This content is from: Portfolio

4 Lessons Power Africa Has Taught So Far

Collaboration, innovation and a multipronged approach hold the key to success in a U.S. initiative to develop Africa’s power sector.

Two years ago President Barack Obama launched one of the most ambitious development initiatives of his presidency: Power Africa, which aims to increase access to electricity on the continent.

Although most of us take for granted the ability to flip on a light switch, refrigerate food or charge a cell phone, some 600 million people in sub-Saharan Africa — roughly two thirds of the population — live without such comforts. This infrastructure deficit imposes severe restrictions on essentially every aspect of life, from health care to education, to farming and business activity.

At a time when the developing world is showing so much potential to participate and even lead in the global economy, this lack of electricity limits economic growth and overall progress. Power Africa, a partnership among more than 100 private sector and public partners, including African governments, is helping to change that. The initiative has generated $20 billion in private sector commitments so far.

My group, the Overseas Private Investment Corp. (OPIC), which has a long history of supporting major infrastructure projects throughout the developing world and of partnering with the private sector, is playing a key role. We’re happy to report we’ve exceeded our initial $1.5 billion commitment to the initiative, two years ahead of schedule. To date, OPIC has approved $1.6 billion in finance and insurance commitments to Power Africa, which will support the installation of about 1,500 megawatts of new power capacity. The projects we’ve supported include the construction of a gas turbine power plant in Ghana, a wind power plant in Kenya and a heavy fuel oil plant in Senegal.

This commitment represents both a major milestone as well as just a small fraction of the work that needs to be done. Bringing electricity to Africa’s rapidly growing population will require a sustained effort. Here’s what we’ve learned so far.

We need to use all of Africa’s resources. The list of approved Power Africa projects reads a little like a laundry list of how to use the planet’s energy resources — and that’s the way it should be. Most of Africa is very sunny, has strong winds in many regions and boasts generous reserves of oil, gas and geothermal steam. When considering how we bring electricity to hundreds of millions of people who have none, we need to consider all of the above, in terms of not just the types of power we produce but also the way we produce it.

Collaboration is key.Power Africa enjoyed a shining moment earlier this year when East Africa’s first grid-connected, utility-scale solar power plant came online in Rwanda. The 8.5-megawatt Gigawatt Global plant got its start with the support of the U.S.-Africa Clean Energy Finance (ACEF) program, a partnership of OPIC, the U.S. Trade and Development Agency and the U.S. State Department, which was established to provide early-stage support to promising young projects. This collaborative venture has provided a way to jump-start some 30 projects that show great potential but may need a little extra boost before they are ready to qualify for OPIC or private finance. Today the Gigawatt Global plant has capacity to generate 6 percent of Rwanda’s power.

Details matter. Successful projects require not only large amounts of time and money but also attention to all the small details. This is particularly true in developing countries that have less of a track record of successful power development and thus need to ensure not only that a plant is built but also that the project is structured in a financially viable way. One of the most useful tools we’ve developed together with our partners in the U.S. government to help advance Power Africa is called “Ten Important Features to Include or Consider for a Bankable Power Purchase Agreement,” a straightforward document that outlines the way to write these agreements to satisfy the needs of both the power producer and the offtaker. In any market — but especially emerging markets — these agreements are critical to ensuring fair and viable pricing for large-scale projects that will help guarantee that energy will continue to be produced after a power plant is built.

Whereas Africa lags in access to power, it can be a leader in innovation. The term “leapfrog technology” is often used in reference to cell phones and mobile banking, which are being adopted ahead of land lines and physical banks in many developing countries. But the same concept refers to power. Africa’s rapid urbanization means that more and more people will be connected to the grid, but there will remain a massive rural population that needs off-grid ways to get electricity. Off Grid Electric, one of the projects that’s received support through the ACEF program, developed pay-as-you-go home solar kits that help rural residents access power for home lighting and electricity. It’s just one example of the innovative ways in which businesses are working to address this major challenge.

John Morton is chief operating officer and chief of staff of the Overseas Private Investment Corp., the development finance institution of the U.S. government, in Washington.

Get more on emerging markets.

Related Content