Energy Poverty Is Holding Africa Back And It’s Time To Fix It

Nigeria doesn’t have enough electricity to meet demand, and the little there is, is expensive and largely unreliable.

Nigerians like to use humor to make sense of frequent power outages. They turned the formerly National Electric Power Authority (NEPA), the parastatal that ran the nation’s grid, to “Never Expect Power Always”. And when the company changed its name to Power Holding Company of Nigeria (PHCN), humor quickly adapted to “Please Hold Candle Nearby”. Humor apparently works as a coping mechanism to energy poverty. Nigeria doesn’t have enough electricity to meet demand, and the little there is, is expensive and largely unreliable. So for businesses to function, they resort to polluting and expensive imported diesel power generators. The story is unfortunately the same throughout Africa.

Globally, an estimated 1.3 billion lack access to electricity, 600 million of whom are Africans. In Sub-Saharan Africa, more than two-thirds of the population doesn’t have access to electricity. This level of energy poverty stunts economic growth, which in turn adversely affects the ability of nations to fight poverty, improve health care and education. Access to modern energy services is a prerequisite for rapid and sustained economic growth, and a great development intervention.

The African Development Bank estimates that Africa’s rolling power outages sap its economy anyway from 2 to 4 percent GDP growth every year. That’s about the same as global growth in 2016, which is estimated at 2.3%. For Nigeria, Africa’s largest economy, the Economist reported that power shortages were responsible for the loss in GDP annual growth of a staggering 4 percentage points.

With sky-high unemployment rates across the continent and a growing population, Africa needs to create an estimated 11 million new jobs every year in order to absorb new entrants on the job market. To do that, rapid growth in labor-intensive sectors such as manufacturing and agriculture is crucial. But these sectors require access to affordable and reliable energy. Addressing energy poverty is therefore an imperative for Africa’s growth and should be a top priority for governments across the continent. Politicians, economists and policy-makers like to make plans for Africa’s industrialization. But that won’t materialize unless Africa can produce enough energy to power its growing cities and burgeoning industries.

Energy scarcity doesn’t just stunt economic growth; it kills millions of people every year too. The International Energy Agency reckons that 38% of the global population – about 2.6 billion people, 700 million of whom are Africans – don’t have access to clean cooking facilities. They cook with polluting fuels like wood, dung, crop waste and coal. As a result, the World Health Organization estimates put the number of deaths linked to indoor air pollution in 2012 to 4.3 million. A silent environmental killer we seldom hear about.

For the poor, energy poverty means that the use of modern medical equipment is limited, putting patients’ lives at risk and children can’t study at night, leading to low-quality education and future low productivity.

The good news is that Africa is endowed with enormous energy resources: from solar and hydroelectric power to wind and geothermal power. The bad news is that tapping into Africa’s energy potential requires massive investments.

Africa clearly needs an energy revolution. And that requires a multi-pronged strategy.

Though Africa is urbanizing fast, it is still majority rural, with about 60% of people living in rural areas while 40% are urban dwellers. Connecting scattered villages in rural areas to the grids is too expensive for cash-stripped utilities in Africa. That’s where off-grid electricity comes in. This works best in remote communities whose energy needs are low. With recent advances in technology and falling costs of solar power, standalone home solar systems and mini-grids are becoming more affordable and present the best option for people in rural areas, who live far off from the grids, to access electricity.

Savvy entrepreneurs are seizing on this opportunity and devising “home solar systems” products to meet growing demand from off-grid communities. Social enterprises such as M-Kopa Solar and Off-Grid Electric have connected over half a million homes to electricity in East Africa in recent years.

Off-grid electricity provides important social benefits. People can light up their homes, hospitals can function properly, the quality of air can be significantly improved and households can perhaps afford to power small home appliances. But don’t count on off-grid electricity to be the solution for Africa’s energy crisis. Off-grid electricity has limits too: they won’t produce the amount of electricity needed for large-scale industrial production that Africa so desperately needs.

So powering Africa’s economies and industries will require expanding significantly the traditional grids too. The good news is that Africa is endowed with enormous energy resources: from solar and hydroelectric power to wind and geothermal power. The bad news is that tapping into Africa’s energy potential requires massive investments.

Completing Congo’s Grand Inga Dam alone, which has been dogged by delays and false promises for decades, could double Africa’s electricity production. But it would also require 100 billion in investment. The reason these big projects don’t come to fruition is Africa’s over-reliance on international donors and lenders such as the World Bank, who are increasingly becoming picky on whether projects are renewable or not and whose promises aren’t always kept. Remember Obama’s Power Africa Initiative announced with much fanfare in 2013 and aimed at doubling Africa’s electricity production? It has so far met less than 5% of its goals.

So Africa must mobilize its own public and private resources, and perhaps international capital, to meets its energy needs. Access to energy is an economic emergency for Africa. Africans don’t have the luxury to be so picky about the source of energy at this time. If access to energy means doing it the old-style – building dams, for instance – it should be done. The “New Deal on Energy for Africa” policy by the African Development Bank is a first step in the right direction. It’s resource-neutral and technology-neutral, which means that the bank will work with “countries to develop their comparative energy resource advantages without bias, in renewables and non-renewables alike”. Africa’s economic future depends on producing affordable energy to power its growth and industries. Africa must get it right this time.

 

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