|Energy as a Tool for Sustainable Development for African, Caribbean and Pacific Countries (EC - UNDP, 1999, 89 p.)|
|CHAPTER 2: THE SUB-SAHARAN AFRICA REGION|
In some ways the Sub-Saharan Africa region is in a good position to make a transition to sustainable energy. Its renewable resources are vast and its accumulated wisdom from a multitude of energy sector efforts is substantial. And on the time-scale needed for such a transition, it is not weighed down by its past: much of its future infrastructure is not yet designed or built; there are few established energy systems to absorb into new strategies; and there are few entrenched interests and industries to protect.
Along with this sense of opportunity many positive ideas are emerging about the shape which African energy systems could take. The vision is of an energy sector with a human face, serving African people affordably and efficiently, and helping to propel development through its links with other sectors: industry, agriculture, transport, finance, education, and health.
This vision calls for radical change in the conception of the energy sector and its objectives - especially from traditional top-down central planning towards more diverse structures and innovative approaches. It also calls for a massive acceleration of implementation and investment rates, without which the benefits of sustainable energy development may never be realised.
"This vision calls for radical change in the conception of the energy sector and its objectives - especially from traditional top-down central planning towards more diverse structures and innovative approaches."
SCALING UP TO MEET THE CHALLENGE
The need to move fast and think big is most evident in the context of electrification, and can be illustrated through a simple calculation. In 1990 only 8% of rural people and 38% of urban dwellers in SSA had electricity connections. An ambitious growth target might be to increase access to 50% of rural and 75% of urban populations by 2025. Achieving this goal would require a five-fold increase in rates of new connections per year in urban areas, and a seven-fold increase for rural areas, relative to the rates achieved in the 1980s. Nearly 720 million people would need to be connected, 60% of them (430 million) in urban areas. Yet despite this huge acceleration of effort and investment, in 2025 the absolute number of Africans without electricity would be higher than today: 470 vs. 420 million. Furthermore, if conventional approaches to grid electrification were relied upon to meet this target, with costly borrowing and inadequate cost recovery, indebtedness and aid dependence could worsen considerably.
This calculation underscores the fundamental importance of diversification and enabling policy frameworks. First, in order to meet the electrification challenge, a diverse array of technical and institutional approaches will be needed, including large-scale, grid-connected hydropower developments, lower-cost methods of grid extension and connection, large-scale and small-scale distributed renewable energy sources - both on and off - grid applications, and greater use of energy efficiency mechanisms. A similar diverse set of options will be needed to meet rapidly growing demands for transport and other liquid fuels.
Second, policies that foster productive diversification must be the priority. Policies that create the right enabling environment for rapid investment and business-led market growth must in particular replace the traditional small-project model (unless this adds real value to policy formulation).
LINKING ENERGY WITH OTHER DEVELOPMENT ACTIVITIES
For most governments, development cooperation agencies, and individual people, development priorities centre on poverty alleviation, job creation, and the improvement of basic services such as education, health, and water supply. These priorities often depend for their development on a source of energy that is secure, affordable, and appropriate to the end-use. Indeed, projects which address these priorities have been a principal means of disseminating energy technologies. In South Africa, for example, the new government undertook in 1994 to electrify all schools and health clinics in the country, and for many of them the most appropriate energy technology was PV. Where energy has not been included or thought out in such projects until a late stage, however, users have often been saddled with inappropriate or costly technologies.
In many cases, sectoral development priorities can be provided most cost-effectively and appropriately using renewable energy technologies (RETs) combined with energy efficiency measures. Leading examples include the most basic and popular development activities, such as community lighting; lighting and water pumping for schools and hospitals; and refrigeration for vaccines in remote health centres. Using RETs in sectoral projects can also provide valuable new opportunities to generate income, as was demonstrated in the Democratic Republic of Congo (see Box 1).
Renewable energy and energy efficiency (REEF) solutions are often ignored in development projects because people do not understand their capabilities, benefits, and costs as well as they understand the better-known and well-tried technologies such as the diesel engine and generator. To counteract this problem there is a need for good quality information about alternative energy options for health, education, agriculture, water, small business promotion, and other development sectors. This information must be developed and distributed widely to sectoral ministries, public utilities, the private energy sector, development-oriented NGOs and, so far as possible, local communities within each project area. Establishing electronic or physical data centres where project managers can access current information is one possible approach; another is to require comparisons of conventional and alternative options in all development assistance supported projects with energy components.
Box 1. PV Systems for Health Care and Income Generation
During 1984-1990 the European Development Fund financed, in the Democratic Republic of Congo, the worlds largest rural health care project using PV. The project installed 750 lighting systems and 100 refrigeration systems for vaccine storage in rural health centres, and carried out equipment testing, maintenance, and user training.
The high PV capital costs and the expensive operating costs of the vaccination programme were major constraints on further expansion. To enable expansion, the PV systems were enlarged to generate surplus solar electricity, which was sold to the local community, and the revenue used to help pay the programme costs. The extra cost of larger PV generators was low compared to that of the solar refrigerators, while the transport, installation, and maintenance costs remained the same. The electricity was not sold directly, but used to generate a substantial income from the following businesses:
· Recharging car batteries, which are used locally to power TV and radio. Two simple and reliable chargers gave a 50% profit margin on the costs of running the recharging service.
· Community TV and video service, which generated income and had the additional benefits of popular health education, staff training videos, and entertainment.
· Rechargeable dry cell batteries (Ni-Cad), a scheme which should have generated substantial income in principle but failed because of management problems and the initial high cost of the batteries.
An evaluation in 1991 showed that the first two schemes added only 13% to the total costs of the project, but generated more than 50% of the operational costs of primary health care in the whole district.
The information should provide balanced comparisons of technology performance; capital and operating costs (including first costs and lifetime costs); maintenance requirements; and key aspects of project implementation. Information on the way that RETs can contribute to sector objectives should also help to ensure that they are properly considered and adopted whenever they are the least-cost or most appropriate option.
Most importantly, renewable (and other) energy systems must be fully integrated into sectoral programme activities and not as is so often the case treated as a low priority add-on. The RET components of projects must be managed with an enterprising and long-term perspective and should follow the requirements of good RET projects outlined in the next section and in Box 3, including especially investments for training systems users and technicians, and for developing technology support systems.
"Renewable (and other) energy systems must be fully integrated into sectoral programme activities and not as is so often the case treated as a low priority add-on."
MAXIMISING THE EFFECTIVENESS OF DEVELOPMENT ASSISTANCE
Several cooperation agencies are presently revisiting their assistance strategies, with potentially significant implications for energy-sector assistance in Africa. The Energy Sector Management Assistance Programme of the World Bank and UNDP (ESMAP), which has maintained an historic focus on Sub-Saharan Africa, is currently developing a new strategy. The core Energy Unit of the World Bank is preparing a new Africa initiative, on the heels of recent energy and environment and rural energy policy reviews (the Bank has established an Africa Energy Team). And two major changes are afoot within the EC that could present a unique opportunity to make sustainable energy a central theme for cooperation with Sub-Saharan countries. First, the Lomé Convention that governs community aid to ACP countries and establishes the principal source of EC grant funding for energy in Africa (the European Development Fund) is currently being renegotiated. And second, the restructuring of DGVIII may enable sustainable energy to be built in as a cooperation theme, particularly in recognition of its linkages with other development priorities.
"The principal challenge is to design the criteria of these funding instruments so that they support investments in long-term sustainable energy development, and not merely those projects with cheap or easy-to-quantify near-term carbon reductions."
There are two principal forms of international assistance: loans and grants. Grants are widely used to support technical assistance and studies, capacity building (training and institution building), policy dialogues and stakeholder participation processes, demonstration projects, concessionary loan terms, and guarantees. Such grants - the main form of cooperation administered by the European Commission, UNDP, and ESMAP - are often a forerunner of loan investments in energy infrastructure (power plants, transmission systems) or other enterprises which are expected to yield financial returns sufficient for loan repayment. The principal actors in the African energy sector include the African Development Bank, the World Bank, and the European Investment Bank.
In order to mobilise loans, lenders must be reassured as to the creditworthiness of the borrower and the loan operation must be large enough in size to justify the banks appraisal costs. This becomes a particularly delicate issue in the case of sustainable energy for Sub-Saharan Africa, where loan applications tend to be small and perceived as high risk. This is one of several reasons why renewable energy and energy efficiency projects have made few inroads with lenders, who, with a few notable exceptions, still invest almost exclusively in conventional energy projects in Africa. Cooperation agencies have an important role to play in various aspects of risk mitigation, such as the clustering of operations. The World Bank Group has expressed clear interest in developing innovative sustainable large-scale rural energy projects, focusing either on large countries or clusters of smaller projects, such as the Photovoltaic Market Transformation Initiative, which is focusing initially on India, Kenya, and Morocco; the Renewable Energy and Energy Efficiency (REEF) Fund; and the Solar Development Corporation of the International Finance Corporation (the private banking arm of the World Bank Group).
Global environmental problems are an increasingly important motivator for international funding agencies. Incipient environmentally motivated funding instruments, such as the Global Environment Facility, have largely bypassed Sub-Saharan Africa, in part because the regions greenhouse gas emissions are amongst the lowest in the world. As existing instruments evolve and new ones - such as the Clean Development Mechanism - emerge, they could become an increasingly important source of funding for sustainable energy activities in Sub-Saharan Africa. The principal challenge is to design the criteria of these funding instruments so that they support investments in long-term sustainable energy development, and not merely those projects with cheap or easy-to-quantify near-term carbon reductions.
Lessons Learned and Principles for More Effective Interventions
Since the 1980s there have been hundreds of small demonstration and pilot projects on REEF technologies throughout Africa. Many of these have been valuable, others have been merely repetitive. Most have also been extremely expensive in terms of capacity installed and lessons learned, helping to account for the slow progress these technologies have made in the region.
It is time to halt this process and put more effort into ensuring that projects add real value by informing sound policy and institutional development. The aim of project support should be to help create an enabling environment for sustainable energy take-off, not for additional externally funded projects. Pilot or demonstration projects should be used only where they will inform better policy-making, and should fit within a sound policy framework. In particular there is a need for:
· Better project coordination and information sharing amongst the international development community. It is not unusual to find two or more cooperation agencies proposing essentially the same project in a country, or different agencies conducting very similar projects. New studies are often funded before thorough research is made of previous studies on the same issue. Project coordination also requires close cooperation with local institutions, where proper incentives can stimulate new activities rather than duplicate past or parallel ones.
· Greater coherence is needed between projects and policies. Projects sometimes attempt to resolve problems that are much better tackled by policy changes. For example, studies on the economics and scope for renewable energy production have been proposed in countries where independent power producers and electricity sales to the grid are not (yet) allowed.
· Better coordination is needed between cooperation agencies and governments. Client ownership of projects and policy proposals is crucial to successful development assistance. Governments must truly support project objectives and be committed to learning policy lessons from them - and to putting those lessons into practice. The dust-collecting shelved project report has become an icon of misconceived development assistance.
· Greater attention must be paid to the policy lessons arising from demonstration and pilot projects, and those lessons used in consequent policy development.
As the EC, UNDP and other development cooperation institutions have voiced growing recognition of many of these key points, it is now critical to translate these lessons into common practice. There is huge scope for targeted and coordinated grant-based development assistance to build up appropriate frameworks and more directly promote and support the development of REEF systems. This assistance covers many areas and activities and calls for substantial and well-designed grant support.
"Pilot or demonstration projects should only be used where they will inform better policy-making, and should fit within a sound policy framework."