By William Kabagambe
In the twenty-first century, access to energy is vital to society’s basic needs. Modern energy sources are critical inputs to economic development, yet 1.2 billion people around the world live without access to electricity. In Africa alone, 600 million people do not have access to electricity, and even those with access use a fraction of the power that US citizens do.
Demand for energy in Sub-Saharan Africa (SSA) in particular is growing; the region is projected to consume close to 1,600 terawatt hours by 2040, four times the amount used in 2010. Despite the increasing demand, more than half of SSA’s nations are currently experiencing power shortages and rolling blackouts. Without reliable energy from the grid, most business and families must rely on generators. In SSA, generators can cost between three to six times more than they do in the rest of the world. Given the high costs of electricity generation, development objectives are increasingly difficult to attain, resulting in unemployment and economic stagnation. With growing populations and declining economic growth, the challenges to improved energy access are numerous. SSA must create critical infrastructure, implement effective policy and promote new sources of investments if it is to unlock its development potential.
The difficulty in accessing reliable energy sources on the continent is most attributed to inadequate infrastructure. In much of SSA, inefficient generation, transmission, and distribution of energy account for significant electricity shortages and hinder economic growth. Kribs Govender, the Vice President at Sasol, a multinational energy company based in Johannesburg, emphasizes this point, arguing that “energy infrastructure changes the economy, it adds from a jobs and employment perspective. It’s a key enabler and the rest follows. Good infrastructure also makes us more competitive at a global level. Energy infrastructure needs to lead rather than lag.” Additionally, the power plants currently active in SSA are old and inefficient, creating an excess of greenhouse gas, which pose environmental threats to local communities.
While most SSA countries have experienced some reform in the energy sector, inadequate policy and regulatory frameworks make SSA a tough environment in which to invest. In SSA, central governments are often too weak to create policy that promotes inclusive energy access. Most countries do not have clearly stated national energy targets, which leads to a lack of policy coherence in the energy sector. Governments must be more proactive in finding ways to improve local capacity, but more importantly, they must build national policies that meet the rising energy demand. Ethiopia, for example, has installed a national energy plan that aims to generate 37,000 megawatts (MW) by 2037, and cut its carbon emissions by almost two-thirds by 2030. Creating national policies such as Ethiopia’s will be critical to ensure commitment from both governments and stakeholders towards achieving energy security.
The scarcity of funds for investment in the energy sector remains another obstacle for development in SSA. Addressing the gap in energy infrastructure is typically a long and costly process. There are currently 130 independent power providers in SSA. Over 27 private equity investments made between 2010 and 2013 by the United States, China and Europe are valued at $1.2 billion. While public sector investments from donors and other development actors are important, SSA governments must come up with new, bankable energy projects that can capture investment from the private sector. There is a willingness by development and private sector actors to readily fund infrastructure projects, but these investments are risky and require long approval processes due to government inefficiencies. In order bring about bankable and sustainable energy infrastructure, it is essential for stakeholders to support “expanding and refining project preparation support, developing innovative financial tools to protect private-sector actors from risk, and building the capacity of foreign national and local governments.”
Building on Successes:
For all the shortfalls of energy access in SSA, countries are taking steps in the right direction. These examples can serve as models on how the overall SSA energy sector can grow sustainably:
Power Africa: The Power Africa initiative, launched by President Obama in 2013, can serve as a blueprint for many SSA countries to increase energy access. The initiative is aiming to grow energy access by 60 million new connections around the continent. It plans to accomplish this by scaling up grid roll-out programs and intensifying its Beyond the Grid efforts, an initiative that facilitates investments in off-grid and small-energy solutions. Power Africa also plans to add more than 30,000 MW of new generation capacity around the continent. The initiative looks to build on nearly $43 billion in commitments from both public and private sector partners, which include the Overseas Private Investment Corporation (OPIC), the Millennium Challenge Corporation (MCC), and the United States Agency for International Development (USAID).
East Africa’s Potential: Ethiopia represents the country that has the largest potential to serve as a model for closing the energy gap in SSA. The Ethiopian government is building what will be the largest hydroelectric and geothermal plants on the continent. These projects, funded mostly by donor countries and the private sector, are expected to triple the country’s power production. As countries attempt to be more environmentally friendly, Ethiopia can be an example to other SSA countries, encouraging the use of more renewable energy sources, as opposed to coal. This approach also aligns well with the UN Sustainable Development Goals (SDGs), which advocate for affordable, reliable and sustainable energy access for all by 2030.
Rwanda is another nation moving in the right direction towards reliable energy access. Post-genocide, Rwanda is one of the only SSA nations that transformed an inadequate energy policy into a transparent and robust regulatory framework designed to revitalize electricity access in the country. In 2014, the government partnered with Gigawatt Global to contract an 8.5 megawatt (MW) power plant 60 kilometers east of the capital, Kigali. The plant’s construction has created 350 jobs and increased Rwanda’s generation capacity by six percent. Rwanda has also developed an effective business environment that encourages long-term sustainable partnerships and dismisses corruption.
Access to energy is critical to the development process. With rising population growth, the continent must continue to build on its economic growth rates by improving energy access. As political momentum increases around energy security, an opportunity presents itself for development actors to leverage private sector investments and unlock the continent’s energy potential. Moreover, renewed multilateral and development finance institutions should create specific targets to help countries build national energy strategies, promote bankable infrastructure projects, and increase private sector investment opportunities in SSA. The United States in particular should pursue infrastructure financing that will enhance funding and attract innovative solutions to the problem. In order for SSA to truly capitalize on its growing populations and economic progress, governments must prioritize energy access as a key to achieving development goals.