Green Finance - CC via Max Pixel
CAIRO - 9 December 2018: One of the largest financiers of clean energy in the continent is the African Development Bank (AfDB) Group, a strong supporter of renewable energy and solar power projects in African countries. In fact 100% of the new power generation and decentralized energy investments supported by the bank in 2018 focused on renewable energy, reveals Malinne Blomberg, AfDB’s Egypt country manager. We talked with Blomberg about the size of their green investments in Egypt and why energy resources in Africa are so neglected.
What’s the size of your investments in Egypt in both energy and wastewater?
Investing in the Egyptian power sector since 1974, the African Development Bank has financed 25 energy operations. In the last decade alone, AfDB- financed projects added 4,000 MW to the national grid, created 9,000 direct jobs and met 4.5 million customers’ demand. Currently, the portfolio in Egypt consists of 30 operations for a total commitment of $2.9 billion, with a focus on energy, water and sanitation and irrigation as well as support to the government’s reform program.
Under the aegis of the New Deal on Energy, the Bank has placed green growth at the heart of its operations. The Bank approved financing in 2017 for three private sector solar energy projects at the Benban solar park in Upper Egypt to the tune of $55 million.
In water and sanitation, the AfDB is helping Egypt address water quality and sanitation needs through supporting the second phase of the Gabel Al Asfer Wastewater Treatment project that is currently being completed with a total capacity of 2.5 million m3/day, and the Abu Rawash Wastewater Treatment Plant extension with a total capacity of 1.6 million m3/day that is just starting.
AfDB solar power project in Egypt - Courtesy of AfDB
What other contributions has AfDB made to Egypt’s economic reform?
The AfDB has supported the government’s macroeconomic and structural reform pro- gram as it was indeed critical for jump-starting economic growth after the slowdown following 2011. Through the programmatic (2015-2018) Policy-based Operation (PBO) for Economic Governance and Energy Support Program, AfDB, together with the World Bank and the IMF, supported government reforms in three key areas: enhancing fiscal consolidation; ensuring sustainable energy supply; and enhancing the business environment. The AfDB’s support amounted to a total of $1.5 billion. The final $500 million tranche was disbursed in September 2018.
How do you assess Egypt’s current investment environment in renewable energy?
Over the past few years, Egypt has made strides in terms of attracting investments to the renewable energy sector, especially the private sector on both international and domestic levels. This achievement is underpinned by a strong government reform pro- gram that aims at tackling the legal, regulatory and institutional bottlenecks that traditionally impeded private investment in the sector. The reforms have indeed borne fruit, with close to $2 billion of private investment in the renewable energy sector alone being currently realized on the ground. Several more investments are in the pipeline.
How does the New Deal in Energy for Africa en- hance partnerships across the continent?
The AfDB’s New Deal on Energy for Africa is a partnership-driven effort with the aspirational goal of achieving universal access to energy in Africa by 2025. The AfDB has worked with governments, the private sector, and bilateral and multilateral energy sector initiatives to develop a Transformative Partnership on Energy for Africa, mobilize domestic and international capital for innovative financing, and support African governments to strengthen energy policy among other goals.
Can entrepreneurs help solve the challenge of high costs of renewable energy?
We’ve supported entrepreneurs and incubated 40 startups working on waste management under the “Leha Keema” initiative. This resulted in the establishment of 28 startups that are operational, have mobilized financing and are growing, producing fish-feed and bricks from waste, alternative wood and activated carbon from biochar required by water treatment companies. The success of this project has encouraged us to mobilize additional resources in order to design a larger project, called “Tanmia wa Tatweer,” which will support entrepreneurs in clean and green, agribusiness and handicrafts and performing arts sectors.
AfDB's Egypt country manager Malinne Blomberg - Courtesy of AfDB
How can Egypt as an energy hub help solve Africa’s related crises?
The new sizable gas discoveries in Egypt, the large increase in the number of new oil and gas concessions, and the intensive government investment program in new modern and efficient energy infra- structure are the foundations upon which Egypt is building its aspirations to becoming a regional energy hub. Unlike the North Africa region, not all of Sub-Saharan Africa has access to modern energy sources, where Egypt can play a major role to help. Egypt can also provide a lot of experience sharing with many of its fellow African countries on how it has managed to achieve universal access to its rather large population and on the recent success stories on attracting private investment to the sector.
Why aren’t there enough investments in Africa’s energy?
In total, $230-310 billion is required until 2025, while an additional $190-215 billion is required from 2026-2030. The total average annual investment from 2018-2030 is estimated at $32-40 billion. There is no question that these amounts are too large for public investment alone; private investment in Africa’s energy sector is therefore a must. Yet there are undoubtedly barriers to mobilizing private investment in the energy sector in Africa, including lack of access to affordable finance to SMEs, volatilities of exchange rate, and the lack of legal and regulatory frameworks for private in- vestment.
How do you see Africa’s transition to clean energy in parallel to its potentials and needs?
The large gap in terms of access to modern energy sources in many African countries poses several developmental and economic challenges. However, since Africa is building its energy sector almost afresh, there is a great potential to maximize the use of green and clean energy sources that the continent is already endowed with in various forms. The Bank saw this opportunity and indeed tried to capitalize on it. As a result, since 2017, renewable energy has increasingly taken a significantly larger share of the energy investments supported by the Bank.
How can mobile technology help smooth transition to clean energy in Africa?
The so-called PAYGO model has proven to be very successful in scaling up access to modern energy in many parts of Africa where access is low. In such cases, mobile technology is used to facilitate acquisition or lease of solar home systems in peri-urban and rural areas of Africa where people generally cannot afford to buy those systems in cash upfront. In those areas, the availability of modern mobile technologies is a prerequisite for the adoption of modern energy solutions.