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Sustainable Energy: Towards Clean and Renewable Energy Sources
Mark Hankins, Managing Director
Energy Alternatives Africa
 

Programme

The Modern Energy Future of East Africa will be Private Sector and Renewable, and Governments need to help make this happen

Electricity statistics portray some of the most stark and sobering differences between the state of the developed west and the state of sub-Sahara Africa. Put on a pie chart of total world generating capacity, Africa's electricity share is only a tiny sliver and most of that goes to South Africa. New York City, an area of less than 100 square km, consumes a peak load of 20,000 MW while Uganda, as an entire nation, consumes a mere 180 MW of grid-based power. Rural Africans use hundreds of times less energy than do urban people in developed countries. This lack of modern energy is one of the underlying forces that traps people here in poverty cycles. There is an urgent need for new thinking to address the issue.

Energy use --- and moreover energy planning --- impacts on the continent's finance, environment, development, business, communication and health sectors in huge ways. Many African countries are crippled by the costs of energy projects and on-going energy bills. Loans for dams built 25 years ago are still being repaid.

On one side rising commercial energy costs impact on foreign exchange balances, extracting an ever increasing amount from the national budget to pay for oil imports. On the other side, burgeoning populations, without access to modern energy, consume ever increasing amounts of wood: burning it for fuel, burning it to make charcoal and selling it for income. If a balance between forest regeneration and harvesting is not struck, loss of forest cover means loss of catchment area and ability to hold water. Dams silt up, rivers run dry, electric power shortages follow, and petroleum must be imported to run massive generators. It is a downwardly spiraling cycle…

The problem of traditional energy urgently needs to be addressed. Energy planners give an inordinate amount of attention to modern energy --- electricity and petroleum --- and not enough is given to the "traditional" fuels that are really the mainstay of the rural economy (this is the subject of another paper!). Sustainably meeting the population's energy requirements means providing wood and charcoal energy to tens of millions for cooking. Truly, the candle is burning at both ends. Recognising the problems of the traditional fuels sector (and the connections between it and the "modern fuels" sector), this article examines how East Africa can effectively tackle modern energy problems.

Two power sector transformations --- which have already changed the way the industrialised world's power companies are organised --- are beginning to impact on East Africa. First and foremost, parastatals are giving up their strangle hold on power supply and distribution. Like it or not, private power offers the most realistic way forward for African power supply. Secondly, renewable energy is becoming a more important player in the energy scene. Smaller, more efficient power systems are being taken up in both remote and grid-connected areas. In the same way that the advent of private sector-run cellular phone networks has altered communications, a private-sector led introduction of smaller, renewable-based power supply has the potential to revolutionise the way power is supplied in East Africa.

How We Got Here

Behind the statistics is an agonizing lack of power generation and distribution services in East Africa. Growth in demand for electricity is rising at 6% per year, while supply staggers far behind. Coverage, in terms of rural distribution, is less than 2% and going backwards. Even where there is a grid, there is often not enough juice in it to supply power. For example, Uganda has spent millions running lines to far-flung districts who now get undervoltage power for a few hours a day. When flying over nighttime rural Africa, this is truly the Dark Continent.

Power is an essential underpinning for just about any sector, be it tourism, industry, education, communication, commerce or health. It is impossible to talk of economic transformation when 70% of the population uses 19th century solutions (i.e. wood, kerosene lanterns and dry cells) for their basic energy needs. As demand for power spirals upward, we all seem to be sitting idly by and waiting for someone to do something about it. The question is "Who?". In the old days, it was big projects, donors and Government. The future of energy, as this article will establish, is increasingly in the hands of independently-thinking investors and entrepreneurs.

Historically, donors worked hand in glove with parastatals to plan and build the dams that supply the region with most of its power. Large scale, capital-intensive investment in energy infrastructure were seen to be the only way to light up urban East Africa and to power industry. Though they did successfully bring power to the cities, the projects did not put in place sustainable vehicles for meeting power needs. It is not enough to blame local power companies or "corrupt" African Governments. The building process was largely driven from the outside as donors financed armies of expatriate managers and engineers to plan and construct the dams. During the boom period of 1970-1985, huge sums of tied aid were made available for power projects. Not surprisingly, Western finance paid for Western engineering companies and much of the money ended up back in the banks of the donor country of origin.

After the dams were built and the foreign engineers went home, parastatal utilities consolidated monopoly fiefdoms, poorly equipped with the foresight, finance or creativity necessary to cope with the region's increasingly complex power problems. East African power companies had to work with what they had --- their limited financial resources were not enough to electrify millions of households twenty years ago, let alone today. More responsible to political will than fiscal control, companies subsidised power sales, squandering millions of dollars. Ratepayers and donors underwrote haphazard rural electrification programmes with scant impact. Plans had more to do with donor budgets than real needs or revenue-raising potential. Since nobody else could sell power, companies were not proactive, and they became agents of highly placed politicians, extremely reluctant to give up their cartels.

Indeed, by the end of the 80's, donors were tired of pouring money into power projects that generated no returns, and the well ran dry. Not able to finance neither increases in capacity nor better rural distribution networks, companies began to buckle. Dams silted up, equipment failed, transmission and distribution networks fell apart and quality staff went on to greener pastures. The results are clear. Today, load shedding, blackouts and crisis management are the order of the new "Dark Ages" in Dar, Nairobi and Kampala.

The Privatisation "Pill"

To address these serious power sector problems, multilateral donors --- particularly the World Bank --- are pushing governments to privatise power supply. The conventional wisdom behind power privatisation is that utilities are expensive beasts for governments to manage, and that, thrown out into a competitive world, commercial operators will offer better products to consumers at attractive rates.

Legislation has been tabled in Kenya, Uganda and Tanzania, and the countries are reluctantly being pushed to unbundle the old parastatals. Albeit slowly, East Africa's monopoly power companies are being broken up, and new players are entering the field. Generation and supply of power is no longer in the hands of single companies. In Kenya, KP&L has been broken into a distribution company and power generation company, Kengen, with several IPPs now in action. Uganda and Tanzania are also moving forward, though just as tentatively.

Privatisation of "rural electrification" is being fought in Parliaments, as some MPs worry loudly that commercial operators will "take advantage" of the rural poor. Further increases in electricity prices, the argument goes, will add even more of a burden to the destitute. Although this argument is compelling, it is easy to see through it. The question is "Who can best supply power?", not who should get it. No donor, foundation or bank in East Africa has the billions of dollars that it would cost to send "lifeline connections" to every household in the country, and many of the poor have far higher priorities than electricity. Power monopolies in East Africa have been good neither for business nor for consumers. They have not improved service, and they have not developed the capacity necessary to meet existing demand. They have kept prices low at the expense of service, and consumers are now paying for this in lost work time, lost manufacturing time and darkened streets. The private sector, if properly regulated and supported, will provide far better service and reach.

Consumers and industry long ago started seeking their own energy alternatives in the private sector. In Uganda, Kenya and Tanzania, people and industries are buying their own generators to get around blackouts. There is an installed auto-generation capacity of over 100 MW or more in gen-sets. Battery backups are common devices among urban offices seeking to survive constant shedding. And, having long ago given up on RE programmes, between 5 and 10% of rural Kenyans have a lead-acid battery in their house so that they can watch TV, play music or have lights.

The Renewable Revolution

With little, if any known petroleum or coal resources, East Africa needs to focus on what is available locally. The region is not energy-poor. There are tremendous unexploited hydro-power resources, especially in Uganda and Tanzania. Solar energy resources are virtually unlimited. There are excellent geothermal sites all along the Rift Valley. There are, in many places, good wind resources. Biomass (wood) resources are, of course, the most important energy source in the region.

Worldwide, solar energy has made incredible advances in the 1990s. Fueled by growing consumer and government demand for clean energy, wind and solar electricity are among the fastest growing power sources in the world right now. Wind electricity markets are booming. 2590 MW --- contracts worth $2.5 billion --- were installed worldwide in 1998. $3 billion worth of wind generators was installed in 1999. Last year, Germany installed as much wind generator capacity as Kenya's entire generation system (793 MW). Little has been done to develop wind electric power resources in Africa.

The other rising star in renewables is solar electricity. Though, solar electricity is not near as big a player in terms of megawatts as wind, it is now a billion dollar industry. World production of PV surpassed 200 MW in 1999, up from less than 60 MW in 1992. As many as 70,000 multi-kilowatt households around the world --- mainly in Japan, Germany, the US and Netherlands --- feed solar power into the grid, making their meters run backward. Integrating solar electricity into building facades, which turns office buildings from power hogs to power plants, is a fast growing practice in cities around the world, and there are now office buildings that boast 1 MW power generation capacity. Hundreds of thousands of rural households in developing countries use small solar electric systems to power lights, radios and TVs. China and India are two of the biggest markets for PV in the world. In Kenya, more than 100,000 rural households use small PV systems to power lights and TV in a market worth more than $6 million per year.

Other renewable energy industries, including solar water heaters, small and micro-hydro, geothermal and biomass power, are also growing fast. For example, 7 million square metres of installed solar water heaters in Europe generate 3500 MW.

Battlefields of the New Energy Revolution

Power is a good that people will buy. There is a huge demand for it. Privatisation offers East African industrialists and financiers the chance to address a problem that has plagued the region since independence. Entrepreneurs --- ranging from large multinational corporations operating power stations, to financiers supporting franchises, to small independent rural operators running mini-grids --- need to take up the challenge of power supply, and they need to be allowed by Governments to do so in a matter that is efficacious, safe, affordable to the customers and profitable for the suppliers.

As with the communication, computer and automotive revolutions, a privatised power sector has the potential to grow extremely fast, and its reach will be wide. We are beginning to see privatisation and the potential of renewables, albeit sometimes in crude forms.

There are tens of thousands of renewable energy systems and generators in off-grid sites. Instead of sending expensive lines across mountains and deserts to remote sites, power can be generated on-site using wind, hydro, solar and petroleum. In Hargesa and Bosasso, where there are no power companies, Somali entrepreneurs are profitably stringing up wires to lighting and television customers and charging per connection. This has begun to occur in some rural centres in Kenya and Uganda, though it has been, up to now "illegal" to do so.

In trading centres, there are countless opportunities for entrepreneurs to set up mini-grids powered by generators (as well as hydro, wind and solar) to power appliances, video-cinemas, grinding mills, workshops, machinery, refrigerators and battery chargers. (In Uganda, the World Bank counted more than 700 rural trading centres, most of which are un-electrified.)

Lead acid and solar-PV-based battery systems offer the lowest cost solution for rural households who require lights, radio and TV. Over 200,000 households in East Africa power their Chinese Great Wall black and white TVs with batteries; at least 70,000 of these have a solar panel in the system. This has happened without any targeted finance or organised programme of any sort.

Solar electricity is the power source of choice for remote telecom, church missions and health centres. Tourism is also beginning to take up PV in tented camps and lodges as well. Using modern inverter technology and battery sets, solar and wind electric systems can be integrated with generators, reducing the need to run generators long hours, and to truck in fuels from distant centres.

Power can be sold to the grid. East Africa is under-served by power and there will be opportunities for large-scale operators to enter this market. As enabling laws are developed, opportunities will greatly expand. We have already seen independent power producers (IPPs) selling power into the grid from diesel generators and geothermal sources in Kenya. Industries (i.e. sugar mills, coffee factories, mining operations) with excess power will be able sell into the grid. Entrepreneurs will be able to set up generation facilities (Uganda and Tanzania's hydro potential is great) and sell to the grid. In Kenya, KP&L used a Belgian grant to set up 3 wind generators in Ngong and Marsabet, but grid-connected wind has been taken no further (investors are setting up wind farms in South Africa).

Where there is grid power, businesses and households who desire self-sufficiency can install generation capacity on their premises to meet their own needs. Today, this is done as a survival strategy. In the future, customers will sell excess power from their PV systems to the grid. Sooner or later, one of the architects putting up skyscrapers in Nairobi, Dar or Kampala, will think about including a solar PV facade in the plan.

There is no question about it, with privatisation electricity will get more expensive. Those who think long-term and sustainably will quickly realise that efficient use of power is the most important strategy. Electricity is indeed a precious resource, and we cannot afford to let limited water in reservoirs be "pissed" away on wasteful applications. Throughout the region, those who use power will start installing energy-efficient appliances ( i.e. compact flourescents) and switching to cheaper cooking alternatives. Price rises of electricity in Kenya have stimulated increased requests for energy audits and solar water heating systems already. LPG sales will go up as more and more people switch off their electric cookers.

There is no doubt about it, renewable power sources will play a big role in East Africa. While the power companies in East Africa have their heads buried in the ground, international investors are already poking around. Eskom and Shell Renewables have already visited East Africa looking for opportunities. NEG Micon, the largest wind manufacturer in the world, is also sending representatives around Africa looking for partners.

Hurdles in the Way

When it began 100 years ago, the power industry was started privately and on a relatively small scale. Edison strung up the wires from America's first power plant in NYC and few complained about the fact that only the rich could afford electric lights. It was straight forward business. The more people that bought in, the cheaper electricity became and the more demand that was created. Power supply became an industry --- one of the biggest in the world --- and virtually the whole developed world got hooked up.

The privatisation of power is not a "panacea". Although Africa is neither as affluent nor as fast growing as America in Edison's day, the demand for power is huge. Power availability is certainly one of the requirements necessary to help rural areas overcome poverty. What Edison did have was financiers with long term vision. Investments in sustainable power sources are investments in long term economic growth. East African investors now have the opportunities to invest in power supply, on large, medium and small scale.

Development of private power in Africa, especially as it applies to rural electrification, will need to be guided, supported and nurtured. This process will require input from the government, the private sector, and civil society, and it will take time. Though the power monopolies are over, the unbundling has just begun, and it will be necessary for the private sector, hopefully with input from civil society, to break down the final walls. Uganda, slightly ahead of the game, is working to do this with the World Bank in a several-country multi-million dollar initiative. The effort will mobilise the private sector to undertake rural electrification. Based on success there, other efforts will necessarily spread to the rest of the region.

Every problem contains a kernel of opportunity --- and the current power problems faced by this region can be turned around. Those entrepreneurs now complaining about power shortages and high energy costs should sniff the winds blowing across Africa. Given East Africa's tremendous energy resources, the rapid advancement of energy technology, and the large amount of private initiative available, there should be no power shortages. There are only shortages of common sense….