The head of the AfDB, Akinwumi Adesina, wants to connect 75 million people with off-grid-systems. But he still thinks, that Africa has to use all means of energy, even new coal fired power plants.
How can the Africans still lacking power get the energy they need?
First of all, The African Development Bank is leading on renewable energy in Africa. We co-developed the Africa Renewable Energy Initiative (AREI) together with the African Union and African leaders during COP21, the world climate summit in Paris 2015. The initiative has commitments of ten billion Dollars from the G-7-countries to expand access to electricity through solar, wind, small hydro or geothermal projects. That is going very well. Germany contributed two billion Euro to the independent delivery unit of that Africa Renewable Energy Initiative.
If you look at renewable energy companies: They lack access to finance. Especially those operating in the off-grid-area. So the African Development Bank is launching a fund called Facility for Energy Inclusion which is a 500 million Dollar fund to provide both equity and dept for renewable energy companies producing everything from three megawatt to 30 megawatt of energy. Most of them rely on solar systems. The third thing, we are doing, is supporting the preparation of projects. The lack of well developed projects in renewable energy projects is a problem.
The bankability for bigger investors, right?
We are financing that a lot, and at the African Development Bank we help to scale up the business models. So we launched a co-guarantee-platform. It will take our own guarantee-facilities and those of other multilateral development banks and put it into one big fund to de-risk renewable energy projects at a bigger scale. We are doing quite at lot. Business models like that of Mobisol are of great interest to us. Mobisol is a Berlin based company selling small solar systems to rural households in Tanzania and other African countries via mobile money applications. My goal as head of the bank is to connect 75 million people to off-grid-systems. It is doable. If you take companies like Mobisol or M-Kopa, which has a similar business model mainly in Kenya, reaching 250 000 people a year, then I say: Let’s finance them to do ten times more. And then replicate that in 30 countries. And then we can reach 75 million people. We are talking about large scale.
The African Development Bank (AfDB) is promoting renewable energies all the time. But just a few days ago the AfDB approved investment into a new coal fired power plant in Senegal. Why is that?
The other thing I want to say about energy and Africa, Africa needs grid, It needs mini-grid, it needs off-grid and it needs an energy mix. It is not possible to power industries with solar. So we need a combination of grid and off-grid based power. Africa has a huge amount of resources. It has gas, it should use natural gas. It has a lot of water for big hydro it should use. And in some areas it has coal. Africa should use that coal but be mindful of the environmental impacts. Because the critical issue is: Use the cleanest coal technology available to reduce emissions. That is key. At the African Development Bank we pay special attention to environmental and social safeguards. So we have that as a policy. Projects that have been in the pipeline like the Sendou coal power plant in Senegal you are referring to, so we help African countries to say: If you have to use coal, then use the ultra super critical technology, which is the best in the world. But you know: The challenge Africa has. It has no power. So you cannot really choose. You have to use all means of power resources. But do it as environmentally sound as possible.
When I talk to Adnan Amin, the head of the International Renewable Energy Agency (Irena), he says: We need a power connection from Cairo to Johannesburg . Is that a vision, or is that already under way?
When it comes to power, we need regional power pools. There are countries that have more power than they can use others have no power. The African Development Bank is investing a lot into interconnectors to link for example the countries of Sierra Leone, Liberia, Guinea to Cote Ivoire, so they get access to power from Cote Ivoire. We built a connection to link Zambia, Zimbabwe and Namibia so they can get electricity coming from the Kariba Dam near Victoria Falls.
As soon as the dam and the generators are repaired and the dam has water again after the long drought….
If it is repaired. We also financed an interconnector between Ethiopia and Kenya. Those kind of interconnections are very important. But the other thing we work on are utilities.
We give utilities technical and non technical assistance. We set up a big program to look at national utilities reform. They need to reform their business models and prizing models. When you look at power investments it only makes sense with a cost reflecting tariff. If the prize do not reflect the cost then people will not invest in the sector. So the policy and regulatory environment oft the power sector has to change too. As a bank we put in 12 billion Dollars into the energy sector for the next five years. We expect to leverage between 45 and 50 billion dollars from the private sector or other co-financing investors. We are working now in Uganda with the Bujagali hydro power station which we try to refinance so they can lower the tariff. Now it is 13 Cents per kilowatt hour, we would like to get it down to seven. The government of Uganda approached us as a lead arranger to structure a long term dept to extend the financing of the facility to bring down the tariff.
You mentioned in your speech at the Berlin summit „A world without hunger“ that the bank is investing in cooking energy too. How do you do that?
We do not want to reinvent the wheel. We want to support what already works and want to take it to a higher scale. There is a lot of work in clean cooking stoves, energy efficient stoves. There is liquefied natural gas (LNG) that can provide access to clean cooking energy when they can build up the delivery system in the rural areas too. It requires a distribution chain to deliver the cylinders and refill them. The poor households will need access to consumer credit to be able to buy the cylinders. We are looking at these two options and work with the Clean Cook Stove Alliance to see how to scale up these projects. Our target is to reach 150 million people over the next ten years. We are not developing a new technology but take what is already developed and create a new financing vehicle to give access to the bottom of the pyramid to women in particular.
The best health investment you can make.
I am particularly passionate about it. If you look at cooking. Every year 300 000 women and 300 000 kids in Africa die because the rely on fire wood kerosene and charcoal. So I thought, If we do not do something about that in the time of my ten year tenure six million people will die under my watch. That is not acceptable.
With these programs you even can destroy the business of Al Shabaab in Somalia which is financing it’s terror mainly with the charcoal business.
(he laughs) Yes. That is right.
So where to you want to steer the bank in the next few years?
In the last one year we made our largest approval in the history of the bank. We made about 10.5 billion Dollars. We also made 6.4 billion Dollars of disbursements. The highest in the history of the bank. We put together a AB-loan for Eskom to finance the South African utility with 9.65 million Dollars, the highest ever provided AB-loan in Africa’s history. I measure results on the ground, We connected in 2016 around 3.5 million people to power.
Dagmar Dehmer of the Berlin based daily Der Tagesspiegel conducted the interview in Berlin.