[Senate Hearing 113-621]
[From the U.S. Government Publishing Office]
S. Hrg. 113-621
POWERING AFRICA'S FUTURE: EXAMINING
THE POWER AFRICA INITIATIVE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON AFRICAN AFFAIRS
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
MARCH 27, 2014
__________
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COMMITTEE ON FOREIGN RELATIONS
ROBERT MENENDEZ, New Jersey, Chairman
BARBARA BOXER, California BOB CORKER, Tennessee
BENJAMIN L. CARDIN, Maryland JAMES E. RISCH, Idaho
JEANNE SHAHEEN, New Hampshire MARCO RUBIO, Florida
CHRISTOPHER A. COONS, Delaware RON JOHNSON, Wisconsin
RICHARD J. DURBIN, Illinois JEFF FLAKE, Arizona
TOM UDALL, New Mexico JOHN McCAIN, Arizona
CHRISTOPHER MURPHY, Connecticut JOHN BARRASSO, Wyoming
TIM KAINE, Virginia RAND PAUL, Kentucky
EDWARD J. MARKEY, Massachusetts
Daniel E. O'Brien, Staff Director
Lester E. Munson III, Republican Staff Director
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SUBCOMMITTEE ON AFRICAN AFFAIRS
CHRISTOPHER A. COONS, Delaware, Chairman
RICHARD J. DURBIN, Illinois JEFF FLAKE, Arizona
BENJAMIN L. CARDIN, Maryland JOHN McCAIN, Arizona
JEANNE SHAHEEN, New Hampshire JOHN BARRASSO, Wyoming
TOM UDALL, New Mexico RAND PAUL, Kentucky
(ii)
C O N T E N T S
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Page
Alemayehou, Hon. Mimi, executive vice president, Overseas Private
Investment Corporation, Washington, DC......................... 9
Prepared statement........................................... 10
Responses to questions submitted for the record by Senator
Robert Menendez............................................ 60
Responses to questions submitted for the record by Senator
Benjamin L. Cardin......................................... 61
Angiuoni, Rick, Africa director, Export-Import Bank of the United
States, Washington, DC......................................... 14
Prepared statement........................................... 15
Responses to questions submitted for the record by the
following Senators:
Christopher A. Coons..................................... 64
Benjamin L. Cardin....................................... 65
Bob Corker............................................... 65
Coons, Hon. Christopher A., U.S. Senator from Delaware, opening
statement...................................................... 1
Elumelu, Tony O., chairman of Heirs Holdings, founder of the Tony
Elumelu Foundation, Lagos, Nigeria............................. 27
Prepared statement........................................... 30
Flake, Hon. Jeff, U.S. Senator from Arizona, opening statement... 3
Gast, Hon. Earl, Assistant Administrator for Africa, U.S. Agency
for International Development, Washington, DC.................. 4
Prepared statement........................................... 5
Responses to questions submitted for the record by the
following Senators:
Christopher A. Coons..................................... 66
Robert Menendez.......................................... 69
Bob Corker............................................... 72
Benjamin L. Cardin....................................... 74
Hart, Tom, U.S. executive director, The One Campaign, Washington,
DC............................................................. 39
Prepared statement........................................... 41
Response to question submitted for the record by Senator
Robert Menendez............................................ 58
Hinks, Paul, chief executive officer, Symbion Power, Washington,
DC............................................................. 45
Prepared statement........................................... 46
Response to question submitted for the record by Senator
Robert Menendez............................................ 58
Renigar, Del, senior counsel for Global Government Affairs and
Policy, General Electric, Washington, DC....................... 33
Prepared statement........................................... 35
Response to question submitted for the record by Senator
Robert Menendez............................................ 59
(iii)
Additional Material Submitted for the Record
Written Statement from Daniel W. Yohannes, chief executive
officer, Millennium Challenge Corporation...................... 52
Letter from 13 organizations to Senators Christopher A. Coons and
Jeff Flake concerning the Power Africa Initiative.............. 53
Written Statement from Shari Berenbach, president/CEO, United
States African Development Foundation.......................... 54
Letter from John Coequyt, director, International Climate
Programs, Sierra Club.......................................... 56
Biogas White Paper submitted by Del Renigar...................... 79
POWERING AFRICA'S FUTURE: EXAMINING THE POWER AFRICA INITIATIVE
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THURSDAY, MARCH 27, 2014
U.S. Senate,
Subcommittee on African Affairs,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:33 a.m., in
room SD-419, Dirksen Senate Office Building, Hon. Christopher
Coons (chairman of the subcommittee) presiding.
Present: Senators Coons, Markey, Flake, and Corker.
OPENING STATEMENT OF HON. CHRISTOPHER A. COONS,
U.S. SENATOR FROM DELAWARE
Senator Coons. Good morning. I would like to call to order
this hearing of the Africa Subcommittee.
Today we will consider Power Africa, an ambitious
Presidential initiative designed to double access to electrical
power in sub-Saharan Africa in the next 6 years by producing at
least 10,000 megawatts of more efficient, cost effective, and
hopefully sustainable electricity generation capacity on the
continent. By 2020, this initiative aims to increase
electricity access for 20 million new households and commercial
entities with a robust mix of on-grid, mini-grid, and off-grid
solutions; enhance energy resource management capabilities of
partner countries; and increase regional cross-border trade.
These are goals I strongly support and I look forward to
discussing the scope, scale, sustainability, and implementation
of the initiative, as well as prospects for its future.
First, I would like to recognize Senator Flake, and we will
also welcome other subcommittee members. I am grateful for
Senator Flake's deep interest in this critically important
issue.
And I would like to welcome our first panel of witnesses:
Earl Gast, Assistant Administrator for Africa at USAID; Mimi
Alemayehou, Executive Vice President of OPIC, the Overseas
Private Investment Corporation; Rick Angiuoni, Africa Director
for the Export-Import Bank. Our second panel will include Tony
Elumelu, chairman of Heirs Holdings and founder of the Tony
Elumelu Foundation; Paul Hinks, CEO of Symbion Power; Del
Renigar, senior counsel for Global Government Affairs for GE;
and Tom Hart, U.S. executive director for The ONE Campaign. I
very much look forward to all of your insights and thank you
for taking the time to be with us today.
These witnesses have been selected because of their
leadership implementing and supporting this initiative either
on behalf of the U.S. Government, the private sector, or global
NGOs. There are also critically important perspectives on a
range of related issues, especially environmental and social
impacts associated with energy development, and for this
reason, I would like to enter into the record statements by the
Sierra Club, Oxfam, and other organizations and thank them for
their commitment and engagement on this issue. I will also
enter into the record statements by the U.S. African
Development Foundation and the Millennium Challenge
Corporation, which plays an important role in financing power
projects through its country compacts that focus on
infrastructure, as well as promoting regulatory and
institutional reforms in the energy sector.
Last year, President Obama committed to expanding energy
access across Africa with a collaborative effort across 12
different U.S. Government agencies shown in the visual. We have
committed almost $8 billion of leveraged U.S. Government
resources to support Power Africa over the next 5 years,
including $1 billion in MCC energy-focused compacts, $1.5
billion in OPIC loans, and $5 billion in Em-Im loans, coupled
with a roughly $285 million investment by USAID. These
investments have been leveraged by a robust commitment by the
private sector of roughly $14 billion toward large-scale energy
projects. And the six Power Africa focus countries are
initially identified as Kenya, Tanzania, Ghana, Liberia,
Nigeria, and Ethiopia.
Power Africa can catalyze vast opportunities for the
private sector and mobilize private resources to help solve the
endemic problem of energy poverty across Africa. The initiative
has garnered the support of several large investors, as well as
multinational institutions such as the African Development Bank
and World Bank, which serve as critical partners for Power
Africa. By helping to shepherd through power sector deals with
regionally based transaction advisors and a capable coordinator
located in Nairobi, Power Africa also aims to improve the
business climate in order to attract further private sector
investment in the energy sector, creating new opportunities for
U.S. businesses, and promoting lasting regulatory reforms.
In some ways, most importantly, Power Africa aims to
address the critical humanitarian needs stemming from endemic
energy poverty across the continent. Seventy percent of the
population of sub-Saharan Africa does not currently have access
to electricity. That number increases to 85 percent in rural
areas. When compared with other regions of the world, sub-
Saharan Africa has just a tiny fraction of the electrification
rates of other regions.
Businesses have cited the lack of reliable energy across
the continent as the most significant impediment to doing
business. Thirty percent of health facilities lack electricity.
Ninety million children across the continent attend school
without power, and without electricity at home, toxic fumes
from kerosene and other cooking fuels lead to an estimated 3
million deaths per year. That is more than HIV/AIDS and malaria
combined.
I want to make sure this initiative has bipartisan support
and can be sustained over the long term in order to meet
Africa's critical energy needs and accelerate U.S. private
sector engagement. It is important to consider areas where the
initiative can be strengthened and improved, including through
its expansion and sustainable and robust budgetary support. An
issue to consider is whether the number of focus countries can
or should at some point be increased in order to more
effectively promote access to power and encourage greater
energy sector reform. This hearing will also consider how to
sharpen the focus of Power Africa on distributed energy,
renewables, and off-grid and mini-grid solutions, as we work
together to protect the environment and address energy access
issues.
As we consider the future of Power Africa, it is clear
Congress, in my view, has a critically important role. This
committee will soon consider legislation to authorize the
initiative and address these unresolved issues, and I am
pleased that today's hearing will help inform our future
consideration of that bill. I am encouraged by the increased
tempo of the administration's engagement on power issues
highlighted by Commerce Secretary Penny Pritzker's upcoming
trade mission to West Africa, the convening of the U.S.-Africa
Energy Ministerial in Addis this coming June, and the U.S.-
Africa Heads of State Summit in Washington this August where
energy will be discussed, among other issues. The United States
has taken bold steps forward in creating this Power Africa
Initiative, and I look forward to working closely with the
administration, with my colleagues here in the Senate and in
the House to fasten and to ensure a sustained, strengthened,
and successful initiative for the future.
I will now turn to Senator Flake and welcome his opening
statement.
OPENING STATEMENT OF HON. JEFF FLAKE,
U.S. SENATOR FROM ARIZONA
Senator Flake. Thank you, Senator Coons. I want to thank
Senator Coons for working on this issue and scheduling this
hearing and for all of you who have come to testify,
particularly those who have come, like Tony, from a long way
away and I really appreciate it on short notice as well. We
have, obviously, those who are in positions of authority from
the agencies to give us an assessment of where we are and where
we are going and also technical expertise from others and
people in the private sector to make sure that, as Senator
Coons said, as we go through the authorization process, that we
are informed in our opinions.
So with the comment, 70 percent of the population without
access to electricity, it is certainly needed. This is also a
big commitment in terms of funds from the U.S. taxpayer, and we
want to make sure that it is directed at the right place and
that we are good stewards of the taxpayer resources. We also
want to make sure that bureaucratic overlap and misdirected
agendas and hasty agency changes that do little to achieve the
goal are mitigated here and that we move forward in ways that
are both efficient and necessary.
So I look forward to the hearing today and look forward to
your testimony.
So thank you again.
Senator Coons. Thank you, Senator Flake.
We will now hear from Assistant Administrator Gast,
followed by Executive Vice President Alemayehou, and Director
Angiuoni.
STATEMENT OF HON. EARL GAST, ASSISTANT ADMINISTRATOR, FOR
AFRICA, U.S. AGENCY FOR INTERNATIONAL DEVELOPMENT, WASHINGTON,
DC
Mr. Gast. Mr. Chairman and Ranking Member Flake, it is, as
always, my pleasure to be here before you.
Senator Coons, before I begin, I would like to take a
minute to recognize your outstanding leadership as chairman of
this subcommittee. This subcommittee's commitment to
development in Africa has informed our work, including Power
Africa, and it has advanced our goals, and for that we thank
you.
Of the 1.2 billion persons in the world who have no access
to electricity, half of them live in Africa. Outside of South
Africa, the 47 countries of sub-Saharan Africa generate a total
of 28 gigawatts of power. That is about the same amount
generated in Argentina.
There is no question that improving access to energy would
multiply the impact of our development aid because it is key to
building health, wealth, and education. Without light,
businesses cannot operate after dark. Without electricity,
hospitals cannot function, and without refrigeration, food goes
bad before it reaches those who need it.
Power Africa seeks to address those issues by creating
partnerships with governments, investors, and donors that will
bring sustained economic growth to the people of Africa and to
the United States. It is our new model for development in
action, leveraging partnerships to expand access to electricity
and extreme poverty, promote resilient and democratic
societies, and advance security and prosperity.
Power Africa's approach multiplies the impact of every
dollar we spend. Less than a year after its launch, our 35
private sector partners have pledged $14 billion to Power
Africa's goals, double that which we have committed, while
hundreds more companies have contacted us to find out how to
get involved. Some have worked in Africa before. Many are
making investments for the first time because of Power Africa.
So, so far, we have already helped closed deals that will
generate 2,800 megawatts of electricity. So again, in less than
1 year, we have more than exceeded 25 percent of Power Africa's
goal.
And we are currently planning projects that will add 5,500
megawatts more. Some of these projects offer innovative off-
grid and mini-grid solutions which can often be the best means
of delivering electricity to communities that are not connected
to a power grid.
Because there is no one-size-fits-all solution, Power
Africa pulls the expertise of 12 U.S. Government agencies in a
way that allows us to tailor our efforts and apply instruments
that lock in investment. MCC, for example, which has already
made major investments in power in Africa, plans to invest up
to $1 billion in three Power Africa countries, Ghana, Liberia,
and Tanzania, to increase access and the reliability and
sustainability of electricity systems.
The U.S. African Development Foundation worked with General
Electric to develop a contest seeking innovative ideas to reach
off-grid communities.
The State Department is leading an effort to develop a
multipronged power pool approach throughout the continent.
And the Commerce Department is providing a range of
technical expertise, including hosting a conference this week
with top United States and African energy lawyers to develop a
common power purchasing agreement that will help electricity
come on line quickly.
We could cite numerous other examples of our coordination,
but in short, the agencies that make up Power Africa are
working together like they have never done before. And that
includes not only carrying out a seamless, integrated strategy,
but also relying on each other to identify which of our tools
need to be sharpened to accelerate our progress and which of
those need to be adapted to better suit our new model for
development.
Thank you again for inviting me, and thank you to the
subcommittee for holding this hearing.
[The prepared statement of Mr. Gast follows:]
Prepared Statement of Assistant Administrator Earl Gast
Chairman Coons, Ranking Member Flake, and members of the
subcommittee, thank you for the opportunity to speak with you today.
U.S. assistance to Africa is commonly thought of in terms of food,
schools, clinics, and agricultural support. These are the instruments
of traditional development assistance that USAID and other aid
organizations have been deploying for decades. Yet our work in these
sectors has limitations. With his new model for development, President
Obama has added new and game-changing tools to the development toolkit.
One of those tools is Power Africa.
People who lack access to cleaner, more affordable energy spend
significant amounts of their limited income and resources on costly and
unhealthy forms of energy like indoor fires for cooking and expensive
diesel to run factories. Without light, children can't study and
businesses can't operate after dark. Without electricity, life-support
machines and newborn incubators in hospitals don't function. Without
refrigeration, food and medicine go bad before it ever reaches those
who need it. Without modern cooking fuel, homes are filled with
dangerous smoke and fumes. Better access to energy will multiply our
investments in reaching the Millennium Development Goals by improving
health, education, and household income.
Of the 1.2 billion people in the world who have no access to
electricity, half live in sub-Saharan Africa. Over a year, a
refrigerator uses six times more electricity than a Tanzanian citizen,
and it would take an Ethiopian citizen 2 years to consume the same
amount of electricity as an American does in 3 days. Of the 20
countries with the lowest electricity consumption in the world, 17 are
in Africa. Sub-Saharan Africa (excluding South Africa) generates 28
gigawatts of power for more than 900 million people--about the same
amount as Argentina generates for its 41 million people. And on any
given day, a quarter of that energy is unavailable due to inefficient,
outdated infrastructure. Rural electrification rates are well below 5
percent in many areas--the lowest in the world, significantly lower
than average rates in Asia and Latin America. And even when all of the
key components are there--energy resources, technology, know-how,
demand--too few energy projects make it past initial planning because
the investments that would bring all of these together rarely
materialize.
Yet the region has tremendous untapped sources for sustainable
energy generation. Africa hosts vast reserves of natural resources,
from geothermal and natural gas reserves to hydro and solar power
potential. Tapping into these plentiful, sustainable resources will
advance efforts to mitigate the effects of climate change, promote
economic development, and improve education and health care. Cleaner
energy and new technologies can power Africa's growth by bringing new
businesses and jobs, and improving quality of life, while jumping past
old generation technologies that pollute the environment and harm
public health.
Power Africa is helping to make that happen through the U.S.
Government's partnerships with African governments, private investors,
other donors, and developers, which will bring sustained economic
growth and benefits to the people of Africa and the United States. In
six initial countries--Ethiopia, Kenya, Tanzania, Ghana, Liberia, and
Nigeria--the U.S. Government will work with its partners to add 10,000
MWs of new generation capacity; increase the number of electricity
connections by 20 million; increase the reliability of electricity;
increase the number of countries participating in regional cross-border
energy trade; and enhance the resource management capabilities of
selected countries, allowing them to gain greater energy security.
The amount of investment needed for sub-Saharan Africa's power
sector far exceeds the resources of the U.S. Government, African
governments, and other donors. For USAID, Power Africa is our new model
for development in action: facilitating private sector investment to
advance development outcomes. We are discovering and supporting new and
innovative ways to make our traditional development interventions
become more effective and sustainable in the long run. Power Africa is
creating investment opportunities and opening new markets to
companies--from small businesses to multinational corporations. By
leveraging U.S. strengths in energy technology, private sector
engagement, and policy and regulatory reform, Power Africa is
galvanizing collaboration, making quick-impact interventions, and
driving systemic reforms to facilitate future investment. Power Africa
uses these private sector engagements to identify the most critical
policy and institutional reform issues standing in the way of these
specific projects. African companies have already begun to seek out
American investment partners so that they, too, can access tools that
Power Africa offers from 12 different U.S. Government agencies that are
working closely together to implement a comprehensive strategy.
Part of that strategy will work to advance gender equality because
women and men are affected differently by energy policies and
strategies due to differences--particularly concerning security--in
access to electricity, as well as control over energy and energy
services. That's why we are studying the relationship between gender
and energy and developing approaches to leverage its relationships with
the private sector, host governments, NGOs, and local communities.
What we've accomplished in less than a year's time is striking. We
have helped close deals that will generate 2,486 MW of electricity--25
percent of Power Africa's 10,000 MW goal--and we are in the planning
stages of projects that will add 5,579 MW more. And for every dollar
that the U.S. Government has committed, the private sector has
committed two, over $14 billion thus far.
There is no ``one size fits all'' solution to Africa's energy
challenges, so Power Africa is serving as a conduit for pooling the
expertise of the U.S. Government and other donors such as the World
Bank and African Development Bank to tailor solutions to address each
country's and each project's unique challenges. Power Africa is using a
transaction-centered approach that concentrates on closing those deals
that will have the greatest impact on improving sustainable energy
access. The approach provides host governments, the private sector, and
donors with incentives to encourage collaboration, provide quick
results, and drive systemic reforms that will facilitate future
investment.
For businesses and governments, Power Africa offers a variety of
support mechanisms. African governments may establish delivery units
that can help to expedite transactions. For investors and developers,
Power Africa brings together the financing, insurance, and technical
assistance offered by the U.S. Government to help bring power and
transmission projects to fruition. U.S. Government transaction advisors
are stationed in each of the six Power Africa countries to identify
these potential opportunities for investment and partnership, as well
as obstacles that may derail a deal. They ascertain what needs to
happen to keep these deals on track, while simultaneously helping to
build the capacity of existing host government ministries to deliver
results.
This new model for development relies on private sector
participation and private capital for success. When Power Africa was
launched 9 months ago, we had secured partnerships with more than 35
partners from the United States, Africa, and other regions that
collectively committed over $14 billion to achieving Power Africa's
objectives. Since then, hundreds more companies have contacted us for
information or assistance. Some have worked in Africa for decades; many
are now evaluating opportunities on the continent for the first time
because of Power Africa.
To ensure both large and small power projects are successful and meet
the energy needs of the population, African governments must improve
their investment climate by forming laws, regulations, tariffs, market
structures, and institutions, and improving indigenous capacity to
plan, design, and negotiate sophisticated transactions. Given the scale
and diversity of renewable and gas resources, there is growing interest
in the development of regional energy corridors and regional power
transmission networks that will expand opportunities for economically
and environmentally sound development for larger markets. We are
working, together with other donors and international finance
institutions, with existing west, south, and east power pools and
looking for possible generation projects that can further cross-border
interconnections and commercial electricity trade.
Consequently, a major contributor to Power Africa's success is the
Millennium Challenge Corporation work to engage the African energy
sector in countries eligible to receive MCC funds, Ghana, Tanzania and
Liberia. MCC plans to invest up to $1 billion in these three Power
Africa countries through its country compacts to increase access and
the reliability and sustainability of electricity systems.
One of the most significant deals that Power Africa is helping to
close is the 1,000 MW Corbetti geothermal project in Ethiopia, which
promises to be the first privately owned generation project in
Ethiopia. With Power Africa's assistance, the Ethiopian Government has
engaged accomplished legal assistance to help negotiate its power
purchasing agreement with Reykjavik Geothermal, the U.S.-Icelandic
company developing the project. Power Africa's transaction advisor has
been deeply involved in the deal structuring and negotiations as a
neutral broker, and Power Africa and its partners are working to help
reduce the drilling risk through grant facilities.
The involvement of the U.S. Government through Power Africa has
also helped to increase investor confidence in Corbetti, which has
expanded from an initially planned 300 MW project to up to 1,000 MW
today. This project is transformational. Not only is Ethiopia opening
up its energy sector to private investment for the very first time, but
the Government of Ethiopia also is diversifying its energy portfolio,
moving beyond large dam projects and embracing other types of renewable
energy. As a direct result of Corbetti, U.S. and other companies now
are exploring entering the Ethiopian energy market, and it is only the
beginning for power development in the Rift Valley, which has the
potential to eventually produce up to 15,000 MW of clean geothermal
power.
In fact, every Power Africa country offers unique natural resources
that can be developed using tailored mechanisms. In Tanzania, Power
Africa helped local company Kiwari develop a 10 MW hydropower project
by providing a loan guarantee through USAID's Development Credit
Authority, as well as by playing an active role in negotiating the
financial term sheet and loan processing associated with the $17
million project. In Kenya, as part of the Lake Turkana 300 MW wind
project, which just celebrated its financial close in Nairobi on
Monday, Power Africa provided technical advice that gave Lake Turkana's
lenders comfort that the Kenyan electrical grid could absorb the
intermittent power associated with wind farms. In addition, through the
Overseas Private Investment Corporation (OPIC), Power Africa is working
with the African Development Bank to provide necessary financial
guarantees. Power Africa is also providing new opportunities to
facilitate the growth of existing African businesses. An Ethiopian-
American company is now working to develop and manufacture over 2
million smart meters for Ethiopia's power utility--in part due to a
loan guarantee from USAID, as well as technical assistance funding from
OPIC--to produce devices that will help reduce commercial losses and
improve the efficiency of Ethiopia's national electric grid.
Reaching the most inaccessible corners of Africa's rural
communities and other underserved populations is a critical component
of Power Africa. Decentralized off-grid and mini-grid solutions often
offer the swiftest, cleanest, and most innovative solutions to energy
poverty by sidestepping the need to connect to the national electricity
network. Power Africa has deployed an array of activities that
explicitly target small-scale, creative energy innovation.
The Off-Grid Challenge, for instance, is a partnership between the
U.S. African Development Foundation and General Electric that asked for
ideas--from companies or from individuals--to develop or scale-up off-
grid activities that would reach communities not served by existing
power grids. Six first-round winners were selected based on the
sustainability, efficiency, and impact of their projects. One Off-Grid
Challenge winner, Mibawa Suppliers, will expand delivery of pay-as-you-
go lighting to households in rural Kenya. Another, GVE Projects Ltd.,
will electrify off-grid communities using metered solar and
rechargeable battery systems.
However, Power Africa's off-grid solutions are not about
identifying one-off projects that may not be scalable due to the lack
of interest on the part of large investors. For this reason, Power
Africa continues to explore opportunities to bundle together off-grid
projects so that institutional investors can deploy capital into these
projects at scale.
In Kenya, Power Africa recently helped launch a 10 MW biomass
project with Cummins that will use mesquite wood, a highly invasive
species, as feedstock for its generator. This plant is a source of both
energy and income for local residents who now will sell the wood for
fuel at four times the price they currently sell for charcoal. Power
Africa helped facilitate the power purchasing agreement negotiations
between Cummins--a U.S. company--and the Government of Kenya. Cummins
is looking to expand to add up to 18 new biomass projects in Kenya and
exploring opportunities in other Power Africa partner countries.
Through the U.S.-Africa Clean Energy Financing Facility managed by
OPIC, Power Africa also approved technical assistance funding to
support 28.5 MW in a series of potential hydropower projects in Uganda.
Power Africa is also exploring cleaner technologies that are more
efficient, effective, and in some cases, even easier to set up than
traditional energy sources like diesel-powered generators. We have seen
how these clean energy solutions can make a tremendous difference in
communities. In Kenya, Power Africa's work with government counterparts
helped to expedite the development of the privately owned 60 MW
Kinangop Wind Park, which will use GE turbines and is now the largest
privately owned wind park in sub-Saharan Africa, outside of South
Africa.
Sometimes the Power Africa contribution does not merit a front page
headline, but its effects can be significant. In Nigeria, USAID's team
of advisors is working with the central government on its extensive
privatization plan for the electricity grid. The gradual sale of these
government-owned power plants will raise much needed capital for
Nigeria's Government while helping reduce inefficiencies. USAID's
transaction advisor for Nigeria, a highly experienced U.S. lawyer,
identified one of the key constraints preventing some deals from moving
forward: the lack of a government guarantee. In response, he worked
with the Nigerian Government to adapt its power purchasing agreements
to include an innovative ``Put Call/Option Agreement'' clause that
helped address that concern. That clause has now been used in 12 other
deals.
In fact, this week in Washington, top U.S. and African energy
lawyers who have negotiated power purchasing agreements in many of the
Power Africa countries are gathered at the U.S. Department of Commerce
alongside experts from international financial institutions and lawyers
from Power Africa governments for a workshop hosted by the Commercial
Law Development Program. Their goal for this week is to emerge with
annotated, standard power purchasing agreement clauses that will
significantly reduce the amount of time spent on negotiating the terms
of power deals. In short, this will help electricity come online more
quickly.
We also know that simply creating new energy supply will not solve
the issue of cost, which remains out of reach for many Africans. We are
committed to working with partner governments to ensure that these
projects make energy both accessible and affordable and that our
partner governments improve their legal and regulatory environment to
sustain investment. For example, we are supporting the Government of
Tanzania in developing its roadmap for energy reform, and the
Government of Kenya in integrating renewables into its national grid.
Finally, because Power Africa's work is not over once a transaction
is complete, we have created an extensive monitoring and evaluation
plan to ensure that we meet our goals. We also plan to release our
first annual report this summer summarizing progress.
In August, USAID established Power Africa's field headquarters in
Nairobi, which has greatly facilitated interactions with the private
sector and eased close collaboration with our teams at the U.S. Embassy
in each of the Power Africa focus countries. As countless businesses
pass through Nairobi or set up headquarters there, Power Africa's team
can meet face-to-face with the businesses and speak to them directly
about the constraints they are confronting and identify what the U.S.
Government can do to address them.
Soon, an institutional support contract will be awarded in Nairobi,
which will permit us to deploy experts in a wide range of fields on a
moment's notice, to work on everything from identifying gaps and
solutions for facilitating new deals to helping our African partner
governments develop energy master plans. USAID already has embedded an
advisor at the African Development Bank in Nairobi to work with donors
and partner governments in East Africa to develop a collaborative
regional geothermal development plan. Power Africa's teams in Ethiopia,
Ghana, Kenya, and South Africa are also in the process of developing a
strategy for strengthening power trade and regional power pools across
sub-Saharan Africa.
Power Africa's strong field presence is contributing to our
success. Our teams know what is happening on the ground and can convey
information in real time to the Washington-based agencies for the
purpose of tapping into tools and solutions. On a daily basis, the U.S.
Government interagency team works together to advance transactions and
push reforms, and each week, the team meets to discuss the Power Africa
priority transactions, policy issues, and new opportunities. This model
is working.
USAID hopes to build upon our early successes to generate momentum
for additional partners and investors to support electrification in
Africa.
Thank you Mr. Chairman, Ranking Member Flake, and members of the
subcommittee for facilitating our assistance for African development. I
welcome your questions.
Senator Coons. Thank you, Administrator Gast.
I would like to welcome Senator Corker and thank him for
his support of this hearing and his engagement and interest in
this topic.
Ms. Alemayehou.
STATEMENT OF HON. MIMI ALEMAYEHOU, EXECUTIVE VICE PRESIDENT,
OVERSEAS PRIVATE INVESTMENT CORPORATION, WASHINGTON, DC
Ms. Alemayehou. Thank you. Chairman Coons, Ranking Member
Flake, and Senator Corker, and distinguished members of the
committee, thank you for your invitation to testify today.
Six hundred million people in Africa live without power.
Across all of sub-Saharan Africa, the entire installed capacity
is less than that of Delaware.
Nine months ago, President Obama launched an initiative to
double access to electricity in Africa. He drew attention to
how vital increased access to power is to shared prosperity of
Americans and Africans so that children could study after dark,
so businesses could start up and grow, and so Africa can begin
linking to the grid of the global economy. The President
proposed to extend electricity access to 20 million Africans.
Africa is ready for this initiative. OPIC has financed or
insured projects in sub-Saharan Africa for more than 40 years.
Annual transaction value in the region is up fourfold since
2008. The agency has more than 120 projects totaling $3.9
billion across the continent, representing about 22 percent of
OPIC's total portfolio, up from 6 percent just a decade ago.
Several factors have converged to make Africa the fastest
growing region in OPIC's portfolio. Number one, enormous
African demand and increasing investor interests. Second is the
abundance of natural resources. Third is a growing middle class
with disposable income. Fourth, new U.S. investors, including
members of the diaspora investing and entering the market. Five
is a host-country investment climate that is actually improving
by the day.
To support Power Africa, as you know, OPIC has committed
$1.5 billion in financing and insurance for power projects
across sub-Saharan Africa. It will also deploy its four decades
of experience to help achieve the President's goal in the
region.
Mr. Chairman, I am proud to report that OPIC already has a
pipeline of African electricity projects that if fully
committed would surpass our $1.5 billion commitment. It is a
diverse pipeline, including thermal, renewable, off-grid, and
biomass projects in both rural and urban areas. We have
recently approved several highly developed African energy
projects. Let me mention a few examples.
In Togo, OPIC is helping to finance a 100-megawatt tri-fuel
facility. This plant would allow Togo to become the first
exporter of power in its region.
In November, we approved funding for the Boshoff Solar Park
in South Africa. This transformative project will feed 60
megawatts onto the grid.
And just last week, OPIC's board of directors approved a
loan to the African Finance Corporation, which will expand
AFC's energy infrastructure lending portfolio in support of
power projects in Nigeria and elsewhere.
We have also financed recent energy projects in Kenya,
Nigeria, Ethiopia, and Tanzania.
In addition to our projects, we have joined with the State
Department and USTDA in a $20 million initiative called the
U.S.-Africa Clean Energy Finance Initiative, providing small
but critical elements of early funding that would allow future
clean energy projects in Africa to get off the ground.
Finally, to reenergize our existing clients and reach out
to new partners, OPIC and USAID later this year will be hosting
a conference on African energy and infrastructure to bring
investors, developers, and companies together.
Mr. Chairman, I am also happy to see that Africa's need has
galvanized bipartisan support, including the recent committee
approval of H.R. 2548, the Electricity Africa bill. I am
especially glad to see that the Senate is also thinking about
how to provide OPIC with the backing and tools it needs to do
the job in Africa, backing like your support for a multiyear
reauthorization to reassure long-term investors, tools like
additional flexibility in the choice of financial instruments
we use, and support for retaining some more of our earnings
each year to support even more investments in Africa and other
emerging markets around the world.
OPIC has the products that can help make this happen, our
well-established and proven lending insurance and support to
the private equity community. We also have the experience
needed, having catalyzed more than $24 billion in power
projects around the world.
With this committee's assistance, OPIC will help Africa
realize its electrification potential. But we cannot do it
alone. We need all the tools of the U.S. Government, the
multilateral institutions, the World Bank, the African
Development Bank, as well as the African governments
themselves.
In closing, President Obama's vision appeals to me not only
as a development finance official, but as someone who was born
and raised in Africa. My grandmother spent her whole life in
southern Ethiopia without ever having switched on a light.
During my childhood there and later in Kenya, I saw how lack of
electricity affects almost every aspect of life and work. This
is real to me.
Thank you, Mr. Chairman, Ranking Member Flake, and Senator
Corker and members of the other committee. I and my colleagues
at OPIC are deeply appreciative of the opportunity to work on
this initiative and appreciate the sustained attention and
leadership of this committee. Thank you.
[The prepared statement of Ms. Alemayehou follows:]
Prepared Statement of Mimi Alemayehou
Thank you, Chairman Coons and Ranking Member Flake, for inviting
OPIC to participate in this important hearing to discuss the
President's Power Africa Initiative. OPICs global development mission,
its private sector focus and its proven finance and risk mitigation
tools are well-suited to this initiative.
About two-thirds of Africa's people--600 million in all--live
without electricity. That's nearly twice the size of the U.S.
population. To put that in perspective, only about 30 percent of South
Asia's population lacks electricity, and only about 10 percent of those
living in the Middle East, in North Africa, and in Latin America and
the Caribbean lack it. So this is a particularly African problem.
Solving the problem will unlock tremendous African social and
economic potential across multiple sectors.
African hospitals and clinics will be able to offer
medicines that require refrigeration, as well as advanced
medical diagnostic and treatment equipment. Health care
providers will be able to treat people at more times of the day
and night.
Food can be refrigerated, reducing spoilage, improving
health, and strengthening the livelihoods of farmers and
grocers.
Children will be able to study after dark and families will
be able to read.
More businesses will be able to start up and grow.
Cellphones and laptops can remain charged, and Africa can
become increasingly plugged into a global grid of information
and communication.
The President's Power Africa Initiative, which is already taking
shape, and is backed by increasingly broad and bipartisan support in
Congress, within the business and nonprofit development communities,
and in Africa itself, represents an extraordinary opportunity to change
all this.
As an Ethiopian-American, this work is very personal to me. My
grandmother spent her whole life in southern Ethiopia and passed away a
few years ago without ever having switched on an electric light. I also
spent much of my early life in Africa, where I saw firsthand the
obstacles faced by families and whole communities without ready access
to electricity.
background: opic in africa
OPIC has been supporting projects in sub-Saharan Africa for more
than 40 years, using structured finance, business loans, political risk
insurance, and private equity investment funds. Annual transaction
value in the region is up over fourfold since FY08. Today, the agency
has more than 120 projects totaling $3.9 billion across the continent.
Today, African projects represent about 25 percent of OPIC's total
portfolio, up from 6 percent a decade ago. Several factors have
converged to make this the fastest growing region in OPIC's portfolio:
Enormous African demand and increasing investor interest in
the continent;
An abundance of natural resources;
A growing middle class with disposable income;
New U.S. investors, particularly diaspora investors,
entering the market;
Host-country investment climates that are improving by the
day.
Over $1.3 billion of OPIC's sub-Saharan Africa portfolio is devoted
to financial services like microfinance lending, and loans to small and
medium-sized enterprises. Other investments span sectors like
agriculture and food security, health care, education, housing and
technology.
Recent OPIC energy projects in sub-Saharan Africa have included:
Three combined heat and power (CHP) plants in Nigeria that
have energy efficiency as high as 90 percent and carbon capture
technology sufficiently advanced to trap 95 percent of CO2
emissions;
The expansion of a geothermal power plant in Kenya that has
added 52 MW to its previously installed capacity of 48 MW;
$250 million in financing that is helping two American
companies construct a 60 MW solar power plant in South Africa,
a plant that will help South Africa avoid 140,000 tons of CO2
emissions in its first year alone.
Currently, OPIC's energy portfolio in sub-Saharan Africa totals
about $1 billion, generating 500MW of power. Globally, the energy
portfolio totals $4.1 billion across 46 projects. OPIC renewable
resource projects in the portfolio have seen more than a fortyfold
increase since 2008.
power africa
To support the Power Africa Initiative, OPIC will commit $1.5
billion in financing and insurance to power projects across sub-Saharan
Africa. It will also deploy its four decades of sub-Saharan Africa and
power project experience to help achieve the President's goals in the
region.
In just the 9 months since Power Africa got underway, OPIC has made
major strides in participating in a framework for interagency
cooperation and in committing financing to bankable, highly
developmental power projects.
I am proud to report that OPIC already has a pipeline of African
electricity projects that, if fully committed, would surpass our $1.5
billion commitment.
This is a testament to OPIC's expertise in power projects, growing
interagency collaboration, and the sheer demand for investment support
in African power from the U.S. private sector. Our pipeline includes a
diverse mix of thermal, renewable, on-grid, and off-grid projects in
both rural and urban centers throughout sub-Saharan Africa. Large and
small, from $250 million down to $500,000, OPIC is working across
sectors and regions to provide access to energy.
In Togo, which never had its own sources of power, OPIC and a U.S.
company financed a 100 MW facility that can switch between three kinds
of fuel: light fuel, heavy fuel, and gas when available. When the
facility is online in Togo, not only will most of Togo become
completely self-sufficient in power, but the country shifts from being
an energy importer to an energy exporter, selling power to its
neighbors, the first country in the region to do so.
Using the new U.S.-Africa Clean Energy Finance Initiative, better
known as ACEF, OPIC and its interagency partners are preparing new
renewable energy projects in a collaborative way. ACEF is funded
primarily by $20 million of State Department funds, of which $15
million is managed by OPIC directly and $5 million by USTDA. Through
ACEF, relatively small project preparation costs are identified that
impede the readiness of renewable energy projects for financing--costs
like surveys, preliminary engineering work, social and environmental
impact assessments, and third-party consulting fees. In just over a
year, OPIC has committed nearly a third of its allotted ACEF funds,
which have covered a variety of projects across seven countries.
Here are two examples:
In Tanzania, ACEF is supporting Off-Grid Electric's plans to market
solar power from the mobile phone distribution platforms that are
flourishing across Africa. Through ACEF, OPIC is providing $200,000 for
software and analytics, hardware design, and supply chain optimization
to finalize the design of Off-Grid Electric's solar home systems.
Customers are able to prepay for energy via mobile phone, adjusting
their usage according to their specific needs. Beneficiaries are low-
income, remotely located households in Tanzania, where annual
electricity usage is 92 kWh/person compared to over 13,000 kWh/person
in the U.S. These solar home solutions will be affordable for 80
percent of Tanzanians, as well as more reliable and less dangerous than
traditional energy sources, such as kerosene and diesel generators.
In Rwanda, only 8 percent of all households have access to grid
electricity. ACEF support for Gigawatt Global, a multinational power
generation project developer, with $400,000 of project development
funds, has accelerated the construction of an 8.5 MW grid-connected
solar power plant in the Eastern province of Rwanda. This will be
Rwanda's first grid-connected solar PV project, introducing a
replicable renewable energy model to the country and increasing total
energy output in Rwanda by 9.3 percent. The plant will be installed on
land leased from a residential community home for youth who were
orphaned during and after the 1994 genocide. The Gigawatt Global
project shows how a small investment on the front-end of a project can
be incredibly catalytic. Because of the ACEF facility and OPIC's
support, Gigawatt Global was able to reach financial close in February
and expects the solar installation to be online by mid-2014. For those
not familiar with the renewable energy development timeline, this is
exceptionally fast.
The good news is that over the next 5 years, 7 of the world's 10
fastest-growing economies are expected to be in sub-Saharan Africa. The
bad news is that energy isn't keeping up. While Africa's annual
economic growth is averaging 4.5 percent or better, power generation is
growing at only about 1.2 percent annually.
So OPIC is also trying to address some of the obstacles that are
holding back power generation growth. Since OPIC works to facilitate
transactions between the private sector in the U.S. and the private
sectors in emerging markets, rather than working government to
government, we can often identify government policies that stand in the
way of transparent and competitive electric power generation solutions.
Working with our colleagues at USAID, MCC, Treasury, Commerce, and
State, we have moved these open market policy measures forward. For
example, we have developed a best practices guide for Power Africa host
countries and private sector investors regarding key elements of power
purchase agreements.
OPIC also participates in another multiagency collaboration, called
the Power Africa Working Group, that has established a wide range of
private sector engagement tools and host country best practices.
Importantly, it simplifies access for the U.S private sector by
creating a unified one-stop shop. Power Africa has united its working
group in a focused and transaction-driven approach, providing more
access to electricity as part of a broader poverty reduction goal.
Thanks to this ACEF collaboration, we've seen the establishment of
the U.S. Government's South Africa Energy Trade Hub, which combines the
tools and expertise of OPIC, alongside our colleagues from USTDA and
USAID, and the U.S. State Department.
OPIC brings to the Power Africa table its background in managing
large projects and its development finance knowledge. Over the past 40
years, OPIC has committed nearly $24 billion to infrastructure projects
in developing countries. Bringing these projects to completion
frequently has meant working on highly complicated transactions that
are time-consuming and that require the structuring of complex
partnerships. Protection of U. S. taxpayers is also needed: through
careful risk mitigation strategies, OPIC has kept its losses, net of
recoveries, below 1 percent of portfolio value. This has allowed OPIC
to return money to the Treasury for 36 consecutive years, helping
reduce the federal deficit. Since FY 2008, OPIC has returned more than
$1 billion to the Treasury.
While development is the primary focus of OPIC's work, we also seek
to level the competitive ``emerging markets playing field'' for U.S.
investors. In doing so, we help generate both U.S. exports and U.S.
jobs.
To date, OPIC has supported more than $200 billion of investment in
over 4,000 projects globally, generated an estimated $76 billion in
U.S. exports and supported more than 278,000 American jobs. Over three-
fourths of OPIC's 2012 projects were with American small and medium-
sized businesses. And every OPIC project is empirically assessed for
its development impact before funds are committed.
Based on its experience in the region and the power generation
sector, OPIC believes that providing affordable, reliable energy to
millions of Africans is within Power Africa's reach. Thanks to the
support of Congress, the U.S. private sector and the advocacy
community, we and our partner agencies are aligned in our passion to
solve this global challenge.
To best utilize OPIC's ability to advance these Power Africa goals,
a few key authorities are crucial including:
Providing a multiyear reauthorization. As the U.S.
Government's development finance institution, OPIC partners
with the private sector in loans of up to $250 million for as
long as 20 years. OPIC provides political risk insurance in
some of the most dangerous parts of the world. Investors who
are depending on OPIC for these long time spans want some
reassurance from Congress that OPIC will continue to be there
with them for the long haul.
Supporting the President's FY 2015 budget for OPIC.
I am happy to see that Africa's electricity needs have galvanized
bipartisan and bicameral support, including the recent approval of
legislation in the House Committee on Foreign Affairs, on a virtually
unanimous vote. I'm especially glad to see that both chambers are
thinking deeply about how to provide OPIC with the backing and tools it
needs to do the job in Africa. Many of the above authorities just
described, are included in the House legislation and I know this
committee is also considering them.
Looking ahead, OPIC will continue to increase U.S. investors'
ability to access Africa's growing power sector, as well as finance and
insure developmental projects across the developing world. OPIC can be
nimble in taking advantage of such opportunities in part because it
operates on a self-sustaining basis, at no net cost to taxpayers. In
closing, I will conclude with some of my own thoughts about Power
Africa.
Earlier in my testimony, I referred to my grandmother's experience
of a lifetime without electricity. As an Ethiopian-American, helping to
ensure Power Africa's success is more than just my job, it's an
obligation to my family, friends, and birthplace. I understand how lack
of electricity affects almost every aspect of life and work. The rapid
advances in development that come from access to power are life-
changing. I still have scores of family members and friends in both of
these countries. I visit Africa often, so I associate faces and names
with the task of bringing power to the continent. It's not an esoteric
goal for me, but one that carries memories and real-life implications.
I feel privileged to be able to contribute something back to the
place that I came from, and to the culture of which I am still a part.
OPIC remains committed to investing with impact and welcomes Congress'
partnership and support in the coming years.
Thank you to this subcommittee and committee for your interest in
and support for this crucially important initiative. I would be happy
to take any questions at this time.
Senator Coons. Thank you, Executive Vice President
Alemayehou, for that moving testimony.
Director Angiuoni.
STATEMENT OF RICK ANGIUONI, AFRICA DIRECTOR, EXPORT- IMPORT
BANK OF THE UNITED STATES, WASHINGTON, DC
Mr. Angiuoni. Chairman Coons and distinguished members of
the committee, good morning. Thank you for inviting me to
testify today. As Director of Business Development for Africa
at the Export-Import Bank of the United States, I am honored to
testify, alongside my colleagues from USAID and OPIC, on the
importance of the Power Africa Initiative to the United States
and to Africa.
Unlike our sister agencies here today, Ex-Im Bank is not an
aid or development agency. We are a financing institution with
the mission of supporting U.S. jobs through exports. We require
a reasonable assurance of repayment as part of our mandate.
Ex-Im Bank has a deep commitment to Africa and to Power
Africa.
As you know, Ex-Im Bank is the official export credit
agency of the United States. Our mission is to support U.S.
jobs by empowering U.S. companies, large and small, to finance
their exports. In fiscal year 2013, Ex-Im Bank supported an
estimated 205,000 U.S. jobs through exports. Nearly 90 percent
of the transactions the bank financed were for small business.
The bank does all of this at no cost to the American taxpayers.
We maintain a very low default rate of around one-quarter of 1
percent, and we did all of this while generating more than $1
billion in revenue for the taxpayers in the last year alone.
Under the leadership of Chairman Hochberg, Ex-Im Bank's
global business volume has grown significantly. With respect to
sub-Saharan Africa, the bank has authorized over $4 billion of
transactions in the last 4 years.
Throughout our 80-year history, Ex-Im Bank has a long and
successful track record when it comes to supporting power
initiatives and power infrastructure development across Africa.
As early as 1946, Ex-Im Bank approved a transaction to support
Ethiopia's post-World War II reconstruction, including
electrification.
Between 1946 and 2007, we approved power transactions in 14
African countries.
In the early 1960s Ex-Im Bank helped Ghana finance the
Akosombo Dam on the Volta River. Praising this project,
President Kennedy wrote to the Ghanian President, Dr. Nkruma,
in 1961 saying: ``It is a source of satisfaction that we have
been able to join with Ghana's Government in helping to make
this great day possible.'' And the exporter that we supported
in that case was Morrison-Knudsen from Idaho who also built the
Hoover Dam.
More recently, Ex-Im Bank has supported power projects in
Benin, Ghana, and South Africa.
As noted by my colleagues, sub-Saharan Africa has among the
lowest rates of electricity access around the world.
A key factor for the power deficit has been underinvestment
in this sector in the last 20 years. If we look into the
future, we know that the population of Africa is projected to
increase to 1.6 billion by 2030. Therefore, it is critical that
investments in the power sector are planned and executed today.
While the benefits to Africa are clear, this also presents
a significant export opportunity for U.S. companies and for
American job growth.
Without initiatives like Power Africa that aim to mobilize
capacity investments and funding from both the public and
private sectors, the power deficit in Africa is likely to
become exacerbated.
Ex-Im Bank Chairman Hochberg traveled with President Obama
to launch the Power Africa Initiative in June 2013.
Ex-Im Bank is a key participant in the Power Africa
Initiative due to our particular capacity to support U.S.
exports. As an active participant, alongside our fellow
agencies, Ex-Im Bank is engaged in the Power Africa Working
Group. We also maintain continuous engagement with African
entities, project developers, United States exporters, and
financial institutions as power projects develop across the
continent.
Ex-Im Bank pledged support of up to $5 billion in support
of the President's goal of doubling sub-Saharan Africa's access
to electricity. And our $5 billion is a signal to African
countries and investors in the African power sector that they
should source equipment and services from the United States.
United States exports to sub-Saharan Africa are nominal
compared to U.S. global exports. In calendar year 2013, U.S.
exports to the region were $24 billion, representing about 1
percent of the U.S. global exports. Many countries are
aggressively supporting their exports, and our exporters face
competition not only from China but from other countries in
Asia, Europe, and Latin America. Power Africa can be a catalyst
for more U.S. exports, and our financing is needed to support
U.S. companies. In the end, exports equal U.S. jobs.
We all know that vitalizing the power sector in sub-Saharan
Africa is an enormous undertaking, but we are already seeing
some progress across the region. We are beginning to see an
increasing number of private sector investments complementing
public sector initiatives like Power Africa. New investors are
also entering the market, including U.S. companies, as well as
many foreign players.
Given our mission to support American job growth, we would
like to see more U.S. exporters engaged with the region and
particularly the power sector.
Once again, thank you for the opportunity to testify and I
am open to questions you may have.
[The prepared statement of Mr. Angiuoni follows:]
Prepared Statement of Rick Angiuoni
Chairman Coons and distinguished members of the Committee on
Foreign Relations' Subcommittee on African Affairs, thank you for
inviting me to testify before you on ``Powering Africa's Future:
Examining the Power Africa Initiative.''
As Director of Business Development for Africa at the Export-Import
Bank of the United States, I am honored to testify alongside my
colleagues from USAID and OPIC on the importance of the Power Africa
Initiative to the United States and to Africa.
Unlike our sister agencies here today, Ex-Im Bank is not an aid or
development agency. We are a financing bank with the mission of
supporting U.S. jobs through exports. We require a reasonable assurance
of repayment, and we are pleased that many economies in sub-Saharan
Africa have matured to the point that they can utilize Ex-Im Bank's
financing.
We have a deep commitment to Power Africa and my remarks today will
focus on four key areas:
Ex-Im Bank
Overview of the African Power Sector
Ex-Im Bank's Role within Power Africa
U.S. exports in sub-Saharan Africa
i. ex-im bank
Ex-Im Bank is the official export credit agency of the United
States. Our mission is to support U.S. jobs by empowering U.S.
companies--large and small--to finance their exports and win deals on
the international stage. By breaking down financing barriers for U.S.
firms, we contribute to a stronger national economy.
In FY13, Ex-Im Bank supported an estimated 205,000 U.S. jobs
through exports. Nearly 90 percent of the transactions the Bank
financed were for small businesses. The Bank does all this at no cost
to the American taxpayers. We maintain a default rate of around one
quarter of a percent and we did all this while generating more than $1
billion for the taxpayers in the last year alone. (This default rate is
different than the default rates published in the annual Budget
Appendix due to differing definitions. The reported rate in the Budget
Appendix reflects projected defaults over the life of the loan while
the default rate report as required in Section 89 of the Bank's charter
reflects actual defaults at a particular point in time.)
Under the leadership of Chairman Hochberg, Ex-Im Bank's global
business volume has grown significantly in recent years, and we are
proud of our work in
sub-Saharan Africa. In the last 4 years, we have authorized over $4
billion in sub-Saharan Africa transactions through our loan, guarantee,
and insurance programs.
Throughout our 80-year history, Ex-Im Bank has a long and
successful track record when it comes to supporting power initiatives
and power infrastructure development across Africa. As early as 1946,
Ex-Im Bank approved a transaction to support Ethiopia's post-WWII
reconstruction, including electrification.
Between 1946 and 2007, we approved power transactions in 14 African
countries. (They are: Algeria, Angola, Cote d'Ivoire, Democratic
Republic of Congo, Egypt, Ethiopia, Ghana, Liberia, Morocco, Nigeria,
Republic of Congo, South Africa, and Togo).
In the early 1960s, Ex-Im Bank helped Ghana finance the Akosombo
Dam on the Volta River. Praising the project, President Kennedy wrote
to the Ghanaian President, Dr. Nkruma, in 1961, saying: ``It is a
source of satisfaction that we have been able to join with [Ghana's]
Government in helping to make this great day possible . . .''
More recently, Ex-Im Bank has supported power projects in Benin,
Ghana, and, South Africa. Across the continent, we place a particular
emphasis on clean energy development.
ii. overview of the african power sector
Sub-Saharan Africa (SSA) has among the lowest rates of electricity
access in the world--less than 30 percent.
In the 2013 edition of their World Energy Outlook, the
International Energy Agency (IEA) noted that sub-Saharan Africa is the
only region in the world where the number of people without access to
electricity is expected to deteriorate by 2030.
According to the IEA, sub-Saharan Africa will require more than
$300 billion in additional investment to achieve universal electricity
access by 2030.
The World Bank notes that generation capacity has been largely
stagnant since the 1980s, and the entire installed generation capacity
of the 49 sub-Saharan countries is about 77 gigawatts (GW) for a
population of 910 million.
While there are a number of factors, the most significant reason
for the power generation shortfall has been underinvestment in the
power sector. The population of Africa is projected to reach 1.6
billion by 2030. Therefore, it is critical that investments in power
are planned and executed today. While the benefits to Africa are clear,
this also presents a significant export oppmtunity for U.S. companies--
and for American job growth.
Without initiatives like Power Africa that aim to mobilize
capacity, investments, and funding from both the public and private
sectors, the power deficit in Africa is likely to become exacerbated.
Economic growth, social development and poverty alleviation are
built on the foundation of a strong infrastructure, for which
electricity is a critical component.
iii. ex-im bank's role within power africa
Ex-Im Bank Chairman Hochberg travelled with President Obama to
launch the Power Africa Initiative in June 2013.
Ex-Im Bank is a key participant in the Power Africa Initiative due
to our particular capacity to support U.S. exports. As an active
participant alongside our fellow agencies, Ex-Im Bank is engaged in the
Power Africa Working Group. We also maintain continuous engagement with
African entities, project developers, U.S. exporters, and financial
institutions as power projects develop across the continent.
Ex-Im Bank pledged support of up to $5 billion in support of the
President's goal of doubling sub-Saharan Africa's access to
electricity. As Chairman Hochberg likes to say, our $5 billion pledge
is a signal to African countries and investors in the African power
sector that they should source equipment and services from United
States.
iv. u.s. exports in sub-saharan africa
Sub-Saharan Africa is now home to 6 of the 10 fastest-growing
economies in the world.
The region--and particularly its rising middle class--is poised to
continue to grow in relevance to U.S. export interests, and Ex-Im Bank
is proud of our work in the region. In the past 4 years, Ex-Im Bank has
authorized more than $4 billion in financing for U.S. exports to sub-
Saharan Africa, including $604 million of authorizations in FY 2013.
The Bank approved a record 188 authorizations to sub-Saharan Africa
in FY 2013. This financing supported U.S. exports to 35 of 49 sub-
Saharan African countries, including Cameroon, Ethiopia, Ghana, Kenya,
Mozambique, Nigeria, South Africa, and Tanzania.
As a destination market, sub-Saharan Africa receives about 1
percent of U.S. exports, but the region receives a significantly higher
percentage of Ex-Im's financing. As of FY 2013, almost 5 percent of Ex-
Im's total exposure was concentrated in sub-Saharan Africa.
conclusion
Vitalizing the power sector in sub-Saharan Africa is an enormous
undertaking, but we are already seeing some progress across the region.
We are beginning to see an increasing number of private sector
investments complementing public sector initiatives like Power Africa.
New investors are also entering the market, including U.S. companies as
well as many foreign players. Some companies are considering retooling
their production facilities to source from the U.S. and create jobs
here.
We are also seeing follow-on sales for U.S. business coming from
projects financed in sub-Saharan Africa.
Given our mission to support American job growth, we would like to
see more U.S. exporters engage with the region, and particularly the
power sector.
Once again, thank you for the opportunity to testify, and I am open
to questions you may have.
Senator Coons. Thank you.
I would like to begin now a round of 7-minute questions.
Director Angiuoni--if I might just start from there and I
will work my way back--I am thrilled to hear your focus on
creation of U.S. jobs through exports and your recognition that
there is a significant opportunity here that we are not meeting
yet and would be interested in your input on the importance and
relevance of long-term authorization in order to attract real
partners for financing and for projects, the engagement of the
diaspora community, and whether or not you think Ex-Im has the
staffing, the capacity, the analytical ability to deliver on
this very ambitious $5 billion commitment.
Mr. Angiuoni. Thank you.
In the first place, it is an exciting time to work on
Africa. Today there are more than 20 democracies; 20 years ago,
there were only 3. The private sector is vibrant, and we have
economic growth.
In terms of engaging the diaspora community, for example,
we will be working with PTA Bank in terms of engaging with them
and the diaspora community.
In terms of authorizations, as you know, we believe we do
have the required authorization. We have a very solid balance
sheet of $140 billion. And also, as you know, Ex-Im Bank in 6
months is up to authorization. So we hope for your support on
that.
In terms of staff, we believe that we have a fine team at
Ex-Im Bank; the Bank and my colleagues that work on structured
finance have extensive sector as well as geographic expertise.
And as part of the increase in our appropriations, which we
thank you for, Chairman Hochberg is undertaking a strategic
review in realigning resources, and Africa is very much on the
agenda.
So we believe that we do have the authorization, and with
the realignment of some of the resources, we believe we have
the staffing and the expertise.
Senator Coons. Thank you.
If I might, Executive Vice President Alemayehou, roughly
the same questions. How important is it for there to be long-
term authorization for the Power Africa Initiative in order to
attract partners, given the timeline of most power projects?
You referenced in your testimony the importance of outreach and
engagement with the diaspora community. If you could expand on
that a little bit.
And then what portion of your portfolio is renewables or
distributed generation projects? That would be of interest to
me.
Ms. Alemayehou. Thank you, Senator.
In terms of long-term reauthorization, it is absolutely--
absolutely--necessary for an agency like OPIC, which has a
unique sort of mandate to support the private sector. As you
may know, a few years back in 2008, OPIC's authorization had
expired and for about 6 months OPIC cannot commit to, and
disburse on, any of its investments. You can imagine, since we
work with the private sector, they insist on predictability and
knowing that we will be around to support them in these
projects. And on infrastructure projects in particular, these
are very long-term projects. The loans are sort of on our books
for a very long time, and usually they take many years to come
to fruition. So the fact that we will be around--there is
predictability--is very important to our private sector
partners.
In terms of the importance of the diaspora, obviously
particularly in the African context, I myself am a member of
the diaspora. I never imagined my own brother would pack up and
move back to Ethiopia, which he did a few years ago, because it
is sort of an exciting time in Africa.
As Rick said, we are seeing a level of interest from
serious institutional investors that were never there. We are
seeing--obviously, you will hear in the second panel from the
private sector that are testifying--GE and others who have been
there 100 years or so but are expanding their footprint. But we
are also starting to see actually small- and medium-sized
businesses that OPIC has worked with in other regions, in Latin
America, in Asia. The example I gave you with SunEdison in
South Africa; SunEdison has worked with OPIC in Latin America
and other regions, but that was their first investment in South
Africa. So I think one of the things Power Africa has done is
that.
But in terms of the diaspora itself as a population, they
have, obviously, a very direct link to the continent where they
come from, and they have a very long-term perspective. So they
are not investing with sort of short-term gains in mind. And
when things go wrong, they also do not tend to be the first to
pack up and leave. So they tend to be actually really good
partners for OPIC. And our investment, as you know, has grown
fourfold in the last 4 years, and some of those investments
have actually been made by partnering with Ghanian Americans
and Nigerian Americans who are interested in investing in their
country of origin because they see huge opportunities in those
countries and in those markets.
Senator Coons. Thank you.
Assistant Administrator Gast, if I might, looking at the
rest of the world, electrification rates are significantly
higher. In the developing world, Africa lags behind by the
biggest margin particularly in rural electrification where the
rates are very low.
In our own development history, the Rural Electrification
Administration, or REA, launched as part of the New Deal, and
the use of the co-op model, which still provides power in the
rural part of my State and many other States across the
country, strikes me as a powerful model worth looking at.
In your own work through USAID that has made significant
progress already in providing transaction advisors, promotion
of energy, governance reforms, what positive experience are you
seeing that might be also applied to our work to open up rural
electrification in other parts of the developing world, and
what, if any, use are we making of the previous experience in
the United States of electric co-ops and of our rural
electrification experience?
Mr. Gast. Thank you, Senator.
So for Power Africa, as you know, we have very large
transactions to help with on-grid power delivery, as well as
small transactions for off-grid. And as you say, the deficit of
power is much larger in Africa than any other place.
So if there is a focus on getting power to rural
communities outside of Africa, what Power Africa is
demonstrating now is that it can be done on a commercial basis.
We are seeing this in Africa, and I assume that it is happening
in other parts of the world where there is a growing business,
in fact, of African businessmen who are developing small,
renewable, off-grid project solutions.
With regard to your question about the rural
electrification commission, AID has had a partnership with
NRECA, the National Rural Electrification Cooperative Agency,
for a number of years. They have done fantastic work and we are
cooperating with them on Power Africa.
Senator Coons. Thank you.
Senator Flake.
Senator Flake. Thank you for your testimony.
Mr. Gast, the six countries that are selected--how did they
make the cut or the grade there? And are those six countries--
is this to be the source of power or the recipient of power?
There may be cases where a hydro facility in one country feeds
the other. Can you just give some indication of why we are
focusing on those six countries?
Mr. Gast. Sure. To answer your second question, you are
absolutely right. It could be a source of power, as well as an
exporter of power. And that is one of the reasons why we are
looking at power pools to help with power-sharing agreements
between countries and among countries. So in the case of
Ethiopia, in the coming years, within the next decade, it will
be a major exporter of power, not just to Djibouti and Sudan
but also to Kenya and Tanzania.
With regard to your first question, how the countries were
selected; those six countries together represent about 40
percent of the 600 million persons who go without power. So we
looked at it from the perspective of how can we get power
delivered to the most persons on the continent quickly.
Second of all, we had to look where the private sector was
interested, where the deals were being developed because the
private sector is a critical component to it. If the private
sector is not interested in going into a country, then this
model fails.
Then third, we looked at governments making commitments to
improve the regulatory and enabling environment in order to
attract private investment.
Senator Flake. Thank you.
Can I call you Mimi so I do not have to say your last name?
[Laughter.]
Not to be overly familiar.
With regard to OPIC, can OPIC be effective in its mission
with the current carbon cap that you operate under?
Ms. Alemayehou. Thank you, Senator Flake.
When we made the $1.5 billion commitment over 5 years for
the Power Africa Initiative, we actually made that with the cap
in mind because we knew the pipeline that we had already and
the power sector in the continent--we know we can meet it with
the cap in mind.
Having said that, with this new ambitious legislation that
was introduced in the House, we definitely need some
flexibility in that so that we can do additional power
projects.
Senator Flake. Well, thank you.
I certainly would second that. I think if the goal here is
to bring power, that needs to be the goal. I know that many
development experts and private sector individuals and others
that I have spoken to--their main concern about this Power
Africa Initiative is that it might tilt toward serving one
agenda at the expense of another. I mean, if the goal is to
bring power to Africa, we need to be concerned about how we
best effect that, and if we need to change through legislation
or otherwise these caps or mandates or stipulations that you
have, I hope you will let us know what we can do.
Can you give some idea as to the mix? I think it was asked
by Senator Coons, and maybe I missed the answer. What is the
mix right now in terms of renewables?
Ms. Alemayehou. Sure. By the way, you know the omnibus bill
removed the cap, and that would allow us to do an additional
300 to 700 megawatts.
In terms of the mix, right now in our portfolio, we have
about $1.7 billion in our pipeline. I would say a third of that
is actually renewable and two-thirds is thermal.
Last year, overall, in terms of our portfolio, a third was
in renewables, actually to your question earlier, Senator
Coons. So we have actually had a pretty robust growth in terms
of renewables globally, not just in Africa.
Senator Flake. But, Mr. Angiuoni, give us some indication
of what our competitors are doing or other countries. What is
China doing in this field? Your job is to make sure that U.S.
exporters have options and the opportunity and ability to play
in these countries. What are some of the other countries doing,
particularly China?
Mr. Angiuoni. Thank you for the question.
As you well know, Africa has been seen as a great
opportunity for countries around the world. It is not only
China, as I have said in my earlier testimony. It is Europe. It
is Latin America and many other countries in Asia see Africa as
a tremendous opportunity not only for exports but for
investments and for resources.
On the export side, it is actually quite interesting. If
you look at the data provided by the U.N., the amount of
imports from China represent only about 30 percent. Perhaps our
biggest competitor is in Europe. The EU-27 represents about 45
percent of the imports that go into Africa. Our share of those
imports is only 10 percent. So as a nation, we must do better.
Our exports are increasing. Exports as a percentage of GDP is
increasing. Yet, compared to other countries, it is quite low.
China is obviously quite aggressive. If you look at the
energy sector, if you look at Africa, north Africa is primarily
gas. The central part of Africa is primarily hydro, and the
southern part of Africa, Namibia, South Africa, parts of
Botswana, parts of Mozambique, is primarily coal. Where China
has been extremely aggressive is primarily on hydroelectric
projects. It is interesting that in the 1960s, as I mentioned
in my testimony, Morrison-Knudsen helped to build the Akosombo
Dam, and now primarily you have Sinohydro building dams in
Africa. But I see a change in this.
Number one, I see a change that I think there is a game
changer in Africa. There is 450 trillion cubic feet of gas that
has been discovered in Africa, and I really think that is the
future.
And also I see U.S. companies much more engaged. I think
U.S. companies are realizing the opportunity costs of not being
in Africa. So companies like Bechtel, who also was one of the
consortium firms that built the Hoover Dam, now is looking at
Africa for some big projects. So I see a greater interest in
Africa and that is positive for United States jobs and United
States exports.
Senator Flake. Thank you.
Senator Coons. Senator Corker.
Senator Corker. Well, thank you, Mr. Chairman. I want to
thank you and the ranking member for having this hearing and
for your continued focus on Africa and the outstanding job that
you all do here.
We, all three, have a bill on the floor here in about an
hour, so I am going to ask my questions and then leave. But our
staff will listen. Okay?
Thank you again for doing this.
And we are excited about Power Africa. I know we want to
shape that a little differently over here in the Senate.
Ms. Alemayehou, you understand, I know--Senator Flake
talked a little bit about the conflicting agendas. I know that
we really have kind of cut our nose off to spite our face in
years past because we have had carbon caps in Africa that have
kept Africans from having power, which is not the agenda we are
pursuing here. And I know you understand that a big, big piece
of the power generation in the future, with the appropriations
bill lifting the cap, is really going to be through natural
gas. You understand that. Right?
Ms. Alemayehou. Yes, Senator. I mean, Africa, as I said in
my testimony--there are 600 million people in the dark, and we
are going to need all sources of energy to support those
people. I believe really every country is sort of unique.
Ethiopia, where I was born, 90 percent of the energy actually
comes from hydro, and the rest may come from geothermal. It is
clean. But as Rick was saying, in Mozambique where there are
huge gas finds, probably second only to Qatar, that makes sense
for that country. So I agree with you in terms of the mix of
sources of energy. It has to come from every source when we are
thinking about such a huge problem.
Senator Corker. Well, listen, I am going to ask just two
questions and leave.
If you would speak to--I know the private sector panel is
coming up, but if you could speak a little bit to some of the
difficulties the private sector is having relative to financing
and why what you do is so important to this initiative, I would
appreciate it.
Mr. Gast, one of the concerns that I think many people have
is that we are going to end up with a lot of power generation,
but a lot of times--and we have all seen this in countries we
have been involved in--we do one component of it. We do not
really follow through and have the discipline sometimes to
force the other pieces to happen. And I think there is a big
concern. We all want to see this successful I think, and I am
personally very excited about this effort. But I think the
distribution away from power generation, the ability to
actually have tariffs that cause all of this to be self-
sustainable is very important. And I wonder if you would speak
to that also.
And with that, I might leave and thank you so much.
Ms. Alemayehou. Maybe I will talk a little bit about some
of the challenges that we see in some of these transactions and
why I think OPIC is sort of glad to be as part of the Power
Africa team is sort of lack of capacity really on the
government level, not just in these six countries of the Power
Africa, but in some of the other countries where OPIC works at
and where obviously a very tiny agency--we just have one person
in South Africa. We are all sort of here in Washington. And
some of the work that the transaction advisors are doing by
advising these governments and these ministries on the policy
and regulatory reform I think is really, really important. And
I think the private sector team that is probably testifying
after us may weigh in on that. But I think those are the kind
of reforms that are much more long-term and will have a huge
impact.
I will give you an example. In Tanzania, where we were,
with USAID's assistant transaction advisor, able to change the
PPA terms from 15 years to 25 years, that opened up that
country's attractiveness for private sector investment in the
renewable industry by doing that, not just from United States
investors, but I am talking about investors from Europe and
anywhere else in the world.
And in Ethiopia's case, I think Earl talked about it in his
opening testimony. Their transaction advisor there--again I
think this is really huge. It is for the first time ever that
country is allowing the private sector to invest in their power
sector. The government until now has been able to do it on its
own. They obviously cannot continue to do that. But this is
huge that the fact that the country allowed the private sector
to come in as a result of some of the policy and reform work
that we were doing. I think that is the kind of support that
would have a long-term impact on U.S. investors in the long
term.
Mr. Gast. Senator Corker asked about cost-reflective
tariffs, which we feel is an essential ingredient to making
this a successful initiative. And, in fact, the governments
make commitments as well. When they sign on to Power Africa,
one of the commitments that they make is that they will move to
cost-reflective tariffs. And we have already seen Ghana and
Tanzania increase significantly, by 40 percent, their tariffs
within the last few months. So that is a good first step.
It also leads to a bankable deal. Without a cost-reflective
tariff, lenders are not going to lend and investors will not
invest. So that is absolutely critical.
Senator Corker also asked about while we are focusing on
generation, are we looking at the big picture. And we
absolutely are. And that is where our other development
partners come into play, the African Development Bank, the
World Bank, MCC. The transmission costs are huge, and without
the investments of the multilateral development banks, these
projects also will not be bankable.
So we have integrated strategies built around the country's
generation plans, as well as each individual project. And so
what we are trying to do is ensure that we have sequenced
investments coming in in all areas of the energy sector to make
these projects viable.
Senator Coons. Thank you to the panel. If we might, we have
votes scheduled for noon, which is in part why Ranking Member
Corker left. I want to ask one or two more questions, if I
might, and then forgive me. We have a robust second panel as
well.
In terms of plans, if I could, Assistant Administrator
Gast, what plans are there to consider future expansion of
Power Africa beyond these six focus countries? And has USAID
considered a dedicated line item? You are carrying most of the
operating costs of providing these transaction advisors, these
in-country teams. It would be easier for appropriators to
specifically support a dedicated program line.
And then last, if I might. The Foreign Commercial Service.
It is reported in some settings that China has, I think, 10
commercial officers in Nairobi alone. We have fewer than that
on the entire continent. To your point, Ms. Alemayehou, there
are not enough U.S. agency staff on the continent to help
actually facilitate and move these deals through. What
additional assistance are you getting from some of the
coordinate agencies like the Department of Energy, which has
relevant labs and capability particularly in renewables and in
grid management, and from the Department of Commerce that has
commercial service officers in a few but, in my view, not
enough of the countries?
So sustainability in terms of funding, possibility and
value of expanding the number of countries, and then engagement
by other agencies, Commerce and Energy.
Mr. Gast. The President, when he launched Power Africa last
year, laid out some very ambitious goals; 10,000 megawatts of
new power and 20 million new connections. Through careful
analysis, we believe that the $285 million that we have as a
development agency is sufficient within those six countries to
reach those
goals. If we are considering expanding the goals, then
additional resources would be needed.
With regard to your question about having a line item
within the budget, the way that we have treated Presidential
initiatives previously is to build it into each country budget
with a narrative around how it supports a Presidential
initiative. We can certainly look into your request.
Senator Coons. In my view, as I said at the outset and as I
think Senator Corker just reflected, sustaining this beyond one
administration is a broadly shared goal and could have long-
term positive impacts for rural electrification, for the
development and deployment of renewables, for addressing I
think legitimate environmental concerns about overly focused on
generation and in sustaining this reform more broadly.
Senator Flake, any more questions for this panel?
Senator Flake. No.
Senator Coons. Senator Markey, we are about to transition
to the second panel. If you have a quick question for this
first panel----
Senator Markey. Thank you so much, Mr. Chairman. And I
thank you for having this very important hearing and for
allowing me to join the subcommittee today.
It does not quite feel like baseball season yet here in
D.C., but I really think the Obama administration is primed to
hit a home run here with Power Africa. If we enable Africa with
the right technical expertise and financing resources, we are
going to see a total revolution in their electricity system and
their economy more generally.
And this transformation is going to look a lot different
than the way we saw our continent electrified over the last 80
years. The 1936 Congress passed the Rural Electrification Act
to fund the massive build-out of transmission lines across the
country and to bring electricity from large, mostly coal-fired
central power stations to Americans spread out across our
Nation. In 1949, that program was amended to similarly build
out the wire telephone network.
Africa has, obviously, not followed that path on the
telecom front. They skipped the wires. They went straight to
mobile technology and the results have been breathtaking. There
will be 1 billion mobile subscriptions across the continent in
2015--1 billion. We are talking Africa--1 billion
subscriptions. None of that would have been possible in the
imaginations of people just 20 years ago.
I was the House author of the Telecommunications Act in
1996. In less than 20 years, that spread to Africa because we
passed forward-looking legislation here to think about what was
possible in Africa, in Asia. And we had the hearings on those
issues back in the early 1990s, mid-1990s, talking about what
was possible, what could our imagination take us to.
The same potential for technological leapfrogging is there
with electricity. Instead of spending billions of dollars
building huge, polluting central station generators and
stringing thousands of miles of transmission lines, there is an
opportunity here to build a more decentralized grid that
utilizes local renewable resources. And they can do it with
American-made technology.
Mimi, do you agree with that? I apologize. I am not going
to try to say your--can you say your name for me please?
Ms. Alemayehou. That is okay. I was already on a first name
basis with Senator Flake. [Laughter.]
Senator Markey. Excellent. Great minds think alike.
Ms. Alemayehou. Well, as you know very well, the continent
has a huge need, 600 million people in the dark, and so it will
require every source of energy.
As you may know, OPIC has had a very, very healthy
renewable energy portfolio worldwide but also actually in
Africa. Currently in our pipeline, we have wind deals in Kenya.
We have solar in Tanzania. We have biofuel in Tanzania. We did
a solar deal last year in South Africa. So there is very strong
interest from U.S. investors investing in the renewable energy
market in the continent.
But as you know, every country in Africa, obviously, is
unique. There are some countries like my country of birth,
Ethiopia again--I will give an example--where 90 percent of the
energy source is hydro, and the other additional would probably
come from geothermal. And Kenya and others----
Senator Markey. But there is a lot of sun in Ethiopia, as I
recall, from my----
Ms. Alemayehou. Yes. Unless you are there in the summer,
yes, there is a lot of sun as well. But geothermal is also
very, very cheap. Because they are across the Rift Valley, the
whole Kenya, Tanzania, Ethiopia have huge geothermal potential.
But countries like obviously Mozambique, which have huge finds
in gas as well, will probably develop those kind of energy
resources as well.
Senator Markey. Let me go to you, Mr. Gast. In your written
testimony, you state that Power Africa continues to explore
opportunities to bundle together off-grid projects so that
institutional investors can deploy capital into these projects
at scale. That is a very encouraging thing to hear, but I am
quite concerned that we may not be seeing adequate progress in
that area. Are you seeing models that work here that we can
scale up?
Mr. Gast. Absolutely we are, and if you do not mind,
Senator, I will give you an example.
We have a partnership with Cummins Power. They have
proprietary technology on biogas. There is an invasive species
in the Rift Valley in Baringo County, for example, in Kenya
where we are piloting this effort. The invasive species is what
we would call mesquite. It is very harmful to the local
population and very harmful to their cattle. So we are helping
organize communities so that there is a collection effort of
this invasive species so that the communities are earning money
from this. We have helped Cummins Power and turned to a power
purchasing agreement with KPLC. That is the power and light
company of Kenya. The economics are there, and we have one
project that is underway and we are looking at replicating it
not only throughout Kenya but also into other parts of east
Africa.
Senator Markey. So I understand that your off-grid program
provides loan guarantees for fewer than 30 projects a year
worldwide across all sectors. What can be done to increase the
number of projects supported in total and to off-grid
entrepreneurs in particular beyond the good things that come
from bringing clean, reliable power to hundreds of millions of
people that do not currently have it?
I think it is also important to highlight how much this
program stands to benefit the American economy. The clean
energy sector is worth an estimated $2.3 trillion over the next
decade. Power Africa will help booster American companies in
this huge growth sector. Can you talk about that a little bit,
how it helps our country as well?
Mr. Gast. Absolutely. OPIC mobilizes American capital for
investment in Africa. Through our development credit authority,
we help mobilize local capital. And so local currency is also
critical for projects, especially those that are operating at a
smaller scale. We have a history of working with banks
throughout the country to help with the portfolio guarantees
and to increase their confidence that their investments are
going to be good investments.
We, in the 2015 bill, have asked for authority to expand
that from $1.5 billion to $2 billion, which would allow us to
do much more on small-scale renewable and easily replicable
projects on the continent.
Senator Markey. So next year in Africa, there will be 1
billion people walking around with devices like this, and they
are not going to have black rotary dial phones the way we did
in America for 80 years. We could not figure out how to get out
of that trap, the utility trap, the trap of saying we have to
take it from the utility. They are not going to innovate. They
are not going to change.
So we have to help these countries to not fall into the
same trap because the same potential is there for them for
solar, for wind, for other renewable energy resources rather
than forcing them to get trapped or financing the trap of
having to be tied to the central grid that runs contrary to
where all of history and all of technology is now heading not
only here but all across the planet, but especially on a
continent that can really look at this through fresh eyes. They
have done it. They have skipped the wire for one source. They
can skip the wire for another.
Thank you, Mr. Chairman.
Senator Coons. Thank you, Senator Markey.
And thank you very much to our first panel. Assistant
Administrator Gast, Vice President Alemayehou, and Director
Angiuoni, thank you for your testimony and your engagement.
We would like to move, if we can, quickly to our second
panel given the limitations of time we face. We have votes in
half an hour.
I would like to welcome to the table Tony Elumelu, chairman
of Heirs Holdings; and Paul Hinks, CEO of Symbion Power; Del
Renigar, senior counsel for General Electric; and Tom Hart,
U.S. executive director of The ONE Campaign.
As we begin our second panel, I would like to specifically
thank Mr. Elumelu for traveling from Nigeria to be here with us
today and to share with us an African perspective. Your
leadership role in advancing Africapitalism and in partnering
with Power Africa is particularly welcome and appreciated.
And if we would move in order down the panel, that would be
terrific.
Mr. Elumelu.
STATEMENT OF TONY O. ELUMELU, CHAIRMAN OF HEIRS HOLDINGS,
FOUNDER OF THE TONY ELUMELU FOUNDATION, LAGOS, NIGERIA
Mr. Elumelu. Mr. Chairman, I want to thank you, Senator
Coons, high Ranking Member Senator Flake, and Senator Markey,
for extending this kind invitation to me to make testimony to
the subcommittee of the Senate Foreign Relations on this
important topic of powering Africa. And I would like to say
when Senator Flake called me on Monday to attend this
testimony, I was excited to come because of the importance and
significance of what you and your committee members are doing.
So thank you.
I am the chairman of Heirs Holdings and the founder of the
Tony Elumelu Foundation. Heirs Holdings is a pan-African
investment company which operates in strategic sectors of the
economy, including banking, oil and gas, agribusiness, real
estate, and power. We take a long-term investment approach in
order to unlock value for our stakeholders and to create a
catalytic effect in propelling Africa's economic development.
I coined the term ``Africapitalism'' to describe our
approach to business. I believe that long-term investment in
key sectors like power can create economic prosperity and
social wealth, benefiting investors and Africa's development
future. At its core, Africapitalism has an economic philosophy
that encourages practices that create and multiply value
locally.
Energy poverty is very close to my heart. I am an
entrepreneur, one that is born, raised, and educated in Africa,
and through the work of the Tony Elumelu Foundation, we are
helping to launch and support a thousand more successful
entrepreneurs across the continent. Through our philanthropic
efforts, I have repeatedly seen how lack of access to reliable
power has constrained human potential and stifled economic
growth across the continent.
Currently over 600 million of my fellow Africans have no
access to electricity and many more lack reliable access. We
are a continent of entrepreneurs, some of the smartest in the
world. But how many budding entrepreneurs can really succeed
and create more jobs if they do not have lights to power SMEs
or the cost of electricity is more than 55 percent of the
operating costs of their business? The lack of electricity in
sub-Saharan Africa has significant implications on livelihoods.
Lack of electricity significantly impairs food security.
Technology advancements have supported food security in the
West, while the lack of electricity in sub-Saharan Africa has
meant that the current population continues to rely on
rudimentary facilities for harvesting and storage without the
benefit of processing a value addition that could support food
security and boost livelihoods.
Lack of electricity impairs national security, too. Because
extremism, as you know, is--forever poverty, with only 54
million new jobs available for the 122 million Africans
expected to join the workforce by 2020, I am extremely alarmed
and concerned with what this means for national security. The
creation of jobs in Africa is completely dependent on industry,
and industry cannot thrive without a consistent supply of
electricity.
Mr. Chairman, the point, therefore, is why is Power Africa
Initiative important to Africans, why is what your members are
doing very important to Africans. The leadership of the United
States is considering this issue at an important time as
African citizens from both the public and private spheres are
prioritizing the issue of electricity access and linking
success in this area to the alleviation of poverty and
promotion of lasting economic prosperity. Power Africa,
therefore, is a vital important initiative for the following
reasons.
First is influence matters. The U.S. Government's elevation
of this issue has galvanized both the private sector in the
United States and other countries to examine the African power
sector as an opportunity for viable investments.
Second, using a coordinated approach, Power Africa set a
collective and measurable target to generate an additional
10,000 megawatts within a set timeframe for United States
agencies, African governments, the African private sector, and
the investors to work toward in Africa.
Third, the establishment of Power Africa has also
encouraged other African nations to undertake reforms of their
regulatory structures so as to participate in future power
deals and partnerships.
In my opinion, Power Africa must by viewed by the
administration and this distinguished body as only a start. The
initiative is valued at $7 billion, and Africa's
infrastructural needs are estimated to be in excess of $300
billion. But like all long journeys, the journey to
infrastructure sufficiency in Africa begins with the first step
or, in this case, the first $1 billion.
At the request of the leadership of your committee, I would
like to say that the African success story I would like to
share with you today is that of the Ughelli power plant in
Nigeria. This is located in the Niger Delta region of Nigeria.
Through Transcorp Limited PLC, Heirs Holdings committed to
invest $2.5 billion to generate about 2,000 megawatts of
electricity over a 5-year period under the Power Africa
Initiative. This represents about 20 percent of the U.S.
Government goal of doubling access to electricity in Africa for
the same period of time.
The initial investment in the Transcorp Ughelli plant was
$300 million from mid last year. When we first took over the
plant in November last year, its power output was less than 160
megawatts of power. By January 2014, this year, we had doubled
its output to 348 megawatts, and this morning I am happy to say
that we have gone up to 382 megawatts of electricity with an
ongoing investment of an additional $200 million to refurbish
some turbines, we project that we will be generating over 700
megawatts by the end of this year. We are doing this in
partnership with one of your own, Symbion Power, who is here
also. And General Electric is giving technical support to us
also. We are actually again working with both Symbion and
General Electric for an additional 1,000 megawatts expansion,
which will cost us $1 billion.
I am pleased to inform you that we are on track to fulfill
our commitment to Power Africa and we will be producing the
equivalent of almost 50 percent of the current total output of
4,200 megawatts in Nigeria today. And in 2015, we will begin
plans to generate power in other west African and east African
countries.
Transcorp really also currently directly provides
employment for nearly 300 full-time workers and 1,000
contractors, and this will grow to 700 employees and 2,000
contractors with the planned additional 1,000 expansion. And we
have not even calculated the thousands of tangential and
consequential jobs that we created by the plant and the output.
Mr. Chairman, let me say a few words on a topic that has
been discussed already this morning, and that is natural gas,
climate change, and environmental sustainability.
With respect to climate change, environmental
sustainability, and concerns about the development of natural
gas for power, our company, Heirs Holdings, believes strongly
in protecting the environment for future generations. But we
also recognize the importance of addressing the other needs of
this generation. Through a mix of renewable and nonrenewable
resources, in accordance with the African country plans, some
of whom prioritize the abundantly available natural gas
resources, to follow up with this in context, the annual
average carbon emission in sub-Saharan African countries is .3
tons per person. In Europe, the average is 10 tons per person.
And in the United States, average annual emissions are as high
as 17 tons per person. Africans now want to harness these same
resources that abundantly exist on the continent to meet our
own urgent development needs. Sub-Saharan African countries
account for less than 3 percent of total global carbon
emissions--our progress via--of the climate change problem, and
it simply cannot be solved on the backs of these people.
Finally, Mr. Chairman, we call our company Heirs Holdings
because we are committed to enhancing the lives of Africans
today and driven to create transformative change for future
generations in Africa. We believe in Africa. We believe in our
ability to help catalyze its emergence as a strong player in
the global economy, and we are confident that history will
remember who played a role in making this happen. And that is
why this committee and what this Government is doing will be
remembered not just by this generation of Africa but future
generations of Africa will remember those who made it possible
or played a role in improving access to electricity.
Thank you again, Mr. Chairman and Senator Flake, for your
kind invitation to participate in this important hearing, and I
look forward to answering your questions.
[The prepared statement of Mr. Elumelu follows:]
Prepared Statement of Tony O. Elumelu
Good morning. I want to begin by thanking Chairman Coons and
Ranking Member Flake for inviting me to testify before this committee
and provide an African private sector perspective on President Obama's
Power Africa Initiative. More importantly, thank you for your
leadership in holding this hearing on a very important issue that has a
profound daily impact on the lives hundreds of millions of people in
Africa.
heirs holdings and our foundational philosophy of africapitalism
I am the Chairman of Heirs Holdings and founder of the Tony Elumelu
Foundation. Heirs Holdings is a Pan-African investment company head
quartered in Lagos, Nigeria, which operates in strategic sectors of
industry including banking, hospitality, agribusiness, health care,
power and energy. We take a long-term view in order to unlock value for
our shareholders and to have a catalytic effect in propelling Africa's
economic development.
We have coined the phrase ``Africapitalism'' to describe our
approach to business--our belief that long-term investment in key
sectors, like power, can create economic prosperity and social wealth,
benefiting investors and Africa's development future.
At its core, Africapitalism is an economic philosophy that seeks to
encourage practices that create, retain, and multiply value locally.
This is critical to stimulating and sustaining job creation and
economic growth.
the challenge of electricity access--the loss of human potential
We are all familiar with the statistics:
Nearly 600 million, or 7 out of 10, Africans have no access
to electricity;
Only 2 percent of South Sudanese and Burundians, and 3
percent of Liberians, have access to electricity. In my country
of Nigeria, half of the population lives in total darkness, and
those who do have electricity have unreliable access;
In African Business Enterprise surveys, more than 50 percent
of businesses cited lack of electricity as a major constraint
to their growth.
This is happening at a time when half of Africa's 200 million
people are between the ages of 15 and 24, a potential boom or bomb, and
we need to create 13 million jobs per year to absorb them.
It is also important to note that many of the greatest, and
solvable, health challenges in Africa, which are priorities for U.S.
foreign assistance, are linked to energy poverty of the people and
government agencies that provide basic health services.
An estimated 4 million deaths per year, globally, are
associated from illnesses derived from cooking with wood and
charcoal.
Millions of child mortalities can be linked to lack of cold
chains needed to distribute vaccines.
Blood supplies cannot be properly tested and preserved to
save lives.
Similarly, millions of mothers and babies are lost every
year from lack of power-driven diagnostic and surgical
interventions.
Laboratories cannot function regularly and effectively.
Education is another fundamental sector necessary for achieving
development gains, yet 90 million children go to school without
electricity. This translates to millions of lost hours of study and
homework every day. Over time, this will become a cumulatively
unrecoverable loss for a continent with a large youth population, who
will lack the necessary understanding and skills to power the
continent's industries, and to emerge as a full player in an integrated
global economy. This large and expanding pool of unskilled labor would
condemn the continent to a continued role as an extractives source--the
source of energy, food, and raw materials for use by other world
regions--while its own citizens lack the ability to access and benefit
from their own abundant resources.
In short, if we can fix power, we can transform lives, and we can
realize our potential as an emergent continent.
the power africa initiative
Many African countries had already begun to prioritize and address
their electricity-access needs before President Obama's announcement of
the Power Africa Initiative, during his July 2013 trip to the
continent, so local ownership and local momentum were in place.
Nigeria's privatization process was already under way, just as it
was in countries like Tanzania and Ghana. In fact, with the exception
of Liberia, given its post conflict status, most of the countries
selected to participate were partly chosen on the basis of the reforms
already enacted by their governments in the power sector.
The above being said, there is no substitute for the power of the
American Presidency and the U.S. Congress in setting the global agenda
and global priorities. I view the initiative as a precedent setting
engagement on the continent, one that offers Africans an opportunity to
be partners and not dependents. More specifically:
First, influence matters. As the global leader, when the
U.S. Government pays attention to an issue, the world pays
attention too. The U.S. Government's elevation of this issue,
and coordinated approach to tackling it, has galvanized the
private sector in the U.S., and other countries, to examine the
African power sector as an opportunity for viable investments.
Second, Power Africa created a collective and measurable
target of 10,000 MW, within a set timeframe, for U.S. agencies,
African governments, the African private sector, and outside
investors to work toward.
Third, the establishment of Power Africa has also encouraged
other Africa nations beyond the ``Power Six'' to seek U.S.
assistance to undertake reforms of their regulatory structures,
so as not to miss opportunities to participate in future power
deals and partnerships.
Most African countries are natural allies for American
business. Many of our citizens were educated in the U.S., our
professionals gained experience here, hundreds of millions of
us speak English as you do, our financial, regulatory, and
business practices are similar to, or based on, yours, and
millions of our citizens were born or live here in the U.S. It
is a long overdue effort for the U.S. Government to help find a
way for these African diasporans to engage in economic
activities within the framework of a mutually beneficial
bilateral partnership.
All of the above being said, Power Africa must be viewed by this
administration and this distinguished body as only a start. The
initiative is valued at $7 billion and Africa's infrastructural needs
are estimated to be $300 billion. But like all long journeys, the
journey to infrastructure sufficiency begins with the first step or, in
this case, the first $1 billion.
power africa and the transcorp ughelli power plant
The success story of power expansion I'd like to share with you
today is one of partnership between the U.S. and the African private
sector. It is that of the Ughelli plant in the Delta region of Nigeria.
Heirs Holdings pledged to commit to the Power Africa Initiative because
we felt it was important to support the innovative approach to
development being undertaken by the American Government. We also felt
it was important for the African private sector to step up to the plate
and be part of the development effort on the continent, in a way that
is consistent with our mission to create value for our shareholders.
Our Power Africa commitment was to invest up to $2.5 billion to
generate 2,000 MW of electricity over 5 years, toward President Obama's
goal of doubling access to electricity in Africa over the same period.
Heirs acquired the Ughelli power plant as part of the Nigerian
Government's privatization of the power sector. When we took over the
plant in November, it had never produced more than 160 megawatts (MW)
of power. By January 1, 2014, we had doubled its output to 348MW and
project that we will be generating 725 MW by the end of the year. We
are also beginning a rehabilitation of the turbines in the plant and an
expansion, to generate an additional 1,000 MW at Ughelli.
I am pleased to report that we are on track to fulfill our
commitment to Power Africa and we will be producing more than one-third
of the total current output in Nigeria which is 5,898 MW. And our power
investments will not be limited to Nigeria. In 2015, we will begin to
roll out our plans to generate power in other West and East African
countries.
We are meeting these objectives, working with America partners.
Symbion, a U.S. power company, led by my friend, Paul Hinks, who is
also testifying today, is one of our investors in Ughelli. General
Electric (GE), the world's foremost leader in power technology provided
us with technical expertise to help increase the output of the plant,
and we're in talks to work together on the Ughelli rehabilitation and
expansion. Encouraging and supporting these types of partnerships
between African and U.S. companies is one of the major contributions of
Power Africa.
Ughelli currently directly provides employment for nearly 300 full-
time workers and 1,000 contractors, and this will grow to 700 employees
and 2,000 contractors with the expansion. We cannot yet estimate the
number of jobs that will indirectly be created because new and existing
businesses will have increased access to power.
concerns around the exploitation of natural gas to expand
electricity access in some african countries
There is some debate around how Africa ramps up its energy use and
what resources it will utilize. Africa has tremendous energy potential,
via both renewable and nonrenewable resources, and most countries have
fully developed national plans and priorities around their existing
energy resources. Many are interested in hydro, geothermal, solar and
wind power, with the latter two of particular interest in providing
off-grid solutions for rural dwellers.
Additionally, natural gas is abundantly available in several
African countries, to the tune of billions of cubic meters. Only 15
percent of Mozambique's population has access to electricity, yet the
country may possess up to 150 trillion cubic meters of natural gas.
With 180 trillion cubic meters of gas, Nigeria actually has more gas
than oil. For the last 3 decades, companies have flared this gas,
amounting to roughly 1.2 billion cubic feet daily in wasted energy,
sending it into the atmosphere, harming the health of local populations
and negatively impacting the environment. Today, along with hydropower,
Nigeria's national energy plan prioritizes the harnessing of its
trillions of cubic meters of natural gas reserves, to help stabilize
its current grid and increase energy access for our millions of
citizens who still lack regular access to power.
Working within the national energy plan, Transcorp, a subsidiary of
Heirs Holdings, made the strategic investment in the Ughelli gas plant,
thereby helping to reduce gas flaring and carbon emissions. Transcorp
also just concluded another round of Environmental and Social Impact
Assessment (ESIA) for the plant, with an aim of ensuring that we manage
the environment around our plant in a responsible manner. The earlier
mentioned plans to rehabilitate our turbines will also help to reduce
carbon emissions, while transforming the lives of our people.
Some stakeholders resist any use of natural gas over concerns about
the climate change impact. The Heirs group of companies care strongly
about protecting the environment for future generations, but we also
recognize the importance of addressing the urgent needs of this
generation. As I explained earlier, energy poverty is a pressing
concern which impacts many social development indicators.
To further put this in context, the average annual carbon emissions
in sub-Saharan African countries is .8 metric tons per capita. The
average for the European Union is over 7 metric tons per capita, and in
the United States, average annual emissions are as high as 17 metric
tons per capita. And every day millions of barrels of oil and gas leave
the continent to be used by more developed countries to satisfy their
own energy needs. Africans now want to harness these same resources to
meet our own urgent development needs.
We must not look at this situation in stark black and white terms,
but recognize that we are all stakeholders in developing the continent
in a sustainable way. We can do this by encouraging energy efficiencies
and clean technologies and by working with each nation to develop a
national plan for the harnessing and preservation of its natural
resources.
conclusion and recommendations
Introduce and pass the Electrify Africa Act: Passage before the end
of this Congress is critical because it would be historic, and codify
the expansion of access to electricity in Africa as a U.S. Government
development and foreign policy priority and ensure continuity for the
next President and Congress. Like the Africa Growth and Opportunities
Act (AGOA), Power Africa, augmented by Electrify Africa Act, has the
ability to help lay the foundations for a new U.S.-Africa relationship:
one based on partnership for mutual economic benefit, which
simultaneously delivers development gains through capacity-building,
technology and knowledge transfer, and regulatory reform.
Take long-term approach to development policymaking in Africa,
particularly in the power sector: It is all about de-risking the sector
and supporting those partnering for a collective benefit. Not only do
investors need the predictability and assurance of a continuity of
policy and flow of financing, but it takes a long time to put the
infrastructure in place to realize their return on investments.
Look at development differently: Multilateral and bilateral
development agencies, like the African Development Bank, also need to
consider prioritizing the provision of funds to create sovereign
guarantees, bond securitization, and other ways of de-risking the
sector with the clear objective of facilitating private investment in
power. Funds could be pooled and reprogrammed for this purpose.
Similarly, development finance institutions need to be unleashed to
provide support to sustainable and responsible investment in the power
sector.
Incentivize policy reforms and energy efficiencies through
programmatic support to governments and institutions: There is no
amount of capital investment or entrepreneurial zeal that will provide
affordable and sustainable access to electricity for Africa's 1.5
billion people without the full buy-in and energetic support of African
governments. With the best of intentions, for more than 30 years, the
various Nigerian military and civilian governments could not come close
to meeting the energy needs of their citizens. However, when the
current government worked in collaboration with the private sector to
develop a sensible privatization plan and schedule, the private sector
stepped up to the plate. The government also incentivized the long-term
investment required for the power sector by instituting the multiyear
tariff order to ensure that investors in the power sector earn an
attractive rate of return on their investment.
Make strategic investments in catalytic and transformative sectors
by taking a supply chain approach to your development policy: Heirs did
not start out intending to go into power, our goal was to break into
the oil and gas sector as a domestic producer. However, with a lot of
gas reserves within our assets and recognizing the needs in our country
for electricity, we proceeded to invest in converting that gas to
electricity. We are also looking down the supply chain and exploring
opportunities for power distribution to tackle power from raw material
to end consumption. Basically, we plan to go from our oil and gas block
to serving our neighborhood blocks.
Make engagement with the African private sector a congressional
priority in oversight and new policymaking: Public-private partnerships
are critical to developing the African Continent, particularly in the
power sector. It is important to recognize the revolution that has
taken place in the African private sector and that we've stepped up to
the development plate.
conclusion
We call our company Heirs Holdings because we are committed to
enhancing the lives of Africans today, but driven to create
transformative change for future generations.
Despite all of these hardships the continent is home to 7 of the 10
fastest-growing economies in the world. According to UNCTAD's 2013
Global Investment Report, at an average of 9.3 percent, Africa offers
the highest rate of return on investment of any region in the world and
26 African countries have committed to support the goal of providing
universal energy access by 2030.
Imagine the potential that could be unleashed if we get electricity
right. Imagine the GDP growth, the education, and job opportunities for
our youth and the families lifted out of poverty. Imagine Africa's
future.
Thank you again for your kind invitation to participate in this
important hearing, and I look forward to answering your questions.
Senator Coons. Thank you, Mr. Elumelu.
Mr. Renigar.
STATEMENT OF DEL RENIGAR, SENIOR COUNSEL FOR GLOBAL GOVERNMENT
AFFAIRS AND POLICY, GENERAL ELECTRIC, WASHINGTON, DC
Mr. Renigar. Mr. Chairman, Ranking Member Flake, members of
the subcommittee, it is a pleasure to be here today.
I am Del Renigar with General Electric. General Electric is
the world's largest infrastructure company. We like to tackle
the world's toughest challenges finding solutions across health
care, home, finance, energy, and transportation, and nowhere in
the world is that more relevant than sub-Saharan Africa. We
have been in sub-Saharan Africa since 1898, started in South
Africa, but have transformed our operations across the
continent, across 35 countries. We now employ over 1,800 people
in sub-Saharan Africa, and sub-Saharan Africa is a strategic
focus for our company. Our headquarters are in Nairobi, Kenya,
and we continue to see huge opportunities for growth.
Power Africa is a fantastic initiative that is fully
supported by GE. We committed to help bring online at least
5,000 megawatts, and we believe we are making very solid
progress in achieving that target.
Power Africa is a great approach. We believe the whole-of-
government focus, as well as the coordination with the in-
country team and the transaction advisors, is a really smart
way to go. Senator Flake, I am sure you are focused on
basketball this time of the year. It is really the perfect
high-low kind of approach and we see tremendous progress and
results because of that coordination and the reach-back to
Washington.
We have been very active in a number of projects already.
We are doing gas projects in Nigeria and Tanzania and Ghana. We
are doing wind projects in Kenya. We also see opportunities to
do more wind in Ethiopia.
There has been a lot of talk about off-grid and distributed
power. We are very engaged on those topics. As has been
mentioned, we put together this off-grid challenge with the
U.S.-African Development Foundation to encourage African
innovators and entrepreneurs to come up with smart ideas for
off-grid and renewable solutions.
At the same time, though, I cannot help but comment that
the gas issues are really central to this. Africa has
tremendous gas resources and we need to figure out ways to
deploy those resources to improve the quality of life on the
continent.
I want to focus, Mr. Chairman, on your priorities and how
do we institutionalize this. I think there are a few things
that we can be doing and we are already starting to see some
progress on this.
Number one, it is really standardizing documents and
templates. There ought to be a standard model for PPA's, a
standard model for IPP's, a standard way of providing credit
enhancements for off-takers. That can be replicated, then
banked for projects across the continent.
We believe there needs to be an intense focus on gas to
power. One of the most frustrating things in sub-Saharan Africa
is you have all this gas and no way to translate it into power.
We need to be focusing on the infrastructure that can provide
that gas to those power locations. Even distributed power runs
on gas. It is not all renewables. Gas is a central feature of
distributed power. We need to be looking at pricing. We need to
be looking at subsidies. We need to be looking at allocation of
gas to meet the target of doubling access.
We also need to be looking at grid capacity. If you are
going to bring on this many renewables and this much gas, you
have to look at whether the grid can stabilize and what
improvements, what management techniques can be brought to bear
on the grid.
Finally, biogas. You heard from USAID this is an area where
we believe that there needs to be a policy focus on providing
more incentives and more of a framework on how to encourage
countries to go after this. We think Ethiopia and Tanzania are
places where we could also see huge progress on biogas.
Finally, Mr. Chairman, you asked about what the Congress
can do. The Congress, of course, can do a lot. Reauthorizing
Ex-Im Bank and OPIC is critical. Sixty percent of GE's revenues
now come from outside the United States. That means to sustain
our manufacturing base in this country, we need help from Ex-Im
Bank and OPIC.
We also believe USAID's development credit authority is a
great tool for encouraging U.S. exports and engagement with the
world.
Finally, I want to touch specifically on the carbon cap
issue and the Electrify Africa Act. We are strong supporters of
the Electrify Africa Act. However, we do believe there needs to
be a focus on the carbon cap issue. The omnibus has provided
one solution, but we think a permanent solution is appropriate
here.
Finally, we continue to support more commercial resources
from the Commerce Department on the continent to provide that
market intelligence and that support.
Thank you again for this opportunity. I look forward to
your questions.
[The prepared statement of Mr. Renigar follows:]
Prepared Statement of Del Renigar
Mr. Chairman, Ranking Member Flake, and members of the
subcommittee, thank you for the opportunity to testify today on the
Power Africa Initiative. I am Del Renigar, Senior Counsel for Global
Government Affairs and Policy, for General Electric.
As you know, sub-Saharan Africa is home to tremendous people and
tremendous resources. Yet, sub-Saharan Africa is mired in energy
poverty:
Sub-Saharan Africa accounts for only 12 percent of the
global population, but almost 45 percent of those are without
basic access to electricity.
Nearly 7 out of every 10 Africans still have no access to
what we would consider modern electricity.
90 million sub-Saharan children have no electricity at
school.
70 percent of businesses cite the lack of access to reliable
power as a major constraint.
225 million sub-Saharans rely on health facilities that are
without electricity.
At GE, we believe that power has the potential to transform lives
and communities and bring economic growth to every corner of the globe,
especially sub-Saharan Africa. Through our presence in sub-Saharan
Africa, we directly witness how the continent's power deficit impacts
every element of daily life and work, with pronounced impacts in
education, public health, medical care, and business productivity. We
are enthusiastic partners with the U.S. Government in launching and
implementing the Power Africa Initiative, which we see as a new
framework for public-private collaboration to address some of the
world's most intractable challenges.
background
GE is the world's largest infrastructure company. We bring the best
people and the best technologies to take on the toughest challenges,
finding solutions in energy, health and home, transportation and
finance. GE has been actively involved in Africa for well over a
century. The Company established the South African General Electric
Company in 1898, and has been a reliable partner to African nations and
communities since that time. We now have more than 1,800 employees
working across 35 countries in the region, providing solutions and
services that support Africa's infrastructure and sustainable growth.
We have a strong foundation for serving as a partner to the U.S.
Government (USG) in implementing the Power Africa Initiative. Several
GE business units contribute to serving Africa's energy needs, but the
principal technology and service provider for Power Africa is GE's
Power & Water business, which provides customers with a broad array of
power generation, energy delivery, and water process technologies to
solve their challenges locally. Power & Water works across the spectrum
of fuel sources, including renewable resources such as wind and solar;
biogas and alternative fuels; natural gas; coal; oil and nuclear
energy. Headquartered in Schenectady, NY, Power & Water is GE's largest
industrial business.
power africa initiative
GE is one of the founding private sector partners for the Power
Africa Initiative. At the project announcement in June 2013, we
committed to help bring online 5,000 megawatts of new electric
generation capacity, in cooperation with the Initiative's government
and other private sector partners. We are proud to join these partners
in alleviating sub-Saharan Africa's most significant development
challenge and laying the foundation for Africa's economies to prosper
and the health, well-being, safety, and productivity of its people to
flourish.
One of the important strengths of Power Africa is that it brings a
whole-of-government approach and focuses it on a single metric:
doubling access to power in sub-Saharan Africa. In pursuing that goal,
Power Africa has the potential to address some of the longstanding
policy and regulatory bottlenecks to solving Africa's power problem. It
also provides a unique opportunity to support Africa in developing new
energy resources that provide an unparalleled opportunity to accelerate
access to power--including natural gas and renewables. By operating at
the policy level, Power Africa can enable the development of a clear
framework to incentivize investment in sustainable power for the long
term. By operating at the transactional level, Power Africa can help
get deals done. The obstacles in developing and executing these energy
projects are complex and multifaceted, ranging from securing financing
to obtaining regulatory approval to negotiating with local utilities
and off-takers. The coordinated, interagency nature of Power Africa
provides the type of cross-cutting support that enables power projects
to move forward.
Power Africa's on-the-ground coordination out of Nairobi and its
placement of embedded in-country advisors in the African ministries
complements the ``whole-of-government'' approach. This lends a strong,
local perspective and understanding to the administration of the
Initiative and enhances the awareness and capabilities of the local
ministries combined with domain and process expertise in Washington.
Because the GE Africa team is able to meet regularly with the on-
the-ground USG team and share information in real time with interagency
partners, we can all act quickly from multiple angles on multiple
fronts to keep projects on track. For example, the GE, USG and Kenyan
Government teams were activated in a matter of hours on both sides of
the ocean when Kenya considered tariffs that would have increased the
cost of wind projects.
ge projects and investments
GE is pursuing a range of projects and technologies to support its
commitment to the Power Africa Initiative. Local needs vary drastically
across and even within the Power Africa countries, and each requires a
solution tailored to that context. We are using expertise across the
full spectrum of fuel sources, including natural gas, wind, and other
renewables like biogas, to meet these needs in a way that is suitable
in each context. Grid capacity and connectivity is a huge challenge in
many parts of the region, and we are also supporting a portfolio of
grid-based and off-grid solutions with our specialized expertise in
distributed power. While many projects are still in various stages of
planning, financing, and implementation, I would like to highlight
several major accomplishments below.
Natural Gas
One of our most significant efforts to date has been focused on the
privatization of the Nigerian power sector. This effort is focused on
improving performance at existing generation and distribution assets,
and adding additional capacity going forward. Power Africa's advisors
in Nigeria have supported capacity-building in the Nigeria power
sector, including through advising on power privatization in the Bureau
of Public Enterprises. As independent and neutral advisors, the Power
Africa advisors have worked with the Nigerian authorities to develop
the Power Purchase Agreement (PPA) for the Nigeria Bulk Electricity
Trader (NBET). This included an innovative put/call structure that
helped to enhance the creditworthiness of the NBET as the final off-
taker and provide developers with recourse in the event of default. If
adopted, this will provide a model for PPAs in Nigeria and reduce the
obstacles to concluding negotiations on power generation projects.
Indeed, innovative ways of enhancing off-taker credit should be
explored throughout the other Power Africa countries as well.
We have also made significant progress in developing gas power
projects in Tanzania, where we expect to bring the Kinyerezi-Tanesco
150 megawatt project on line this year. Ghana also offers the
opportunity to bring significant new power on line with the development
of major gas-fired power projects. In particular, the Ghana 1000
project aims to bring on line 1,000 megawatts of power over the next 6
years. In June of last year, GE signed an MOU with the Ghanaian
Government and established a consortium of companies to fast track fuel
availability through the global LNG supply and to create options for
gas capacity to support other projects.
Power Africa, working along with the Millennium Challenge
Corporation (MCC), has the opportunity to support the transformation of
Ghana's power sector by supporting LNG infrastructure. We also believe
that Ex-Im and OPIC are potential sources of financing for the
projects. If MCC, Ex-Im, OPIC and the other Power Africa agencies were
to engage across the entire value chain of the Ghana 1000 project
including fuel supply, infrastructure, incentives and execution, then
Power Africa could demonstrate an ability to support end-to-end
development of innovative, large-scale energy sector transformations.
Wind
We are actively supporting the Kenyan Government's objective to
increase the country's power capacity by an additional 5,000 megawatts.
We are involved in two major wind projects, including supplying
turbines to the 60 megawatt Kinangop Wind Project, which reached
financial close in late 2013. The project is scheduled to start
construction this year. We also expect to see significant progress this
year on the Kipeto Wind Project, which would ultimately produce an
additional 100 megawatts.
We also see significant wind opportunities in Ethiopia.
Off-Grid Energy Challenge
At GE, innovation is at the heart of everything we do, and
solutions that drive progress should be elevated and taken seriously--
no matter where they come from. African innovators and entrepreneurs
are developing new technologies to tackle the continent's energy
deficit, and we are determined to lend scale and resources to these
transformative ideas that have the potential to solve this challenge.
We recently announced the first round of winners of the Power Africa
Off-Grid Energy Challenge, which we are sponsoring in conjunction with
the U.S. African Development Foundation. We solicited the best ideas
from African entrepreneurs and innovators designing innovative off-grid
energy solutions that deploy renewable resources and support local
economic activity. Winners from Kenya and Nigeria designed innovative
projects including solar-powered water points, stand-alone cold storage
facilities, urban biodigesters and solar mini-grids. We are looking
forward to expanding the program over the coming years.
institutionalizing progress
Mr. Chairman, we applaud your focus on ensuring that the Power
Africa Initiative is institutionalized and continues to achieve
important gains for decades to come. We agree wholeheartedly, and we
believe there are systematic, structural improvements that would ensure
the durability and longevity of the initiative. We also encourage
ongoing congressional support for key USG activities that facilitate
power projects as a component of broader foreign policy, security,
environment and development objectives in the developing world that
stress strong private sector participation.
Power Africa Reforms
Our most significant challenges continue to be in three key areas:
speed of contracting and financial close; transforming abundant gas
resources to power generation; and financing--particularly credit
enhancement for off-takers. While Power Africa transaction advisors are
doing a good job of advancing individual transactions, we see cross-
cutting opportunities to get projects across the finish line more
quickly and efficiently. These opportunities include:
Support effective contracting structures: We constantly face
a challenge in navigating contracting structures in a way that
provides confidence to financing partners. We believe that the
Nigeria PPA can serve as a potential model for other power
generation projects in the region. We suggest that Power Africa
consider standardizing documentation for IPPs and support
credit enhancement for off-takers, with a view toward medium-
term creditworthiness. This could significantly speed project
implementation. We understand that USAID and the Commerce
Department's Commercial Law Development Program are convening
private sector experts to develop model templates that can be
replicated and banked quickly for projects across sub-Saharan
Africa. We support this initiative and believe it can play an
important role in facilitating and streamlining the project
development process.
Establish framework for gas-to-power: The mismatch between
gas resources and power deficits is one of the most frustrating
aspects of working in Africa. This structural issue is orders
of magnitude larger and more challenging than any individual
project in Nigeria or Tanzania. We recommend that the Power
Africa Initiative create a comprehensive framework to promote
gas-to-power in the region, which would examine infrastructure
needs for gas networks, gas pricing and allocation,
implications for power tariffs and support for alternative
solutions that enable power to be provided in remote locations.
Assess grid capacity: Grid capacity limitations currently
act as a constraint to bringing on additional power in many
countries. As we make long-term plans for power generation
solutions, we recommend that Power Africa undertake a review of
grid needs to absorb higher capacity and efficiency equipment.
This will facilitate effective planning that matches the most
appropriate power resource technology with localized needs and
capabilities. This analysis is particularly important as
countries introduce a range of generation sources (including
renewables, gas, etc.), which produces some instability and
requires more sophisticated grid management technology and
planning.
Facilitate biogas projects: We see significant potential for
biogas-based power generation projects in Africa. These
distributed power systems offer win-win solutions for rural
communities--they improve waste management practices, avoid
greenhouse gas emissions and meet near-term energy needs. While
several existing programs support biogas projects, current
efforts tend to be one-off, opportunistic solutions. Larger
projects still face significant hurdles in achieving commercial
viability. We suggest that Power Africa explore more systematic
options for reducing costs of project feasibility, in order to
enable more significant investments in biogas projects in the
region. In particular, we believe that Ethiopia and Tanzania
are rich environments for biogas and should be the focus of
feasibility studies and pilot projects. Power Africa should
examine, for example, whether the USTDA- and OPIC-supported
U.S.-Africa Clean Energy Finance Initiative could be a useful
tool here.
Congressional Support
Coupled with these programmatic efforts and ongoing oversight, we
encourage Congress to continue to support, expand, and improve the core
federal programs that enable U.S. companies to meet the needs of
foreign markets. At GE, nearly 60 percent of our revenues derive from
markets abroad--up from 40 percent just a decade ago--which sustain our
domestic manufacturing base. Much of our opportunity for future growth
lies in these expanding markets.
We support reauthorizing the Overseas Private Investment
Corporation (OPIC) and the Export-Import Bank (Ex-Im), and we encourage
Congress to seek improvements to make both institutions more flexible
and user-friendly, and to use the full range of their tools and
authorities. Similarly, it is important to ensure that the U.S. Agency
for International Development (USAID) has sufficient funding and
flexibility to use its delegated credit authority to work with
companies on projects. We also support efforts led by several members
of this committee to ensure sufficient Commerce Department resources
for commercial, advocacy, and market intelligence support in sub-
Saharan Africa.
In addition, we have been working closely with this committee and
your counterparts in the House on the Electrify Africa Act. We believe
that the legislation is an important component of a long-term strategy
to institutionalize the Power Africa Initiative. We appreciate your
commitment to this legislation, and we look forward to continuing to
work with you and your staff as a bill is introduced and advanced here
in the Senate.
I would like to address one specific issue we have raised as part
of the Electrify Africa Act discussion. Until the passage of the FY14
omnibus, the OPIC carbon cap effectively precluded OPIC activity in
support of U.S. participation in much of the global energy sector (with
the exception of renewable energy projects). Without access to OPIC
financing, some projects were delayed or canceled outright, while
others were awarded to foreign entities that were able to obtain
financing from OPIC-like institutions abroad.
The carbon cap policy hurt U.S. manufacturers of power generation
equipment, limited U.S. foreign policy objectives in key regions,
constrained the private sector's ability to invest and hampered the
developing world's ability to grow and obtain access to basic services,
such as electricity. We believe that OPIC can help to meet the urgent
demand for increased generation in low-income countries while
preserving the integrity of U.S. environmental objectives. The omnibus,
which temporarily lifted the carbon cap under certain circumstances,
was a step in the right direction. We encourage this committee to
consider modifying OPIC's carbon policy on a more permanent basis to
enable limited financing and support for power projects for the world's
poorest countries.
conclusion
Thank you for the opportunity to share GE's perspective on the
Power Africa Initiative. We believe this coordinated, whole-of-
government approach offers an innovative and effective mechanism for
working with the private sector to address the energy deficit in sub-
Saharan Africa. We have seen important successes to date, and we look
forward to continuing to work with Initiative leaders to drive even
more significant impacts going forward. I appreciate this committee's
attention to this critically important Initiative, and I am happy to
answer any questions you may have. Thank you.
Senator Coons. Thank you, Mr. Renigar.
I am just going to remind everyone we have votes scheduled
at noon. So we are likely to end at noon.
Mr. Hart.
STATEMENT OF TOM HART, U.S. EXECUTIVE DIRECTOR,
THE ONE CAMPAIGN, WASHINGTON, DC
Mr. Hart. Great. I will try to be brief.
Thank you, Mr. Chairman, so much for inviting me to testify
this morning.
The ONE Campaign is an organization committed to the fight
against global poverty and disease mostly in Africa. We are
probably best known for our cofounder and lead singer of U2,
Bono. But with our nearly 2 million members in the United
States, we raise attention about critical issues and work with
policymakers on bipartisan solutions.
So given our focus on fighting poverty and disease, our
interest in energy might seem curious. But the lack of energy
impacts nearly all aspects of human development, including
health, agriculture, education, and poverty reduction.
And the scope of the problem in Africa is massive, as has
been noted a number of times. Seven in ten people in sub-
Saharan Africa lack access to modern energy resources, and that
grows to 85 percent in rural areas.
African business leaders cite the lack of electricity as a
top concern to economic growth and job creation. This deficit
is estimated to cost African countries 2 to 5 percent of GDP.
And at a human level, without electricity, mothers give
birth by candlelight or must bring their own can of diesel fuel
with them to power hospital generators. Many children's
vaccines can spoil without refrigeration. Farmers cannot
irrigate their fields or store crops. School children often
crowd around street lamps at night to study for exams.
For a small farmer in Ethiopia, what difference would cool
storage make in keeping her hard-earned crop from spoiling in
the heat on the way to market?
For a furnituremaker in Kenya working by hand, what
difference would a power saw and a lathe make to growing his
small business?
For a mother in Nigeria, what difference would an electric
stove and lighting mean to making a meal or heating her
family's home? Today she probably burns wood or dung or
kerosene. And shockingly, each year more than 3 million people
worldwide die prematurely from inhaling toxic smoke from indoor
fires and kerosene used for cooking, heating, and lighting.
Three million. That is more deaths than from AIDS and malaria
combined. As a career-long advocate in the fight against AIDS
and malaria, this fact made me realize I could not not work on
this issue.
So we are deeply grateful to President Obama and his
administration for the Power Africa Initiative which is taking
the first serious steps in six African countries toward
tackling this disparity.
I am also thrilled that in the House, Chairman Royce and
Ranking Member Engel have introduced and cleared through their
committee the bipartisan Electrify Africa Act. This would
catalyze investments to nearly double the amount of electricity
available in sub-Saharan Africa, excluding South Africa, and
reach 50 million people with first-time access. And because
this bill draws on existing resources in the Government and
leverages in private sector capital, these goals can be reached
at no additional cost to taxpayers. In fact, the CBO has scored
the House bill as a net moneymaker for the United States.
Mr. Chairman, let me also thank you and Chairman Menendez
and Senator Corker for considering similar legislation here in
the Senate and I look forward to its speedy introduction.
So why is legislation important? Simply put, legislation
creates the stability, direction, and support, giving longevity
beyond the current administration. I can best relate this to
PEPFAR, the United States flagship program to fight HIV/AIDS.
President Bush is rightly credited for leading the initiative,
but it was built on the shoulders of bipartisan legislation
from this body introduced by Senators Frist and Kerry. The
legislation was not easy to pass, but it has since been
reauthorized twice, maintained strong bipartisan support for a
decade, and so far put 7 million people on lifesaving
treatment.
Addressing the energy deficit in Africa is earning the same
kind of bipartisan support on both ends of Pennsylvania Avenue
and, with sustained support through legislation, we believe
will be every bit as transformative as PEPFAR has been to the
people on the continent of Africa.
Two quick points in conclusion. The people of Africa must
be in the driver's seat in terms of the mix of power sources.
The good news is African countries are harnessing what they
already have in abundance--solar, wind, geothermal, hydro,
natural gas--resulting in a mix far more sustainable than we
have in the United States. For example, in rural communities,
off-grid and mini-grid renewable power is often more viable
than traditional grid solutions and can provide rapid access to
basic services.
Lastly, let us admit challenges still remain. Generating
electricity on the one hand is one issue, but it is quite
another to sort out how to get it to people, run power lines,
sort out domestic regulations, create a customer payment
system. We may not have answers to all of these challenges just
yet, but recall that when PEPFAR was signed into law, we still
had not figured out how to get high-tech drugs to a highly
stigmatized disease to the poorest parts of the continent.
There is nothing quite like political leadership and the
promise of bold progress to incentivize problem-solving.
The world has made dramatic progress in reducing extreme
poverty, cutting it in half over the last 20 years, and it is
possible--possible--to virtually eliminate it in our lifetimes.
But I am reminded each day that African leaders, nurses,
farmers, business owners, teachers, and citizens cite
electricity as one of their most urgent daily needs and the
engine that can drive the economic growth and poverty reduction
that we and, most importantly, the people of Africa strive for.
Thank you.
[The prepared statement of Mr. Hart follows:]
Prepared Statement of Thomas H. Hart
Thank you, Mr. Chairman and Senator Flake, for this opportunity to
address energy access in sub-Saharan Africa. It is a shocking fact that
7 in 10 Africans lack any access to modern energy sources.
The ONE Campaign is a policy advocacy organization committed to the
fight against global poverty and disease, particularly in Africa. We
are probably best known for our cofounder and the lead singer of U2,
Bono. We don't do service on the ground and we don't raise money from
the public. With our nearly 2 million members in the United States, we
raise attention about critical issues and work with policymakers on
bipartisan solutions.
Given our focus on fighting poverty and disease, our interest in
energy might seem curious. But we quickly realized this issue impacts
nearly all aspects of human development including health, agriculture,
education, economic growth, and poverty reduction.
This reality has been made perfectly clear to us by our partners
and friends in Africa. The Sub-Saharan Africa Business Enterprise
surveys cite Africa's insufficient and unreliable electricity access as
the biggest constraint to business growth, impeding job creation. The
lack of modern reliable energy access is estimated to cost African
countries 2-5 percent of GDP. Twenty six African countries have
committed to the goal of providing universal energy access by 2030
under the U.N. Sustainable Energy for All (SE4ALL) Initiative. The
African Union has made regional energy access a top priority.
Early last year, 18 African heads of state and ambassadors--
alongside policy, political and civil society leaders in the U.S.--
signed ONE's ``Open Statement on Electricity in Africa,'' which details
the vast impact of the lack of electricity (see Appendix). The letter
noted that lack of electricity means that mothers are forced to give
birth by candlelight, and that many children's vaccines can be spoiled
without refrigeration, given that 60 percent of refrigerators in health
clinics in Africa do not have reliable power. Limited access to modern
energy services hinders irrigation, agricultural mechanization, and
post-harvest storage and processing. Ninety million children go to
primary schools without electricity and most students do not have
decent lighting to do their homework after sunset. Some are forced to
crowd around street lamps or airport runways at night to study for
exams. According to a paper from the Center for Global Development,
nearly 90 percent of rural Africans and about half of the urban poor in
major cities across Africa, like Nairobi and Dakar, have no access to
electricity. In fact, more than 700 African-based NGOs have signed
similar letters asking for help on providing electricity to their
people.
The world has made dramatic progress in reducing extreme poverty
over the last 20 years, cutting it in half. And it is possible to
virtually end extreme poverty in our lifetime. But electricity is
essential to the kind of human well-being and economic growth needed to
meet this audacious goal.
For a small farmer in Ethiopia, what difference would cool storage
make in preserving her hard-earned crop on the way to market?
For a furniture maker in Kenya working by hand, what difference
would a power saw and lathe make to his small business?
For a mother in Nigeria, what difference would an electric stove
and lighting mean to making a meal or lighting and heating her family's
home? Liberian President Ellen Johnson Sirleaf wrote in a recent
Foreign Policy opinion piece: ``In many places without power, women and
girls are forced to spend hours each day in the time-consuming task of
hunting for fuel and firewood--often a key reason that girls spend less
time in school than boys. Women are also disproportionately affected by
respiratory illness as a result of indoor air pollution from open fires
and kerosene used for cooking, heating, and lighting. Even the simple
act of being outdoors becomes fraught with danger for women and girls
in some places when the sun goes down and there are no streetlights.''
The respiratory illness noted by President Sirleaf, stemming from
inhaling toxic fumes, results in 3 million premature deaths each year
worldwide. That is more deaths than from AIDS and malaria combined. As
a career-long advocate in the fight against AIDS and malaria, this fact
made me realize this issue could not be ignored.
So, we are deeply grateful to President Obama and his
administration for the Power Africa Initiative, which has helped shine
a spotlight on this issue and taken the first serious steps toward
tackling this disparity in six African countries. U.S. Government
commitments combined with substantial investment from the private
sector has already started to make an impact.
For example, a key milestone was reached in securing financing for
Kenya's Lake Turkana Wind Power Project. This project will add an
existing 300 megawatts of reliable, low-cost wind energy to Kenya's
national grid and is part of Harith General Partner's Power Africa
commitment to provide $70 million in financing for wind energy projects
in Kenya and $500 million across the African power sector through a new
investment fund.
Power Africa is a crucial first step, but Congress has an important
role to play. Increasing energy access is a massive, long-term
challenge and it will take a long-term commitment to make a real
impact. We are very grateful for the bipartisan work being done in
Congress to pass legislation that builds on and strengthens the Power
Africa Initiative.
In the House, Chairman Royce and Ranking Member Engel's
legislation, the Electrify Africa Act, would catalyze investment in the
energy sector in Africa, reaching 50 million people with first-time
access with 20 gigawatts of new power, which is close to double the
amount of usable power in sub-Saharan Africa outside of South Africa.
And because the bill uses resources already available within the
government, and leverages private sector capital, these goals can be
reached without additional appropriations. In fact, the Congressional
Budget Office has estimated that the House bill would raise a net $86
million in revenue. In this case, doing good can actually reduce the
deficit.
And I want to compliment Senator Coons and his colleagues, Chairman
Menendez and Senator Corker, for considering similar legislation and
look forward to its introduction in the near future.
ONE is often asked why legislation is necessary. The answer is
simple: legislation will give longevity to the initiative, beyond the
Obama administration. The scale of the electricity deficit in Africa
combined with the complexity of securing financing and generating and
distributing power requires a long-term commitment. While I have every
confidence the next administration will embrace this idea, Congress
creates the stability, direction, and support. Ten years ago, ONE was
heavily involved in the passage of The President's Emergency Plan for
AIDS Relief, PEPFAR--the largest investment in any global health
challenge and responsible for keeping nearly 7 million people alive
today. President Bush deserves enormous credit for his commitment and
leadership. What is often forgotten is that it was built on the
framework of bipartisan legislation from this chamber--sponsored by
Senators Frist and Kerry. Once President Bush announced PEPFAR,
legislation was debated, with all the arguments, compromises, twists
and turns, resulting in a law that has been reauthorized twice and
maintained strong, sustained bipartisan support for 10 years.
Addressing the energy deficit in Africa is earning the same bipartisan
support from both ends of Pennsylvania Avenue and from the American
public, and could be every bit as transformative as PEPFAR has been to
the lives of people on the continent.
Most importantly, beyond a sustained commitment to increasing
investment in the energy sector in Africa from the U.S. Government and
private sector, ONE believes the people of Africa must be in the
driver's seat in terms of the mix of power solutions most appropriate
to their countries. We have to recognize that with current technology,
bringing power to those who do not have it will inevitably lead to a
small increase in global carbon emissions. The International Energy
Agency estimates that bringing a basic level of energy access to all
1.2 billion people globally who need it would increase emissions by
about 0.7 percent. In that context, the U.S. Government, international
institutions, civil society organizations and policy experts should
support those countries to make better choices than we--and most
western nations--did in our own drive to bring power to all.
The good news is that many African countries are choosing cleaner,
more sustainable forms of energy from renewable sources and natural
gas. In fact, what little electricity Africa currently has is 26
percent renewable--more than two times cleaner than what we have in the
United States. Many African countries have barely scratched the surface
of their renewable energy potential, from solar to wind to geothermal.
As renewable energy becomes more available at an affordable cost, we
expect to see, and certainly support, significantly more investment in
cleaner energy sources. This is particularly true in rural communities
where off-grid and mini-grid renewable power is more viable than
traditional grid solutions and can provide rapid access to basic
services. Natural gas deposits are also abundant in many African
countries and will doubtless be harnessed as part of a mix of solutions
to tackle the massive need. In everything we do, we need to recognize
that we have obligations both to those whose needs demand urgent
attention today and to the generation yet to come who will inherit the
planet.
A myriad of other substantial challenges exist in delivering
electricity to people in Africa. Generating more electricity on the
African Continent is one thing, but it is quite another to sort out how
to get it to people, run power lines, sort out tricky domestic
regulations, subsidies, and create a customer base. ONE does not
pretend to have answers to all these challenges. That is one reason we
are so pleased to work with the U.S.-based National Rural Electric
Cooperative Association. These are the people who got electricity to
rural America and they are now active in Africa and are a critical
partner in this effort.
When PEPFAR was signed into law in 2003, we still had not figured
out all the difficulties of getting high-priced and technical drugs, to
combat a highly stigmatized disease, to the most remote parts of
Africa. But, there's nothing quite like political leadership and the
promise of bold progress to knock down these tough issues. Reforms
happen only as a result of crisis or the promise of bold positive
change. The Millennium Challenge Corporation is another good example of
this phenomenon, where large development compacts have incited domestic
reforms, called the ``MCC effect.'' And I should note the MCC, while
not a focus in the legislation, is doing terrific work in the energy
sector in Africa.
Challenges certainly remain in delivering access to electricity for
the first time to millions of Africans. But I am reminded each day that
African leaders, hospital workers, farmers, businessowners, teachers
and countless ordinary citizens say that reliable electricity is one of
their most urgent needs. American constituents have spoken up as well:
more than 100,000 people have signed ONE's petition encouraging and
applauding this effort. ONE members have sent over 62,000 individual
messages to Members of the House and Senate. There is broad, bipartisan
support for these issues--and let me thank the committee again for
focusing on this critical component to reducing poverty and promoting
health and well-being for people in Africa and for the opportunity to
address this panel. Thank you.
APPENDIX
Signatures on this statement do not imply endorsement of specific
legislation.
open statement on electricity in africa
More than 550 million people in sub-Saharan Africa do not have
access to electricity. In 30 African countries, endemic power shortages
are a way of life. Without a reliable power supply, women give birth in
underequipped hospitals, children's vaccines requiring refrigeration
are at risk, students are unable to study after dark and routine
business transactions become extremely difficult.
One in five Africans cites infrastructure--including electricity--
as their most pressing concern. Seven out of ten business leaders
across the region say the lack of affordable and reliable power is one
of the most important constraints to growth. The absence of modern
energy access limits GDP growth in sub-Saharan Africa by an estimated 2
to 5 percent each year. With 14 million sub-Saharan Africans entering
the workforce annually, government leaders are facing the political
imperative to address critical and growing energy demands.
The good news is sustainable solutions to address Africa's energy
poverty can deliver immediate progress as Africa has yet to harness the
majority of its energy potential from renewables and natural gas.
Countries are increasingly taking the lead with bold plans to develop
these resources for their national benefit. We support the more than
two dozen African nations that have committed to the goal of providing
universal energy access by 2030, so that people living in rural and
urban areas are lifted out of poverty and can benefit from strong
economic growth. We encourage catalytic support from the U.S.
Government and private sector in order to achieve this large scale
increase in energy access. Collectively, this partnership can help
provide millions of people access to modern energy which, in turn, will
energize progress in all areas of human development and self-
sufficiency on the continent.
Signed,
Her Excellency Ellen Johnson Sirleaf, President, Republic of Liberia
His Excellency Adebowale Adefuye, Ambassador to the United States,
Federal Republic of Nigeria
His Excellency Daniel Ohene Agyekum, Ambassador to the United States,
Ghana
His Excellency Blaise Cherif, Ambassador to the United States, Republic
of Guinea
His Excellency Daouda Diabatee, Ambassador to the United States,
Republic of Cote d'Ivoire
His Excellency Joseph B.C. Foe-Atangana, Ambassador to the United
States, Republic of Cameroon
His Excellency Al Maamoun Baba Lamine Keita, Ambassador to the United
States, Republic of Mali
His Excellency Silas Lwakabamba, Minister of Infrastructure, Republic
of Rwanda
His Excellency Steve D. Matenje, Ambassador to the United States,
Republic of Malawi
His Excellency Cheikh Niang, Ambassador to the United States, Republic
of Senegal
His Excellency Abednego M. Ntshangase, Ambassador to the United States,
Kingdom of Swaziland
His Excellency Cyrille Oguin, Ambassador to the United States, Republic
of Benin
His Excellency E. Molapi Sebatane, Ambassador to the United States,
Kingdom of Lesotho
His Excellency Seydou Bouda, Ambassador to the United States, Burkina
Faso
His Excellency Bockari Kortu Stevens, Ambassador to the United States,
Sierra Leone
His Excellency Jeremiah Congbeh Sulunteh, Ambassador to the United
States, Republic of Liberia
Her Excellency Maria De Faatima Lima da Veiga, Ambassador to the United
States, Republic of Cape Verde
His Excellency Oliver Wonekha, Ambassador to the United States,
Republic of Uganda
African Ambassadors Group
The Honorable Bethel Nnaemeka Amadi, President, Pan-African Parliament
Amadou Mahtar Ba, Co-founder and Chair, AllAfrica.com
Seth Berkley, Chief Executive Officer, GAVI Alliance
Nancy Birdsall, President, Center for Global Development
Erik Charas, Founder and Managing Director, Charas LDA
Tom Daschle, Former Majority Leader, Unites States Senate
Michael Elliott, President and Chief Executive Officer, The ONE
Campaign
Jo Ann Emerson, Chief Executive Officer, National Rural Electric
Cooperative Association
Dr. Paul E. Farmer, Co-Founder, Partners in Health
Dr. Helene Gayle, President and Chief Executive Officer, CARE USA
John Githongo, Co-founder, Inuka Ni Sisi Kenya Ltd
The Rev. Mitchell C. Hescox, President/C.E.O., The Evangelical
Environmental Network
Richard Horton, BSc MB FRCP FMedSci, Editor, The Lancet
Mike Huckabee, Former Governor, State of Arkansas
General James L. Jones, USMC (Ret.), President, Jones Group
International
Julian B. Kiganda, President, African Diaspora for Change
Cathy Leslie, Executive Director, Engineers Without Borders USA
Former Senator Richard Lugar, President, The Lugar Center
Charles Lyons, President and Chief Executive Officer, Elizabeth Glaser
Pediatric AIDS Foundation
Darius Mans, President, Africare
Carolyn Miles, President and Chief Executive Officer, Save the Children
US
Ory Okolloh, Director of Africa Programs, Omidyar
Arunma Oteh, Director General, Security and Exchange Commission in
Nigeria
Lowell (Rusty) Pritchard, Ph.D., President, Flourish/Creation Care Inc.
Jim Presswood, Executive Director, Earth Stewardship Alliance
Rakesh Rajani, Head, Twaweza
Mandla Sibeko, Chief Executive Officer, Icon South Africa
The United Nations Foundation
Evans Wadongo, Founder and Executive Director, Sustainable Development
for All--Kenya
World Vision
Kandeh Kolleh Yumkella, Co-Chair, UN High-Level Group on Sustainable
Energy for All
Senator Coons. Thank you very much, Mr. Hart.
Mr. Hinks.
STATEMENT OF PAUL HINKS, CHIEF EXECUTIVE OFFICER, SYMBION
POWER, WASHINGTON, DC
Mr. Hinks. Chairman Coons, Ranking Member Flake, and
distinguished members of the subcommittee, thank you for the
opportunity to appear here today.
Large swathes of Africa have no power. Without electric
lights, children do homework under paraffin lamps, which are
very dangerous. Without electric pumps, villagers have no water
and women must walk miles, buckets of water on their heads,
babies on their backs. They cannot refrigerate food. They cook
on wood or charcoal stoves. The indoor pollution causes large
numbers of premature deaths, mostly women and children.
I have seen how electricity transforms a village. Within
months, the villagers are using milling machines to grind maize
into flour. Go back to that village 5 years later. The place is
thriving.
The Power Africa Initiative deserves full bipartisan
support. It will be a long-term game-changer for the people of
Africa. Here in the United States, jobs will be created and new
technologies and products will be deployed in Africa. It is a
win-win partnership.
Now a little bit about myself. Since 1980, I have worked on
electrification projects in 16 African countries. I am the
founder and CEO of Symbion Power, a Washington-based
independent power producer and electricity infrastructure
engineering contractor. We own three thermal power plants in
Tanzania, and as Tony described earlier, we are a partner in a
consortium that owns a power plant in Delta State, Nigeria. We
are developing power plants in Kenya and Ghana, as well as a
new facility in Tanzania in partnership with the government-
owned utility TANESCO.
I am also the chairman of the Corporate Council on Africa,
which is the largest private sector organization in the United
States promoting trade and investment in Africa. CCA member
firms represent 85 percent of all United States investment in
Africa.
African governments are used to getting loans and grants
from development finance institutions such as the World Bank to
build power facilities. The Power Africa Initiative is a new
model. No pots of money are being distributed as happens with
the other agencies. Rather, the private sector is collaborating
with the public sector to invest in electricity infrastructure
with the United States providing whole-of-government support to
the host governments, as well as to the private sector
investors.
USAID has made a great start by putting experienced teams
in place in the six Power Africa countries, Liberia, Tanzania,
Kenya, Ethiopia, Ghana, and Nigeria. Those teams already have
facilitated what might be the first-ever power development
agreement between the Ethiopian Government and a private sector
company, as well as an agreement between the Kenyan Government
and a United States generator manufacturer.
I have always believed, however, that it will be more than
a year before we see real progress, real new megawatts coming
on stream. This new model is not something that everybody is
used to working in.
The focus in 2014 should be on addressing some of the
significant challenges facing the initiative in order to pave
the way for future private sector investment.
One challenge is the reluctance by some in Africa, some
politicians, who fear that the private sector power generators
will levy higher costs to increase profits. Certainly tariffs
must be cost-reflective. Electricity cannot be sold for less
than it costs to produce or to buy it. But Power Africa must
get across the message that privatization will create
efficiencies. Private sector providers can bring to bear their
experience and advances in technology to lower production costs
and tariffs.
Another serious challenge to the success of power
investments in Africa is the creditworthiness or, frankly, lack
thereof of some of the off-takers, the government-owned
utilities that produce the electricity and distribute it to
consumers. If utilities do not pay producers promptly, the
producers will, in turn, default on their payments to the very
financial institutions such as OPIC, Ex-Im, USTDA, who help
fund the investments.
For more than 2 years, my company, Symbion, has been
battling in one of the Power Africa countries to be paid fully
and to be paid regularly. As of the end of February, we are
owed US$70 million for a company that has a turnover of $300
million. This creates problems for a company and it limits our
ability to invest in new projects in the same country. Our
experience will discourage lenders from funding power projects.
It is imperative and urgent that the Power Africa Initiative
and U.S. Government agencies address at the highest levels the
issue of off-taker creditworthiness across the board to ensure
that the economic environment facilitates new investments.
I must add at this point that Nigeria is probably the
exception in this case. They have done a fantastic job in their
privatization.
Dealing with myriad rules and regulations of multiple
bureaucracies in Africa and the United States is one of the
biggest challenges. We have not yet seen all of the African
host governments cutting through much of the redtape that
President Obama spoke about in his speech about the initiative
in Tanzania.
And regulatory speed bumps remain in the United States as
well. For example, project funding approvals can take 6 months
to a year or longer. That is not bad. Sometimes it takes up to
2 years. U.S. agencies should expedite the processes and ensure
that they have enough staff to deal quickly with project
evaluations.
Finally, Congress' role is absolutely essential to the
success of Power Africa. The Electrify Africa Act, championed
by Representatives Ed Royce and Karen Bass, along with the
Power Africa Initiative will literally light up the lives of
hundreds of millions of people in Africa. I hope that this
subcommittee and Congress as a whole will agree that the
electrification of Africa is a critical goal and that the Power
Africa Initiative is a very important step on that way.
Thank you.
[The prepared statement of Mr. Hinks follows:]
Prepared Statement of Paul Hinks
Chairman Coons, Ranking Member Flake, and distinguished members of
the subcommittee, thank you for the opportunity to appear before you
today to discuss the Power Africa Initiative. I hope I can provide the
subcommittee some useful insights into this important program.
introduction
By way of introduction, I will provide some brief comments about
the Power Africa Initiative and describe a bit of my background,
including my experiences with electrification projects in Africa.
When we talk about the lack of access to electricity in sub-Saharan
Africa, the hard reality of what it means to the African people often
goes over our heads. In some countries, large swathes of the rural
population have never had power and, quite frankly, they do not believe
they will ever get it.
Without electricity, they have no lights, and their children must
do their homework under dangerous paraffin lamps. Using a computer for
schoolwork or anything else is impossible, and while there has been an
African cell phone revolution, many still have to travel a long way to
find someone who has a communal charger.
They cannot get water in their villages because they don't have
electric pumps to transport it. Instead, the women--not the men--must
walk for miles and miles, carry plastic paint buckets of water on their
heads with babies strapped to their backs.. They cannot refrigerate or
freeze food, and they cook on biomass-burning stoves, the fuel for
which--wood, dung, and charcoal--has to be manually collected--again by
women, and by children--causing deforestation, indoor air pollution,
and taking children from school. The World Health Organization
estimates that those biomass--burning stoves cause two million
premature deaths from pneumonia and other illnesses every year
worldwide. Most of the victims are women and children. See World Health
Organization, Fact Sheet No. 292, Indoor Air Pollution and Health
(September 2011), found at http://www.who.int/mediacentre/factsheets/
fs292/en/ (last visited March 24, 2014).
No electricity means no development. Over the last three decades I
have seen what happens when a village gets electricity for the first
time. Within months the villagers start to use milling machines to
grind maize into flour and new industry is born. When you return to
that same village 5 years later it is thriving, and life has changed
forever for its inhabitants.
I was in Africa when the Power Africa Initiative was launched, and
I can tell you that it has given hope to hundreds of millions of
people. These are rural people with simple lives, and when they hear
that the United States is going to help them they believe it. Recently,
I was in a village in rural Tanzania for a project inauguration with
the Millennium Challenge Corporation, a U.S. Government agency that has
electrified hundreds of villages in Tanzania in the past 3 years. The
subcommittee would have been touched to see thousands of smiling men,
women, and children all waving the U.S. and Tanzania flags. It is nice
that we are appreciated in Africa.
This Initiative deserves full bipartisan support. It will be a
long-term game changer for the people of Africa, and it is an area
where U.S. expertise, U.S. technology, U.S. experience, and U.S.-
manufactured products are highly desirable and greatly valued. Many
jobs will be created in America, and new U.S. technologies will be
deployed. It is a win-win partnership.
my background
I am the founder and Chief Executive Officer of Symbion Power, a
Washington, DC-based Independent Power Producer and electricity
infrastructure engineering contractor that has invested in the energy
sector in Africa. We own three thermal power plants in Tanzania which
generate 217 total megawatts (``MW'') of power, and we are a partner in
a consortium that owns a 972 MW power plant in Delta State, Nigeria. We
also are in the final stages of negotiations for the right to build,
own, and operate a geothermal power plant in Kenya, and we are
developing a new 450 MW gas facility in Ghana. In addition, we are
developing a new 600 MW power facility in southern Tanzania as a
public-private partnership with the government-owned power utility
TANESCO.
I was trained by the U.K.'s state-owned utility which, at that
time, was called the Central Electricity Generating Board. I first went
to work in Africa as a young man in 1980 when I worked for the
electricity utility of Zimbabwe. After that I worked in Tanzania
building electricity infrastructure projects. I lived in Africa,
working in the electricity sector, for 10 years, and when I returned to
London I continued to work on electrification projects in Africa. At
the last count, I have worked on projects in 16 African countries, many
of which were facing economic ruin at the time.
From 2003 until 2010 I was heavily involved with the U.S.
reconstruction efforts in Iraq and Afghanistan. Working hand in hand
with the U.S. military and with the U.S. Government, Symbion Power
undertook some of the most difficult and dangerous electrification
projects in Iraq, including the 400 kilovolt (``kV'') transmission line
from Baiji through Haiditha to Al Qaim at the Syrian border. We also
built substations in Fallujah, Ramadi, and Sadr City. We were the only
U.S. company that worked in those areas between 2005 and 2008 at the
height of the insurgency.
In addition to my position at Symbion Power, I have another role
here in Washington: I am the Chairman of the Corporate Council on
Africa (``CCA''). The CCA is the largest private sector organization in
the United States promoting trade and investment in Africa. Some of
America's largest corporations are members of the CCA, and CCA member
firms represent 85 percent of all U.S. investment in Africa.
what is power africa all about?
As the Chairman of CCA, and as someone with extensive experience in
the African power sector, I have been privileged to have been consulted
as a representative of the private sector during the development of the
Power Africa Initiative. The White House, the State Department, the
Department of Commerce, the Department of Energy, USAID and various
other government agencies have sought my input from the outset, and I
am pleased to say that they have always welcomed, and have carefully
considered, my views, which are representative of those of private
sector firms who have an interest in power investments and contracting
work in Africa.
Dealing with the myriad rules and regulations of multiple
bureaucracies in Africa and in the United States is one of the biggest
challenges for private sector firms who want to invest in the
electricity sector. In his first major speech about the Power Africa
Initiative in Dar es Salaam, President Obama, speaking to President
Kikwete of Tanzania, emphasized the need to cut through this
``redtape'':
Now, in order for this to work, then we all have to feel a
sense of urgency. One of the things, Mr. President, that I
learned around the business roundtable is if we are going to
electrify Africa, we've got to do it with more speed. We can't
have projects that take, 7, 8, 9 years to be approved and to
get online. If we're going to make this happen, we've got to
cut through the redtape, and that can only happen with
leadership like the leadership that President Kikwete has
shown.
Remarks by President Obama at Symbion Ubungo Power Plant, July 2,
2013, (``Pres. Obama Remarks'') found at http://www.whitehouse.gov/the-
press-office/2013/07/02/remarks-president-obama-ubungo-symbion-power-
plant (last visited March 23, 2014).
Achieving President Obama's stated aim of ``doubling access to
electricity,'' starting with ``bring[ing] electricity to 20 million new
homes and businesses'' (id.) is not going to be easy, but it is
possible if the stakeholders can find a new way of working together.
The Power Africa Initiative is that new way of working together, with
the U.S. Government providing a ``whole-of-government approach'' to
host nations and to the private sector. But these three partners are
pretty strange bedfellows.
In Africa, the host governments and the civil servants in
ministries are accustomed to a steady flow of development loans and
grants from the World Bank, the African Development Bank, and other
Development Finance Institutions (``DFIs''), which the governments use
to build power-generating facilities. Power Africa is a different
model. There are no large pots of money being distributed to the host
governments. Rather, the private sector is being asked to step up and
invest in electricity infrastructure in Africa, while in parallel USG
agencies such as USAID and MCC seek to improve the policy environment
and create an enabling environment for U.S. private sector investment
in Africa. It will take time for the host governments to become
familiar with this new model and to working with the private sector.
Indeed, private sector independent power facilities are still quite
rare in Africa. The exception is Nigeria, which has embarked on an
aggressive power privatization program in the past 2 years.
Privatization is not without controversy; some African politicians and
government officials contend that electricity should remain a public
sector service provided by the State, citing concerns that because the
private sector is required to make a profit there will be pressure to
increase retail tariffs, with no consideration for the spending power
of their people.
early successes
USAID has made a great start on the Power Africa Initiative by
putting teams into place in the six Power Africa countries: Liberia,
Tanzania, Kenya, Ethiopia, Ghana, and Nigeria. These teams, who
collaborate with other U.S. Government agencies, are coordinated out of
the Embassy in Nairobi. From what I have seen, they are comprised of
experienced, knowledgeable people who can be of great help to the
various African governments, their energy ministries, and the
respective power utilities. But whilst there are huge power deficits in
each of these countries, we don't yet see the sense of ``urgency'' on
the part of the host governments that President Obama emphasized is
necessary to achieve Power Africa's goals.
Nonetheless, in East Africa, the Power Africa team at USAID has
achieved a significant milestone by helping the Ethiopian Government
and a project developer execute what might be the first-ever power
development agreement with a private sector company in that country.
The developer, a New York-based investment firm, has projected that
this renewable energy geothermal power plant eventually will deliver
1,000 MW of power to the East African grid. And in Kenya, the Power
Africa team has assisted a U.S. generator manufacturer who is one of
the members at CCA, to execute an agreement with the Kenya Government.
adjusting to the new way of working will take time
These are early victories that represent real progress for the
Power Africa Initiative. But I have always believed that it will take
over a year before we see tangible results in the form of new
megawatts--that is, megawatts that were not previously under
development--coming on-stream in Africa. Power Africa is ground-
breaking, and it will take time for the three new bedfellows--the U.S.
Government, African host nations, and the private sector--to adjust to
working together in a new way. The focus in 2014 should be on
addressing some of the significant challenges facing the Power Africa
Initiative, in order to pave the way for more private-sector investment
in the future.
I have already mentioned one of those challenges: the fear that
private sector power generators will levy higher costs to increase
profits. Addressing this concern is already on the Power Africa agenda:
one of the clear messages of Power Africa, the DFIs and the private
sector is that tariffs must be cost-reflective--electricity cannot be
sold for less than it costs to produce. But private sector providers
can bring to bear their experience and advances in technology to ensure
that power production costs, and therefore tariffs, are kept as low as
possible. Through Power Africa, the United States must work at
political and administrative levels on the continent to better explain
the role of the private sector and the benefits that can be achieved in
terms of efficiency if privatization programs are properly implemented.
security of payment and creditworthiness is a critical issue
Another serious challenge to the success of power investments in
Africa is the creditworthiness, or lack thereof, of the ``off-takers''
which are usually the government-owned utilities that purchase the
electricity from the power producers and distribute it to the
consumers. In most instances, the state-owned utility cannot
demonstrate a sufficient level of assurance that it will be in a
position to pay the private sector producers or that it will pay
promptly and in accordance with the terms of the contract. In practice,
if the producers are not paid, they will in turn default on their
payments to banks and other financial institutions who help fund the
investments that have very little tolerance for nonpayment.
For more than 2 years, my company, Symbion Power, has been battling
in one of the Power Africa countries to get paid fully and regularly,
to the point where, as of February, 2014, we are owed $70 million USD.
The debt will be even greater at the end of March when more invoices
are submitted. This level of debt is simply unsustainable for a company
of our size. Whilst we have confidence that the host government
eventually will pay us, the cash-flow problems that the situation has
created cause considerable disruption to our operations.
Our experience will have a negative effect on lenders' willingness
to fund power projects in that country, and if lenders will not fund
large-scale--or even small-scale--private sector development, the aims
of Power Africa in that country will not be met. It is therefore
imperative and urgent that the Power Africa Initiative and all agencies
of the U.S. Government address at the highest levels the issue of off-
taker creditworthiness so that the economic environment facilitates new
investments. Not being paid on time or at all is at the top of the fear
list for the private sector.
urgency and speed
To achieve the speed of development that the President has
emphasized is necessary to meet the ever-growing need for electricity
in Africa, the various U.S. Government agencies involved in the Power
Africa Initiative should examine how they can expedite their processes.
The normal lead times for project funding approvals can be in the range
of 6 months to 1 year, but it is often much longer. These agencies are
bound by rules and regulations that do not necessarily foster alacrity,
and if some dispensations are made we will see faster results and more
power, quickly, in Africa.
Some in the private sector have also raised the question whether
the U.S. agencies will have sufficient human resources to deal with a
large influx of project evaluations. This issue obviously must be
addressed by the agencies themselves; I note only that the private
sector is concerned that it may not get the attention and speed needed
when projects are submitted for consideration and funding approval.
Finally, I want to emphasize that Congress's role is absolutely
essential to the success of Power Africa. The Electrify Africa Act--
which is being championed by Representative Ed Royce, chairman of the
House Committee on Foreign Affairs, and by Representative Karen Bass,
ranking member of the Subcommittee on Africa--coupled with the Power
Africa Initiative itself, will literally light up the lives of those
hundreds of millions of people in Africa. Those of us who spend our
time working in the power sector on the African Continent do so because
we know that reliable power is essential to the economic development of
Africa and because we know just how much it will improve the lives of
the African people. I hope that this subcommittee and Congress as a
whole will agree that the electrification of Africa is an important
goal, and that the Power Africa Initiative is an important step in
achieving that goal.
Senator Coons. Thank you very much, Mr. Hinks.
I would like to thank our entire panel.
Our 12 o'clock vote is going to be called any moment now.
So if I might, I am going to suggest a series of questions. We
will stay and listen to the answers as long as we can, and
then, frankly, if you will forgive us, we are going to depart
to go cast our votes on a foreign relations related matter.
First, several of you have referenced the importance of a
whole-of-government approach, Mr. Hinks in particular. One
concern we share is that there are 12 different agencies to
which different potential partners, private sector and
coordinating public sector agencies, that have to work
together. How can we do a better job of reducing duplication,
overlap, and streamlining the review and approval process that
is currently being led through USAID? Mr. Renigar, Mr. Hinks.
First.
Second, if I might, to Mr. Hart, there is some concern
about overemphasis on large-scale centralized power, the high-
low that Mr. Renigar referred to. It is great that GE has
partnered with ADF on a significant sort of off-grid and
renewable demonstration project, but the scale of centralized
power versus the distributed in this overall initiative is
significantly, as it were, high-low. Do we need to be doing
more, Mr. Hart, in order to ensure that the most remote, most
rural, most distant from access to grid systems and centralized
power are in fact served and our development goals are in fact
met?
Mr. Elumelu, what are the biggest barriers to ensuring a
strong African private sector partnership? This is a great
start. Thank you for your partnership, but what are the
remaining largest barriers?
If we might, in turn with those three questions, and we
will do our best to listen. Thank you to the entire panel.
Mr. Hinks. On the question of the interagency,
intergovernment approach, to be quite honest, we have seen an
exceptional collaboration taking place between the various
Government agencies. We have been working with USAID, with
OPIC, with Ex-Im, all of them. And really, the Power Africa
Working Group or the Power Africa group in Kenya is working
across all those agencies and coordinating things. And we are
not seeing, I would say, duplication. We are seeing cooperation
between them. So my words for the interagency part of this are
only good of what we have seen so far.
The issue of the delays I talked about is that if we are
going to have urgency, which is the language that President
Obama used, we have to get funding urgently. And if funding is
going to take 1 year or 18 months, 2 years, we are not going to
achieve anything fast. So the way I see it is there are things
that could be done within the agencies to speed up the process
of project evaluation, due diligence, getting congressional
approvals, et cetera, et cetera. I believe that can be done.
Senator Coons. Thank you, Mr. Hinks.
Speaking of urgency, our vote has been called.
Mr. Hart, anything on high-low and distributed power and
access for rural?
Mr. Hart. Very, very briefly, yes. The initiative has to
focus on the hardest to reach or it simply will not happen.
Projects will go to the lowest hanging fruit, the most
efficient, easiest to reach. So that has to be a priority of
the initiative, both Power Africa and the legislation.
Let me also say that it is not also sufficient just to do
solar lanterns in remote villages. Off-grid, mini-grid,
renewable units that harness natural gas locally, all of these
things need to be focused on in order to get the poorest and
most needy the electricity they deserve.
Senator Coons. I will note that today Africa as a continent
has the highest percentage of renewable power generation, as
Mr. Elumelu pointed out in his testimony. Our hope is to
sustain that by a truly all-of-the-above strategy which we will
turn to when we look at legislation.
Mr. Elumelu, you get to have the last word. What are the
remaining major barriers to effective partnership----
Mr. Elumelu. I think first would be for this Electrify
Africa Act to be passed, to play a key role in helping to open
up the continent as relates to the core objective of increasing
access to electricity. So that is what we want.
Two is policy reforms. As we heard from Paul, in some
African countries, they are setting policy inhibitions that
actually are affecting the realization of this wonderful
initiative of improving access to electricity. My solution on
that would be that the U.S. Government should please have to
encourage African political leaders and institutions to embark
on reforms that will help to improve access to electricity.
The third point is getting some form of guarantee that can
support the private sector investment in this.
Thank you so much.
Senator Coons. Thank you very much.
I will invite a closing comment from Senator Flake, and
then we will keep the record open until close of business on
Thursday, April 3, for any additional questions from members of
the subcommittee who were unable to attend today.
Senator Flake.
Senator Flake. Thank you.
And we apologize for our schedule here. But this was very
thoughtful testimony, very useful, enjoyed reading it, and we
will look forward to studying it in the future.
Mr. Elumelu, thank you again for traveling so far, and
thank you for, in both your written and oral testimony, talking
about the carbon footprint, if you will, for every African and
how much lower it is, .3 tons per person, compared to the
United States, as much as 15 tons per person. And that speaks
to me of the need to make sure that the goal to power Africa
and to bring power is not subverted for other agendas. So it
was very important testimony.
All of you, thank you for being here.
Senator Coons. Thank you, Senator Flake.
I would like to thank all the members of our second panel
and our first panel for some very insightful and broad
testimony. I look forward to working together as we move to the
consideration of the Power Africa bill going forward. Thank you
very much.
[Whereupon, at 12:07 p.m., the hearing was adjourned.]
----------
Additional Material Submitted for the Record
Written Statement From Daniel W. Yohannes, Chief Executive Officer,
Millennium Challenge Corporation
Chairman Coons, Ranking Member Flake, and members of the
Subcommittee on African Affairs, the Millennium Challenge Corporation
(MCC) appreciates this opportunity to describe our critical
contributions to the USG Power Africa initiative, and commends you for
convening this hearing to draw attention to this ambitious and very
worthy initiative. We particularly appreciate the opportunity to
outline the significant contributions that MCC has made and will make
toward the goal of bringing electricity to Africa.
Before there was a Power Africa initiative, MCC was funding power
in Africa. In a compact with Tanzania signed in 2008, MCC funded
approximately $200 million in power sector investments. As a
requirement of this compact, the Government of Tanzania passed the
first comprehensive revision to an electricity law dating back to 1931,
which was far too dated to address current market needs. As a result of
MCC's engagement with the government through the compact, Tanzanian
regulators approved new, more cost-reflective tariffs, a key step
toward bringing in private sector investment. MCC is currently working
with the Government of Tanzania to develop a new compact that would
include an even more comprehensive program of sector reforms that are
intended to establish a more efficient, well-managed and creditworthy
power utility that will operate in a competitive market place.
Since our inception 10 years ago, MCC has funded programs across a
wide variety of sectors and disciplines of international development.
The common thread across MCC's commitments--whether a port in Benin,
land tenure programs in Burkina Faso, education in Namibia, or a 100 MW
submarine cable between Zanzibar and mainland Tanzania--is that
economic analysis and country commitment underpin sector and project
choices. Increasingly, African countries are discovering that one of
their major constraints to economic growth is their lack of reliable
power, and they are committing to tackling this constraint.
As partner countries in Africa identify energy poverty and
insecurity as binding constraints to economic growth, they are
developing their compacts funded by MCC to address this pressing
challenge. Increasingly, MCC compacts in Africa are being designed to
increase and improve access to reliable and affordable electricity.
This means investing in energy infrastructure, policy and regulatory
reforms and institutional capacity-building in the power sector.
Of the six Power Africa countries, three are current MCC partners:
Ghana, Liberia, and Tanzania. MCC is working with these governments to
identify potential projects which will seek to address the nations'
inadequate and unreliable power supply. These countries have set
ambitious goals in electric power generation and are taking the steps
to reform the utility and energy sectors to pave the way for investment
and growth. Through the Power Africa initiative MCC will work with host
governments to help increase technical skills and accelerate energy
sector regulatory, market structure and enabling environment reforms
that are critical to the sustainability of the sector and projects.
In addition to the $200 million already invested in Tanzania, MCC
plans to invest up to $1 billion in Ghana, Tanzania, and Liberia's
power sectors. Although Africa needs approximately $40 billion annually
to meet its power needs, only about a third of the investment
requirements are currently being met. MCC will help fill the gap
through investments in the sector. A reformed and competitive power
market, which MCC will also support, should attract private sector
investment to fill this gap.
In Ghana, two main reasons for low levels of private capital in the
power sector are the lack of creditworthy off-takers and non-cost-
reflective tariffs. To that end, the Public Utilities Regulatory
Commission recently announced a 79 percent increase in tariffs. This
important step toward cost recovery accompanies a commitment by the
government to use an automatic adjustment mechanism to keep the rates
reflective of evolving costs. The government has also committed to
bring similar order to the pricing and supply of gas--a critical fuel
for power generation.
MCC is working with the Government of Ghana to evaluate private
sector participation to help the utility become a creditworthy entity.
MCC has also proven the importance of integrating private sector input
in program design early on in Ghana's compact development process. In
fact, MCC's work has already scored a significant success before the
compact has even been signed; General Electric credited MCC's compact
and associated reforms with being a major factor in its plans to build
a 1,000 megawatt power park and associated infrastructure in Ghana--a
$1.5 billion financial commitment.
Working with other agencies in the Power Africa initiative, MCC
will maximize its power sector investments. USAID technical assistance
and EX-IM and OPIC products can help unlock commercial debt and equity
capital, while the use of USTDA studies can reduce the early stage risk
for companies.
MCC's work on energy extends to Malawi, which is not currently a
Power Africa country. MCC's $350 million compact in Malawi is focused
on the turnaround of the power utility and related sector reforms. The
government is taking steps to establish a market-friendly power sector,
and the results have been encouraging. A number of key sector reforms
have been implemented, the balance sheet of the utility has been
cleaned up and the government has agreed to implement a restructuring
program to prepare for a competitive power market which includes
various options for increasing private sector involvement in the power
sector.
In countries that meet MCC's good governance standards, MCC will
work in partnership with country governments to uncover opportunities
for economic growth, and when lack of energy is a constraint to
economic growth, MCC has the proven ability to fund infrastructure,
leverage private sector financing and investment, and commit to
improving energy sector policies and institutions. MCC is proud to be
part of the USG-wide partnership initiative that is Power Africa.
______
Letter From 13 Organizations to Senators Christopher A. Coons and Jeff
Flake Concerning the Power Africa Initiative
25 March 2014.
Hon. Chris Coons, Chairman,
Hon. Jeff Flake, Ranking Member,
Subcommittee on African Affairs,
Committee on Foreign Affairs,
Washington, DC.
Dear Chairman Coons and Ranking Member Flake: Our organizations
have followed with interest the Power Africa Initiative and the
progress of the Electrify Africa Act of 2014 in the House and still to
be introduced Senate bill. We believe there is a great opportunity for
development and environmental organizations to work together with
Congress and key private sector allies to bring inclusive,
environmentally and socially sustainable energy to the people of sub-
Saharan Africa. In advance of the March 27 subcommittee hearing on the
Power Africa Initiative, we want to share with you key principles we
see as priorities for initiatives that aim to address electricity
access in Africa.
ACCESS: We believe that one of the greatest potential
strengths of the Power Africa Initiative and the Electrify
Africa Act is to promote electricity access that is truly
inclusive as a tool for development. Our organizations feel
very strongly that an initiative focused on energy access must
emphasize providing energy to populations currently without
access and with intermittent access, focusing on households and
services--such as health care and education--in poor, rural,
and marginalized communities. Achieving this will require an
emphasis on sustainable off-grid and mini-grid energy
production and distribution projects.
RENEWABLES: In expanding electricity access, development goals
are best served and effectively implemented when clean,
renewable energy sources, including off-grid and mini-grid
solutions, are prioritized, fully accounting for the
environmental and social externalities of fossil fuel projects;
and when energy efficiency and demand-side management are a
central part of electricity expansion strategies. Also, our
organizations feel strongly that the Power Africa Initiative
and Electrify Africa Act should not instigate any weakening of
the greenhouse gas emissions cap at the Overseas Private
Investment Corporation, a policy which has made OPIC a
development investment leader in renewables projects that
increase energy access.
GOVERNANCE: We believe that the promotion of electricity
access should be accompanied by support for inclusive,
transparent, and accountable processes for electricity
production and distribution planning, implementation, and
management. These efforts should ensure compliance with
international best practice fiduciary standards and social and
environmental safeguards. In cases of potentially significant
environmental and social impacts, communities must have the
right to free, prior and informed consent to projects.
We welcome an opportunity to meet with you to discuss further
details and how we could be of assistance in shaping the Senate
legislation to authorize and expand the Administration's Power Africa
Initiative.
Sincerely,
Center for Biological Diversity; Center for
International Environmental Law; Foreign
Policy in Focus; Friends of the Earth;
Greenpeace; Institute for Policy Studies
Climate Policy Program; International
Rivers; Natural Resources Defense Council;
Oil Change International; Oxfam America;
Pacific Environment; United Methodist
Church General Board of Church and Society;
Vasudha Foundation USA.
______
Written Statement From Shari Berenbach, President/CEO,
United States African Development Foundation
Chairman Coons, Ranking Member Flake, and members of the
Subcommittee on African Affairs, thank you for the opportunity to
provide written testimony on President Obama's Power Africa Initiative.
We would like to share with you the experience of the U.S. African
Development Foundation (USADF) in Africa's renewable energy sector,
particularly the Power Africa Off-Grid Energy Challenge we are
undertaking in partnership with GE Africa.
about usadf
Founded by an Act of Congress in 1980, the U.S. African Development
Foundation (USADF) provides direct development assistance at the
grassroots level to support African-designed and -driven solutions to
economic challenges. USADF operates as a public corporation in the
United States Government (USG) to support the economic development of
marginalized and underserved populations. USADF directly funds African
cooperatives, small- and medium-sized enterprises (SMEs), community-
based organizations, and African technical service organizations.
Together, they work to increase economic activities, improve
livelihoods, and establish sustainable businesses.
USADF, as the sole USG agency focused exclusively on Africa, has an
ever-increasing role to play in the continent. USADF operates in 18
countries in Africa, with an emphasis on the Sahel and the Horn of
Africa, where we are supporting marginalized communities to foster
resilience and new economic opportunities, critical for restoring
peace, stability, and economic independence.
need for off-grid renewable energy
The marginalized communities in need of economic opportunities
supported by USADF are vastly underserved by the conventional
electrical grid currently in Africa. Not only does the grid not reach
these communities today, it is unlikely to do so for the foreseeable
future. In fact, a number of sources contend that even in the long-run,
these rural communities will be best served by a new generation of
technology that is making off-grid solutions both reliable and cost-
effective. Just as cell phones revolutionized the delivery of
telecommunication services to remote regions, leapfrogging the need for
costly land-line installations, we anticipate a new generation of off-
gird solutions that will be launched and implemented by creative SMEs
to develop and operate mini-grid and off-grid approaches to meet the
energy needs of Africa's rural poor.
No doubt, you have already received substantial testimony that
addresses the need and opportunity for lighting-up Africa across much
of the continent. In the six Power Africa countries alone, over 230
million people live without access to electricity. In east Africa, four
out of five people live without access to power. In a country such as
Liberia, only one out of twenty people have access to power.
USADF witnesses on a regular basis how this lack of power curbs
economic prospects. Farmers could benefit from electricity to power
local processing of agricultural products. Enterprises could work
longer hours, produce could be refrigerated and more food could make it
to market--all contributing toward the goals of increased productivity,
food security and improved household incomes.
On a more human level, data shows that access to electricity can
significantly benefit rural households. Children are able to study when
light is available in the evening. Cleaner cooking technologies benefit
women and children, as well as the environment. Clinics with access to
electricity will be able to maintain needed vaccines and offer a
lighted theater for childbirth and other urgent medical care. Schools
with electricity can operate longer hours and serve more needs of the
communities. Lighting matters!
ge-usadf power africa off-grid energy challenge--
launching new business models
With such great need for electricity in rural areas, USADF has
teamed up with GE Africa to launch the Power Africa Off-Grid Energy
Challenge. The goal of this challenge is to support a new generation of
business models for the generation and distribution of renewable energy
to meet the needs of marginalized, underserved communities in Africa.
By mandate, USADF solely funds 100 percent African owned and
managed enterprises--so we have sought out African SMEs, organizations
and associations that are developing profitable, sustainable approaches
to bringing energy to rural communities. And, as we know, ``Angel
Investing''--popular in the U.S. for funding new technologies--is
virtually nonexistent in Africa. To overcome this gap, the Off-Grid
Energy Challenge is providing $100,000 grants to these African
companies and organizations to test new prototypes and scale-up
delivery of energy to rural communities operating beyond the grid.
The first round of the Challenge was launched last July just days
after President Obama announced Power Africa and was limited to entries
from Kenya and Nigeria. As we know, there is no shortage of smarts and
initiative among entrepreneurs in these countries, so there should be
little surprise to the outpouring of interest and enthusiasm for the
Challenge. In just a few weeks after the launch, the Challenge received
nearly 150 applications--equally split between the two countries--with
ideas ranging from solar to bio-gas to wind to hydro and every
combination you could possibly imagine. USADF assembled a panel of
judges that included not only individuals from USADF and GE Africa, but
also experts from the Millennium Challenge Corporation, the World Bank,
and the Shell Foundation. In November 2013, in Lagos, GE and USADF
announced the first round of grant winners:
Solar World (E.A.) Ltd. will construct 5 solar-powered water
points to provide water and electricity to pastoralists in the
semiarid lands in northern Kenya.
Afrisol Energy Ltd. will utilize biodigesters to produce
electricity and biogas for small businesses in Nairobi's urban
slums.
Mibawa Suppliers will expand its delivery of pay-as-you-go
lighting and chargers to households in rural parts of western
Kenya.
TransAfrica Gas and Electric will power stand-alone cold
storage facilities with solar photovoltaic systems for farmers
and fisherman in Jos, northern Nigeria.
GVE Projects Ltd. will electrify 24 off-grid communities in
Nigeria using metered solar photovoltaic microgrid and portable
rechargeable battery systems, targeted to customers' demands.
Afe Babalola University in Nigeria will investigate
hydroelectric and solar systems to serve students and faculty,
and the neighboring community of 10,000+, who currently rely on
diesel generators.
USADF and GE Africa are now gearing up for a second round of the
Challenge. This time the effort will expand to business solutions from
all six Power Africa countries. Along with support from USADF and GE
Africa, USAID has come on-board to add to the total pool of funding
needed for grant awards, as well as technical support for the winners
once they are awarded. This second round will be launched in May 2014
and we expect to announce three winners per country, for a total of 18
awards in September 2014.
Experts from across the field have commended this sort of Challenge
as it provides essential seed capital to test new business models--that
can lead toward profitable, sustainable business solutions to meet the
energy needs of Africa's rural and underserved communities.
conclusion: powering africa
Power Africa has set out to meet an urgent need--to electrify the
millions of businesses, homes, clinics, and schools that lack access to
basic energy services. While much of this need will be met with proven
technology for conventional energy generation and distribution in the
urban centers of Africa, there is an unprecedented opportunity to
support new sustainable approaches to meet the energy needs of rural
communities beyond the grid. We believe that this extraordinary
challenge will be met by a new generation of energy entrepreneurs who
will bring innovative solutions and new business approaches to overcome
today's energy gap. In so doing, we will be creating economic
opportunity for those on the margins and laying the foundation for a
brighter future for all of Africa.
Thank you.
______
Letter From John Coequyt, Director,
International Climate Programs, Sierra Club
Sierra Club,
March 27, 2014.
Senator Christopher Coons,
Russell Senate Office Building,
Washington, DC.
Dear Senator Coons: Thank you for opportunity to submit testimony
for today's hearing on the Power Africa Initiative.
The President's Power Africa initiative has brought much-needed
attention to the critical problem of energy poverty in Africa. Across
the world, there are still 1.3 billion people living in severe energy
poverty today, almost half of whom (587 million) live in sub-Saharan
Africa. It has become increasingly clear that the traditional approach
to this problem--increasing electricity supply by building large,
centralized power plants feeding into a geographically extensive grid--
will not be sufficient to address this challenge with appropriate
urgency or at an acceptable cost. Grid extension projects often are not
an effective approach for reaching the majority of the people in need
of energy, who are rural and poor. They often take a long time to bring
online, and even when the grid reaches communities the cost of
interconnection is often beyond reach. Indeed, perhaps due to the
prohibitive cost, the initial round of Power Africa proposals focuses
almost exclusively on expanding supply of electricity, with scant
attention to delivering it to those who need it through grid extension.
Rather than thinking about energy poverty primarily as a problem of
supply and distribution of electricity, it is more useful to frame the
challenge as one of expanding access to modern energy services. This
approach begins by asking what energy services the poor most need to
enhance their development opportunities, and then determining the best
way to provide those services. Recent technological and financial
innovations have created a wealth of new opportunities to expand access
to those critical services for the world's energy poor. Dramatic
improvements in solar technologies have reduced the costs of solar home
systems considerably. At the same time, game-changing improvements in
the efficiency of consumer appliances such as lights, cell phone
chargers, fans, and televisions have enabled smaller, cheaper solar
systems to deliver more energy services at lower cost. Moreover, social
entrepreneurs have developed innovative financial models that enable
the poor to avoid paying the prohibitive upfront costs of these
systems. Instead, they can now pay over time, which results in monthly
charges that are often much less than they are currently paying for
vastly inferior kerosene-based energy services or what they would pay
to access to the grid.
To capture the benefits of new technologies and financial models
and move beyond outdated approaches, Power Africa should strike a
balance among grid extension, mini-grid, and off-grid solutions. Of
these three approaches, we currently see the least emphasis on, and
most need for, distributed clean, renewable energy sources that power
mini-grids and off-grid solutions. In their ``Energy for All'' case--
the scenario required to provide modern energy for all by 2030--the IEA
allocates 64 percent of additional (above the ``New Policies
Scenario'') annual energy investments to mini-grid and isolated off-
grid solutions. Yet distributed clean energy is the least supported of
the energy access solutions in sub-Saharan Africa.
Off-grid, distributed programs that have been supported with
targeted public money are growing rapidly, and have established an
impressive record of success. In Bangladesh, companies like Grameen
Shakti are deploying 60,000 solar home systems every single month.
Already the country has installed over 2 million systems. In sub-
Saharan Africa, Lighting Africa estimates the off-grid solar lighting
market is growing at a 95 percent compound annual growth rate. Just one
of those companies, d.light, has empowered 28.7 million people with
solar lighting, including 7 million school-aged children. The
development benefits of these installations are enormous: they
contribute to the empowerment of women, education of children,
effectiveness of health care, and growth of the local economy.
Significantly, these companies make energy affordable for poor
consumers today, whether they are connected to the grid or not. Rather
than paying large amounts of upfront costs on grid connection or
monthly energy bills, customers can pay on a pay-as-you-go basis, using
mobile phone-based money transfer platforms. M-KOPA Solar in Kenya, for
example, has used a mobile money platform to provide solar power to
over 50,000 Kenyan households. They have since secured $20 million in
private investment and expect to serve 1 million households by 2018.
These rapid off-grid solutions provide a critical first step onto
the energy ladder with basic energy services such as lighting, mobile
phone charging, fans, and now, super-efficient televisions. Most
importantly, this happens on a time scale that accelerates impact: days
and months, not the years and decades they often must wait for
centralized power plants and grid extension. Then, as their income, and
their country's infrastructure, grows, people can move up the energy
ladder to consume more energy services such as refrigeration. Lighting
and mobile phone charging are the beginning, not the end of energy
access.
While distributed renewables are essential for rural populations,
they also fill important needs for other populations. For many urban
Africans and the growing middle class, the centralized grid is
unreliable and provides just a few hours of power each day. Solar
companies have found an important customer base among grid connected
populations seeking more reliable power through solar and battery
technology. Solar panels on these roofs helps to keep the electricity
flowing even when the grid is not working.
Finally, distributed generation can empower the poor in the
political sense as well as in the developmental one. Often, the poor
have not been afforded access to modern energy services due to
governance reasons as much as technological or economic reasons.
Decisionmakers may not see expanding affordable access as a priority,
and the poor often lack the means to hold them accountable. With the
deployment of distributed generation such as solar home systems, access
to energy is no longer dependent on political decisions regarding where
the grid will be extended, or how much utilities can charge. Smaller
project sizes associated with distributed clean energy removes the
ability of governing elites to centralize and control resources, and
limits opportunities for corruption.
Despite these advantages of off-grid renewables, support from the
Power Africa Initiative has been skewed toward large scale power
plants, without costly grid extension. Clean energy has received
significantly less support. To better balance its approach, the
administration should expand its support for off-grid and mini-grid
energy access projects. For example, Power Africa should implement a
dedicated loan guarantees for distributed renewable energy projects. In
many Power Africa countries, banks are hesitant to take on the risks of
loans to a new company or to players in an emerging sector. Loan
guarantees can therefore stimulate local lending and provide an
opportunity for local banks to gain comfort with entrepreneurs in this
sector over time, and thus provide desperately needed working capital
across the supply chain. With greater access to local resources, solar
system providers can scale up their operations and get products and
power into people's hands quickly. Expanded finance for these
innovative solar entrepreneurs would allow their work to reach an
unprecedented scale. Even a fraction of the Power Africa budget devoted
to off-grid solutions could help these markets grow at exponential
rates similar to mobile phone adoption in the early 2000s.
Distributed solutions need to play a bigger role in this
initiative, and in public electrification efforts, than they have. In
order to do that the industry needs public support. Over the past
several years OPIC has become a key source of support for distributed
renewable energy solutions. Important energy access programs like the
African Clean Energy Finance (ACEF) Initiative leverage the investment
made available by OPIC to support clean energy, including off-grid and
mini-grid interventions. This means more dollars for programs on the
ground and more people getting energy access. It is essential that OPIC
continue to support programs like ACEF.
Many have sought to frame this issue as an environmental or climate
imperative. It is not. This is about choosing the right tool for the
energy access job. In many cases, distributed clean energy is the
preferred option. If we are able to move beyond business as usual we
can help catalyze a 21st century transition in Africa. Just as mobile
phones have leapfrogged landlines, distributed renewables can leapfrog
centralized grids. It's time we unlock the world's most sophisticated
technologies for the world's poorest populations. Only that can be
truly considered empowerment.
Thank you again for the opportunity to submit comments to this
hearing.
Sincerely,
John Coequyt,
Director,
International Climate Programs.
______
Response of Tom Hart to Question
Submitted by Senator Robert Menendez
Question. M-KOPA, a company based in Kenya, sells a home power
system composed of a small solar panel, a battery, two ceiling lights,
a portable light, a radio, and slots to charge five cell phones
simultaneously. The company recently raised over $20 million in private
financing, which M-KOPA says will allow it to expand its customer base
from 50,000 now, to 1 million by 2018. M-KOPA is clearly an example of
an innovative business that is rapidly expanding in order to
effectively serve people living off-grid. What can we do to help M-KOPA
and similar companies address critical energy access issues in sub-
Saharan Africa?
Answer. Thank you, Mr. Chairman. Given the magnitude of the
electricity deficit in Africa, ONE supports scaling up investments in
innovative off-grid renewable technologies as well as increasing
financing for traditional on-grid power solutions. Numerous U.S.
Government agencies can assist companies like M-KOPA depending on their
ownership structure (i.e., companies that have a U.S. connection or
wholly African owned) and financing needs. OPIC, the World Bank,
African Development Bank, USAID's Development Credit Authority, the
U.S. African Development Foundation, Millennium Challenge Corporation
and others are increasing access to finance and technical assistance to
companies. We believe African entrepreneurs are a key part of
successfully addressing energy poverty. In partnership with African
governments and African financial institutions, enactment of
legislation to build on the President's Power Africa initiative would
be critical to ensuring people living in sub-Saharan Africa have access
to the most appropriate technologies to meet their energy needs.
Getting reliable electricity access to the poorest and most
underserved areas will require special effort, and we believe the
legislation should specifically address this challenge. Picking only
the low hanging fruit would leave millions without energy.
______
Response of Paul Hinks to Question
Submitted by Senator Robert Menendez
Question. You have cited Symbion Power's difficulty in getting the
Tanzanian utility TANESCO to pay the $70 million it owes your company.
How much of that debt stems from the Emergency Power Contracts you have
with TANESCO? Is there an opportunity to reduce the high tariff rates
under the Emergency Power Contracts so that TANESCO will be able to
repay its debt, but Symbion will still enjoy a sizeable profit?
Answer. Symbion owns and operates three power plants in Tanzania.
One, which is in Dar es Salaam, has a net output of 112MW. Symbion
charges 4.9 cents per Kwh for this plant. This is a gas-fired power
plant and the gas is supposed to be provided to the power plant by the
national power utility TANESCO. Unfortunately, 2 years ago, the amount
of gas available in Dar es Salaam became limited when TANESCO
introduced a new power plant, which they own. Instead of providing gas
to the Symbion plant per our contract, they asked us to convert our GE
aeroderivative gas turbines to run on Jet A liquid fuel. The turbines
are four GE jet engines coupled to generators. The cost of running an
aeroderivative gas turbine with Jet A fuel is enormously expensive.
The other two plants are in more rural areas of Tanzania--Dodoma
(55 MW) and Arusha (50MW). The charge per Kwh for those two plants is
roughly half a cent more than the plant in Dar es Salaam--5.5 cents.
Because there is no other source of fuel there, these plants also have
to run on liquid fuel which in this case is diesel. Both plants were
imported and installed on an emergency fast-track basis in 2011 and
2012. Once again, because of the cost of fuel, it is very expensive to
run 105MW far from the place where the fuel is imported. It has to be
trucked every day from Dar es Salaam.
The rates Symbion is charging are fair given the cost of operating.
The problem for TANESCO is that the fuel we have to use is expensive
Jet A and diesel. Symbion were contracted to buy the fuel and then get
reimbursed at cost (with no profit margin on top of it) by TANESCO but
this never happens in a timely manner so in fact we have been financing
the fuel--and therefore the electricity for the people of Tanzania--for
2 years now.
Symbion is not making excessive profits from its power plants in
Tanzania, and we have to carry huge interest costs to support the debt
from TANESCO which seriously erodes any profit that we make. The costs
of operating and maintaining the equipment in Tanzania--and especially
in rural areas--is also expensive. The real problem is not Symbion's
costs but that there is insufficient gas in Dar es Salaam and that the
two plants in Dodoma and Arusha utilize diesel causing high costs.
Because of our commitment to the Tanzania Government and the people
of Tanzania, we have never taken any action that would result in an
interruption of power to the country. We have a very good relationship
with TANESCO and the GOT. At certain times of the year when the
hydroelectric plants do not run because of drought conditions, Symbion
represents 30 percent of the total available capacity which means that
we are a very critical supplier.
The large debt that has accumulated could be paid if the GOT
injected funds into TANESCO, but it seems they are reluctant to do
that. The level of the debt is unsustainable for a company of our size
and it is limiting Symbion's operations and other new Power Africa
equity investments because of the resultant constant cash-flow
problems. We are developing new investments in Tanzania that will need
cash as well as in Nigeria, Ghana and Kenya.
Symbion has given outstanding support to the Tanzania Government.
Our investments are coupled with social programs that include a
training school for overhead power linemen in Morogoro where we have
trained hundreds of workers to U.S. standards, a school for the
underprivileged in Morogoro, an HIV/AIDS program called ``Transmit
Electricity Not Aids,'' a Sports Park in central Dar es Salaam, and a
new development for a soccer academy which is a collaboration with
Sunderland Football Club, an English Premier League Team. We have set a
new standard in the level of community programs we have embarked on and
we believe we have been an excellent flag bearer for the United States
of America.
______
Response of Del Renigar to Question
Submitted by Senator Robert Menendez
Question. In your testimony, you stated that in order to allow
natural gas to be used for power in sub-Saharan Africa, ``we need to be
looking at subsidies. . . .'' This is not the first time we have heard
about GE advising African governments to subsidize natural gas.
Does GE advise governments to do this? If so, is this
suitable advice, considering that natural gas subsidies are
contrary to U.S. policy, can distort electricity markets, can
lead to enormous debts for utilities and governments, as well
as inefficient use of natural gas, and, at least in the case of
Ukraine, can help spark international crises?
Answer. On behalf of GE, thank you for the opportunity to clarify
any misunderstanding of the Company's position on natural gas pricing
and allocation policies.
As noted in the Power Africa Reforms section of the written
testimony, the inability to take full advantage of Africa's vast
natural gas reserves is a serious issue on the continent. GE's position
is that to bridge this gap, to develop African economies, and to raise
quality of life for their people, governments in the region must create
a regulatory framework that brings natural gas on shore and
successfully links it to power generation.
An effective enabling policy requires a sensible approach to
natural gas pricing and allocation. The status quo includes fuel
subsidies in many countries, which may distort the market. When my oral
statement noted that these subsidies should be ``looked at,'' it was in
reference to GE's position that the subsidies and their disruptions
should be reconsidered so that a more market-based system can emerge to
enable natural gas to assume a competitive role among other, currently
subsidized fuels. To be clear, we do not, and have not, and have no
intention of advocating for subsidies for natural gas in Africa or
elsewhere. Ultimately, energy security and prosperity in Africa and
elsewhere will depend on a broad and diverse range of energy sources,
and efficient and effective policies to ensure their development and
management.
______
Responses of Hon. Mimi Alemayehou to Questions
Submitted by Senator Robert Menendez
Question. Given OPIC's commitment to renewable energy, and the fact
that OPIC's portfolio is well under the carbon cap it has been
operating under, has the carbon cap truly hindered OPIC's operations?
Answer. OPIC's $1.5 billion commitment to Power Africa was premised
in part on careful calculations of the Green House Gas (GHG) emissions
that would be allowable under the reduction targets then in force.
These GHG emissions should be sufficient to accommodate approximately
800 MW of thermal power production, in addition to the existing robust
pipeline of renewable energy projects.
The Electrify Africa bill that has been approved by the House of
Representatives contains more ambitious power generation and access
goals than the Power Africa initiative. To achieve the Electrify Africa
goals, OPIC would need the flexibility to finance a broader mix of
energy resources. But it bears noting that OPIC, an inherently market-
driven agency, has not financed a coal-fired power plant since 1996.
This was more than a decade before the focus on renewable energy and
the creation of the GHG emissions reduction plan.
OPIC anticipates that the suspension of its GHG emissions reduction
goals in IDA-eligible countries for FY14, as mandated by the FY14
Omnibus Appropriation bill, means that the emissions from 300-700 MW of
thermal energy power in OPIC-financed projects will not be counted
under the agency's GHG cap.
With respect to the overall size of OPIC's energy generation
portfolio, however, we would note that OPIC is a small agency with a
very limited number of deal teams. The absolute number of projects that
can be financed and insured in any given year is constrained by this
resource limitation. So while changes in OPIC's GHG emission reduction
policy may shift the mix of power projects that are financed or
insured, these changes are unlikely to expand the overall number of
power projects that OPIC can support.
Question. You were asked about support for the off-grid light and
power sector, but I do not think you answered the question. How has
OPIC been able to use the ACEF program and other tools to serve this
market? What are the prospects for further supporting off-grid
businesses to dramatically increase power access?
Answer. Like other regions of the world, Africa needs of mix of
power sources. On-grid, off-grid, urban and rural, renewable and base
load power sources each make sense in specific environments and
situations. But as a market-driven agency, OPIC is largely limited to
the transactions that the private sector proposes.
Still, there are occasions when OPIC or partner agencies can
strengthen the commercial viability of renewable energy proposals by
providing a small increment of technical assistance--such as help in
obtaining an engineering study, legal documentation, or an
environmental impact statement--that would make the larger transaction
more likely to achieve financial success. This need is particularly
acute in smaller, off-grid, renewable energy projects.
This is a goal of the U.S.-Africa Clean Energy Finance Initiative
(US-ACEF), which has been developed by OPIC, the State Department, and
the U.S. Trade and Development Agency. Implementing ACEF is one of the
key objectives of the Clean Energy Development & Finance Center in
Johannesburg, South Africa, which is staffed by OPIC and USTDA
representatives.
Here's what ACEF has provided so far:
ACEF Data (through 31 March 2014):
Total Projects: 12
Total Countries: 7
(Ethiopia, Kenya, Morocco, Namibia, Rwanda, Tanzania, Uganda)
Power Africa Countries: 3
(Ethiopia, Kenya, Tanzania)
Anticipated MW generated: 119
Total Funds Approved: $6.23 M
While OPIC does not have a unique focus on off-grid solutions, it
has supported a number of projects in this key market segment.
ACEF focuses specific attention on off-grid solutions. As of now, 6
of the 12 projects that ACEF has supported offer off-grid solutions.
This will translate into an additional 23 MW of off-grid power
generation in those countries (Ethiopia, Kenya, Morocco, Namibia,
Rwanda, Tanzania, and Uganda). ACEF projects include both project
financing and software approaches to promoting off-grid solutions.
And here's what ACEF's support looks like in the context of OPIC's
overall Africa portfolio.
OPIC Exposure in Africa:
Total Exposure in Africa (as of 12/31/13): $3,977,195,067.12
Number of Finance Projects: 52
Number of Investment Funds Projects: 12
Number of Insurance Projects: 64
Total Number of OPIC Projects in Africa: 121
Renewable Energy commitments in Africa (FY12&13): $273 M
Renewable Energy commitments in Africa (FY08-13): $855 M
But ACEF cannot create projects out of whole cloth. To have the
best chance of meeting the Power Africa and Electrify Africa goals,
OPIC needs the authorities and flexibility to be responsive to
commercially viable opportunities, such as a multiyear reauthorization
and the increased staffing that would be enabled by the President's
FY15 budget request.
Question. Congress gave OPIC statutory authority to make technical
assistance grants to U.S. cooperatives and small businesses as part of
its 1978 amendments to the Foreign Assistance Act. (Section 220 (a) and
2194 (e)). This authority gives OPIC broad discretion to use the
agency's own income to make grants. How will OPIC use this authority to
support the Power Africa initiative and deliver both increased access
and sustainability?
Answer. While OPIC's authorization permits this activity, OPIC's
appropriation does not fund its use. The modest technical assistance
that OPIC is distributing through the ACEF program utilizes State
Department funds. The use of these funds is stipulated in OPIC's
agreement with the State Department. OPIC is therefore not using its
own income for ACEF technical assistance.
______
Responses of Hon. Mimi Alemayehou to Questions
Submitted by Senator Benjamin L. Cardin
World Bank President Jim Yong Kim has said, ``If we don't confront
climate change, we won't end poverty.'' We understand that developing
countries in Africa are relatively low--CO2 emitting countries. We also
understand that these countries need better access to electricity in
order to become full partners in our global economy and to ensure
effective delivery of social services, such as public health,
education, and the like. This is going to require a delicate balance in
our approach to Power Africa.
Question. How can we make sure that we reach the goal of providing
electricity in underserved populations without compromising our climate
change goals?
Answer. OPIC's renewable energy portfolio has been growing since
2007, and especially since 2009. In each of the last 3 years, OPIC has
committed more than $1 billion to renewable energy projects. Partly
because of OPIC's commitment to reduce greenhouse gas (GHG) emissions
from its portfolio, but also because of rapidly growing market demand
for renewable energy in emerging markets, OPIC's renewable energy
commitments have dwarfed its thermal fuel commitments over the past 5
years.
OPIC's $1.5 billion commitment to Power Africa was premised in part
on careful calculations of the GHG emissions that would be allowable
under the reduction targets then in force. These GHG emissions should
be sufficient to accommodate approximately 800 MW of thermal power
production, in addition to the existing robust pipeline of renewable
energy projects.
The Electrify Africa bill that has been approved by the House of
Representatives contains more ambitious power generation and access
goals than the Power Africa initiative. To achieve the Electrify Africa
goals, OPIC would need the flexibility to finance a broader mix of
energy. But it bears noting that OPIC, an inherently market-driven
agency, has not financed a coal-fired power plant since 1996. This was
more than a decade before the focus on renewable energy and the
creation of the GHG emissions reduction plan.
OPIC anticipates that the suspension of its GHG emissions reduction
goals in IDA-eligible countries for FY14, as mandated by the FY14
Omnibus Appropriation bill, means that the emissions from 300-700 MW of
thermal energy power in OPIC-financed projects will not be counted
under the agency's GHG cap.
With respect to the overall size of OPIC's energy generation
portfolio, however, OPIC would note that it is a small agency with a
very limited number of deal teams. The absolute number of projects that
can be financed and insured in any given year is constrained by this
resource limitation. So while changes in OPIC's GHG emission reduction
policy may shift the mix of power projects that are financed or
insured, these changes are unlikely to expand the overall number of
power projects that OPIC can support.
Question. What has the administration done to limit the possible
negative environmental impact of Power Africa?
Answer. For its part, OPIC maintains some of the most robust
environmental standards among its development finance institution (DFI)
peers. All projects that OPIC supports must meet rigorous environmental
and social standards, over and above the GHG reduction targets. When
OPIC's analysis suggests that a project may have significant negative
environmental impacts, the project is opened to 30 days of public
comment. In addition, OPIC proposes mitigation plans for all
environmentally challenging projects. In many cases, adequate
mitigation requires the installation of best available pollution
controls. If these mitigants cannot be agreed upon with the project
sponsors, OPIC will not go forward with the project. If the mitigants
are agreed to and the project does go forward, it will be monitored on
the ground by OPIC after the fact. OPIC conducts regular monitoring of
all its projects, with particular attention to projects with higher
environmental sensitivities. Environmental issues discovered during
monitoring inspections must be rectified. Failure to do so can lead to
a cessation of OPIC support, and/or the calling of the loan.
Question. The development of fossil fuels carries social and
environmental costs over a range of areas: access to land, access to
water, water pollution, air pollution and the resulting health impacts,
and of course climate change. How have environmental and social
assessments been incorporated into the choice of energy technology
employed in the Power Africa Initiative's efforts?
Answer. Projects that OPIC supports must meet rigorous
environmental and social standards. These include access to land and
water and the protection of human health. OPIC helps investors identify
opportunities to improve environmental performance and improve
resilience in response to changing conditions. All projects are
required to assess reasonable and feasible alternatives that would
lower any environmental and social risks, including alternatives
related to project location and selection of energy technology.
Question. How does it help Africa leap-frog forward toward a truly
sustainable and efficient renewable energy based economy? Please
describe any clean energy projects supported by the Initiative.
Answer. As noted above, OPIC has focused on renewable energy
transactions in recent years. Thus, adapting this focus to Africa was a
logical pivot. A summary of OPIC's African projects is below:
OPIC Exposure in Africa:
Total Exposure in Africa (as of 12/31/13): $3,977,195,067.12
Number of Finance Projects: 52
Number of Investment Funds Projects: 12
Number of Insurance Projects: 64
Total Number of OPIC Projects in Africa: 121
Renewable Energy commitments in Africa (FY12&13): $273 M
Renewable Energy commitments in Africa (FY08-13): $855 M
In 2013, OPIC began its Africa Clean Energy Finance program in
partnership with the State Department and USTDA. State provided OPIC
with $15 million in funding (and USTDA with $5 million) in a 4-year
program to target technical assistance financing to early state
development of projects that might not otherwise occur without such
backing. After establishing strong policies and procedures for the
program, OPIC has committed financing to 12 projects for roughly $6
million in various renewable energy sectors. We expect to fully utilize
the State Department transfer by the end of calendar year 2014. A
summary of the ACEF program is below:
ACEF Data (to date):
Total Projects: 12
Total Countries: 7
(Ethiopia, Kenya, Morocco, Namibia, Rwanda, Tanzania, Uganda)
Power Africa Countries: 3
(Ethiopia, Kenya, Tanzania)
Anticipated MW generated: 119
Total Funds Approved: $6.23 M
Examples of projects that are moving forward after just 1 year of
ACEF technical assistance include: Gigawatt Global, an 8.5 MW solar
project in Rwanda; Off-Grid Electric, which is distributing pay-as-you-
go home solar systems in Tanzania; and Virunga Power, a 6 MW hydropower
project in Kenya.
ACEF focuses specific attention on off-grid solutions. As of now, 6
of the 12 projects that ACEF has supported offer off-grid solutions.
This will translate into 23 MW of off-grid power generation in those
countries (Ethiopia, Kenya, Morocco, Namibia, Rwanda, Tanzania, and
Uganda). ACEF projects include both project financing and software
approaches to promoting off-grid solutions.
Overall, OPIC has a healthy pipeline of power projects that fall
under Power Africa. The current pipeline of projects in development
(not yet in implementation) includes roughly $1.7bn for over 2,000 MWs
of power, two-thirds of which is thermal and one-third from renewable
energy sources. This pipeline also includes a rich mix of on-grid and
off-grid, renewable and thermal, urban and rural power.
Question. What benchmarks and metrics are set out to guide and
evaluate Power Africa?
Answer. OPIC is working together with the interagency Monitoring
and Evaluation Working Group for Power Africa to help establish
benchmarks for the measuring the impacts of the Power Africa
initiative. On its own, OPIC measures and monitors the impact on the
ground of each of its private sector investments, including key impacts
such as jobs created; additional local revenues generated; additional
local purchasing, which can spur indirect job creation through supply
chains; demonstration effects; and development reach, as products and
services reach new, generally underserved populations.
Question. Is there a need to set some sort of cost-benefit ratio or
criteria for authorizing Power Africa projects?
Answer. There are extensive metrics already being established for
the program by the interagency Monitoring and Evaluation Working Group
for Power Africa, an interagency group of experts on monitoring and
evaluation.
But more broadly, every project that OPIC supports--in any sector
and any country--undergoes rigorous scrutiny with regard to its costs
and benefits.
This procedure, refined over decades of project finance experience,
has enabled OPIC to select projects with the most development impact
and the greatest likelihood of success.
The shorthand version of this analysis is called ``the 4Rs,''
reflecting OPIC's emphases on risks, rewards, returns and resources.
Risks: The credit risks associated with the project are taken into
careful account. These include not only transaction risk, but country
risk, sector risk, counterparty risk, business plan risk, management
risk, currency risk, credit history risk, and other financial risks of
the project. Potential mitigants for each credit risk are also studied.
Development returns: OPIC analyzes (a) the developmental impact of
the project, based on historically proven measures of local job
creation, local procurement, worker training, demonstration effects of
the project, positive environmental impact, broader economic impacts,
etc., and (b) the U.S. impact of the project, based upon U.S. job
creation, U.S. exports, balance of payment effects, capital
mobilization, and market expansion for U.S. enterprises. In addition,
the importance of the project to any relevant federal government
initiatives (such as Power Africa) is taken into account.
Financial returns: OPIC also projects expected financial returns to
the U.S. government and the taxpayers, weighing the financial risks
associated with the project against the estimated interest spread,
fees, and other financial returns.
Resources: The use of internal OPIC resources, given the complexity
of the project and the dedicated OPIC personnel and funds needed to
accomplish it, is likewise assessed. This includes OPIC staff resources
that would be needed for such tasks as underwriting, legal analysis,
document preparation, economic impact analysis, environmental
assessments, portfolio tracking, and monitoring, in order to execute
the project start to finish.
______
Responses of Rick Angiuoni to Questions
Submitted by Senator Christopher A. Coons
Question. What are Ex-Im's plans to meet its $5 billion commitment
over the next 5 years to support Power Africa projects, do you see a
commensurate increase in demand from the private sector, and what
additional resources or authorities may be needed to ensure Ex-Im meets
this commitment?
Answer. Ex-Im Bank is actively following more than a dozen projects
in eight countries across sub-Saharan Africa. Most of these projects
are in early-stage development. Ex-Im Bank continually engages the
sponsors in the hope that sourcing comes from the United States and
thus qualifies for our support. For example,
Ex-Im Bank has entered into institutional arrangements with the
Ministry of Power in Nigeria and Industrial Development Corp. of South
Africa Ltd. (IDC). We plan to enter into additional strategic
arrangements in the future to promote U.S. exports.
Given the above arrangements, coupled with various potential
projects in the pipeline in countries such as Nigeria, Tanzania,
Angola, Cote d'Ivoire, South Africa, Mozambique, Ghana, and Kenya, Ex-
Im Bank sees strong growth in the power sector as well as other
economic sectors such as aviation, transportation, oil and gas, mining,
construction equipment, and health care.
Ex-Im Bank's Sub-Saharan Africa Advisory Committee (SAAC) is
assisting Ex-Im in meeting its commitment to support Power Africa.
Established by an Act of Congress, the Sub-Saharan Africa Advisory
Committee (SAAC) provides guidance and advice regarding policies and
programs designed to support the expansion of financial commitments by
Ex-Im Bank in sub-Saharan Africa consistent with the Bank's mandates.
This committee is comprised of members with extensive experience in
Africa that can provide advice on strategy, financing, and marketing
outreach.
Recognizing the massive investment needs of sub-Saharan Africa,
U.S. companies are recognizing the potential for increased investments
and exports to the region. Ex-Im Bank is aware of an increase in demand
from the private sector and seeks to support those efforts. For
example, some private sector companies that export to Africa are
considering retooling their production facilities to source from the
United States and create jobs in America. With respect to resources,
Ex-Im appreciates the increase in appropriations for the Bank contained
in the recent omnibus appropriations bill which will allow the Bank to
invest in additional resources. Ex-Im Bank Senior Management is in the
process of reviewing where to best place those resources.
Question. How does Ex-Im coordinate with the interagency to select
and implement Power Africa projects, and do you coordinate with DOE to
measure and evaluate the reliability of grid extension efforts?
Answer. The Bank actively participates with sister agencies in
promoting power projects across the region. Working with the Department
of Commerce, Ex-Im Bank works with the United States and Foreign
Commercial Service, and actively supports the Doing Business in Africa
campaign. The Bank participates in trade missions to identify
opportunities and projects for financing. In countries where U.S.
embassies do not have a U.S. and Foreign Commercial Service presence,
Ex-Im works closely with the State Department's Econ/Commercial
officers.
With the U.S. Trade and Development Agency (TDA) and Overseas
Private Investment Corporation (OPIC), Ex-Im Bank is engaged in the
U.S.-Africa Clean Energy Development and Finance Center (Center). The
Center is an initiative by USTDA, OPIC, and Ex-Im Bank to provide a
coordinated approach to clean energy project development in sub-Saharan
Africa. Specifically with TDA, Ex-Im participates in Reverse Trade
Missions where we highlight the Bank's financing in support of U.S.
exports for prospective African purchasers of American-made equipment.
Ex-Im Bank actively participates in the weekly Power Africa Working
Group meetings which have representation across agencies including
OPIC, USTDA, USAID, State, Department of Energy (DOE), Army Corps of
Engineers, National Security Council (NSC), Commerce, African
Development Foundation (ADF), Millennium Challenge Corporation (MCC),
and Treasury.
Ex-Im Bank does not coordinate with DOE to evaluate and measure
grid extension efforts. This is because the scope of the work is more
developmental and of a technical assistance nature. As a financing
institution with a mandate to finance U.S. exports, technical
assistance is not part of Ex-Im's mandate.
______
Responses of Rick Angiuoni to Questions
Submitted by Senator Benjamin L. Cardin
Question. What benchmarks and metrics are set out to guide and
evaluate Power Africa?
Answer. Ex-Im Bank pledged support of up to $5 billion over the
next 5 years in support of the President's Power Africa Initiative. The
Bank's $5 billion pledge is a signal to African countries and investors
in the African power sector that they should source equipment and
services from the United States.
Ex-Im Bank is actively following more than a dozen possible power
projects across sub-Saharan Africa. Most of these projects are in
early-stage development. Ex-Im Bank continually engages the sponsors in
the hopes that sourcing comes from the United States and thus qualifies
for Ex-Im support.
Ex-Im Bank is demand-driven and reviews projects and applications
as they come into the Bank. Ex-Im Bank's mission is to support U.S.
jobs through exports by supporting the U.S. content of exports. The
Bank works with project sponsors, developers, engineering, procurement
and contracting (EPC) firms, and with original equipment manufacturers
(OEMs) in financing U.S. exports for power projects.
In terms of tracking progress toward Power Africa's goals, Ex-Im
works closely with USAID which, as the Secretariat for Power Africa, is
responsible for coordinating and tracking of progress toward the two
overarching goals of Power Africa: an additional 10,000 MWs of
additional generation capacity added to the power grid and an
additional 20 million households and businesses connected to the power
grid.
Question. Is there a need to set some sort of cost-benefit ratio or
criteria for authorizing Power Africa projects?
Answer. Ex-Im Bank's mission is to support U.S. jobs through
exports. The Bank's financing is done at no net cost to the U.S.
taxpayer (we actually generated more than $1 billion in deficit
reducing receipts in FY 2013), and we maintain an overall default rate
of approximately one-quarter of a percent. (This default rate is
different than the default rates published in the annual Budget
Appendix due to differing definitions. The reported rate in the Budget
Appendix reflects projected defaults over the life of the loan while
the default rate in this report reflects actual defaults at a
particular point in time.)
Ex-Im Bank financing supports exports of U.S. goods and services.
There are varying levels of job intensity in the exports that Ex-Im
finances ranging from manufactured to technical engineering services
for a power projects. If a buyer in a foreign country receives a loan
to purchase U.S. goods, we meet our mission of supporting U.S. jobs.
Ex-Im Bank's financing supported an estimated 1.2 million jobs over the
past 5 years, including 205,000 jobs in FY 2013 alone.
Ex-Im Bank's congressional mandate to support exports to sub-
Saharan Africa must be undertaken consistent with the Bank's reasonable
assurance of repayment mandate, our environmental guidelines, and with
Ex-Im Bank's mission to create and sustain U.S. jobs.
Ex-Im Bank is transactional/project driven. All projects, including
those in the power sector, need to be bankable; they are thus, subject
to our normal due diligence process (financial/technical/environmental)
to ensure each meets Ex-Im Bank's mandated criteria of reasonable
assurance of repayment.
______
Responses of Rick Angiuoni to Questions
Submitted by Senator Bob Corker
Question. I have heard reports from constituents concerned that,
because of perceived commercial risks, limits have been placed on Ex-
Im's Working Capital Guarantee Program (WCGP) for the following
countries: Argentina, Ghana, Indonesia, Mauritania, Tanzania, and
Zambia. As you know, Ghana and Tanzania are Power Africa countries.
Could you describe any limits placed on lending to
businesses exporting to these countries and, if so, please
provide the reasons why?
Answer. Ex-Im Bank's cover policy (terms and conditions of doing
business in a particular market) is contained in a document known as
the Country Limitation Schedule (CLS), and is available to all
exporters by visiting our Web site. Ex-Im Bank determines its cover
policy for each market based on the country risk ratings approved
through the Interagency Country Risk Assessment System (``ICRAS'')
chaired by the Office of Management and Budget (OMB).
Based on the level of risk reflected by such ratings and in
consideration of the mandate to have a reasonable assurance of
repayment in the commitments that it incurs, Ex-Im Bank may decide to
open or close in a particular market. Where open, Ex-Im Bank may decide
to have certain restrictions, such as typically requiring a bank
guarantee or a sovereign guarantee, that are reflected in notes 1
through 14 in the Country Limitation Schedule. The underwriting of
transactions must be in accord with the Bank's cover policy as per the
CLS. For example, in Mauritania, Ex-Im Bank is open only for short-term
public and private sector business (up to 180 day terms; exceptionally
360 days) pursuant to its Africa initiative; closed under its normal
programs for longer terms for all public and private sector business
and notes 1, 11a, 11b, and 13 apply. Any additional limits and/or
conditions are based on an assessment of the risk related to a specific
transaction.
Ex-Im Bank does provide some additional flexibility for private
sector working capital transactions in Ghana, Tanzania, Zambia, and
Indonesia that are subject to a requirement of a bank guarantee or high
quality financial information. The standard policy for working capital
transactions allows for the substitution of an irrevocable letter of
credit in place of a bank guarantee. In addition, Ex-Im Bank will
consider on a case-by-case basis other nonbank guaranteed transactions.
The standard policy for working capital transactions subject to high
quality financial information, also allows for the substitution of an
irrevocable letter of credit. In addition, exceptions may also be made
for transactions that are insured for comprehensive political and
commercial risk.
Question. I have heard from small business exporters concerns about
Ex-Im's ``reduction clause.'' I understand the importance of securing
deals with collateral requirements. I also understand that Ex-Im Bank's
working capital guarantees
depend on having adequate collateral in the form of raw materials,
finished goods, accounts receivables, and other specified assets and
that there might be a need to condition loan disbursements, supported
by inventory, by capping at a certain amount. However, I am hearing
concerns that the Working Capital Guarantee Program's reduction clause
is unreasonably limiting the ability of small exporters, who are
dependent on securing loans with inventory and that this clause, as
currently interpreted by Ex-Im, may be undermining Ex-Im's goal of
assisting small business exporters and instead creating an unfair
disadvantage to small businesses.
Can you provide me with further detail on the workings of
the reduction clause? Is it an accurate interpretation to say
that no more than 60 percent of actual disbursements can be
supported by inventory? Please explain, in detail, why this is
or is not the case.
Answer. The reduction clause referred to above is Ex-Im Bank's
general policy with respect to Working Capital Revolving Loan
Facilities (other than Transaction Specific Revolving Loan Facilities),
is that at no time shall the portion of the principal balance of the
credit accommodations that is supported by export-related inventory
exceed 60 percent of the sum of the outstanding disbursements plus the
aggregate undrawn face value of all outstanding Commercial Letters of
Credit. At least 40 percent of the total principal balance must consist
of export-related accounts receivable.
Ex-Im Bank recognizes that from time to time it may be necessary
for a small business exporter to carry inventory balances that exceed
60 percent. This often happens when export sales are growing, and more
inventory is needed to fill orders. To accommodate this need and
facilitate the export, Ex-Im Bank on a case-by-case basis, will allow
the percentage of export-related inventory to exceed 60 percent of the
outstanding principal balance. Our approval to allow the percentage of
export-related inventory to exceed 60 percent is based on an assessment
of risk related to each specific transaction.
______
Responses of Hon. Earl Gast to Questions
Submitted by Senator Christopher A. Coons
Question. How can the administration more effectively coordinate
with Congress to ensure the Power Africa initiative is funded,
authorized, and sustained in the future?
Answer. The administration appreciates the committee's engagement
and support of Power Africa. We believe that your continued focus and
support on the important issue of increasing access to energy in Africa
through briefings and hearings will help ensure the Initiative's long-
term sustainability. Congressional support for the President's FY 2015
request for the Development Assistance account where funding for Power
Africa is allocated will be essential. Additionally, we hope that
Congress will continue to identify and create opportunities to mobilize
support for Power Africa by hosting events in the U.S.--similar to the
very successful ``Opportunity Africa Conference'' recently held in
Delaware. These events provide a forum for us to speak to businesses,
constituents, the diaspora, and technical experts about the goals,
progress, and implementation of Power Africa. We also welcome
opportunities for congressional and staff delegations to visit Power
Africa sites in Africa where they can meet with our transaction
advisors and our teams and partners in the field. Additionally,
bicameral and bipartisan legislation which support the goals of Power
Africa will signal congressional interest in the sustainability and
future of the Initiative.
Question. Latin America and Asia have substantially accelerated
their energy production, resulting in electrification rates upward of
70 percent in most areas. What are the lessons learned from these other
low- and middle-income countries with regards to tackling
electrification challenges in sub-Saharan Africa and ensuring
sustainability of the Power Africa Initiative in the long term?
Answer. A fundamental lesson from Latin America and Asia is that if
the legal and regulatory structure is in place for electrification
projects to recoup their investments that the incentives for a wide
variety of approaches play a huge role in improving overall access. We
have also seen a number of small-scale renewable models that
demonstrate that these power projects can be bankable and sustainable.
It is critical that the tariff structures are in place so that costs of
producing the power are fully reflected. In addition, the legal and
regulatory structure needs to be transparent and predictable over time
so that investors have a high level of confidence that they can recoup
their investment over time. There must be clarity as to whom the power
can be sold, how that power is sold and at what price. For power
projects, this needs to be clear not only for the immediate term, but
extending forward for 25 years given the size of investments needed for
power generation projects. Additionally, we have seen important
progress in developing sustainable business models for small scale and
distributed energy solutions deployed in underserved areas due to
improvements in low cost technology. These solutions are particularly
important in providing access to power in areas that are not expected
to be connected to the power grid in the near to medium term. For
example, we have seen impressive advancements in Bangladesh deploying
lower cost, technology appropriate solar power solutions such as those
through Grameen Shakti. Households take out microcredit loans for small
solar systems and are able to repay the loan resulting from cost
savings realized by replacing higher cost energy sources such as
kerosene.
Question. We understand that additional funding would be required
to add countries beyond the initial six focus countries. What plans
exist to consider the future expansion of Power Africa beyond the six
focus countries, and how much additional cost would that require?
Answer. The initial set of six countries was chosen after extensive
analysis conducted by the U.S. Government. Around 40 percent of the
population without access to electricity in sub-Saharan Africa live in
these six countries according to a 2013 OECD/IEA report. Given the
needs across the continent, USAID and other USG agencies are also
working in other countries like South Africa, Mozambique, and Malawi;
and other donors are playing a significant role too. With the great
deal of interest in Power Africa and as this model is tested and
proven, we may look to expand our efforts.
The administration has sufficiently funded Power Africa to meet its
current goals with those six countries. To meet the President's
commitment, USAID has identified $285 million of funding for Power
Africa to coordinate and provide technical assistance. Technical
assistance supports power generation, distribution, and transmission
projects, including clean energy projects and off-grid and mini-grid
solutions. Assistance is also being provided to strengthen the enabling
environment for private investment, including legal and regulatory
frameworks and host country institutional capacity.
Currently, the President's Power Africa goal is 10,000 MW in six
focus countries, however, in order to meet goals identified in the
House Electrify Africa bill of 20,000 MW, new countries would need to
be added as Power Africa would need to expand the universe of potential
new energy transactions, and each country has limited absorption
capacity for new power. The Power Africa model will be severely
constrained to expand to new focus countries without additional
resources.
We estimate a properly resourced focus country costs approximately
$20 million/year for USAID, a cost that includes delivery units, off-
shore transaction advisors, technical support, legal support, in-
country embassy staff, senior advisors group, off-grid solutions, and
monitoring and evaluation. Additional resources for regional activities
such as support for geothermal energy, the U.S. Africa Clean Energy
Fund and small scale and distributed energy efforts are needed to help
advance our overall objectives.
Question. What are some of the challenges for U.S. energy companies
doing business in Tanzania, where the government-owned utility is
insolvent? What measures is the Power Africa team considering to help
Tanzania address this issue and ensure U.S. companies do not suffer as
a result of TANESCO's arrears?
Answer. TANESCO has grappled with payment arrears and liquidity
issues, created by operational inefficiencies and tariffs that did not
fully capture the cost of providing power to its customers. As these
arrears built up over time, TANESCO has not had the liquidity to make
payments to power generation companies, including American-owned
companies. However, there has been significant engagement by donors to
help TANESCO and the Government of Tanzania address these issues
impacting its liquidity and arrears. We have started to see TANESCO
take concrete steps to address these liquidity and arrears issues.
TANESCO recently announced a plan to make payments and reduce the
outstanding arrears by the end of 2015 by increasing operational
efficiencies, directing increased revenues from the increased tariff
increase to cost reflective levels and reduce the cost of generation by
bringing cheaper power sources online. Under Power Africa, USAID and
MCC are working closely with the GOT and other donors such as the World
Bank and DFID to strengthen power sector institutions and the legal and
regulatory environment. TANESCO is starting to show some progress in
increasing its collections and liquidity. However, TANESCO will need to
continue progress in improving its operational efficiencies and
implement a phased restructuring to unbundle generation, transmission
and distribution lines of its business.
Question. Are we fully leveraging the strengths of the other
partner agencies, such as the Department of Energy, which is among the
best equipped with expertise relevant to the energy sector? Are there
ways to better utilize the expertise and draw in other federal and
nongovernmental assets such as the DOE's national labs, U.S.
universities, and faith based groups to support the greater Power
Africa mission?
Answer. We are working to fully leverage the strengths of other
partner agencies. The Power Africa Working Group or PAWG is fairly
simple in its organization and implementation, but has been effective
in its implementation due to the commitment of all 12 Power Africa
agencies including the Department of Energy. USAID serves as the
Secretariat for Power Africa--supporting the leadership of the White
House for the Initiative as a catalyst and facilitator. Agency roles
and responsibilities are defined by the tools and comparative strengths
of each agency. For example, OPIC, Ex-IM and USAID through the
Development Credit Authority provide financing tools; the State
Department provides leadership and support through its principal
officers at Post and in Washington in the diplomatic space and through
initiatives such as Sustainable Energy 4 All (SE4All); State, MCC, and
USAID provide support for policy and institutional reforms in the power
sector; the Department of Energy, U.S. African Development Foundation
and USAID provide critical support for renewable technologies as well
as off grid and minigrid solutions and approaches. We continue to
explore opportunities to engage US. Universities and faith based
groups, national labs to support and accomplish the goals of Power
Africa. In addition, Power Africa serves as a one-stop shop for the
private sector through which they can access multiple points of
contacts at the 12 U.S. agencies through the Power Africa Secretariat.
Additionally, Power Africa is in the process of embedding liaisons from
OPIC, the Export-Import Bank, the Department of Energy, the Department
of Commerce and USTDA in the Coordinators office in order to strengthen
the reach back to the tools and resources in these agencies.
There is no ``one size fits all'' solution to Africa's energy
challenges, so Power Africa is serving as a conduit for pooling the
expertise of the U.S. Government and other donors such as the World
Bank and African Development Bank to tailor solutions to address each
country's and each project's unique challenges. Power Africa is using a
transaction-centered approach that concentrates on closing those deals
that will have the greatest impact on improving sustainable energy
access. The approach provides host governments, the private sector, and
donors with incentives to encourage collaboration, provide quick
results, and drive systemic reforms that will facilitate future
investment.
One example of this is a recent meeting in Washington where top
U.S. and African energy lawyers who have negotiated power purchasing
agreements in many of the Power Africa countries gathered at the U.S.
Department of Commerce alongside experts from international financial
institutions and lawyers from Power Africa governments for a workshop
hosted by the Commercial Law Development Program. Their goal was to
emerge with annotated, standard power purchasing agreement clauses that
will significantly reduce the amount of time spent on negotiating the
terms of power deals. In short, this will help electricity come online
more quickly.
Question. Within the Power Africa Initiative, USAID is charged with
increasing private and other investment for small-scale, clean energy
projects, including distributed generation, off-grid or minigrid
development projects, and provide support to rural electrification
initiatives. Please provide more information about the specific
strategies USAID plans to employ to accomplish this mission, as well as
progress toward achieving these goals?
Answer. As a whole, the region has tremendous untapped potential
for sustainable energy generation. For example, East Africa's Rift
Valley alone has the potential to produce up to 15,000 MW of geothermal
energy, which could provide future generations with a sustainable,
dependable supply of electricity. Power Africa is providing a
significant amount of support to develop Africa's geothermal resources
and large-scale wind generation. For example, two of the largest
transactions in Kenya will use wind turbines to generate power.
In addition, minigrid and off-grid solutions, ranging from small
and independent solar powered networks serving 200 homes to stand alone
hydroelectric power systems to biodigesters which produce electricity,
could effectively and affordably provide energy access to communities--
often allowing them to ``leap frog'' traditional grid extension and
level the playing field between rural and urban communities.
Although Africa only produces 6 percent of global greenhouse gas
emissions, no country has developed its energy supply without using a
mix of renewable and fossil fuel energy sources. Expanding energy
access generally requires deploying a mix of the best available
generation resources and fuels. A large number of African countries
have large reserves of natural gas, a fuel that results in 47 percent
less greenhouse gas emissions compared to coal-fired power plants. This
is underscored by the fact that more than two-thirds of the population
of sub-Saharan Africa is without electricity, and more than 85 percent
of those living in rural areas lack access.
Without access to reliable energy sources, most African businesses
now rely on costly and high-emission kerosene or diesel generators to
power their businesses. As they grow, so does pollution. Annually,
Nigeria loses $2 billion of potential revenue through natural gas
flaring--a process that not only negatively impacts Nigeria's economy,
but also creates significant greenhouse gas emissions.
Power Africa is pursuing activities that encourage clean energy
projects, energy efficiency, low-carbon energy development, and energy
sector reforms.
The Off-Grid Challenge, for instance, is a partnership between the
U.S. African Development Foundation and General Electric that asked for
ideas--from companies or from individuals--to develop or scale up off-
grid activities that would reach communities not served by existing
power grids. Six first-round winners were selected based on the
sustainability, efficiency, and impact of their projects. One Off-Grid
Challenge winner, Mibawa Suppliers, will expand delivery of pay-as-you-
go lighting to households in rural Kenya. Another, GVE Projects Ltd.,
will electrify off-grid communities using metered solar and
rechargeable battery systems. However, Power Africa's off-grid
solutions are not about identifying one-off projects that may not be
scalable due to the lack of interest on the part of large investors.
For this reason, Power Africa continues to explore opportunities to
bundle together off-grid projects so that institutional investors can
deploy capital into these projects at scale.
______
Responses of Hon. Earl Gast to Questions
Submitted by Senator Robert Menendez
Question #1. In your testimony, you stated that you are hoping to
help the off-grid lighting and power market achieve greater scale. The
International Finance Corporation (IFC) is looking to create a fund to
supply low-cost, patient capital to firms scaling up production and
distribution of off-grid renewable energy products.
Is that effort something Power Africa plans on assisting
with? To date, has there been any communication between Power
Africa and the IFC concerning this effort?
Answer. Power Africa has been heavily engaged with the IFC
regarding the development of the Lighting Africa Trade Finance
Facility. We are also collaborating with IFC on a number of other
activities. Power Africa and IFC's Lighting Africa overlap in four
countries: Ethiopia, Kenya, Nigeria, and Tanzania therefore there is
great potential for collaboration.
Moreover, Power Africa has been heavily engaged with the World Bank
on a broader effort to align activities, including those of the IFC.
Since last summer, we have been working closely with the World Bank and
the IFC at their headquarters and on the country level to identify
areas of collaboration and identify key activities on which Power
Africa and the World Bank will partner. We are in the process of
finalizing a Memorandum of Understanding to formalize these areas of
collaboration. We anticipate a formal announcement of this partnership
in the near future.
Question #2. You cite the Off-Grid Challenge in your testimony.
This innovative program will help achieve the laudable goal of
developing new businesses and new business models. Similarly USAID has
used the Development Credit Authority (DCA) to help emerging off-grid
companies get off the ground. But what about businesses which already
have proven business models and are ready to grow rapidly? What can
USAID do to help existing successful off-grid companies scale up?
Answer. Power Africa is developing an initiative-wide strategy for
mini-grid and off-grid power focused on fostering and scaling up clean
and hybrid energy solutions in partnership with impact investors,
existing successful off-grid companies, and other organizations active
in this space. Through financial and technical support, the strategy
will seek to test and invest in different business and project models,
identifying technically and financially sustainable solutions for small
scale energy. The strategy is twofold: (1) mobilizing finance and (2)
strengthening institutions, policy frameworks, and quality assurance.
Illustrative activities include:
1. Partnerships with impact investors and practitioners to mobilize
financing, mitigate risk, and provide targeted technical assistance
through USAID Global Development Alliances, DCA facilities, Development
Innovation Ventures, and other funds.
2. Financial and technical assistance for small and medium
enterprises to innovate and scale through the Africa Clean Energy Fund
implemented by OPIC and USTDA, and USADF/GE's Off-Grid Energy Challenge
with USAID support.
3. Development and implementation of a quality assurance framework
for mini-grids through the Department of Energy and National Renewable
Energy Laboratory (NREL) partnership.
4. Capacity building and transaction advisory services for rural
and renewable energy agencies.
Question #3. USAID's DCA has been successful in helping new off-
grid companies such as M-KOPA establish themselves, but DCA provides
loan guarantees for less than 30 projects a year, worldwide, across all
sectors.
What can be done to increase the number of DCA loan
guarantees in total, and to off-grid entrepreneurs in
particular?
In the hearing, you cited your proposal to increase the
cap, but, at best, won't that result in just a few more loan
guarantees?
How do we double or triple the number of loan guarantees
for the promising off-grid lighting and power sector?
Answer. While DCA provides loan guarantee for about 30 projects per
year, the size and scale of those projects have significantly increased
over the past 2 years. The office expanded from $200 million in
mobilized capital (through 31 transactions) in FY 2011 to $500 million
in mobilized capital (through 26 transactions) in FY 2013. To
significantly increase the size and number of transactions in future
years and, to be consistent with the goals outlined in the Electrify
Africa Act of 2014 (H.R. 2548), DCA would need an increase of its loan
guarantee cap from the current $1.5 billion per year to $2 billion per
year. This increase will accommodate much larger and more catalytic
deals, particularly with respect to Power Africa transactions. With
current resources in FY 2014, DCA anticipates the closing of 20
transactions in Africa, of which 5 will be in power. With the increased
cap, both the number of guarantees and the amount financed could
increase significantly.
It should be noted that financing is not the sole means to increase
these loan guarantees; improvements to the business climate are
essential as well. Power Africa includes assistance to a range of local
partners to strengthen institutions and build capacity of public and
private sector stakeholders, including local financial institutions, to
absorb available financing and to make these projects successful.
Questions #4 & #5. So far, the Power Africa Initiative seems
intensely focused on attracting private capital to centralized power
plants. That is obviously an essential part of the equation in
expanding economic opportunity and electricity access throughout sub-
Saharan Africa, but the plan for actually expanding access to
electricity seems more vague.
Will a clearer plan emerge?
In the past, we have seen international support for centralized
power plants built to serve particular extractive industries that do
little or nothing to provide increased access to electricity for
people.
Given the emphasis on centralized generation in the Power
Africa Initiative, how can we be sure we are paying enough
attention to electricity access?
Answer. In addition to Power Africa's generation goal, Power Africa
aims to increase connections for 20 million households or commercial
entities. Large generation projects are not a comprehensive solution on
a continent that remains largely rural, where national grids neither
extend to rural areas nor have sufficient generation capacity.
Therefore, increasing access to reliable and affordable electricity
through both grid-based and off-grid solutions is essential for poverty
eradication and economic growth. In order to accomplish our access
goals, we are focused on expanding the distribution of power, enhancing
the affordability of power by reducing technical and financial losses,
and increasing access through mini-grid and off-grid projects as part
of, and in addition to, the mini- and off-grid strategy described above
(Question 2), illustrative activities include:
Technical assistance to Ghana and Tanzania's utilities to
reduce losses and improve efficiency, thereby improving access
and affordability.
Policy and political engagement on their national
electricity legislation, policies, and sector planning to align
resources and projects with access goals.
Funding for Liberia's utility to extend the grid in Monrovia
to increase connections.
To ensure we are paying enough attention to electricity access,
Power Africa also considers a set of factors related to access when
selecting its priority generation transactions to support with USG
resources, including:
Primary Impact: The project increases availability, access,
or efficiency/reliability of electric power in the country;
Catalytic Impact: Project has potential for scalability,
replicability, or demonstration impact;
Clean Energy Resources: Project prioritizes emission
reduction, renewable energy and/or energy efficiency
technologies to improve quality and mix of electric power in
the country;
Private Sector Role: Project catalyzes private sector
participation or investment;
Project Viability: Project is viable in terms of
bankability, affordability, technical merit, environmental/
social impact, and timeline.
Question #6. I would like to better understand Power Africa's plan
to double access to electricity in sub-Saharan Africa. Power Africa is
described as a private sector, transaction-based program, but, at least
at this point, most businesses are not interested in investing in power
lines or distribution lines in Power Africa countries.
How does USAID plan to address areas where access to
electric service remains extremely low?
How will it address the fact that connecting new customers
can actually lose utilities money because new customers often
use little energy at first?
What role does USAID see for rural communities with respect
to ownership, governance and management of rural electric
systems?
What specific objectives does USAID believe must be
accomplished in order to link increased access to commercial
electric service with job creation, income generation, and
support for small business and food security?
Answer. To improve access to electricity in sub-Saharan Africa,
Power Africa is taking a country-specific approach to address
challenges associated with electric service distribution; leveraging
individual transactions to advance economic growth; and launching the
aforementioned mini- and off-grid strategy to improve access. This
strategy explores opportunities and methods to scale up various kinds
of models (such as anchor clients, prepaid electricity models, and
smart metering) within rural and remote contexts. Moreover, the off-
grid and mini-grid strategy will also support other development
objectives for which energy access is critical. This includes
electricity for health clinics, street-light safety, and home and small
enterprise uses.
Objectives and accompanying activities include:
Helping state-owned distribution companies improve their
performance and viability. For example, in Ghana we launched a
change management program to improve the Electricity Company of
Ghana's functions.
Improving private sector investment and participation in
distribution. For example, in Nigeria, USAID is supporting
Nigeria's privatization process of 10 distribution companies
through technical assistance and financing. The improved
management of the distribution sector will improve the quality
of service and lead to more connected customers as privatized
companies expand their operations. USAID is also working in
Ghana, in concert with MCC, to share positive privatization
experiences and lessons learned in electricity distribution.
Aligning and leveraging energy transactions with local
economic growth and development opportunities.
In Kenya, Power Africa recently helped launch a 10 MW
biomass project with Cummins that will use mesquite wood, a
highly invasive species, as feedstock for its generator.
This plant is a source of both energy and income for local
residents who now will sell the wood for fuel at four times
the price they currently sell for charcoal. Power Africa
helped facilitate the power purchasing agreement
negotiations between Cummins--a U.S. company--and the
Government of Kenya. Cummins is looking to expand to add up
to 18 new biomass projects in Kenya and exploring
opportunities in other Power Africa partner countries.
In Tanzania, Power Africa Transaction Advisors are
supporting several renewable energy generation projects
linked to addressing the vital constraints of adequate and
reliable power for agricultural production and processing
in the Southern Agriculture Corridor, a key geographic
focus for Feed the Future. Projects including a Husk Power
model for small-scale, distributed generation based on
processing waste products such as rice husks or other
biomass feed-stocks from FTF value chains, and small hydro
projects to increase generation potential in the corridor.
Regarding the role of communities in rural electrification, USAID
supports community consultation on projects as well as models for
communities owning, operating, and maintaining power systems. At the
project level, USAID, and all USG agencies, are guided by environmental
regulations and best practices which explicitly include community
consultation during the project development process. USAID implementing
partners are required under their agreements with USAID to specifically
assess and incorporate the impact of youth and gender in their
technical assistance approach, emphasizing the importance of
underrepresented elements of communities in the design, implementation,
and outcomes of these efforts.
Much of our assistance requires community engagement far beyond
consultation, especially when local partners and stakeholders play a
direct role in project implementation. For example, in Liberia, Power
Africa is supporting the establishment of local community cooperatives
to own and operate renewable energy microgrids. Through the U.S.
African Development Fund and GE's Off Grid Challenge, Power Africa
awarded six $100,000 grants to support sustainable renewable power
generation initiatives at the community level. For example, one
awardee, Kenyan suppliers will expand delivery of pay-as-you-go
lighting options to households in rural areas, while another awardee,
TransAfrica Gas and Electric, will power cold storage facilities with
solar systems for farmers and fishermen. Awardee Afrisol Energy's
biodigester will produce electricity for small businesses in Nairobi's
urban settlements. The Off Grid Challenge has enabled a high level of
innovation and community participation, and will be expanded to all six
Power Africa countries later this year with USAID support.
______
Response of Hon. Earl Gast to Question
Submitted by Senator Bob Corker
Question. As we know, a significant number of Africans live in
rural areas and lack access to electricity. Power Africa could be an
important solution to address Africa's energy poverty and could deliver
immediate progress.
How does USAID plan to address rural areas where access to
electric service remains extremely low? And, what role does
USAID see for rural communities with respect to ownership,
governance, and management of rural electric systems?
Answer. USAID plans to increase access in rural areas where access
to electric service remains extremely low in large part through Power
Africa Initiative. USAID recognizes the important role that rural
communities play with respect to the ownership, governance and
management of rural electric systems. Reaching the most inaccessible
corners of Africa's rural communities and other underserved populations
is a critical component of Power Africa. Decentralized off-grid and
mini-grid solutions often offer the swiftest, cleanest, and most
innovative solutions to energy poverty by sidestepping the need to
connect to the national electricity network. To accomplish our goals
for increased access, we are focused on expanding the distribution of
power, enhancing the affordability of power and increasing access
through mini-grid and off-grid projects. Given the constraints to
expanding access through grid extension alone, the Power Africa
Initiative is aligning new and existing small scale activities under a
more targeted framework: an initiative-wide strategy for mini-grid and
off-grid power that will bring together the tools, expertise and
resources available from the 12 partner U.S. Government Agencies. This
strategy builds on existing efforts by multilateral agencies, U.S.
Government initiatives, the private sector, NGOs, and other
practitioners to address issues around energy access and will foster
clean and renewable energy solutions.
Additionally, through financial and technical support, the Power
Africa strategy will test and invest in different business and project
models, identifying technically and financially sustainable solutions
for small scale energy. The strategy will focus on two main components:
Policy and Quality Assurance Framework and Finance. Activities under
the strategy are expected to include:
1. Institutional, policy and regulatory planning, development and
reform focused on off-grid and mini-grid development. Building public
sector capacity that enables or promotes private sector small-scale
project development and investment will improve the public sector's
capacity to act as an effective counterpart. This can be done through
the development of the capacity of rural energy agencies and
associations and technical/transaction advice to the private sector.
For example, a Power Africa transaction advisor is embedded in
Tanzania's Rural and Renewable Energy Agency to identify and advance
policy reform issues and generation transactions;
2. Provision of market information and activities that support the
private sector's understanding of business opportunities and regulatory
processes;
3. Developing and implementing quality assurance frameworks for
mini-grids through the Department of Energy and National Renewable
Energy Laboratory (NREL) partnership;
4. Providing financial and technical assistance for Small and
Medium Enterprises innovation and scaling (Africa Clean Energy Fund
implemented by OPIC and USTDA, Off-Grid Energy Challenge);
5. Catalyzing increased private sector investment for small-scale
projects with credible developers and sustainable business models
through risk mitigation, technical assistance, and finance (via USAID
Global Development Alliances and Development Credit Authority
facilities, OPIC investment in funds or directly into companies);
6. Partnering with impact investors and practitioners in the mini-
grid and off-grid space to mobilize financial resources combined with
targeted technical expertise (USAID Global Development Alliances).
Additionally, USAID supports community consultation on projects as
well as models for communities owning, operating, and maintaining power
systems. Power Africa also encourages host country partners to develop
protocols at the regulatory and utility levels to protect consumer
rights, facilitate public/community participation in regulatory
processes, and conduct outreach on issues such as tariff changes.
At the project level, USAID, and all USG agencies, are guided by
environmental regulations and best practices which explicitly include
community consultation during the project development process. USAID
implementing partners are required under their agreements with USAID to
specifically assess and incorporate the impact of youth and gender in
their technical assistance approach, emphasizing the importance of
underrepresented elements of communities in the design, implementation,
and outcomes of these efforts.
Much of our assistance requires community engagement far beyond
consultation, especially when local partners and stakeholders play a
direct role in project implementation. For example, in Liberia, Power
Africa is supporting the establishment of local community cooperatives
to own and operate renewable energy microgrids.
The Off-Grid Challenge is a partnership between the U.S. African
Development Foundation and General Electric that asked for ideas--from
companies or from individuals--to develop or scale up off-grid
activities that would reach communities not served by existing power
grids, including rural communities. Six first-round winners were
selected based on the sustainability, efficiency, and impact of their
projects and awarded $100,000 grants in Nigeria and Kenya.
Solar World (E.A.) Ltd. will construct 5 solar water points
to provide water and electricity in semiarid areas;
Afrisol Energy's biodigester will produce electricity for
small businesses in Nairobi's urban settlements;
Mibawa Suppliers will expand delivery of pay-as-you-go
lighting to households in rural Kenya;
TransAfrica Gas and Electric will power cold storage
facilities with solar systems for farmers and fisherman;
GVE Projects Ltd. will electrify off-grid communities using
metered solar and rechargeable battery systems;
Afe Babalola University will investigate a hydroelectric and
solar system to serve students and faculty. One Off-Grid
Challenge winner, Mibawa Suppliers, will expand delivery of
pay-as-you-go lighting to households in rural Kenya. Another,
GVE Projects Ltd., will electrify off-grid communities using
metered solar and rechargeable battery systems.
However, Power Africa's off-grid solutions are not about
identifying one-off projects that may not be scalable due to the lack
of interest on the part of large investors. For this reason, Power
Africa continues to explore opportunities to bundle off-grid projects
so that institutional investors can deploy capital into these projects
at scale.
In Kenya, Power Africa recently helped launch a 10 megawatt biomass
project with Cummins that will use mesquite wood, a highly invasive
species, as feedstock for its generator. This plant is a source of both
energy and income for local community residents who now will sell the
wood for fuel at four times the price they currently sell for charcoal.
Power Africa helped facilitate the power purchasing agreement
negotiations between Cummins--a U.S. company--and the Government of
Kenya. Cummins is looking to expand to add up to 18 new biomass
projects in Kenya and exploring opportunities in other Power Africa
partner countries. Through the U.S.-Africa Clean Energy Financing
Facility, Power Africa also provided grants to support a 5.6 megawatt
mini-grid biomass project in Tanzania and a grant used for software
design and supply chain management for pay-as-you-go solar home systems
in rural Tanzania.
USAID vis-a-vis Power Africa is committed to increasing access to
electric service in rural areas and acknowledges the important role
that rural communities play in reaching the Initiative's goal of
increasing electricity access by adding more than 60 million new
household and business connections.
______
Responses of Hon. Earl Gast to Questions
Submitted by Senator Benjamin L. Cardin
Question. There has been an increasing recognition in the public
and private sectors of the critical need for involvement of local
impacted communities. In addition to basic consultation, projects are
more sustainable when they go beyond consultation to create an
environment where local communities are active participants in all
stages of planning and implementation.
How will Power Africa ensure that the impact on local
communities--particularly land and livelihoods--are evaluated
and shared prior to project implementation?
What structures exist to guarantee community participation
throughout the process and how can they be strengthened?
Answer. Power Africa uses an innovative private-sector-based
approach to accelerate the planning and completion of both large and
small power projects in sub-Saharan Africa. These projects have a broad
range of stakeholders, including local communities, businesses,
financial institutions, government institutions, and others. Power
Africa's central premise is that public/private partnerships, based on
shared goals and objectives, will also drive the six focus countries to
develop the necessary infrastructure as well as the institutional,
regulatory and human resources needed to increase the availability of
power and attract the investment resources needed to grow each
country's power sector.
USAID, the State Department, the Millennium Challenge Corporation
(MCC) and other U.S. Government agencies support community
consultation. MCC has specific requirements for community and
nongovernmental organization consultation in their country compact
development process. Power Africa also supports host country partners
to develop protocols at the regulatory and utility levels to protect
consumer rights, facilitate public participation in regulatory
processes, and conduct outreach on issues such as tariff changes.
USAID is guided by internal environmental regulations requiring an
environmental review of all activities it implements. Those activities
that might have a significant impact on the environment require a
rigorous environmental impact assessment; environmental assessment best
practices include the evaluation of potential social impacts as well as
consultation of the affected community during the assessment process.
Such activities must also respond to host country environmental
regulations, which typically have similar assessment requirements. If a
project receives funding from a multilateral development bank, it must
also meet that institution's social and environmental review
requirements. Many of the anticipated Power Africa activities will put
USAID in the role of providing technical assistance and other support
to ensure the successful completion of power generation or transmission
projects that are implemented by another party, often private. In such
cases, Power Africa will seek to ensure that the activity is informed
by an environmental impact assessment that follows good EIA practices.
Importantly, USAID and other U.S. Government (USG) partners take
specific measures to ensure that typically underrepresented members of
the community--women and youth--have a voice in these processes. USAID
implementing partners are required under their agreements with USAID to
specifically assess and incorporate the impact of youth and gender in
their technical assistance approach, emphasizing the importance of
underrepresented elements of communities in the design, implementation,
and outcomes of these efforts. More broadly within the Power Africa
Working Group (comprised of 12 U.S. Government agencies), the
interagency is exploring opportunities to build upon analysis that OPIC
has conducted on implementing additional best practices for community
engagement.
Much of our assistance requires community engagement far beyond
consultation, especially when local partners and stakeholders play a
direct role in project implementation or otherwise benefit from the
assistance in question. For example, in Baringo County in Kenya, Power
Africa is supporting an innovative biomass fuel project which allows
local farmers to sell wood to a biomass plant which will then convert
such materials into steam to produce electricity. The farmers' prior
practice was to burn the wood into charcoal which they then sold at a
lower price than the price they do now through the biomass plant. The
biomass project will reduce environmental impact while increasing both
power availability and economic opportunity for the farmers.
Community engagement and ownership is critical to ensuring the
sustainability of Power Africa's investments. In Liberia, Power Africa
is supporting the establishment of local community cooperatives to own
and operate renewable energy microgrids. Through the U.S. African
Development Fund Off Grid Challenge, implemented in partnership with
General Electric, Power Africa awarded six $100,000 grants to support
sustainable renewable power generation initiatives at the community
level. The selected projects offer creative, community-driven solutions
and highlight prioritized need. For example, Kenyan suppliers will
expand delivery of pay-as-you-go lighting options to households in
rural areas, while another awardee, TransAfrica Gas and Electric, will
power cold storage facilities with solar systems for farmers and
fishermen. A biodigester from another awardee, Afrisol Energy, will
produce electricity for small businesses in Nairobi's urban
settlements. The Off Grid Challenge has enabled a high level of
innovation and community participation, and will be expanded to all six
Power Africa countries later this year.
Question. World Bank President Jim Yong Kim has said, ``If we don't
confront climate change, we won't end poverty.'' We understand that
developing countries in Africa are relatively low--CO2-emitting
countries. We also understand that these countries need better access
to electricity in order to become full partners in our global economy
and to ensure effective delivery of social services, such as public
health, education, and the like. This is going to require a delicate
balance in our approach to Power Africa.
How can we make sure that we reach the goal of providing
electricity in underserved populations without compromising our
climate change goals?
What has the administration done to limit the possible
negative environmental impact of Power Africa?
The development of fossil fuels carries social and
environmental costs over a range of areas: access to land,
access to water, water pollution, air pollution and the
resulting health impacts, and of course climate change. How
have environmental and social assessments been incorporated
into the choice of energy technology employed in the Power
Africa Initiative's efforts?
How does it help Africa leap-frog forward toward a truly
sustainable and efficient renewable energy based economy?
Please describe any clean energy projects supported by the
Initiative.
Answer. Rural electrification rates are well below 5 percent in
many areas of sub-Saharan Africa--the lowest in the world and
significantly lower than average rates in Asia and Latin America.
People who lack access to cleaner, more affordable energy spend
significant amounts of their limited income and resources on costly and
unhealthy forms of energy like indoor fires for cooking and expensive
diesel to run factories. Without light, children can't study and
businesses can't operate after dark. Without electricity, life-support
machines and newborn incubators in hospitals don't function. Without
refrigeration, food, and medicine go bad before ever reaching those who
need it. Without modern cooking fuel, homes are filled with dangerous
smoke and fumes. Better access to energy will multiply our investments
in reaching the Millennium Development Goals by improving health,
education, and household income.
Sub-Saharan Africa has tremendous untapped potential coming from
renewable energy sources including through wind, solar, and geothermal.
East Africa's Rift Valley has the potential to produce up to 15,000 MW
of geothermal energy. Through Power Africa, the U.S. Government and its
private sector partners are bringing technical expertise to accelerate
the development of these resources.
Power Africa intends to reach the goal of providing electricity in
underserved populations without compromising our climate change goals
by engaging in power sector projects that use a sustainable mix of
generation technologies, focusing on the use of renewable for off-grid
and mini-grid solutions and helping Power Africa focus countries to
build the necessary regulatory framework and institutional framework to
encourage the use of and investment in renewable technologies so they
can be scaled up from small levels of use. The Power Africa approach
provides the opportunity to help the six focus countries use
significantly cleaner generation technologies as well as utilize a
greater level of renewable technologies. Power Africa is also providing
critical institutional capacity building and assistance to develop the
energy policy framework to manage the integration of renewable
resources into several Power Africa countries' power gird on a more
sustainable and reliable basis. A prime example of this is our work in
Kenya helping the government and Kenya Power and Light manage the
integration of wind and geothermal power into their grid while
mitigating the risks to the stability of the grid because of the
intermittent nature of the renewable resources.
Power Africa represents a new way of doing business for USAID.
USAID's level of involvement in any particular transaction varies
widely and may not involve directly developing, implementing, and/or
funding any transaction-specific assistance. Under Power Africa, USAID
seeks to partner with private sector entities that demonstrate concern
for environmental sustainability and innovative approaches to
incorporating these concerns into activities. Although USAID may not
directly contribute to particular transactions such that USAID can
dictate the scope of the activity, USAID selects priority transactions
based in part upon the extent to which the project promotes the use of
renewable technologies, as well as project viability (e.g.,
affordability, bankability, environmental, and social impact) and
political and policy impacts and government support. Where USAID does
directly engage in an activity facilitating infrastructure investments,
USAID fully adheres to the Regulation 216 environmental compliance
procedures.
By the time Power Africa is reviewing a project for engagement, the
technology/energy source has already been selected by its private
sector developer and investors. Although individual agencies may differ
slightly in how they evaluate projects for assistance, Power Africa
will review a project using the following criteria:
Primary impact (MW, access, efficiency, reliability);
Catalytic impact (potential for replication, larger
projects);
Private sector leadership and interest (global, local, U.S.
partner);
Clean energy resources;
Project viability (affordability, bankability, environmental
and social impact, etc.); and
Political and policy impacts and government support.
When evaluating whether Power Africa will engage on a project, we
prioritize cleaner and renewable energy sources and we review the
relevant and available Environmental and Social Impact Assessments to
understand whether the project is viable and sustainable.
Currently, Power Africa is supporting 26 transactions that are
expected to reach financial closure by July 2014, with the potential to
add over 5,000 MW of power in the six Power Africa countries. Power
Africa leverages partnerships with the private sector and other donors
and the incentive of private sector investment to accelerate the
financial close and the construction of power generation projects to
expand the availability and access to power. These 26 priority projects
represent a variety of generation technologies and sizes.
In order to accomplish our goals for increased access under Power
Africa, we are focused on expanding the distribution of power,
enhancing the affordability of power and increasing access through
mini-grid and off-grid projects. Given the constraints to expanding
access through grid extension alone, the Power Africa Initiative is
aligning new and existing small scale activities under more targeted
framework: an initiative-wide strategy for mini-grid and off-grid power
that will bring together the tools, expertise, and resources available
from the 12 USG agencies working under Power Africa. This strategy
builds on existing efforts by multilateral agencies, USG initiatives,
the private sector, NGOs, and other practitioners to address issues
around energy access and to foster clean and renewable energy solutions
in partnership with investors and NGO networks, particularly in rural
areas.
The choice of a renewable technology does not automatically make
mini-grid and off-grid projects sustainable. Power Africa focuses much
of its effort in this space on ways in which we can scale up off-grid
and mini-grid efforts that have been successful on a smaller scale and
identifying business models that will make these efforts self-
sustaining with local buy-in. With financial and technical support, the
Power Africa strategy will seek to test and invest in different
business and project models, identifying technically and financially
sustainable solutions for small scale energy. The strategy will focus
around two main components: Policy and Quality Assurance Framework and
Finance.
In addition to the off-grid/mini-grid strategy, Power Africa
supports a number of clean energy projects. Through the U.S.-Africa
Clean Energy Financing Facility (ACEF) sponsored by the Overseas
Private Investment Corporation (OPIC) and U.S. Trade and Development
Agency (USTDA), Power Africa has provided grants for clean energy
projects including a 5 MW solar plant in Tanzania as well as a $200,000
ACEF grant used for the software design and supply chain management for
pay-as-you-go solar home systems in rural Tanzania. Specific examples
of clean energy project supported by Power Africa include:
USADF: Solar World (E.A.) Ltd. will construct five solar
water points to provide water and electricity in a semiarid
area of Kenya. TransAfrica Gas and Electric will power cold
storage facilities with solar systems for farmers and fisherman
in Nigeria.
Corbetti Geothermal 1,000 MW, Ethiopia: Ethiopia's first
private generation project was developed by Reykjavik
Geothermal, a U.S. company, with the assistance of a Power
Africa transaction advisor.
Lake Turkana 300 MW Wind Project, Kenya: The Power Africa
team provided technical advice that gave Lake Turkana's lenders
comfort that the electrical grid could absorb the intermittent
power associated with wind. The team also worked with the AfDB
to secure needed financial guarantees.
Kipeto 100 MW Wind Park, Kenya: Power Africa, through OPIC,
is providing financing to Kipeto Energy, as well as providing
technical advice to the Kenyan Government.
NextGen 5 MW Solar Project, Tanzania: Power Africa, working
with other donors, convinced the Tanzanian Government to
increase the length of a standard PPA from 15 to 25 years so
that NextGen, an American company, could access financing. The
OPIC/USTDA U.S.-Africa Clean Energy Financing Facility (ACEF)
provided a grant to support this project.
Question. What benchmarks and metrics are set out to guide and
evaluate Power Africa? Is there a need to set some sort of cost-benefit
ratio or criteria for authorizing Power Africa projects?
Answer. Power Africa has developed an interagency monitoring and
evaluation (M&E) framework and plan that track progress toward the
10,000 MW and 20 million connections goals announced by President Obama
in Cape Town, South Africa, in late June 2013. Through the interagency
Power Africa Working Group (PAWG), we have established a M&E subworking
group that has representatives from each of the Power Africa agencies.
We've defined a set of 33 indicators that USAID and other members of
the PAWG analyze and reports annually to benchmark and guide our
efforts. These indicators range from tracking planned, closed, and
commissioned transactions and their renewable energy mix to the
reliability and distribution of power.
Benchmarks and indicators are based upon the overarching objective
to increase access to reliable, affordable and cleaner energy. Specific
benchmarks and indicators include measuring:
The number of planned generation transactions in each of the
six Power Africa focus countries;
The number of MW's of generation capacity supported by the
U.S. Government relating to the 10,000 MW and 20 million
connection goals;
Clean energy policies and the number of new laws passed or
being implemented related to climate change;
The national energy mix of each country; and
The reliability of existing power resources including
calculating the number of incidents and hours of power loss per
month.
Initial results will be made public in August 2014 when Power
Africa releases the Initiative's first annual report.
In addition, Ex-Import Bank tracks U.S. jobs created or sustained
as a result of its financing (e.g., every 1 billion dollars in exports
supported by Ex-Import Bank supports approximately 6,000 jobs).
We do not believe that there is a need to formally establish a
cost-benefit ratio or criteria for authorizing Power Africa projects
because Power Africa priority transactions/projects are being advanced
by private sector developers and investors. These private sector
partners would not advance these projects if they did not already meet
some level of return and their cost-benefit analysis. Any mandated
cost-benefit ratio or criteria remove a great deal of flexibility from
the process, could create a significant burden for implementation, and
would be duplicative of a process that is already being carried out by
private sector partners.
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Biogas White Paper Submitted by Del Renigar
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