a range of resources and tools to advance key projects on the electricity grid, or beyond it. By leveraging U.S. expertise in energy technology and regulatory reform, combined with U.S. Government and private sector financial resources, Power Africa helps drive-quick impact interventions and policy reforms to push for sustainable energy development.
To date, Power Africa has leveraged more than 20 billion USD in commitments from the private sector for new on- and off-grid projects in sub-Saharan Africa. The U.S. Government is committed to providing more than 7 billion USD in financial support, loan guarantees, and technical support. Additionally, the African Development Bank, the World Bank Group and the Swedish Government have collectively committed an additional 9 billion USD in support of Power Africa.
On Power Africa Annual Report, Coordinator, Power Africa and Trade Africa Andrew M. Herscowitz explained, “Through this initiative, we have brought all of the tools and capabilities of the U.S. Government to bear to meet these ambitious targets and to have a meaningful impact on Africa’s energy poverty. President Obama and the heads of each of the twelve participating U.S. Government agencies are leading this effort, and USAID has the honor of coordinating Power Africa — the first Presidential initiative to be headquartered in Africa.”
Therefore, African leaders should recognize the critical role of the private sector in meeting Africa’s energy needs and have shown a serious commitment to making the tough reforms needed to attract that investment, and to ensure that investment flows continue to rise. The response from the private sector, both from the U.S and Africa, should also be overwhelming. (Courtesy of the Ethiopian herald)