With another round of climate talks set to begin late this year in Paris, the United States wants to lead to the international community. The developed world is listening. But what do the emerging nations think, especially those in Africa?
By most accounts, governance on the continent is improving while borders are opening, all of which has potential to bolster the energy sector there — one that must supply power to the approximately 600 million who are without electricity. Roughly two years after his Power Africa initiative to help feed and finance that need, however, even President Obama is exasperated, but still hopeful, just off his visit to Kenya in July.
The fact that progress is elusive is disappointing. For starters, the Export-Import Bank here lost its funding on June 30th — a financial institution that provides the means by which foreign nations are able to buy U.S. produced goods and services.
The financing, overall, remains a function of governments there privatizing their economies and ridding of them of corruption — things that give investors better odds. And beyond that, the roads and railways within Africa are tough to traverse, which means that such infrastructure must first be laid out so that power plants and distribution systems can get built.
The good news, though, is that Africa was expanding when others were retracting or trudging along: nearly 6 percent growth over the last decade. If good governance can take root, the continent could exceed its potential.
By 2050, Africa is expected to grow from 1.1 billion people today to 2 billion, with a total economic output of $15 trillion — money that will now, in part, be targeted to the transport and energy venues. As the investments compound and the associated opportunities expand, the thinking among both regional leaders and global economists is that gross domestic product could hit 10 percent a year.
Electrification is the primary building block: Blackouts, brownouts and power shortages are all too common in most African countries.
According to the International Energy Agency, sub-Saharan Africa will require $400 billion by 2035 to modernize its energy foundation. The United States’ Power Africa initiative will kick in $7 billion over five years, with much of that going to expand transmission lines to deliver the newfound electricity. Ethiopia, Ghana, Kenya, Liberia, Nigeria and Tanzania are the initial beneficiaries.
With all that need for new energy, just how will the countries of Africa generate their electricity? The international community speaks of harnessing the sun and the wind, and even the continent’s natural gas. Africa’s leaders agree, although they are quick to add that coal could fill a role too.
“One of the main things about the power deficit is that you have to start with the fuel,” says Jay Ireland, president of GE Africa, at a conference in Washington. “There are trillions of cubic feet of natural gas off the coast. There’s also wind, hydro and solar.”
Indeed, Africa is rich with oil and gas, as countries such as Angola, Egypt, Mozambique, Nigeria, Tanzania and Uganda seek to maximize such potential not just for their purposes but to also sell it to others around the globe. As for the natural gas that is supercooled in the form of LNG, it would compete with U.S.-produced natural gas that is expected to be exported to Europe and to Asia.
And there’s also coal. While Africans leaders say that they should be free to use whatever fuel is necessary to industrialize their nations, they acknowledged that global warming is real and that it is manmade. And with that understanding, they made their case as to why coal could fill a niche — to enrich those countries where such resources are located and where they could be responsibly tapped.
“We don’t rule out power from coal,” says Ghana’s President John Dramani Mahama. “We have good potential when it comes to gas and renewable energy, too. We are looking at the effective cost on the environment and we will restrict the (dirtier) sources. We will also use more energy efficient technologies.”
Fueling Africa begins with project financing and it results in new power generation. Obama’s Power Africa initiative is part of the plan, which may pave the way for further investment from both U.S and foreign businesses. The World Bank is another funding source: In fiscal 2013, it approved $8.2 billion for 95 projects in Africa, with energy and mining accounting for a sizable share of that.
“Only 1 percent of energy capital goes to Africa,” says Jim Yong Kim, president of the World Bank. “We need to prepare the deals and reduce the risks,” which includes adding political risks coverage and credit enhancements to investor packages. “We think that people will think in a fundamentally different way.”
“The biggest thing right now from a perspective of multinational companies is that we need more financial players and more manufacturers and service providers,” adds Ireland, with GE Africa. “One of the key things is getting financing. There’s a real perception of risk.”
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