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We know very little about what a Trump administration will do about longstanding US efforts to combat global hunger, disease, and poverty. Until we see key appointments, we don’t know what’s next for development policy to promote jobs, stability, and economic growth either. What is, for instance, the future of Power Africa?
The Trump campaign said little about these questions, and I could find no mention of Power Africa in campaign materials. The sole data point is one three-year old tweet after the launch of Power Africa claiming that $7 billion going to Africa would be stolen. I’m loathe to assume a single tweet tells us anything about future policy. Nevertheless, speculation is rife that the new administration will cancel the initiative. But here are five reasons Power Africa should appeal to a new White House team presumably focused on cutting waste and promoting business:
Power Africa is about private investment. The initiative has never been about handing over money to foreign governments or even paying for power projects with US tax dollars. It was always designed to catalyze private capital to help build power plants, expand grids, and deploy other energy systems. The private investment tally is $40 billion so far and counting. That’s leverage.
Power Africa saves America money. The initial $7 billion public sector pledge (presumably the figure referenced in the tweet) was nearly entirely comprised of anticipated loans to US companies and investors, mainly export credits from ExIm and project finance from OPIC. The modest grant elements are mostly for US transaction advisors and other technical assistance to help private power projects reach completion. That’s why the non-partisan Congressional Budget Office scored the supporting legislation as earning a positive return for taxpayers of $86 million over five years.
Power Africa creates American jobs. Both ExIm and OPIC are explicitly barred from activities that harm American jobs. If anything, new electricity in places like sub-Saharan Africa will help to generate millions of new consumers in fast-growing markets, which are all potential customers for American exporters.
We will know if we’re getting results or not. The initiative’s goals are simple and clear: help generate 30,000 megawatts of new capacity and 60 million new connections to homes and businesses. These are trackable. So far the initiative is off to a promising start.
Power Africa already has broad Republican support with leadership from Chairmen Corker and Royce. It’s much more than a presidential initiative. Power Africa has supportive legislation, the Electrify Africa Act, that was introduced by Chairman Bob Corker (R-TN) in the Senate and Chairman Edward Royce (R-CA) in the House and co-sponsored by a broad bipartisan group that included eight Republican senators and eighteen GOP members in the House. The bill then passed unanimously in February 2016.
Power Africa was always aimed at working with our allies in Africa—those countries that we are counting on to help us fight terrorists—to tackle one of their principal constraints to economic growth. It is already paying diplomatic and humanitarian dividends. Over time, it will also help bolster American prosperity and security too. Once the new team is in place and they take the time to look at the details of Power Africa—the goals, the tools, the costs, and the potential benefits to the United States—they should find plenty to love.
One of the most impressive things about Power Africa is that it has two clear and measurable goals: 30 gigawatts of new generation capacity and 60 million new connections for homes and businesses.
One of the least impressive things has been—at least up to now—how the government has been measuring what counts as a “new connection.” Some three-quarters of the Power Africa-affiliated connections so far have been solar lanterns or small single-household systems with very limited capacity. These tiny electrical systems that charge a cell phone or run a few lights are better than costly and dirty kerosene or old car batteries. And they’re far better than nothing. But they’re also not exactly what most people—or congressional authors of the Electrify Africa Act—would consider an electricity connection.
That’s why we should welcome Power Africa 2.0 and its emphasis on higher power solutions. As part of this, the team will soon halt counting solar lanterns as new connections, capping the total at 12 million or 20 percent of the target. (They’ll still track lantern distribution, but not as part of the connections goal.) This all fits with Power Africa’s sensible evolution toward encouraging a range of higher capacity home systems, physical connections to national grids, and the development of minigrids.
This positive shift is important because larger output electricity systems become necessary as consumers move up the energy ladder to higher power appliances (like my favorite refrigerator). Even more importantly, if people expect to use electricity for what economists call productive uses—and what regular people call jobs—they need a lot more than what small systems can currently deliver. And if African governments want to create prosperous economies that compete globally, they will need not just slightly more efficient small systems, but high-energy systems that provide orders of magnitude more energy.
Now that the US government is moving toward fixing this connection measurement problem and raising its energy ambitions, it should also use its influence to encourage others to aim higher on energy targets. In particular, the World Bank, the UN, and others still use the International Energy Agency (IEA) standard for energy access, which is a paltry 50 kWh per person per year in rural areas and 100 kWh for people living in cities. That’s also the yardstick being used to judge success against the UN’s SDG7 to achieve universal access to modern energy by 2030.
As a CGD Energy Access Targets Working Group concluded, this level of energy is more accurately an “extreme energy poverty line” than anything close to modern energy access. The working group called on the world to raise the bar.
Bravo to Power Africa 2.0 for moving in a positive direction that’s more reflective of how energy contributes to economic development over time. Let’s see the other energy policy actors step up too.
Estimating latent demand for electricity can be tricky. Are some countries too poor to consume a lot more energy? Or is income growth being held back by a lack of reliable and affordable electricity? While there is a strong relationship between energy consumption and income, the direction of causality is often far less clear. One way to estimate unmet demand may be to try to compare pairs of countries—e.g., how much additional energy does Kenya need to reach the level of Tunisia?
Another way may be to look at all countries together and see how far any individual country is from the global trendline. So, here we plot per capita energy consumption against per capita GNI (PPP$) for all available countries in the World Development Indicators. A few things to note right away: we have data for 136 countries and the relationship is extremely tight (for those who care, the R^2 is 0.84). Then, we measure each country’s distance from the predictive line. This distance is one way to think about what any one country’s energy consumption should be given their income level.
In this graphic, countries above the line consume more energy than their incomes would predict, while those below consume less. Yes, yes…the data is highly imperfect, and a lot of factors beyond income like economic structure, endowments, fuel mix, climate, geography, policy, etc., all can influence energy demand and supply. But 0.84 is pretty tight and we are only looking for ballpark magnitudes.
A few things strike us when we look closer at the sub-Saharan countries:
Nigeria is the most underpowered. Per capita energy consumption is a whopping 79 percent below what its income level alone predicts. Further, if we make the (huge) assumption that all the Nigerian projects in the Power Africa pipeline reach completion, we estimate that this would close less than one-third of the present gap.
The other initial Power Africa countries are all below the line too: Tanzania (-60 percent), Ethiopia (-47 percent), Kenya (-44 percent), and Ghana (-18 percent). Sorry, no data on Liberia.
Southern Africa is a regional outlier. Of the seven sub-Saharan countries above the line, six are in the Southern African Development Community. Most of these countries still rely on very large hydroelectric projects built long ago (e.g., Kariba completed in 1959, Inga 1 in 1972, Cahora Bassa in 1974). Mozambique is over 400 percent “overpowered.”
Togo, the only West African country above the line, has seen a 50 percent increase in electricity since 2008, largely because of the opening of one large thermal plant (with the support of OPIC).
In sum: much more analysis is needed to better understand demand. But this simple exercise does reveal, especially in West and East Africa, that there is a lot of work left to be done to close the gap between power supply and demand.
Power Africa is President Obama’s best chance at a policy legacy in Africa. With a clear target of spurring 30,000 MW in new generation and 60 million new connections by 2030, the initiative is as ambitious as it is deeply relevant to US foreign policy objectives. Yet, Power Africa has barely gotten started and now faces a whole new administration, with its own ideas and its own priorities. The biggest risk to Power Africa is loss of momentum.
The Report Card concludes by recommending ways to build on the successes of Power Africa and also take steps to rectify some of the initiative’s shortcomings. The next President should:
Pledge early and clearly that the United States is committed to boosting electrification in Africa and achieving the Power Africa targets.
Institutionalize the authorities and leadership of Power Africa.
Launch a modern full-service development finance institution.
Last night the House of Representatives passed the Electrify Africa Act. They followed the Senate, which passed the same bill by unanimous consent last December. Yes, amazingly enough, Congress has finally spoken: Combatting African energy poverty is the official policy of the land, or at least will be once President Obama holds a signing ceremony in the next 14 days.
Signing the Electrify Africa into law is a big deal for two reasons. First and foremost, this significantly raises the likelihood that President Obama’s Power Africa initiative will have a shelf life beyond January 2017. Second, it shows that there is strong, bipartisan support for African governments’ “all of the above” strategies for generating the energy required to drive economic growth and poverty reduction.
The final vote last night has been a long time coming. The House first introduced similar legislation in June 2013, led by Congressmen Ed Royce (R-CA) and Eliot Engel (D-NY). That bill had nearly 120 bipartisan co-sponsors, and passed the House in May 2014 by a vote of 297-117. Then the clock ran out on the 113th Congress before the Senate could pass their bill.
This time around, the Senate took the first step. Senators Bob Corker (R-TN) and Ben Cardin (D-MD) led the charge, along with more than 20 other co-sponsors. The upper chamber’s unanimous consent right before the holiday recess cleared the way for the House vote last night.
In the meantime, the Power Africa team has been plowing ahead. In fact, they essentially have already met many of the Electrify Africa Act requirements. Last week, the Obama Administration launched the Power Africa Roadmap, which outlines the President’s strategy for doubling electricity access in Sub-Saharan Africa. We have read the Roadmap from cover to cover. It is extremely comprehensive, thoughtful, and backed up by reams of hard data. Even if there are some natural questions about specific issues (such as division of labor with the African Development Bank, World Bank, and other actors), we expect that the Roadmap will receive a warm reception on Capitol Hill.
USAID also released an impressive new app, which is available for free on iTunes (weirdly, it’s hard to find; try searching for PATT). It includes information on every generation project that Power Africa is tracking and/or supporting across the continent. These nearly 240 projects are searchable by country, generation type, and technology. The app also includes data on projected new connections, where available. This tool will be a valuable public good, not just for Power Africa watchers, but investors and policymakers as well. More broadly, it sets a high bar for transparency for a complex interagency effort.
So, with Electrify Africa through Congress, the Roadmap out, and a new app to track progress, it’s been a good week for the fight against energy poverty.
As with all things, however, there is still some work left undone. In an effort to secure passage of the bill, the Senate gutted some of the more substantive components of the Electrify Africa Act. This included multiyear authorization for and a long list of reforms to the Overseas Private Investment Corporation, like: (1) simplifying the approval process for smaller energy projects; (2) allowing for local currency guarantees to facilitate local lending; (3) requiring that OPIC publicly disclose detailed information on all of its sponsored projects; and (4) making OPIC’s Board of Directors bipartisan. All of these reforms would have made OPIC more efficient, effective, and accountable. Given this, Congress should take them up again in the near future.
For now, however, we’re applauding the triple win by Congress and the Power Africa initiative.