Under the Power Africa 2.0 strategy, launched at the 2019 edition of the Powering Africa Summit (PAS), transmission and distribution will be prioritised, announced Andrew M. Herscowitz, the Coordinator of the US Government’s Power Africa programme since 2013. Ahead of the 2020 Summit, Herscowitz spoke on achieving universal access.
Talking on the biggest breakthroughs for Power Africa during 2019, Herscowitz spoke of a phrase his team is using for the projects they’ve worked on for the last seven years: “The popcorn’s popping”. The prices that have come in from the World Bank’s Scaling Solar programmes in Senegal and Ethiopia exceeded everybody’s expectations. In Senegal, we saw that having the local electricity company of Senegal, Senelec, as a partner (20% acuity) helped drive down prices. Not only that, it mobilised local domestic capital and set an example across the rest of the continent about the importance of getting sovereign wealth funds and pension funds to move and action investment operations.
How close is Africa to reaching universal energy access?
I think many countries now understand what needs to be done to achieve universal energy access in their own countries. We’re seeing countries like Kenya, Ghana, Côte d’Ivoire and Senegal really making a lot of smart decisions to get electricity to as many people as possible.
There are still many countries that haven’t had even their first IPP reach financial close yet, so we need to shift the focus towards them, to build the capacity and help them get their first deals across the finish line.
Something to keep in mind, is to recognise that we really have to focus on transmission and distribution, as well. It doesn’t do anybody any good to build a bunch of power generation assets if you can’t move the power to industry and to people.
What have been the biggest challenges?
The biggest challenges continue to be political will and moving the goalposts. We’re seeing a trend across the continent of countries trying to renegotiate existing agreements. That’s scaring off investment. Countries may want to renegotiate PPAs if they feel like they’re financially strained, or if they feel like they’ve committed themselves to too much power. The idea was the more power generation, the better. But you need to have transmission and distribution infrastructure in place to move that electricity.
The problem of countries trying to renegotiate deals is also throwing a lot of uncertainty into the market, and it’s making investors want to look elsewhere. So, while countries think they are in a great position to re-negotiate, they’re really not. And they risk causing decades of damage to their markets. Not just in the power sector, but in all sectors. So definitely moving the goalpost is only going to make potential investors hesitate and seek business in any of the other 200 plus countries in the world.
Do they feel the solution for powering up Africa lies in a handful of massive projects, or a number of hybrid solutions based on each region’s assets?
I think the market itself is going to help define what the landscape looks like and how those projects have to be and interact with each other. I think the role of development finance institutions and development agencies is to try and expedite the rollout of these new business models and new technologies.
We also need to look at the role of mobility and how that’s going to intersect with energy access. We’re seeing electric motorcycles take off all over the world, mostly in Asia for now. But as soon as they hit the market in Africa, they’re going to have the opportunity of basically transporting electricity from one place to the other. What I mean by that is that we might yet see a future where electric transport will be able to transport batteries too, so the focus may shift from homes generating their own energy, to a system of battery swapping in which people can power up their homes.
Another thing that in my opinion has been overlooked is that most power tools are cordless now. We need to figure out how to get these power tool companies into Africa, because of what battery-powered tools will mean for people that lack energy access, or reliability on their local grid. Imagine a person in Lagos running a wood shop, and the power is going on and off. If they had a circular saw that could run on a battery for 60 hours, they could continue and finish their business.
So I think we need to bring together the electric mobility people, the cordless power tools people, and the energy access people together and figure out how their industries can work together and create an entirely new economy driven by battery technology.
What new projects are you most excited about?
I’m most excited about Botswana and Namibia, and the work that we are doing to try and promote the larger solar developments, so that these countries can eventually trade power all across Southern Africa. These are countries that have some of the highest solar irradiation quality, low population density, plenty of land for these installations and good connections with all the other countries. They have access to plenty of foreign currency because of their other industries, and they are politically and economically stable. So we’re really looking forward to continue working with those countries and scaling up their solar developments.
Case studies, country by country
Power Africa was one of the first donor partners to recognise the tremendous opportunity to support the integration of utility scale solar into Zambia’s generation mix through private sector players. Working with Scaling Solar, Power Africa was able to modernise the existing Zambia system to receive cheap solar power.
Scaling Solar is a great example of how effective partnerships support a transaction, including working with Governments to improve the regulatory and legal frameworks to support a deal and move it from financial close to commissioning.
When Power Africa announced its support for Scaling Solar-Zambia with $2 million in 2016, I don’t think anyone expected that the competitive tender would yield the lowest solar PV prices in Africa – at the time $0.06kWh and $0.0785kWh for up to sites (over 75MW for both). The tender rippled through Africa and we were forced into healthy debates about blended finance approaches.
The Government of Ghana, in cooperation with USAID and Power Africa, is addressing the cost of electricity via Integrated Resource and Resilience Planning (IRRP). IRRP planning forecasts future energy demand and uses it to rationalise power sector development and make the sector financially viable.
The Kpone Independent Power Plant (KIPP) is among Ghana’s most fuel efficient thermal-power stations and critical to turning Lights On and meeting the Republic of Ghana’s growing demand for electricity. Developed by Cenpower Generation Company Limited, KIPP accounts for approximately 10% of Ghana’s total installed capacity and is among the largest private IPPs in the country.
USAID provided direct transaction advisory support to the Electricity Company of Ghana and helped attract investors to finance the transaction. The plant employs at least 70 people full-time during operation.
Power Africa has contributed $6 million to the IFC’s Scaling Solar Initiative. In Senegal, Scaling Solar helped reach financial close on two transactions totalling 60MW of solar PV. This was Senegal’s first competitively procured solar plant. The prices achieved through competition ($4.25 and $4.45 cents/ kWh respectively) are the second-lowest tariffs in SSA to date – and 60% lower than the prior lowest solar tariff in Senegal. ESI
About the event
The 6th Powering Africa: Summit returns to Miami on 24-26 February 2020. The Summit welcomes over 370 investors from across North America, Africa and Europe to present energy projects, discuss investment opportunities and build relationships within the international power community.