Powering Africa: The off-grid challenge
President Obama’s Power Africa initiative harnesses the power of private sector investment to help the more than 600 million people in Sub-Saharan Africa, who lack access to energy. It’s a staggering number, but also one that does not fully capture the extent of energy poverty on the continent, or the challenge of delivering power to many of the more rural areas on the continent.
In the same way that powering Africa will require tapping a variety of resources including both traditional and renewable fuels, it will also require some innovative approaches to bring power to off-grid populations.
Here, Peter Ballinger, Director of Business Development at the Overseas Private Investment Corporation (OPIC), discusses the off-grid challenge in Africa. Ballinger leads the U.S. Africa Energy Development and Finance Center in Johannesburg, South Africa and in his work supporting business development across the continent, he has seen both the urgent need for more electricity as well as some promising solutions to deliver it.
We hear a lot about the 600 million people in Africa who have no access to power, but less about who they are, where they live etc. What can you tell us about those people?
Well, I work from a regional office in Johannesburg in South Africa. About 80 percent of all the electricity that is consumed in sub-Saharan Africa is consumed right here in South Africa. What that means is that every other country in sub-Saharan Africa is basically living on 20 percent of the region’s limited electricity supply. We often say that more than two-thirds of the people on the continent lack power, but in many places the shortages are far more severe.
Energy poverty is particularly severe in rural areas. Why are traditional ways of delivering power insufficient to reach these communities?
Most Africans are not connected to the grid and might never be connected. They may have the wherewithal to pay for power but there is just no electricity available. Some burn kerosene lanterns or charcoal in their homes as a means to cook or so that their children can do homework after dark but this is not sustainable. Kerosene and charcoal burned indoors damages the quality of the air and poses health hazards. This lack of easily accessible electricity impacts every aspect of life and work from charging a small cell phone to operating a small business.
One of the ways OPIC and other agencies of the U.S. Government are working to introduce more off-grid power is through ACEF, the U.S.-Africa Clean Energy Finance Initiative, a partnership of OPIC, the U.S. Department of State, the U.S. Trade and Development Agency, and the U.S. Agency for International Development (USAID). ACEF provides support for early stage project development, often to businesses focusing on off-grid power.
ACEF is helping to do in the energy sector what we’ve seen for years in the mobile telecom revolution. It is providing support to a variety of projects designed to generate power from biomass, and from solar and mini-hydro plants. There are all sorts of businesses focused on ways to deliver power that is not delivered via traditional grids. These include solar lighting, phone charging and micro-grids.
What are some of the more interesting and promising off-grid solutions you’ve seen?
Off-Grid Electric is a business that bypasses the grid by installing solar home kits in northern Tanzania. Another off-grid technology that has already shown proven success in India is Husk Power Systems. Husk developed a biomass technology to generate power from discarded rice husks and used OPIC financing several years ago to establish a series of mini-power plants based in remote villages. These plants are simple enough that local villagers can be trained to operate them. Husk is now working to introduce the same technology in Africa.
In addition to reaching remote populations, are there other benefits of off-grid power?
I would say the major benefit with off-grid power lies in the smaller size of these projects. For starters, with a project that is measured in the 5-15 megawatt range, the list of potential investors is exponentially larger than those who would enter a $900 million, 400-megawatt project. The investment and risk are smaller and the speed of construction and return is swifter. You can avoid the lengthy negotiations required with determining an off-taker or a power distribution company. Off-grid power providers are often community-based and the payment systems can be made via cell-phones, for example, so consumers can pay for their power as-needed and in advance.
Many off-grid power projects are also franchise and lease projects that can bring in small investors who will own and operate the project for the community. It really helps introduce sustainability, spreads power access to those off the grid. These solutions also help take kerosene and diesel out of the equation for home power use.
Describe the business opportunity
The business opportunity is tremendous for many, from the companies that are developing these leapfrog technologies to the investors that are helping to introduce them. By helping to provide the energy businesses and people need to sustain economic growth, Power Africa is building upon the work that OPIC has been doing for a long time.
I think Power Africa is bolstering OPIC’s efforts by bringing additional resources to this longstanding challenge. But more importantly, Power Africa is helping to direct the private sector’s focus on the burgeoning opportunity in Africa.