1. What is the status of the New Deal on Energy for Africa and how can it serve Africa’s regional integration purpose?
Energy is one of the most essential requirements for Africa’s development. The cost of delayed full electrification of the continent is increasing as time goes by. The African Development Bank has therefore made “Light up and Power Africa” the first of the five pillars of its High5 vision. The New Deal on Energy for Africa is an ambitious programme that seeks to achieve universal access for Africa by 2025. Its strategy is built around the achievement of four targets: increase on-grid generation to add 160 GW of new capacity by 2025; create 130 million new connections by 2025, 160 per cent more than today; add 75 million connections, 20 times what we have today and also increase access to clean cooking energy for around 130 million households.
To achieve this ambitious energy infrastructure programme, the Bank will provide leadership and support for the implementation of African national, regional and continental initiatives such as the Programme for Infrastructure Development in Africa (PIDA) which aims to develop major regional energy infrastructure including 9 hydropower plants with a capacity of 13.74 GW, 4 interconnection corridors, 2 pipelines (oil and gas). Other African programmes such as the African Renewable Energy Initiative and SE4ALL will be supported.
But the Bank will not only act on the building of physical infrastructure. Addressing markets bottleneck, legal, regulatory, institutional and human capacity issues are all important.
To meet Africa’s energy needs will take significant investments. The Bank has committed to invest close to USD 2.5 billion a year for the next five years in order to boost investments.
To accelerate project development and implementation we will need strong project preparation capacities to ensure availability of bankable projects. This is the role of the NEPAD-Infrastructure Project Preparation Facility (NEPAD-IPPF), a multi-donor Special Fund hosted by the AfDB, which supports African countries to prepare regional infrastructure projects in energy, transport, ICT and transboundary water.
2. What progress has been made and what are the challenges?
The cost of delayed full electrification of the continent is increasing as time goes by. As we speak people’s health is at threat, businesses and SMEs continue to lose money because of the high cost of self-generated diesel base electricity, and the economies of countries loose competiveness. Today, over 645 million Africans have no access to electricity. Power consumption per capita in Sub-Saharan Africa is the lowest of all continents, currently estimated at 181 kWh per annum, compared to 6,500 kWh in Europe. The challenges we face are real, but can be turned into opportunities for accelerating access.
The new energy deal is based on ongoing and new initiatives. So, concretely, actions are already underway. A number of projects have seen financial closure and just to name a few. We have the Ruzizi III Hydropower Plant Project. The project implementation cost is estimated at US $625.19 million (of which the US $138.88 million will be borne by the AfDB’s public sector and US $50.22 million by the private sector window). Ruzizi III hydropower plant involves Burundi, the Democratic Republic of Congo (DRC) and Rwanda. It is a perfect example of a successful infrastructure development through regional integration.
We also have other success stories like the Tanzania-Kenya power interconnection. This project will facilitate power exchange and the development and integration of electricity markets between Burundi, DR Congo, Rwanda, Uganda, Kenya and Tanzania
Finally, another PIDA project, where we have made great strides is the OMVG Energy project. All of these integrated projects are great regional integration models, an important step towards expanding the size of African energy markets. In fact, regional energy trade provides an opportunity for many low-producing electricity countries to still meet their national demand through import over the regional power grids of the regional power pools, such as SAPP, EAPP, CAPP or WAPP.
3. How can the private sector push the energy agenda for a better integrated and prosperous Africa?
While investments must be increased from all sources, the expectation for the private sector is greatest. Public-Private Partnerships (PPPs) have emerged over the last decade as one of the best ways to foster development. Africa is considered the next frontier for investors and we are convinced at the bank that the continent’s future growth will depend on the private investment to bridge the infrastructure gap because Africa must be integrated.
This PPP has been successfully tested with Ruzizi III despite its complex public-private structure, over a period of 18 months. The project, part of the PIDA PAP, offers many valuable lessons for how sound structuring can attract commercial financing and lead to timely implementation.
At AfDB, we believe that there is real interest from the private sector, we just need to transform the opportunities into actual success stories.