The G20’s Energy Infrastructure Plans for Africa: What is Missing?

At their Seoul, South Korea Summit in November 2010, the G20 adopted a Multi-Year Action Plan on Development which aims to promote economic growth, particularly in about 80 low-income countries (LICs). Infrastructure development is at the top of the nine-point agenda. A G20-mandated High Level Panel (HLP) on Infrastructure, working in close cooperation with Multilateral Development Banks (MDBs), submitted its report and final recommendations to the French G20 Summit in November 2011. In order to close Africa’s energy infrastructure gap, the panel emphasises large-scale public-private partnership (PPP) projects in order to promote economic growth and regional integration. The panel asserts that new investments into the continent’s energy sector are long overdue. This is true. However, this article takes issue with the HLP’s call for delivering solutions with an entire focus on large-scale, centralised energy infrastructure projects. The recommendations don’t sufficiently interrogate the feasibility and potential impacts; more attention should be given to modular and more flexibly deployable renewable energy technologies that can reduce poverty and minimise financial risk while maintaining a small carbon footprint.

• The HLP’s project selection criteria led to the proposal for bulky, capital-intensive energy projects – four of which are in Africa. These project proposals ignore important realities such as poverty and income inequalities, as well as the need to promote sustainable development in light of Africa’s vulnerability to the impacts of climate change.
• Large, long-term energy infrastructure investments in resource dependent African countries with high levels of economic uncertainty and without a significant revenue collection base to cover expenses pose a real challenge. If not handled with care, using public resources (including equity investments, loans, and guarantees by MDBs) to leverage private investment could create an enormous additional debt burden in these countries.
• The history of PPPs – particularly in Africa – has demonstrated that when private capital is injected into bulky long-term infrastructure projects, private investors seldom invest in reaching the poor with affordable services. The challenge of universal access is left to poorly funded governments and under-financed utilities to solve. Large power projects tend to solve the problem of large, commercial and government users but leave smaller users – including small- and medium-sized enterprises – under-serviced or not serviced at all.
• Given the complexities of financing large infrastructure projects and the challenge of cost recovery, modular and scalable renewable energy options should receive more attention. The key is to take these niche businesses and mainstream them. Entirely new types of enterprises and connectivity schemes would be possible to allow both large and small enterprises a role in the delivery of power and energy access. This approach would be far more efficient and egalitarian, in terms of accommodating needs, identifying innovative financing solutions and recovering costs, than centralised and highly bureaucratic utilities.
• The HLP’s commitment to conventional solutions obscures the possibility of other alternatives. Even though the alternatives present challenges in terms of replication, cost, and scale, the G20 summit in Mexico in June 2012 should re-cast the criteria for selecting and financing energy projects to highlight modular, renewable energy solutions.