ABIDJAN, Ivory Coast — With just two out of five people in Africa hooked up to power, electrifying the continent is a top priority for the African Development Bank. A series of new policies and plans are pushing for new off grid solutions, a better investment climate and stronger local government capacity to scale up service.
The bank is also scaling up its own investments, bulking out its staff and throwing its political capital behind electrification. The AfDB argues that access to electricity is key to the success of the other goals on Bank President Akinwumi Adesina’s “High 5” agenda, a set of priorities that includes industrialization and an improved quality of life. Experts say access is a must for African nations to compete in the global marketplace; without it, the continent will fall short of achieving development goals and encouraging investment.
“Africa has about 16 percent of the world’s population, but has more than 50 percent of the population that does not have power,” AfDB Vice President of Power, Energy, Climate and Green Growth Amadou Hott told Devex. “Everyone knows it’s now or never, and that you need to create jobs and industrialize and have competitive economies, and that if you don’t have competitive supply of energy, you will not be competitive as industrialized nations.”
The bank’s plans center around its New Deal on Energy for Africa, a plan adopted in 2016, with the aim of universal electricity access by 2025. The AfDB will aim to help governments craft better energy policies, improve local utility companies, boost donor funds, encourage off-grid and other bottom-up solutions, and accelerate regional integration, among other policies.
The bank will also invest $12 billion of its capital over the next five years as part of the $60 to $90 billion it says it needs to reach its goals. In 2017, the AfDB will deploy $2 billion of its own money, along with $5 billion projected from co-investors. Also by year’s end, Hott told Devex that his team will expand from 60 to 100 members, including five directors.
“Our goal, working with all stakeholders, is to connect 130 million people via grid systems, 75 million people via off-grid systems and provide 175 million people with clean cooking,” Adesina said during the opening ceremony of the Off-Grid Revolution workshop hosted at the bank’s Abidjan headquarters last week.
Thinking off the grid
Over the next five years, the AfDB aims to help rehabilitate utilities and help national providers become profitable. Power companies across the continent have struggled to keep up with technology that would provide adequate connections to growing cities. Many utilities are also short on cash since they charge under-market prices, often the result of government subsidies.
Hott suggested that governments may need to step back from energy generation. “Governments cannot subsidize electricity indefinitely. It’s understandable in the beginning, but they need to move to a path of sustainability for the utility.”
The AfDB is already active in Tanzania, Mozambique and Zambia helping to advise and restructure utilities to minimize technical losses, financial losses and to ensure proper network planning and governance. “Utilities have to run like a private enterprise, even if in most cases, it is run by the government,” Hott said.
Yet with much of Africa’s grid power network overstretched and in need of repair, the AfDB sees off-grid solutions as key to reaching 75 million new households in urban and rural areas, an ambitious but achievable goal, according to Hott. Both rural areas as well as major cities, such as Lagos in Nigeria, could benefit from off-grid solutions. Many people in urban areas there use diesel generators for the majority of their power.
The cost of off-grid solutions has fallen in recent years. Solar technology is now more affordable, and investors are less demanding in terms of return on investments, partly because the perception of risk has improved, Hott said.
A major component to the success of off-grid energy solutions will be the collaboration of off-grid providers and governments, Hott noted. “Most off-grid players are following their own business development path, acquiring customers themselves without certainty they will get customers,” he said. If a government collaborated with an off-grid project serving 2 million people, for example, then scale could reduce pricing.
“If you combine all these interventions, you may reduce the price [of off-grid energy] by up to 50 percent,” Hott argued. These savings would attract further investment.
Hott also called for more and better regulatory standards for off-grid solutions, for instance, indicating where other providers can and cannot step in. Some governments also tax users of solar home systems instead of incentivizing the use of renewable solutions.
A long priority list
In addition to off-grid solutions, the New Deal on Energy is looking at a range of other ideas and interventions.
One option is mini-grid solutions, whereby 50 to 200 houses are linked together on a system that is separate from the main grid. Ideally, these mini-grids would be connected to the main grid at a later date.
In 2016, the AfDB made specific investments to strengthen Ivory Coast’s distribution and transmission networks, adding 20,000 households to the grid. The bank also supported the second phase of the “Kenya Last Mile” project that would see the AfDB provide a loan of $135 million to connect more than 300,000 Kenyan households.
Another component of the New Deal on Energy includes improved access to clean cooking, a life-saving intervention that could prevent up to 600,000 deaths annually. Indoor cooking with materials such as wood and coal can lead to pulmonary and respiratory diseases, from lung cancer to heart attacks. Alternatives include cookstoves that convert biomass into clean energy.
A targeted 150 million households will be educated in clean cooking options such as biomass fuel. “This will be targeted at villages where most times people cut wood for cooking, which is not good for health but also the environment.”
Hott told Devex he is confident in the bank’s ability to achieve its objectives by 2025, because the continent has begun to understand the necessity of expanding energy access in order to achieve other developmental goals. “This is not just money going [into these projects], but political will, and that’s why you have a higher sense of urgency, and a higher will from the African governments.”
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