U.S.: our efforts to improve power in Nigeria, others
Mr. Andrew M. Herscowitz is the Coordinator for Power Africa, an initiative of the United States (U.S.) government to double access to electricity in sub-Saharan Africa by 2030. In this briefing in Pretoria, South Africa on Tuesday, he spoke on the American government’s efforts to improve power supply in Nigeria and other parts of Africa. His explanations are contained in this year’s annual report of Power Africa. Excerpts:
Power Africa was launched with a 10,000-megawatt target and 20 million connections in just a few countries. We quickly tripled our goal after the first year because we saw that the system was working. So, now the goal is 30, 000 megawatts and 60 million connections by 2030.
Initially, we didn’t have an end date. It was once we tripled the goal that we said, “alright, this is working and people expect us to have an end date.” And that’s why we have the 2030 goal. And also, just to avoid any confusion, there’s also the Electrify Africa Act, which the U.S. Congress passed unanimously in 2016, which has the goal of having us add 20,000 megawatts and 50 million people getting electrical connection by 2020. The goals are consistent, if you put this on the same trajectory, but if there’s any confusion I’m happy to explain that, the difference between 50 million people versus 60 million connections. We base it on the assumption that there are five people per household in Africa.
So, where are we? We’re at about 80 projects that have reached financial close so far, that comprise 7,200 megawatts. About three quarters of the projects are renewable projects, and by megawatts, about three quarters of those projects are gas projects. And the reason is that a lot of the large generation projects do involve gas and hydropower. What we are seeing, though, it’s trending up in the size of the renewable projects as well.
A lot of countries for the first time are doing solar and wind projects, and starting off with smaller projects. And once they do competitive tenders and even non-competitive deals, the negotiated deals, move forward and countries become more and more familiar with the technology, they’re willing to scale up their technology as well.
Some of the big successes recorded
Power Africa, in coordination with World Bank and International Finance Corporation (IFC), large-scaling solar to Zambia, where we saw the price of solar coming down to between six and eight cents a kilowatt-hour. The winning quote, having the Corbetti geothermal project in Ethiopia move forward as well. It’s been a long haul, but we’ve seen some progress. We’re seen inexpensive solar power being offered in Senegal. One of the trends that we’re seeing if you look at our app, which is available online, it’s available in the Apple Store – the Power Africa Tracking Tool- it shows that we’re tracking over 400 transactions. Those are the ones that we’re telling people about publicly , these are projects that have some level of social-environmental due diligence. And those deals themselves add up to more than 33,000 megawatts. Now, we don’t assume that every single one of those projects actually will reach financial close and be built. Internally, we’re tracking a total of over 700 deals that comprise nearly 70,000 megawatts. And using our methodology, where we have seen that not every deal will get across the finish line, it shows that we are on track.
Some of the trends that we’re seeing
Power Africa was heavily focused on trying to move deals forward and generating a lot of deals, initially. But we’re seeing, in a lot of countries, the demand for the power might not necessarily be keeping up with the deal flow. We’re also seeing countries that are negotiating much harder on price. The projects in Zambia, for example, have made a lot of countries, not want that to accept renewable energy for the prices that they were willing to accept a few years ago. But it’s positive and it’s negative. It’s positive in that ultimately, the consumer will derive benefit and lower cost of power, but the downside is that a lot of these projects are getting stuck because the actual cost of delivering that power may not be as low as what some of the countries are hoping to get.
So, on the whole, Power Africa remains on track. On the connection side, we see tremendous growth in the companies that are providing solar home systems, the pay-as-you-go models, where people in peri-urban and rural areas are able to get access, not just a simple tower and light bulbs, but to clothing irons and electric razors, and televisions, radio chargers, all with a small solar panel that costs them less than $2 a day, sometimes less than 50 cents a day. We’re seeing these companies really start to take off. They’ve been taking off in East Africa for a while, and Power Africa has helped to bring companies now to West Africa. So, we see tremendous potential for expansion.
Power Africa and Nigeria
In terms of grid connections, that remains a significant challenge. Part of the challenge is that the distribution companies, many countries still are not able to charge the actual cost of power, which puts them in difficult financial straits. Power Africa continues to provide support to many distribution companies. In Nigeria, for example, we sent teams into three of the distribution companies to help them turn things around. In one of the companies, for example, they reduced their losses from 54 per cent to 40 per cent in just a few months. That’s real money that can go back into the company to buy smart meters and to make sure that they’re achieving collections from actual customers.
So, Power Africa, in partnership with all of our – we now have over 150 public and private partners – who collectively have committed over $54 billion to help achieve our goals – we’re working very well in sync with all of them. The U.S. government’s not necessarily in the lead on everything, and that’s our model. We want the private sector, not other partners, to take the lead. But also what we’re trying to do is provide private sector solutions to those problems that have 600 million people in sub-Saharan Africa who still do not have access to electricity.
Challenges in Nigeria
In Nigeria there’s still a lot of work to do. We’ve got a country that has 12,000 megawatts of installed generation capacity. At any given time, 3,000 or 4,000 megawatts of power are actually being generated and I think people are only paying for about 1,800 megawatts. So, even adding more power isn’t necessarily a solution. We have to solve the transmission-distribution issues there, and we’re working very hard to do that and we continue so successfully.
US ADF grant agreements
Sure, there were two grants. Now, just to be clear, the U.S. African Development Foundation has provided many grants. It’s a critical tool to advancing Power Africa’s goals, because what we do is we work with local communities to help provide solutions that are scalable. In Uganda, the limited energy challenge is part of U.S. African Development Foundation’s Off-Grid Energy Challenge, which was launched in 2016. One of the grants was to Maria Bawubya, who’s the chairperson of the Joint Energy and Environment Project (JEEP). It’s a 100 per cent women-owned enterprise in central Uganda. With the grant, JEEP will install six green power units in the Kalangala District. It’s an island district in Lake Victoria. Fishing is a main industry there, and the hope is that this grant will be able to do things such as cold storage and producing ice, which will benefit many of the people in the community, including women.
Also, the other recipient of a grant from U.S. ADF was Ashika Masoki, who is the CEO of Conservation and Development Uganda, Limited, CODE Uganda. It’s a majority-owned women enterprise in Western Uganda, you know, the surrounding parts where there’s a limited amount of firewood. Women walk long distances in search of firewood and cooking material, and with the grant, they’ll be able to sell, initially, 350 agro-eco kits that are comprised of a mixture of agricultural inputs, solar lanterns, cook stoves that provide alternative and safer fuel sources.
The synergy to light up Africa
Power Africa already does. We have 14 bilateral and multilateral partners, including Agence Française de Development. The African Development Bank (AfDB) was one of the first supporters of Power Africa; they made a $2 billion commitment to Power Africa, and they’ve already exceeded their commitment in terms of financing towards projects. The World Bank is one of the early supporters; also committed $5 billion towards Power Africa’s goals. We have partnerships with the European Union (EU), they distributed $10 million to the electrify utilities, which is providing financing and grants for renewable projects across the continent. We have partnerships with the United Kingdom (UK), with UKAID, particularly in the off-grid stage. We have partnerships with Canada, with Japan, with Norway, with Sweden. Sweden has committed over $1 billion to Power Africa shortly after it was launched. We’ve been working very closely with them in Zambia and elsewhere.
So, our goal isn’t for the U.S. government to be doing everything. It’s to be working with our partners to figure out who can do what best, and how can we complement one another’s efforts.
The futureof Power Africa under Trump
The Electrify Africa Act, which was passed in 2016, was sponsored by numerous Republicans, in the House and the Senate, and it passed both Houses of Congress unanimously. So, we enjoy widespread bipartisan support. Secretary of State Rex Wayne Tillerson, Deputy Secretary of State John J. Sullivan, and USAID Administrator Mark Green, all have made statements in support of Power Africa, and indicated that they intend to continue Power Africa and it has continued. We continue to get funding under this new administration. In our annual report, you’ll note that the cover note is written by USAID’s new administrator, Ambassador Mark Green, who is an appointee under this administration. So, a lot of people in the new administration are particularly intrigued by Power Africa because of its way of trying to harness private sector funding to advance development goals.
Senator Perdue from Georgia made a comment early on after President Trump addressed our Congress, shortly after he took office. He got a question about how the U.S. government intends to fund the large domestic infrastructure project, and his response was to cite Power Africa as an example of how private sector funding can be used to advance certain goals. When you think of Power Africa, if you add up the total value of the 80 projects that have reached financial close, they’re worth over $14 billion. In terms of how much taxpayer money has been spent to help achieve those goals, it’s much smaller. We’re looking at a leverage of anywhere from 50:1 of 100:1 of private sector funding to taxpayer funding. So, this is a model that many in the administration really like and want to see continue.
Power Africa partners
One of the things that Power Africa prides itself in is the diversity of its partners, because we have something on our website called the Power Africa Toolbox. The toolbox comprises all the different types of assistance that can be available, because our motto is to work with the private sector to figure out what are the obstacles to the deals, and how can we help them reach into the toolbox to help them overcome those obstacles. Those obstacles might be financing; they might be legal assistance that is needed; it might be technical assistance; it might be a political push.
Part of this toolbox includes the solutions also that some of our partners provide. We have private equity firms that are our partners. We have banks that are providing financing and we’re providing the guarantees for that financing, whether it’s for on-grid projects or off-grid projects. It could be a project developer that’s doing the first-ever solar project in the country. You get a company like Gigawatt Global in Rwanda, which is the first-ever grid-level solar project in Rwanda – that’s one of our partners. A company likes GreenWish, which just did 30 megawatts of solar power in Senegal. They did that with some financing from the U.S. government and other assistance from Power Africa. So, when we enter into the partnership, we ask our partners to make one of three commitments – a commitment to adding megawatts; a commitment to adding connections; or a commitment to financing. And then we hold them to that and check in with them on a regular basis to see how they’re moving towards achieving those goals, and also to see if there’s something that we can provide from our very, very broad toolbox of U.S. government agencies and bilateral, multilateral partners, to help them move their deals forward.