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DfID’s new Energy Africa campaign is right to look to off-grid solar power

https://www.odi.org/comment/10039-dfid-energy-africa-solar-power-electricity-access

Kevin Watkins, 29 October 2015

Africa’s energy crisis represents one of the great development challenges of our day. Power deficits remain a powerful brake on economic growth and poverty reduction. Meanwhile, 140 years after Thomas Edison invented the light bulb, 621 million Africans have no access to reliable, affordable energy – no source of heat and light for their homes, schools and hospitals.

As this year’s Africa Progress Panel report highlighted (declaration of interest: I was lead author), changing this picture is an indispensable condition for every aspect of human development. This is recognised in the sustainable development goals, or SDGs, which set a target of universal access to modern energy by 2030.

Last week, the UK Department for International Development (DfID) offered an early down-payment on the SDG commitment. The Energy Africa campaign, launched by International Development Minister Grant Shapps (there’s a good report here), focuses on the provision of renewable energy for rural populations living beyond the reach of national grids.

African governments, 14 of which participated in the launch, welcomed the initiative.

Nigeria’s vice president YemiOsinbajo joined the foreign ministers of Ethiopia and Somalia and the energy ministers of Sierra Leone and Senegal to stress the urgent need for policy-makers to exploit the new opportunities emerging in renewable energy technology. Former UN Secretary-General Kofi Annan, who delivered a compelling keynote speech, declared ‘unequivocal support’.

Other responses have been less favourable. Energy Africa’s focus on off-grid, solar energy has been criticised for diverting attention from the urgent need to develop large-scale power infrastructure. DfID itself has been accused of listening more to environmental NGOs than to Africa’s poor. The latter, according to survey evidence cited by one author, overwhelmingly want to be connected to the grid.

Much of this is straw man territory. As Minister Shapps made clear in his speech, expanding the grid remains a critical priority. The overwhelming bulk of UK development financing for energy – around US$1.1bn over the last five years – is in fact directed to power infrastructure development. The new framework envisages using small amounts of aid to leverage private investment through mechanisms such as the Africa Enterprise Challenge Fund. DfID will also provide technical support to develop regulatory environments conducive to private off-grid investment.

None of this strikes me as evidence of DfID’s capture by grid power-hating green hawks.

The reality is that any strategy for energy in Africa has to tackle the twin challenge of power generation and universal access.

Africa’s energy systems currently generate notoriously limited and unreliable supplies of electricity, at high cost, through grids that largely bypass the poor. Today, sub-Saharan Africa generates less electricity than Spain. Most Africans, including those living in oil-rich Nigeria, live in economies where per capita electricity supply is sufficient to light a single 100 watt light bulb continuously for 60 days a year.

Reaching the power generation levels of a middle-income region will require an annual increase in electricity generation of 10% over the next two decades – five times the growth of the past decade.

Without more power, energy deficits will remain a powerful bottleneck on Africa’s prospects for growth, with attendant consequences for employment and poverty reduction. Yet more megawatts will not resolve the equity challenge that has to be addressed if Africa is to achieve universal energy access.

Even the ‘ambitious’ power generation scenarios developed by McKinsey and the International Energy Agency would leave 500-600 million Africans without access to electricity in 2030. My colleague Andrew Scott estimates that around 60% of this population will have to be reached off-grid, through household-level systems or mini-grids serving communities.

That is why Energy Africa is right to look beyond the grid. Asking rural populations in Africa ‘do you want access to the grid’ strikes me as a loaded survey question. In a country like Tanzania, only 7% of the rural population are connected to the grid – and the country’s power utility (Tanesco) is a byword for inefficiency, corruption and disregard for the rural poor.

Market survey evidence shows that what people want is access to affordable, reliable energy in sufficient quantities for them to light their homes, cook, do homework, charge their phones, and listen to the radio. For millions of poor rural households across Africa, the choice is not between renewable energy and the grid. Indeed, there is nothing to prevent households using renewable solar power subsequently connecting to the national grid. The real choice is between off-grid provision and dependence on high-cost, inefficient and polluting sources of energy, like kerosene, torch batteries and wood.

Dependence on these fuels leaves some of the world’s poorest people paying the world’s highest unit prices for energy, and it contributes to over 600,000 deaths annually from household air pollution.

As a New Climate Economy report has highlighted, technological change and innovative new business models have the potential to bring modern energy within reach of the rural and urban poor. Prices for solar panels and lithium batteries are falling sharply. Mobile ‘pay-as-you-use’ systems are enabling companies such as d.light, M-KOPA Solar and Off-Grid Electric to provide customised services and technologies for poor households.

So large are the efficiency gains that come with a transition from kerosene to solar that even poor rural households can pay for basic off-grid systems with savings over a 2-3 year period.

So why not just leave universal energy access to the market? Because whatever the long-term benefits, the poorest households are typically unable to meet the up-front capital costs of renewable technology. And because the market itself is often riddled with regulatory barriers and risks that deter investors. As Kofi Annan put it at the launch of the Energy Africa initiative, ‘This is not just an injustice. It is a market failure of epic proportions’.

Energy Africa can play a role, however modest, in helping correct that failure.

Critics are right to point out that the household solar systems available to Africa’s poor generate modest amounts of energy. Standard systems provide enough electricity for a couple of light bulbs, a phone charger and a radio. It’s not much. But try asking kids doing their homework by a kerosene lamp or women paying out hard-earned cash for torch batteries whether it’s better than the alternative.