Exploit the huge potential for renewable and climate-friendly energy in local communities by developing the markets that enable SMEs to invest effectively in production, distribution and efficient use of decentralised energy sources.
Percentage of population with access to electricity. Sub-Saharan Africa has the lowest level of access to electricity in the world.
Source: World Energy Outlook (IEA) 2004.
Despite abundant fossil and renewable energy sources, the level of access to energy in Africa is the lowest in the world. More than 75 percent of the population in Sub-Saharan Africa (and more than 90 percent in rural areas) do not have access to electricity.
Even in areas with access to electricity, it is often expensive and unreliable, making it difficult for businesses to operate and be competitive. Close to 50 percent of African companies identify electricity as a major constraint to doing business. Irregular supply of electricity accounts for average losses of 6 percent of total sales and for enterprises in the informal economy up to 20 percent.
The absence of modern forms of energy, such as electricity, liquid fuels and gas, affects productivity, employment, communications, health-care and education, especially for women and children.
Improving energy access in Africa requires efforts at different levels: Strengthening regional cooperation on large-scale energy investments in generation- and transmission lines; expanding national grids and managing utilities more efficiently; and increasing the use of decentralised energy options, such as hydro, biomass, solar and wind energy. In remote areas that will not gain access to the national energy grids in the foreseeable future, decentralised, renewable energy systems are often more cost-effective and reliable than diesel pumps and generators in providing electricity, heat and mechanical energy.
Africa has abundant untapped renewable energy sources that could become the backbone of a reliable, affordable and low-carbon energy system. The technologies are well known and are becoming more reliable and profitable in response to fluctuating fossil fuel prices, increasing market volumes and technological innovation. At the same time, they are generally more labour-intensive in production, installation and operation than centralised energy systems.
African countries already have positive experiences of using decentralised renewable energy sources that can be replicated and scaled-up. In Mauritius, residues from the sugar industry meet more than 40 percent of the country’s electricity needs. In Mali, female entrepreneurs are drying and marketing mango with the help of solar energy. In Kenya, a rural company has manufactured, sold and installed over 300 water pumps, driven by wind energy. Kenya also has more than 200,000 solar-electric (PV) systems, mainly
marketed and installed by private companies. There are promising market opportunities in Africa for SMEs, both as energy providers and energy consumers, be it in agriculture, agro-industries, tourism or commerce. The benefits of decentralised energy production and use include lower and more stable energy prices, enhanced job creation and income generation, increased competitiveness and improved conditions for innovation and entrepreneur-ship, including for women entrepreneurs. In households, women and children will have more time for productive activities and education, and reduced exposure to dangerous indoor air pollution, as new and cleaner energy systems replace the inefficient use of wood and charcoal. At the same time, renewable energy and energy-efficient technologies are climate-friendly and an important part of a future energy system.
A number of constraints affecting the market for decentralised energy need to be addressed. These include the lack of awareness, knowledge and skills needed to develop investment proposals, poor access to risk capital and loans, and a restrictive regulatory environment.
Almost 50 percent of firms in Sub-Saharan Africa identify lack of access to electricity as a major constraint to business
Source: World Bank Enterprise Surveys (2009)
The Africa Commission calls for the following policy actions on energy:
- R18: Increase production, distribution and productive use of electricity and other forms of energy in a cost-effective and climate-friendly manner. This need has to be addressed at the regional, national and local levels. In communities with limited access to energy, the need can be met by an efficient utilisation of local and renewable energy sources.
- R19: The private sector, in particular SMEs, must play an important role in the provision of energy services at the local level. Their potential should be utilised by stimulating and expanding the market for decentralised, renewable energy services.
The Initiative: Access to Sustainable Energy
The Africa Commission will launch an initiative addressing the African energy deficit at the local level. The energy initiative will stimulate and expand the emerging market for sustainable energy, primarily in rural and peri-urban areas, by strengthening the role of SMEs in delivery and productive use of energy from local and renewable energy sources. It will build upon positive experiences with decentralised energy systems in Africa, where technologies are becoming increasingly reliable and profitable.
This initiative will, in support of government policies, provide assistance for:
- Policy advice to African governments to strengthen the market for decentralised renewable energy systems, e. g. through regulation that facilitates private production, distribution and sale of electricity by appropriate power purchase agreements and feed-in tariffs and by creating other incentives for using renewable energy. These actions will be further strengthened by the sharing of knowledge and successful practices among countries and by active outreach via printed and electronic media.
- Capacity support for small and medium-scale local energy producers, business associations, financial institutions, local authorities and other stakeholders in the form of technical assistance and training. It includes assistance to develop bankable investment projects, improving access to know-how, technologies, markets and potential business partners, improving financial institutions’ ability to appraise decentralised energy projects and facilitation of public-private partnerships.
- Finance to investment projects by SMEs, both for the production, distribution and productive use of sustainable energy at the local level. This support will be developed in close cooperation with national financial institutions and could comprise credit lines, guarantee schemes or other forms of risk mitigation, soft loans, equity or other instruments. Support could be channeled through existing banks, rural energy funds or agricultural credit organisations. Options for financing under the UN Climate Convention will be considered as part of the financing package.
The Africa Commission’s energy initiative will be implemented with the African Development Bank and will contribute to the objectives of national development policies and plans in the target countries. It will be a contribution to the Africa-EU Energy Partnership and will seek partnership with the European Commission and EU member states, as well as with the AU and relevant regional economic communities. It will be open for participation and financial contributions from other development partners, private companies, private sector organisations, foundations etc. in Africa and abroad.
This page forms part of the publication 'Realising the Potential of Africa’s Youth' as chapter 12 of 25
Version 1.0. 09-06-2009
Publication may be found at the address http://www.netpublikationer.dk/um/9336/index.htm