Can Africa be the next clean energy powerhouse? That was the question posed by the second plenary panel at the Africa CEO Forum – and panelists reached the conclusion that the answer was yes, if the right policies and the requisite political will are in place. As Siyanga Maluma, CEO of the Copperbelt Energy Corporation, said, “The money is there; so we need the policy, the enabling environment, and the right tariff structure.”
Moderated by Pascal Agboyibor, the Monday session began with an overview from Adam Kendall, managing partner at McKinsey & Company. “The backdrop to our discussion today is that 621 million Africans don’t have access to electricity, and that 600,000 of them a year die from the effects of using biomass for cooking. No matter which figures you read, it’s clear that we have a funding challenge – we need US$40-50bn a year to spend on energy infrastructure, and thus far we’re investing nearer $8bn. The three energy areas with the biggest potential for Africa are gas, hydro, and – potentially the biggest winner of them all – solar energy. Our collective challenges lie in getting the regulatory policy right, raising the financing resources, optimising the role and capacity of the energy utilities, securing rural electrification, and above all securing political will.”
Kevin Urama, an adviser at the AfDB, set out the aims of the New Deal on Energy for Africa, a bank-led initiative to ensure universal access to energy on the continent by 2025, and based on a transformative partnership spanning public and private sector actors… and funding. Our twin challenges, he said, are ramping up energy access to ensure that we can deliver on our development goals, and finding the right mix of renewable and traditional sources of energy.
Elizabeth Littlefield, president and CEO of the Overseas Private Investment Corporation (OPIC), said, “US businesses are waking up to the investment opportunities presented by renewable energy in Africa, and particularly West Africa.” OPIC’s renewable energy portfolio has grown ten-fold in two years, she said.
Oliver Andrews, chief investment officer of the Africa Finance Corporation, was clear that a big challenge lay in the readiness – or not – of fully bankable energy projects. “But we do not view climate finance as a new fad,” he said. “It reminds us of the mobile telephony revolution that swept across Africa – it’s the next real thing. But we have to make it happen, and we have to take the risk out of it. Right now, it’s slow and it needs new financing instruments – for instance with credit enhancement for energy utilities, which aren’t always seen as credit-worthy.”
Ahmed Nakkouch, CEO of Nareva, Africa’s largest domestic independent power producer, which specialises in wind energy, spoke of the energy trilemma of safety, security and supply. He stressed the paramount importance of developing national power networks as the optimal way of serving and reaching the maximum number of people. He cited Nigeria, where only 10% of national energy is on the network.
Siyanga Maluma, the CEO of the Copperbelt Energy Corporation, was clear that a renewable energy revolution in Africa can only be led, managed and funded by Africans. In order to ensure this happens, he made a strong case that African governments and businesses need to start trusting and collaborating more with their fellow Africans.
Audience questions raised the issue of financing. “The financing is there,” said Oliver Andrews. “But we need to look at the avenues we use to make it available, especially through other models than project finance.”
“Greater concerns lie in uncertainty and lack of incentive,” added Elizabeth Littlefield.
Andrews continued: “We need a blend of financing and policy, marrying initiatives like the Green Climate Fund, which can accept lower margins, with the higher returns expected by traditional investors, for whom energy tariff pricing must work.”
The consensus among the panel was that actually there is a significant amount of money available for financing. The fundamental challenge is having the transparent regulations, the credible off-takers, and above all, the political will to make this happen.
This article was originally published by the African Development Bank Group.