Rwanda provides lessons on how to narrow Africa’s energy deficit
Rwanda’s energy sector reforms are striving to improve energy pricing efficiency, increasing sustainable investment in the sector. Reforms target an ambitious goal of connecting over 70% of the country’s population to electricity by 2018.
Only 16% of Rwanda’s households are connected to the grid. But it’s not all doom and gloom. The country is emerging as a regional high-tech hub and one of the world’s most competitive economies. It is one of the countries showing that it is possible to reverse the trend of not having adequate electricity.
Its approach is showing that adapting new technologies, policy reform and innovative business models offer promising pathways to renewable energy transformation. Its vision on energy transformation could be the inspiration the Africa region needs to reverse the energy deficit.
power-sector inefficiencies – as a result of underpricing of electricity and under-investment in operations and maintenance – reduce African governments’ ability to finance broad energy projects
Though Rwanda – the land of a thousand hills – is a small, land-locked country with a population of just 11.7 million, it provides compelling lessons for other African countries.
Rwanda has put in place ambitious plans. These include the Energy Sector Strategic Plan, which has set a target of increasing electricity access to 70% by 2018. This is up from 18% in 2012. The overall national framework, Vision 2020, also aims to increase power generation and expand access to electricity.
It has also adopted solar-driven, methane-based and peat-based power sources of generation. KivuWatt, a private sector-led project, is developing a 25 megawatt (MW) gas-extraction and power-production facility at a cost of about US$128 million. The project sponsor is a private company, Contour Global, which has invested $35.7 million in equity, with the Netherlands Development Finance Company contributing another $8.9 million.
Sustained engagement by the country’s leaders and utility reform has opened the door to wide-ranging investment opportunities. Current plans aim to connect 70% of the population to electricity by the end of 2017. Over the same period, the strategy aims to increase electricity generation from approximately 100MW to 1,160MW using hydropower, solar photovoltaic cells, geothermal energy, biogas and peat.
Rwanda has installed capacity of 112MW of energy. Hydropower contributes 59%, thermal or heat energy contributes 40% and methane 1% of the country’s output. The country’s energy use is dominated by biomass, which accounts for about 85% of primary energy use, while petroleum constitutes 11% and electricity accounts for just 4%.
Rwanda needs about $4.2 billion in investments under a proposed accelerated plan for 2013-2017. Public financing will cover roughly 40% of the cost. Making the money available depends on public-private partnerships.
The country is off to a good start. Aside from KivuWatt, it has already launched a private initiative to extend power into areas beyond the grid.
Ignite Power is the first part of an ambitious plan aimed at achieving universal access to clean energy. It brings together the combined capabilities of many organisations, such as Bloomberg New Energy Finance, the Milken Institute, a Rwandan government partner and several private actors.
The first pillar of the plan is off-grid solar technology. It looks at a pre-paid system that can power four lights, a radio and television, and charge cell phones. In September 2014, Ignite Power signed an agreement to install the technology for 250,000 to 1 million households. Less than three months later a pilot phase of 1,008 units was completed. The company is now gearing up to provide 750,000 units in the next two years.
Africa’s untapped potential
Africa is rich in solar, wind, hydro and geothermal power resources, which is thermal energy generated and stored in the earth. More than 600 million people or two-thirds of the continent’s population live in darkness, without electricity. Sub-Saharan Africa has less capacity to generate and transmit grid-based capacity than South Korea, which has a fifth of the population of sub-Saharan Africa. But the untapped potential of Africa’s primary energy resources (excluding South Africa) is estimated to be 260 times the current grid-based capacity.
This deficit is a result of the lack of financial investment in the energy sector. African governments invest only $8 billion, or about 0.4% of gross domestic product, in the sector. Also, power-sector inefficiencies – as a result of underpricing of electricity and under-investment in operations and maintenance – reduce African governments’ ability to finance broad energy projects. These inefficiencies, linked to political patronage and institutionalised corrupt practices, cost the region $8.2 billion annually.
The cost associated with this lack and inefficiency of energy is devastating. Power shortages reduce economic growth by 2%-4% annually. Key sectors are badly affected, notably education. In Burkina Faso, Cameroon, Malawi and Niger, for example, more than 80% of primary schools have no access to energy to light their classrooms or power computers.
Rwanda’s ambition and vision on energy should be seen by other African countries as a model to follow. The country has demonstrated the potential for rapid delivery, going from vision to plan and deployment in a few years. The active participation of a strong government has been critical to the success of the project. The Rwandan government has provided credit guarantees and, most importantly, a stable planning environment for private investors.
The time is right for African governments to apply similar ambition and vision in transforming their own energy mix. Africa is well positioned to lead the global energy revolution, unlock the potential for skilled jobs, create economic transformation and reduce inequality by investing in renewable energy.