4 August 2014

Africa: U.S. Energy Investment in Africa Starts to Make Headway

Addis Ababa — As Washington hosts the U.S.-Africa Leaders Summit this week, an ambitious but low-profile energy programme announced by President Barack Obama in June 2013 is set to move back into the spotlight.

Power Africa is a U.S. government-led initiative around two-thirds funded by the private sector that aims to double the number of people with access to power in sub-Saharan Africa by 2018, connecting 20 million new customers.

When launched, the programme, focused initially on six countries - Ethiopia, Ghana, Kenya, Liberia, Nigeria and Tanzania - set a target of adding more than 10,000 megawatts (MW) of "clean, efficient" electricity generation capacity.

The U.S government has committed more than $7 billion in financial support and loan guarantees for the first five-year phase, while private-sector financial partners have promised to invest $14 billion, according to the scheme's website.

Rajiv Shah, the administrator of the U.S. Agency for International Development (USAID), told Reuters ahead of the Aug. 4-6 summit new support for Power Africa would be announced worth "several billions of dollars", and the programme's aspirations would be more than doubled, as goals are already being met.

It is also likely to be expanded to other nations, Reuters reported.

So far, Ethiopia appears to be taking the lead in the Power Africa programme. The East African nation hopes to boost its capacity to 10,000 MW by the end of 2015, from the current level of 2,200 MW, in part with funding from Power Africa.

The government's goal is to reach 37,000 MW by 2037 in order to meet demand from its population of more than 90 million - around half of whom lack access to electricity - and its expanding industries.

HELP WITH GEOTHERMAL

Under the Power Africa programme, the Ethiopian government signed an agreement last October with Reykjavik Geothermal, an Icelandic company, to build a 1,000 MW geothermal power plant in the Corbetti area of southern Ethiopia.

According to Amy Beeler, head of private-sector and energy-sector development at the Ethiopian office of the United States Agency for International Development (USAID), the project aims to generate 500 MW by 2018, with the remainder coming online by 2023. The total cost of $4 billion will be funded mostly by U.S. government agencies including USAID, with some finance from Reykjavik Geothermal.

The programme has negotiated a power purchase agreement for at least 25 years with the state-owned utility, Beeler said. It is the first time in Ethiopia that an independent power producer will sell electricity to a state utility, and is the largest such scheme in Africa.

According to Beeler, Power Africa is not only about building power plants, but also includes training of engineers and government officials, as well as other infrastructure projects.

Gossaye Mengiste, an official at the Ministry of Water, Irrigation and Energy, said Ethiopia generates just 7.3 MW of energy from its only geothermal plant, Aluto Langano, which dates back to the 1980s. By contrast, the country currently has 171 MW of installed capacity from wind and about 2,000 MW from hydro.

"Although geothermal energy potential is in abundance in Ethiopia, its initial cost is larger than hydro or wind energy, begging the question: is it cost-effective for a poor country like us?" Mengiste asked. That suggests outside help is necessary, he added, referring to the Power Africa scheme.

COMPETITION WITH CHINA?

African nations are increasingly looking eastwards for development partners, and especially to China. Roads and buildings have been constructed with Chinese help, and Chinese-made cars and mobile phones are becoming a common sight.

Chinese involvement in Ethiopia's energy sector ranges from the controversial 1,800 MW Gibe III hydropower project to a $1 billion credit for a power transmission line for a 6,000 MW hydro dam being built on the Blue Nile.

This has led some to question whether the Power Africa scheme is an attempt by the United States to catch up with China.

Besides Ethiopia, the continent's most populous country, Nigeria, has also recently signed a memorandum of understanding with the U.S. government under the initiative. But the other four countries in the programme have yet to progress that far.

Michael C. Battle, a former U.S. envoy to the African Union, rejected suggestions his country is in a competition with the world's second-largest economy to invest in Africa. Battle said Barack Obama's interest in the continent predated his becoming U.S. president.

"It's absolutely true that China is doing a phenomenal amount of work on the African continent, building infrastructure projects that are tremendous," Battle said. In contrast, the main focuses of the U.S. aid approach to Africa have been eradicating disease, increasing educational opportunities, reducing poverty and creating a context for good governance, he added.

The Power Africa scheme is mainly a way for the U.S. government to back private firms that want to invest in the power sector in Africa, according to Battle.

AIM FOR SELF-SUFFICIENCY

While the U.S. and other nations may have devised strategies to help Africa meet its infrastructure requirements, some development partners say that, in the long term, countries must meet their own needs.

Manabu Momita, a project manager at the Japan International Cooperation Agency, is working on the expansion of the Aluto Langano geothermal project, which is also being funded by the Ethiopian government and the World Bank. The goal is to increase the country's geothermal capacity by 70 MW.

Momita emphasised that Japan's assistance should be the beginning of a process that will lead Ethiopia towards self-reliance.

"We're just starting geothermal development in Ethiopia, but (Ethiopia should not) try to rely on foreign governments' assistance," Momita said. Rather it should give "strong support" to its own development, he added.

E.G. Woldegebriel is a journalist based in Addis Ababa with an interest in environmental issues.

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