In a few days, the US government will move to officially oppose any and all large hydroelectric projects funded by the multilateral development banks, even as USAID considers bringing the mother of all hydroelectric projects, “Inga 3”, into the high profile “Power Africa” initiative.
Opposition to big hydro will be a matter of law when Congress passes the Consolidated Appropriations Act of 2014 in the days ahead. Here’s the provision:
Section 7060(c)(7)(D). The Secretary of the Treasury shall instruct the United States executive director of each international financial institution that it is the policy of the United States to oppose any loan, grant, strategy or policy of such institution to support the construction of any large hydroelectric dam.
This comes on the heels of USAID administrator Raj Shah’s indication a few weeks ago that USAID might participate directly in the $13 billion Inga 3 hydroelectric project in the Democratic Republic of the Congo.
Does the new law prohibit USAID participation in Inga 3? Actually, no. It only pertains to the US position in institutions like the World Bank and African Development Bank.
But “only” is misleading here. USAID, in spearheading Power Africa, is depending critically on these two institutions to provide much of the financing and capacity that will make Power Africa projects a reality.
The trick of Power Africa will be to use relatively little traditional US government aid money (in short supply these days) to leverage funding from other sources (private investors, partner governments, and the multilateral development banks).
At a minimum, pulling off this kind of leverage depends on a clear and consistent policy position from the United States.
When it comes to hydro, we now have the opposite of that. Yes, USAID might proceed with putting a little bit of money into a high priority regional energy project like Inga 3. And they will no doubt take great interest in the progress the World Bank and African Development Bank are making in their own participation in Inga 3. But when it comes to official US support for this participation? It doesn’t appear to be in the cards anymore.
Pursuit of hydro power figures prominently in the African-led Program for Infrastructure Development in Africa (PIDA), reflecting the remarkable potential of hydro for delivering power to the region. The African Development Bank estimates that 95% of the region’s hydro potential remains untapped.
Large scale hydro remains more vision than reality in Africa because it carries considerable financial, social, and environmental risks. Certainly, the opposition to hydro from some (well-placed) parts of Congress reflects concerns about population resettlement, water use, and environmental impact.
Unfortunately, the very institutions that are best positioned to work with the region’s governments to manage these risks are now off limits when it comes to US support.
Interestingly, where Congress went in one direction on one controversial energy source, it went in the opposite direction on another. Another provision in the spending bill essentially seeks to reverse the administration’s restrictions on financing for coal in developing countries.
So, when it comes to Power Africa (and beyond), apparently it’s yes to fossil fuels and no to hydro. Good luck trying to find a coherent message in all of this. I certainly can’t.
 As a legal matter, this particular construction (“…it is the policy of the United States…”) leaves some discretion to the Treasury secretary. That said, this particular directive is so unambiguous and lacking in qualifiers that the secretary will be hard pressed to issue a voting position that contradicts the statement of policy.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.