Regulatory and Legal Frameworks

Most African countries have begun to reform their energy sectors into a wide range of market-based structures. This process is centred mainly on the conventional fossil-fuel and public power supply sectors but could, with huge long-term advantages, be steered towards supporting REEF markets. Sustainable energy and privatisation involve similar radical shifts towards involving a greater diversity of actors, institutions, technologies, and system scales, which in many ways are well matched to the African context. REEF technologies are typically modular, small-scale, and decentralised, features that make them well suited to the generally small-scale African businesses and investors. Indeed, renewable energy systems are so well matched to emerging energy markets in Africa that they can even serve as a base from which to implement energy sector reform. In Cape Verde, for example, a World Bank solar electrification and wind power loan is helping to lead the reform process by introducing the private provision of energy services in rural areas.

By using REEF systems to drive a paradigm shift away from large-scale centralised energy supply, one of the major potential social catastrophes of the privatisation process - the halting of both rural electrification and modern energy provisions for the poor - can be avoided.

The opportunities that REEF systems represent in this context cannot be seized, however, unless specific and adequate attention is given to the development of appropriate legal and regulatory structures, with enforcement mechanisms, that:

· provide clear rules of the game for all players in emerging energy markets;

· define clearly the responsibilities and obligations of the new private energy businesses; and

· protect business and investor interests while safeguarding the public and consumers; for example by ensuring an adequate level of equality of access to modern energy, particularly between rural and urban areas, the rich and the poor.

Governments (with or without development assistance) can favour REEF in the reform process by:

· developing clear social and environmental goals for the energy sector, including implementation targets for renewables. This tells the business and financial communities that sustainable energy is to be taken seriously;

· adopting regulatory and legal measures designed to promote sustainable-energy developments, based on emerging good practice world-wide;

· specifying clear rules and procedures for awarding contracts or concessions to private actors; for example, for decentralised rural electrification or independent grid-connected power producers. Getting the right balance between monopoly and competition, and between business interests and public/social goals, is not easy. For a limited period, development assistance may need to underwrite (by credit guarantees, etc.) obligations in the public interest (for example for rural electrification) that are imposed on newly privatised companies where these lose money;

· removing outdated and constraining legislation. For example, in several countries, owners of small-scale stand-alone energy systems break the law if they connect and sell electricity to neighbours, to everyone’s benefit; and

· promoting a broad national dialogue on energy sector reform and REEF market development through seminars, conferences, study tours, etc., not least to increase exposure to the growing body of international experience on these matters.

REFORMING FOREST OWNERSHIP

Most African forests and woodlands are owned by the state, but forest departments typically lack the resources to manage them, or even to guard them against public exploitation as a free good. Returning this land to ownership and management by local communities, a form of privatisation, can be an effective way of turning this depredation into sound forest management that also provides income for the community (and the state) from the sale of forest products. The process is not simple. Tenure laws, forestry codes, management plans, rural wood markets, and price regulation must be developed and implemented. The World Bank with UNDP and its ESMAP and the Regional Programme for the Traditional Energy Sector (RPTES) programmes are conducting pioneering efforts along these lines in over 12 countries of the region, including Benin, Burkina Faso, Ethiopia, Gambia, Guinea, Guinea-Bissau, Mali, Mauritania, Mozambique, Niger, Senegal, and Togo.