A new deal for Africa

“Electricity is no longer a luxury. It is a definite necessity. It lights our homes, our places of work and our streets. It turns the wheels of most of our transportation and our factories.”

These inspirational words could have been uttered by any politician in Africa in the last few years. In fact they were spoken by Presidential hopeful Franklin Roosevelt when he set out his vision for rural electrification as part of his “New Deal”.  Delivering access to cheap power was a key part of his wider plan to reinvigorate the US economy.

{mosads}Today, the United States consumes, per capita, some of the largest amounts of electricity in the world. In contrast, many sub-Saharan African countries struggle to provide the smallest fraction of these levels. It would take the average Tanzanian eight years to consume as much electricity as an American uses in one month.

The question is how can we mobilize and deploy capital on a sufficient scale to achieve the transformation of African economies through electrification, to deliver similar results to those achieved through the New Deal?

There is strong international support for initiatives like the US Government’s Power Africa and the African Union’s African Renewable Energy Initiative. However, progress on the ground to deliver their goals has been woefully slow.  At present the amount of Africans without access to electricity is set to rise, not fall over the coming decade.

There are several barriers we need to address if we are going to get things moving.  The most important is the administrative weaknesses of government.

At the recent World Economic Forum Africa conference in Rwanda, a senior official from GE described how it had taken sixteen months for Ghana to approve a power purchase agreement for  an “emergency” power project, dryly noting “I don’t know how long it would take if it wasn’t an emergency.” As CEO of a company that is trying to deliver major projects in a number of African countries – including Ghana – I share his sense of frustration.  I have seen projects that could transform people’s lives languish due to a lack of ability – or willingness – by officials to make timely decisions.

It doesn’t have to be that way. South Africa has shown how to design and implement a transparent and bankable procurement process, which has now run through four rounds and brought over 2000MW of renewable energy onto the grid. The South African program has helped to drive the cost of both onshore wind and solar PV power to a point where it is now half that of new coal, and significantly less expensive than a new gas plant. In addition, the short amount of time required to build renewable energy plants – a year from financial close to operation – means that very large amounts of new power can be swiftly deployed to meet unaddressed demand.

A key lesson from South Africa is the need to create a program based on the country’s mid-term energy requirements, rather than taking a plant-by-plant approach. This way, the technical and regulatory frameworks created – as well the intellectual capital and experience gained – can be deployed for project after project until the objectives are met.

Of course, not all sub-Saharan countries have the administrative capacity or domestic capital market of South Africa. This is where programs like Power Africa, or the UK’s Energy Africa, can have meaningful impact. Strengthening governments’ technical capacities, encouraging the harmonization of regulations and tendering procedures, helping to create credible off-takers and system operators – all this will help Africa’s electrification.

But more is needed. We need to combine the ambition of the pre-existing initiatives with the scale of Quantitative Easing. Only by doing so will we unlock private capital on the scale needed to address an issue as critical to our future as the global economic crisis of 2008.

To put things in perspective Power Africa has so far leveraged some $43 billion in commitments from the public and private sector. Compare this with the $4 trillion in securities that the US Federal Reserve has bought through Quantitative Easing. It is entirely possible – and entirely logical – for the US to put its reserves to work to leverage private capital to help electrify Africa so that today’s billions of available investment can become tomorrow’s trillions.

Call it QE4, or Marshall 2, or even a New Deal for Africa, but the United States has the opportunity, through an enhanced Power Africa project to deliver sustainable growth and prosperity through the power of renewable electricity.

To paraphrase Roosevelt, we will be lifting the great burden off the shoulders of that continent, and enabling all its citizens to share the opportunities which we have taken for granted for so long.

Dr. O’Connor is CEO of Mainstream Renewable Power.