Thursday, 12 June 2014

US-Africa Energy Ministerial

Catalyzing sustainable Energy Growth in Africa
 June 3-4,2014, Addis Ababa, Ethiopia

Part One:

Governance as a catalyst for investment and sustainable energy growth;

The African Continent holds large untapped energy resources; however, per capita energy use is less than a third of global average, and an estimated 600 million people lack access to electricity. Development of energy resources for both domestic use and export revenues is often limited by lack of investment due to deficiencies in both policy and structural operating environments. According to reliable estimates, for the African continent to reach energy access by 2030, it would require $48 billion a year in global investment. Currently only $9 billion a year is being invested.

Developing the energy resources and infrastructure that offer revenue and deliver reliable and affordable energy to Africans is essential to development and prosperity on the continent. Fundamentally, it is only the government sector that can stand up the policy, legal, regulatory and commercial frameworks that reduce the systemic risks borne by future investors. If governments take critical actions to reduce systemic risk, energy sector investment will become more attractive, thereby increasing energy supplies, and lowering costs to consumers. The most important components of reducing the risk are political stability, elimination of corruption, ease of doing business, strong capital, and financial markets and the rule of law.
Substantial private investment in the energy sector is essential if the energy resources and needed infrastructure are to be developed. Yet the market for investment capital is global, and African governments must take steps to make investment in their energy sectors competitive with other projects around the world. To meet their need to private capital, each African country must improve its investment climate by improving policy, legal, regulatory, and commercial frameworks to meet global standards. Each African country is competing for private sector investment funds against every other country in the world and their relative operating environments and risk profile will be judged. Continental organizations work with countries and investors to promote and foster operating environments that will lower risks to a level that is acceptable to the markets and catalyze more investment in numerous countries in Africa.
Interactive moderated discussion was made in the lists under following the remarks;
  • What specific actions can African governments take to enhance the policy, regulatory, and commercial frameworks in their energy sectors?
  • What lessons can be learned from successful efforts to encourage private investment in Africa and around the world?
  • Recognizing that competition for capital is global, what actions can African governments take to increase the relative attractiveness of their energy sectors to investors?
  • What role can public private partnerships play in accelerating the development of energy infrastructure?

US government and multilateral tools for encouraging energy financing;

The capital required for energy resource and infrastructure development in Africa far exceeds the financial capacity of most national governments and amounts of assistance from foreign donors. Private investment in Africa’s energy sector will thus increasingly be the primary mechanism for assuring optimal development of energy resources. In order to increase the flow of energy investment in to developing economies, U.S trade and development agencies and multilateral financial institutions have expanded their tools and resources for energy investment, particularly in the clean energy sector.
Until markets are fully transparent and globally competitive , these agencies/institutions can continue to play a critical role in reducing the systemic risks to private investors by providing analysis of markets and technology, and offering financial support and institutional requirements for technical and government regulatory structures. These tools help to make investments in Africa energy projects more attractive and increase the level of private investment in the sector. The ongoing success of individual countries in attracting foreign investment is tied to the investor’s basic risk perception. The most important components of these are political stability, elimination of corruption, ease of doing business, strong capital and financial markets, and the rule of law. Partnership with these institutions can help to foster and encourage individual country achievement of these goals.
Export - import bank of the United States of America, US trade and development agency, Millennium challenge corporation, Overseas private investment corporation, World bank, , the African development bank  are some of currently active institutions  to support the initiative.
Interactive moderated discussion was made in the lists under following the remarks;
  • What specific actions have agencies/multilateral financial institutions taken, or plan to take to encourage more private investment in Africa’s energy sector? How can these institution better cooperate with private investors to leverage more resources for African energy development? Which programs /initiative exceeded expectations? Which have fallen short of expectations? What lessons have been learned?
  • What are the barriers to accessing financing from these institutions and how can they be overcome?
  • What actions can African governments take to help the U.S and multilateral agencies/institutions become more effective in unlocking private investment?
  • What can African and U.S companies do to increase the benefits they receive from these agencies/institutions?
  • What can national policy makers do to create more business friendly environment to attract investment-an how technical assistance from these institutions can help?

Mini-grids as a catalyst for sustainable energy growth

About 600 million Africans do not have access to electricity which forces them to turn to costly and unhealthy energy alternatives, such as diesel generators, smoky cook stoves, and battery and kerosene power lights. While many governments have made the provision of electricity access a top priority, the pre-dominate approach to increasing energy access has been to extend the national grid. However; central grid extension to rural areas can be costly.
Mini-grids and other decentralized solutions can be an attractive alternative to larger, centralized solutions in rural areas for a number of reasons. Governments, companies, and consumers have shown substantial interest in different aspects of the mini grids such as technology performance and standards, integration of smart grid technologies, and load management, and policies and programs to promote mini grid installations. There continue; however; to be barriers - technological, financial, political, and regulatory - that stand in the way of a flourishing mini grid market.

Interactive moderated discussion was made in the lists under following the remarks;
  • What are the market barriers for the scale up of mini-grids?
  • What are viable business and financing models for mini-grids that provide energy access with and without the prospect of grid connection in the future?
  • What are the policies and regulatory frameworks that are required to support commercially viable mini-grids, in particular the renewable generation based mini-grids?
  • What public mechanisms can be created for increasing awareness and disseminating market information and location specific demand characteristics to develop robust markets?
  • Are there technologies, load management approaches, standards, or other enabling factors that would create cost effective mini-grids for both consumers and installers?