Mr. Akinwole Omoboriowo II, a leading Power expert, who has been named amongst the much-esteemed list of “Most Influential Figures in African Power” for 2014 and 2015, speaks exclusively to African Leadership Magazine on the future of the power sector in Africa. Excepts. According to the World Bank, only 24 percent of the population of sub-Saharan Africa has access to electricity; what can be done to increase the access to Power supply in Africa?
The key issues affecting the power sector and the initiative the governments can take to address power supply in Africa will be highlighted to Global leaders, African leaders, key stakeholders in the Power sector at the upcoming Global African Investment Summit taking place in London 1st and 2nd of December 2015.
Some of these key initiatives Mr Akinwole Omboriowo, CEO of Genesis Energy, plans to share for discussion will include the following:
1. Cost reflective tariff is arguably one the most important incentives needed to attract and retain the levels of investments expected of the private investors and financiers into the Power sector in Africa. The effective cost of providing modern form of electricity through the use of the prohibitively expensive diesel hydrocarbon because of low power supply from the national grids of most African countries, plus the loss of productivity efficiency, environmental degradation and alternative use of capital is simply way higher than the commercial tariff required by independent power producers to reliably generate and supply more cost-effective electricity.
2. The “Red Tapes” of bureaucratic and sometimes cumbersome processes of securing investment licenses, permits, ease of flow of capital and so on needs to be streamlined in some African countries, to reduce the ease of making investments and to remove the unwanted hindrances stopping more investors participation. We recognise the fact that processes and frameworks are essential for transparency of operating within the Power Sector, but emphasis must be placed on the expected positive outcomes of multiple investments rather than on processes for the sake of protocols!
3. Investor friendly policies and incentives are also required in well-regulated power sector with transparent laws and independent regulator.
Less or Zero Tax for the independent power producers may be considered to both incentivise more investments into the sector and as well as reduce the effective tariff paid by consumers, as all costs of producing electricity are invariably passed onto the ultimate consumers of the electrons. Furthermore, more electricity generated and supplied directly translates to more economic activities in the country, and higher internally generated revenues for the government from various layers of business and personal income taxes. Some analysts are of the view that Obama’s Power initiative is a sign of greater US commitment to the opportunities available in Africa’s power sector; how would you react to this? Access to the pool of finance is a major impediment into developing multiple power projects across the power chain. Generation –Transmission –distribution.
The Power Africa initiative by the US government is a major boost for investment in Africa and indeed sends a positive signal to other country’s global financial institution, private equity funds and financiers that Africa is ready for business. Processes put in place of accessing funds in the US Power Africa initiative is deemed to be very transparent, and once a Power developer can meet the stipulated conditions of accessing the fund, then securing debt finance, equity credit enhancement becomes reasonably standard.
What are the opportunities to explore for technologies for renewable energy generation in Africa?
Owing to the urgent demand for Power in Africa, the strategic place for Clean Power and the limited sources of non-renewable sources of energy like Natural Gas, Coal, Diesel, and so on, most African countries are tilting their policy thrusts towards encouraging investments in the use of renewable energy solutions such as Hydro (Small to Large Hydro), Solar, Wind, Geothermal and Nuclear. Taking the Mini Hydro, for example, it is a very valuable part of the Africa’s energy mix and can be developed with minimal or no negative social and environmental impacts. Mini hydro plants can be set up in virtually all parts of Africa. Their sustainability for stand-alone utilization in the rural areas of Africa can be justified by noting that many viable mini hydro scale plants are actual ‘run-off-river’ schemes based on water wheels that require a minimal amount of civil works. Genesis Energy, for example, is primed to deploy multiple units of Modular Mini – Hydro power plants across several qualifying communities in Africa, in partnership with SHP Mahel of Norway.
The attractiveness of this most innovative Mini – Hydro Modular solutions, besides speed of deployment on Fast track basis of 3 – 6months with little or no civil construction, includes the financing solution of potential funding to be provided by the Norwegian Export Credit Agency of up to 85% of the equipment cost, single digit fixed interest rate and long term repayment period of up to 20 years.
These renewable energy solutions can be deployed to existing electricity grids limited to a consuming community or location through mini-grids, which ensures that communities that are not competitively served by the national grids may still be served modern, clean Power in a sustainable way.
In your view how do you think African governments can attract more private capital to develop energy and power infrastructure?
As mentioned in my above responses, we encourage Governments to remove or reduce the red tapes that hinders attraction of Private Capital, limit or remove fiscal hindrances such as Taxes on independent power producers, put in place more Cost effective tariffs, and maintain zero tolerance for both corruption and as well as zero tolerance for governments defaulting or breaking of valid contracts.
The Electricity regulators need to be independent in discharging its obligations without interference from respective governments and clear key performance indicators need to be set to measure the positive outputs of the regulators as well.
Africa has been described as the last investment frontier; how would you quantify the potentials in of the power sector in the continent?
Africa is a continent with over a billion people and according to a recent United Nations report, the population is expected to grow to 2.5 billion people by 2050, the majority of whom do not have access to modern forms of energy and or electricity. The opportunity for the power sector to light up Africa is consequentially enormous – to say the least. Nigeria, for example is a country of over 180 million people population has electricity consumption per capita of 150kwh and effectively generating less than 4000MW on average to the national grid, this shows the enormity of the supply gap in the country, and which is made worse when compared to other more developed African countries such as South Africa, which has per capita consumption of over 4,600km with a population of just over 53 million and installed capacity of over 48,000MW. Consequently, the huge amount of capital project construction expenditure needed to meet extant electricity supply gap across Africa makes for substantially compelling positive investment opportunities in the Power space.