Africa, some believe, is poised for breakneck economic growth in the coming decades because of its rich natural resources, favorable demographics and overall scope for development compared to other parts of the world. But much of that growth will hinge on the availability of the power and electricity needed to ignite industries and enable everyday business activity throughout the continent.
The current energy deficit in Africa is alarming. More than 645 million people in sub-Saharan Africa — roughly 70 percent of the region’s population — do not have access to electricity, according to the African Development Bank. The regional development bank estimates that energy-related bottlenecks such as power shortages and pricey services cost African economies 2-4 percent of their gross domestic product every year.
A host of alliances and initiatives have been set up to address the energy deficit challenge. They bring together a range of institutions from business, government and civil society under a common objective of reducing poverty and promoting inclusive growth by meeting basic energy needs.
These initiatives tend to focus on addressing energy poverty through the expanded use of renewable resources such as solar, wind, biomass and hydropower. Doing so is one strategy to align future growth ambitions with environmental sustainability targets. The resources these initiatives draw on combine the policy tools of government, the financial capital of private investors and the economic incentives of markets.
To give a sense of the scope of the challenge and the range of actors involved, Devex has pulled together a shortlist of projects and initiatives that are dedicated to addressing energy shortages in Africa.
Who’s leading it? United States government
What’s its principal aim? To add more than 30,000 megawatts of clean and efficient electricity generation in all of sub-Saharan Africa and to increase electricity access by adding 60 million new home and business connections.
What does it entail? The Obama administration launched Power Africa in 2013 as arguably the U.S. government’s flagship energy initiative in Africa. The plan draws on the resources of 12 government agencies to advance energy sector reforms, expand energy access and boost electricity generation capacity from renewable energy sources.
An ambitious new road map released last week lays out how Power Africa, the U.S. government initiative to increase access to electricity in Africa, will achieve its targets by 2030. Here's a look what Power Africa has achieved and the path the road map paves ahead.
The U.S. has committed to provide more than $7 billion in financial support. Direct funding to expand energy infrastructure projects include loan guarantees, direct loans, technical assistance, risk mitigation insurance, direct grants to African governments for energy projects and working capital loans for U.S. exporters. Other, indirect, financial tools employed by the government to support Power Africa include advocacy for legal, regulatory and institutional reforms, feasibility and project preparation and a government trade missions training program.
Since the launch of Power Africa, the African Development Bank, the World Bank Group and the Swedish government have committed an additional $9 billion in support. According to the Power Africa road map the original $7 billion has leveraged an additional $43 billion from a wide range of public and private sector partners.
What’s its principal aim? Universal energy access in Africa by 2025.
What does it entail? The African Development Bank Group unveiled the New Deal in September 2015 as its landmark initiative to address Africa's energy deficit over the next 10 years. It is designed to coordinate all of the other programs and efforts underway aimed at achieving universal energy access in Africa. The New Deal will work with and build on those existing initiatives to achieve impact at greater speed and scale. The initiative is structured under seven strategic themes, which will each be supported by a series of flagship programs that the bank will launch. Those themes include advising governments on efficient sector regulation, offering technical assistance to restructure energy utilities, aggregating project capital through private sector institutions, de-risking energy projects through public finance, increasing the availability of finance for both on and off-grid projects and boosting regional interconnections.
What’s its principal aim? Universal energy access by 2030.
What does it entail? Launched by DfID in October 2015, the Energy Africa campaign is an initiative that aims to boost electricity in Africa by expanding the rural household solar market. It focuses predominantly on energy access for rural populations who live beyond the reach of national grids. DfID’s stated aim is to increase investment in off-grid energy firms, overcome regulatory barriers, foster innovation and accelerate the delivery of solar energy systems to households across Africa. The donor agency plans to partner with African government, private investors, NGOs, think tanks and other donors to achieve its goal. Its objectives, DfID said, are attainable targets because of the dramatic fall in the price solar photovoltaic panels, improvements in battery technology, the spread of efficient appliances such as LED lights and the proliferation of mobile payment systems that enable energy access for the poor consumers through micro pay-as-you-go platforms.
The Sustainable Energy Fund for Africa
Who’s leading it? Funding comes from the governments of Denmark, Italy, United Kingdom and United States and the fund is administered by the African Development Bank
What’s its principal aim? SEFA was founded on the premise that reliable, clean and affordable energy can contribute to strong African economies and can have a positive impact in creating employment opportunities across the continent.
What does it entail? SEFA launched in 2012 and is a $95 million multidonor facility to support small and medium-scale renewable energy and energy efficiency projects in Africa. It issues three types of funding.
Project preparation funds provide cost-sharing grants and technical assistance for early stage renewable projects. Grant funding targets development activities from feasibility to financial closure for projects with a total capital investment between $30 million and $200 million.
SEFA’s equity investments provide seed capital for small-and medium-sized projects, as well as initial managerial and technical support for smaller entrepreneurs and developers.
A third funding stream offers grants that support public sector activities that create and improve the enabling environment for private sector investments in sustainable energy.
Electrification Financing Initiative
Who’s leading it? The European Commission
What’s its principal aim? To increase energy access and off-grid solutions for poor rural remote communities in sub-Saharan Africa.
What does it entail? ElectriFi is a new initiative that will officially launch in 2016 as a financing mechanism to support market development and private sector initiatives for affordable, sustainable and reliable energy solutions in sub-Saharan Africa. The fund will provide a range of financing options from convertible grants to structured debt and traditional equity. As an initiative of the European Union, the European Commission and European development finance agencies will be the fund’s principal investors. Its primary focus will be on private-sector led rural electrification projects, and will target mainly those using small hydro, wind, solar and biomass sources.
Investments will go towards supporting new project and pilot developments, feasibility enhancements of existing projects and to scale up existing projects. The total fund size will be 75 million euros ($81.8 million) with average investments between 1 million and 10 million euros.
African Energy Leaders Group
Who’s leading it? Heads of state and corporate executives of companies from across the African continent
What’s its principal aim? To bring together political and economic leaders at the highest level to drive the reforms and investment needed to end energy poverty and sustainably fuel the continent’s economic future.
What does it entail? AELF launched in January 2015 at the World Economic Forum in Davos, Switzerland. The political-business alliance aims to push forward energy sector reforms, promote renewable energy, support technological innovation and boost economic gains through the value chain. The group’s efforts will focus in particular on two key areas — innovative public-private partnerships and the creation of integrated and commercially viable regional power plans.
Two regional subgroups will be formed in West and Eastern Africa. Each will be composed of heads of state and chief executives of businesses that have a direct interest in energy issues as either power sector investors or major power users. The groups will also include representatives of civil society and regional development banks. As an alliance of various stakeholders, rather than an investor or donor, in practice the group will be responsible for actions such as promoting policies that support common sub-regional energy strategies, facilitating cross-border energy trade, collaborating on efforts to reduce electricity costs and promoting the financial viability and creditworthiness of state-owned power utilities.
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Naki is a reporter for Devex Impact based in Washington, D.C., where he covers the intersection of business and international development. Prior to Devex he was a Latin America reporter for Energy Intelligence covering corporate investments and political risks in the region’s energy sector. His previous assignments abroad have posted him throughout Europe, South America and Australia.
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