Continental Divide: Are African Energy Investments On Target?

by Terri Hathaway
Monday, September 15, 2008

Across Africa, millions of businesses and residential consumers have been hit by costly energy blackouts -an ongoing problem now exacerbated by a major energy shortage in South Africa. Poor planning, decades of under-investment, a slowness to adopt energy efficiency measures and renewable energy sources, and stalled large supply projects are all to blame.

But because of the continent's huge "electricity divide" - only one in four is plugged into the grid - the electricity crisis affects just a sliver of all Africans. Away from the grid, lighting, cooking and other "modern energy services" have largely been neglected. According to the 2006 World Energy Outlook, "large electricity generation, transmission and distribution projects primarily benefit industry and urban populations, while most rural and poor people depend on biomass [e.g, wood cooking fuels]. Effective, comprehensive policies need to include the forms of energy used by the poor - for cooking, lighting, productive appliances and transport - rather than concentrate on provision of electricity alone as an end in itself."

Anne Wheldon, chair of the judges for the UK-based Ashden Awards for Sustainable Energy, is concerned that emphasis on electrification has hindered other technologies by diverting potential investments. She believes it also raises expectations which are never met in people's lifetime. "I was quite shocked recently to find that senior staff in a development organization assumed that increasing access to grid electricity would significantly decrease fuelwood use, Many people continue to cook with wood or charcoal even when they have electricity," she notes. Wheldon argues that the biggest added-value for energy investments comes from improved stoves and fuels. According to the World Health Organization, more people die annually from indoor air pollution related to cooking than from malaria. Africa has a quarter of the annual 1.5 million deaths worldwide from indoor air pollution, most of whom are women and children.

With the following stories, we begin an ongoing exploration of the complexities behind Africa's energy divide, and steps that are being taken to solve it.  

Lighting Homes in Tanzania

If you mention Zara Solar around northern Tanzania, you'll likely get more than a few smiles. Like most of sub-Saharan Africa, Tanzania suffers from low rates of access to energy: only 2% of rural Tanzanians have access to electricity. Since 2005, Zara Solar has sold over 10,000 solar photovoltaic (PV) systems, making it the leading provider in the region and helping up to 300 new families plug in every month. The company employs five full-time technicians and contracts with another 25 technicians across the region.

Mohamedrafik Parpia could not have imagined the success that would come his way from providing solar energy in northern Tanzania. "In 1998 we opened a family business which was dealing with sales of electrical items and household appliances. Customers were inquiring on solar panels and we began to order a few systems from Kenya. In 2000, a researcher from the Netherlands walked into the shop and explained to me all about solar and how I could do business better. She connected me to various institutions which supported me and today I am in business."

Parpia says there wasn't much of a local market when he started selling systems in 2000. "A UNDP-GEF pilot project in Mwanza region helped open the market up." Zara Solar received a $50,000 startup loan from US-based E+Co. "The challenge for us now is getting finance from local banks to cope with the growth."

Kerosene in the area costs US$1.25 per litre in more urbanized areas, but it can be double that in remote areas with poor road access.. For a typical family using 6-9 litres a month, this represents a monthly cost of up to $11.25, a substantial burden in a region where the minimum employed wage is only ($43) a month. Zara Solar's systems typically require an up-front cost equivalent to two years of kerosene. Zara Solar has established a micro-financing system to help new customers overcome the barrier of capital costs.

"There is an orphanage far from the grid that was trying to get a connection from Tanesco. They were informed it would cost $25,000. They decided to have a solar system instead, at a cost of $1,000. Today they are happy using the system for lighting and the children can watch TV. Initially they were using a generator, which was expensive."

Some customers would be easily accessible by the grid, but long lag times for connections help turn them to Zara Solar. One new customer lived near the university in Mwanza, an area already served by the national utility. With money in hand, she applied for a new connection from the utility. But the utility said it would take 18 months to connect her residence. She opted to buy a solar system from Zara Solar.

"Some people complain that the costs of a PV system are on the higher side. They worry whether they are buying good products and the systems will work," says Parpia. Zara Solar has jumped these hurdles by creating a financing program for customers, educating them on how to spot poor quality PV systems, and providing reputable technicians.

Parpia has found the Tanzanian government very supportive of the solar industry, especially in its effort to remove all import duties and VAT on all solar products. Parpia has been included in various government delegations related to solar and this has benefited us immensely.

In 2007, Zara Solar received a prestigious Ashden Award for Sustainable Energy. "I became famous overnight with so many opportunities on my doorstep." Within eight months, business had doubled. In April 2008, Zara Solar also won a highly competitive grant from the World Bank's Lighting Africa program. With continued hard work, creativity, and support, Parpia has no doubt that Zara Solar will continue to thrive.

Tapping Agricultural Waste for Clean Power in Nigeria

One obstacle said to be hindering the greater adoption of renewables in Africa is technological expertise. With some creative South-South collaboration, a Nigerian group is making use of an innovative technology from Thailand to convert slaughterhouse waste into clean clooking fuel and fertilizer. Dr. Joseph Adelegan and his organization the Global Network for Environment and Economic Development Research (GNEEDR) collaborated with a Thai university and two other Nigerian NGOs on the "cows to kilowatts" biogas plant.

Adelegan showed that untreated wastewater from a slaughterhouse in Ibadan was polluting local rivers and water sources. The polluted water carried diseases, which could be transferred to humans. When the wastewater decomposed anaerobically, greenhouse gases such as methane and carbon dioxide were generated. The plant is expected to be economically self sustainable and even profitable.

More than 6,000 homes in Ibadan now receive cooking fuel from the project each month, and there are plans to replicate the project elsewhere in Nigeria as well as in Zimbabwe, Kenya and Egypt.

Adelegan is now moving on to other agricultural wastes, and recently won a $250,000 grant from the World Bank to help build a biogas plant to treat cassava waste. Nigeria produces more than 20% of the world's cassava. Refining cassava generates wastewater and greenhouse gases. The biogas plant will reduce waste and generate energy for 2,000 households.

"These people currently rely on kerosene lamps that are very bad for emissions and pollution," Adelegan told CNN. "We also plan to provide them with low wattage lamps to bring down usage."

World Bank's $12mn Bid to Light Africa

Africa at night.
Africa at night.
According to the World Bank, Africa is a $17 billion a year opportunity waiting for off-grid lighting providers. The Bank's highly publicized "Lighting Africa" initiative is an attempt to help entrepreneurs develop local lighting markets away from kerosene and into more sustainable lighting and energy options. Poor African households typically spend 10-15% of their income on lighting, mostly for kerosene. The program gained significant media attention in April when it awarded 16 winning entrepreneurs up to $200,000 each through a marketplace development competition.

While the program's goal to provide modern lighting to 250 million Africans by 2030 is certainly worthy, critics wonder if its $12 million budget can make a dent in this huge problem.

Lindsay Madeira, who works on sustainable energy for the Bank's International Finance Corporation, which runs Lighting Africa, admits the program is ambitious. "The goal is to catalyze a market for modern off-grid lighting products which, in turn, will make reliable lighting available to African consumers," she says.

To put it in perspective, the World Bank Group is investing $130mn in loans and up to $260 in guarantees for Uganda's Bujagali Dam project, a project that is expected to cost at least $799 million (not including transmission lines).

West Africa Beating Energy Poverty

In 2006, the West African economic community, ECOWAS, determined that $52 billion must be invested by 2015 to energize the region to meet its Millennium Development Goals. For that price, the region could bring modern cooking fuels to everyone, increase electricity access in cities to 100%, in rural areas to 33%, and make electricity and mechanical energy available to two-thirds of rural communities. The price tag may sound huge, but for a region with 300 million people, it comes down to a bargain price of just $16 per person per year. While other African regions are tackling the same issues, ECOWAS has made the most progress in calculating required investments. Based on ECOWAS’ work, sub-Saharan Africa requires $12 billion a year in energy service investments in order to halve the region’s poverty as defined under the Millennium Development Goals.

Africa's Grid Guzzlers

In South Africa, which produces half the continent's entire electricity supply, just 25 companies consume 40% of South Africa's electricity. These energy hogs have banded together as the "Energy Intensive Users Group of South Africa" to ensure a continued supply at ultra-low costs. Despite a growing energy crisis, South Africa is helping drive regional energy policies to "attract energy-intensive industries" to southern Africa and beyond.

South Africa is not alone in encouraging "grid guzzlers": In Zambia, one quarter of the country's electricity is consumed by just six mining companies in the Copperbelt province. The privately owned Copperbelt Energy Corporation (CEC) buys power from the state utility and supplies more than 520 MW to the six mining companies and an additional 240 MW for other provincial consumers. CEC also owns the critical transmission link from Democratic Republic of Congo (DRC) to the southern African power grid. CEC transports 220 MW of electricity exports from DRC to Zambia, Zimbabwe and South Africa. Only 6% of Congolese and 20% of Zambians have access to electricity.

In Mozambique, BHP Billiton's Mozal smelter in Mozambique consumes 900 MW, three times the electricity consumption of Mozambique's 19 million residents.

In DRC, BHP Billiton has signed an agreement with the government which could eventually lead to a 2,000 MW aluminum smelter - enough electricity for some 2-4 million urban households in the DRC.

In Cameroon, the Alucam aluminum smelter consumes nearly half of the country's electricity. The government hopes to expand its aluminum industry to a level that would consume five times its current electricity use.