Engaging the Private Sector in the Quest for Universal Energy Access in Africa

Sub-Saharan Africa is still largely in the dark when it comes to access to electricity. Fewer than three out of 10 of the region’s people have grid-based access to electricity which is essential for education, agriculture, healthcare and business, and where it has been installed, it is all too often patchy, costly and unreliable.

But momentum is building around the concept of energy as a driver in development. The UN has designated 2012 the Year for Sustainable Energy for All, and announced a clear goal of universal access by 2030.

Here at the World Bank, we estimate that it will cost US$40 billion dollars per year for the next 10 years to overcome the challenges currently facing the African power sector. Meeting a target like 2030 calls for creative thinking on key questions. Who is best placed to deliver services? Where does the financing come from? And how can progress be sustained? It also calls for more appropriate policy and regulatory frameworks, to encourage the private sector to take risks.

I recently moderated a thought-provoking discussion at World Bank HQ about how to involve the private sector in scaling up energy access in Sub-Saharan Africa, with guest contributors from within and outside the region. It was fascinating to hear the first-hand testimony of people working in countries as diverse as Guinea and India, and I feel strongly that their experiences can help us overcome challenges and unblock some of the obstacles, as we move forward.

For example, there can be a simplistic assumption that bringing electricity to a remote village will solve all the community’s problems. However, this is not always the case, as Nava Touré, from the Bureau for Decentralized Rural Electrification (BERD) in Guinea, West Africa, explained.

In just three years, local private operators have made 12,200 connections in twenty-four remote villages, using isolated mini-grids – as part of a pioneering public-private partnership (PPP) with BERD. While hugely important, Touré  said, introducing electricity is the starting point and communities need support to translate it into productive use.

Part of this responsibility lies with training staff in the local operators, so the service is properly delivered and maintained. I was also struck by the highly flexible ways in which these operators have adapted to their customers allowing poor farmers pay for electricity in kind, through a barter system.

The need for community involvement is supported by an Indian entrepreneur, Manoj Sinha’, whose company Husk Systems has brought electricity to villages that were declared ‘un-connectable’ by the state-owned utility.

Working on a fast, efficient and locally driven basis, Husk Systems focuses on building small, village-based, low-cost biomass plants and training local people to run the plants which convert otherwise discarded rice husks into biomass for electricity. Since 2007, their bottom-up model has powered 25,000 households in more than 250 villages in the Bihar region of India, employing and training more than 300 local people and is a great inspiration to others.

The Guinea and India experiences - of keeping the private sector engaged once they have begun to reach remote communities - have been echoed in Nepal, Morocco, Cambodia, Mali and Tanzania. 

Since 2003, Mali’s Rural Energy Agency (AMADER) has encouraged private sector companies to take a bottom-up approach to the challenges of low energy access in remote rural villages. By providing targeted subsidies to cover investment costs and technical assistance the ‘spontaneous projects’ initiated by domestic private companies, NGOs, and other associations have led to about 43,300 connections to households. There are now about 82 completed and ongoing projects, which is extremely encouraging.

Similarly, in Tanzania, renewable energy potential is being harnessed to bring electricity to poorer areas. This has been made possible by the country’s enabling policy and regulatory framework, including standardized power purchase agreements and tariffs. The government supports small power producers though matching grants for pre-investment support and market development, connection subsidies and a credit line that facilitates long-term financing through local commercial banks. The Rural Energy Agency is currently working with IDA on establishing a Carbon Finance Programme of Activities that is expected to improve the financial viability of small renewable energy projects.

One way of making sure experiences like these are shared across national boundaries is through the 270+ strong network of African electrification practitioners called the Africa Electrification Initiative (AEI).  Primarily a knowledge-sharing community, it’s helping some of the key people involved in the delivery of electricity in SSA to learn from one another, how to design and implement sustainable public-private partnerships to accelerate the pace of electrification.

So, while it’s clear to me that private sector involvement in access scale-up programs can take different forms, what unites them is: the need for an enabling policy and regulatory framework; initial capital, whether through equity, loans or both; plus training and capacity-building at all levels, to achieve commercial sustainability.  From Guinea to Mali, India to Tanzania, there are more and more players finding ways to make it work.

I think it falls upon us in the international community, to be more strategic in our engagement with the private sector so we can play a meaningful role in meeting that UN goal of Universal Access by 2030.