G20 leaders should leverage existing partnerships and help deliver power to all, writes Andrew M Herscowitz, Coordinator, Power Africa, and Katrina Pielli, Senior Energy Advisor, US Agency for International Development
Access to electricity is a pressing issue of our time. It affects both economic growth and human development. Currently, more than 600 million people in sub-Saharan Africa lack access to electricity. In response, President Barack Obama launched Power Africa in June 2013, an innovative partnership to double access to electricity in sub-Saharan Africa. In recognition of the urgent need and early Power Africa successes, President Obama tripled Power Africa’s goals in 2014 – to add 30,000MW of new, cleaner electricity generation capacity and increase electricity access by at least 60 million new household and business connections. These goals are ambitious, but Power Africa is already making significant progress through expanding all aspects of its reach, from the markets it works in to the tools it offers.
To date, Power Africa has assisted with the financial closure of transactions expected to install more than 4,100MW of new, cleaner power generation capacity when fully online. This additional capacity has the potential to enable approximately four million new connections through increased availability of power. In addition, one million new connections are expected from projects receiving US government funding through Power Africa’s Off-Grid Energy Challenge and the US-Africa Clean Energy Finance Facility initiative. An example of Power Africa’s transaction model in practice is the 340MW natural gas Cenpower Kpone project in Ghana, which began construction in January 2015. Power Africa was closely involved in accelerating this project through providing a variety of support, including reviewing loan documents, assisting with lender requests, consulting on the negotiations of power purchase agreements and providing due diligence on financial models and reports.
Recognising that Power Africa cannot achieve energy access goals exclusively through large-scale power and grid extension projects, Power Africa launched Beyond the Grid in June 2014, a sub-initiative to unlock investment and growth for off-grid and small-scale energy solutions in sub-Saharan Africa. Beyond the Grid focuses on increasing private investment in off-grid and small-scale energy solutions under 10MW across sub-Saharan Africa. The range of energy solutions supported by Beyond the Grid includes solar lanterns, solar rooftop systems for households, captive power for industrial and commercial buildings, mini-hydro projects providing power to nearby villages, and mini-grids for communities and healthcare centres. Beyond the Grid applies Power Africa’s private-sector-focused model to accelerate transactions and drive systemic reforms to facilitate future investment in off-grid and small-scale renewable energy solutions.
The partnership approach
Partnerships are key to Power Africa’s approach to meeting its goals. This can be seen in its support for Off-Grid Electric, which helped the company grow, improve and attract substantial private capital investment. In 2013, USAID’s Development Innovation Ventures (DIV), an innovation fund within USAID’s US Global Development Lab, invested an initial $100,000 to pilot operations in Tanzania. The company also received $200,000 in funding in 2013 from the Overseas Private Investment Corporation’s US-Africa Clean Energy Finance (ACEF) programme. Support from ACEF allowed Off-Grid Electric to upgrade software and to optimise hardware design and supply chain management. These efforts were critical for the company to better serve its existing customer base while allowing it to scale up quickly. In late 2014, DIV invested an additional $1 million, and in early 2015 Off-Grid Electric secured another $16 million in equity financing led by SolarCity, Zouk Capital and Vulcan Capital, as well as an additional $7 million loan from the International Finance Corporation and its partners. This illustrates the partnership approach critical to Power Africa – private-sector partners have committed more than $20 billion towards specific projects, including $1 billion in commitments under Beyond the Grid.
Power Africa is working beyond US government agencies through strategic partnerships to further progress towards its goals. For example, partnerships with the World Bank Group, the African Development Bank and the Government of Sweden through the Swedish International Development Agency (Sida) have committed $9 billion in total in support of Power Africa. In addition, Power Africa has signed a cooperation agreement with the United Nations’s Sustainable Energy for All (SE4All) initiative focused on cooperation in furthering energy access, electric power generation and market development, cross-border transmission network development, clean energy investments, off-grid energy generation and energy project financing in sub-Saharan Africa. A Power Africa-SE4All collaboration on an energy efficiency roadmap will be launched in Uganda to demonstrate the immense benefits associated with energy efficiency, the important linkages between efficiency and electricity access and quality of service in both urban and rural contexts, and the range of concrete steps that can be taken to harness opportunities and secure needed investment, thereby providing a model that can be replicated in other countries. Most recently, the European Union and Power Africa signed a memorandum of understanding outlining the European Union’s contribution of more than $2.8 billion for sustainable energy activities across sub-Saharan Africa.
These partnerships demonstrate the power of collaboration, and the G20 leaders are in a unique position to build on existing programmes and partnerships to make a dramatic move forward in increasing access to reliable and affordable electricity, a key element in poverty eradication and economic growth in sub-Saharan Africa. G20 leaders can build on successes at Antalya by taking the following actions:
• Support the development of multi-donor initiatives to focus efforts and maximise impact, specifically regarding financing mechanisms to scale up household solar and other off-grid energy solutions. By joining forces and not duplicating efforts, donors can drive greater development impacts across sub-Saharan Africa.
• Assist with the creation of markets for small-scale solar solutions that keep out sub-standard energy products and prevent market spoilage by supporting country and regional efforts to adopt, raise awareness about and enforce internationally harmonised quality standards. Ensuring consumers have positive experiences with energy products is critical to retaining and growing market demand for off-grid and other small-scale solutions, as well as supporting growth and competition within the private sector providing these products.
• Demonstrate the impact of energy sector reforms with leading heads of government and ministers, because creating a transparent and rational market requires cost-reflective tariffs and solvent off-takers. Given that implementing necessary reforms and regulations can be challenging, leaders should use their unique opportunity to lead by example in creating well-functioning energy markets.
It is through effective and sustained partnerships that these critical goals can be met, including Sustainable Development Goal 7 – to ensure access to affordable, reliable, sustainable and modern energy for all. Power Africa will continue to foster partnerships and develop activities that support private-sector investment, and do its part to drive towards universal access to reliable and affordable electricity throughout sub-Saharan Africa.