Mathieu-C. Koumoin
UNDP-GEF regional coordinator

Performance improvement efforts in the modern electricity sector typically calls for power sector restructuring or unbundling of various market segments (production, transmission and distribution) with a measure of commercial principles through corporatization/management contracts towards further private participation in Electric Utility ownership structures. This process usually ends up with medium to long-term concessions contracts.  The importance of assigning national rural electrification initiatives to dedicated rural energy agencies outside the operation of national monopoly utilities may have been underestimated and the impact of such arrangements on the performance improvements on main utilities -- in transitional settings – may have been severely underestimated.  Where such initial efforts were launched, the focus conveniently remained on the conventional electricity sector and the November 2005 GEF Council approved African Microhydro Initiative appears to be Sub-Saharan Africa’s first large scale policy and operational experience involving UNDP, GEF and the AfDB in a concrete operational project.

While Francophone Northern African countries did, by and large, establish Renewable Energy Agencies (CDER in Morocco, ADER in Tunisia etc.) when confronted with similar issues, Sub-Saharan African countries mostly created Rural Electrification While Francophone Northern African countries did, by and large, establish Renewable Energy Agencies (CDER in Morocco, ADER in Tunisia etc.) when confronted with similar issues, Sub-Saharan African countries mostly created Rural Electrification Agencies and the nuance is important in dealing with micro/mini-hydropower technologies which are best “owned” by local stakeholders when transferred in a context of integrated rural development. After a few years of painful local national energy sector dialogue within which participants have had entrenched positions, the prospect of a regional project with UNDP-GEF on such a cross-cutting technology shifted much expectations on a review of the participating countries’ choice of rural electrification schemes, subsidy approaches, tariff setting, electricity sector liberalization options, analysis of the determinants of success and/or failure of the various transitional arrangements, alternative energy/electricity regulatory practice in tandem with the immediate project outputs of the intended micro/mini-hydro project. Because the above issues cannot be addressed in isolation from other broader rural development issues, UNDP-GEF understood the countries’ eagerness to link the expanded UNDP-GEF/AfDB/IEPF project proposal to each country’s own rural development program to the extend feasible.  The capability of rural ESCOs, community-based associations and energy entrepreneurs to collect the bills was discussed at length during project preparation with government decision makers. Community energy self-reliance using distributed micro/mini-hydropower systems and new service delivery mechanisms were investigated along with the current administrative/municipal decentralisation frameworks in participating countries.

The above ground-breaking initiative appears to be particularly timely because with improved energy efficiency in small scale diesel-based power generation, rising oil costs in recent years and the PRSP exercise, many African countries have gradually begun to shift the emphasis of their public electricity sector institutions towards innovative/decentralized systems to supply the power needed to fuel the local economies in remote areas for which grid connection is not economically efficient. Owing to the innovative nature, resource and skills requirements to address the observed electricity service needs of the predominant rural populations, Private Sector participation in a clarified legal and regulatory environment has been identified as a pre-requisite. Within the above context and under the aegis of “Francophonie” ten countries in Sub-Saharan Africa with sizable water resource endowments (Cameroon, Mali, Central African Republic, Democratic Republic of Congo, Gabon, Congo/Brazzaville, Rwanda, Burundi, Togo & Benin) approached UNDP-GEF, the African Development Bank and IEPF (Institut d’Energie et de l’Environnement des Pays Francophones) to launch a regional initiative intended to: (i) demonstrate the technical, institutional, legal, financial and social soundness of new approaches to the production and delivery of micro/mini hydropower; (ii) validate the financial/economic viability and investment worthiness of innovative micro/mini hydropower supply approaches in the African context; and (iii) institutionalize/mainstream the proven successful approaches to rural electrification through micro/mini hydropower systems by having them recognized as worthy of private and public capital investment in Sub-Saharan Africa.

With respect to the evidence from an operational field perspective, after over a decade of electricity sector restructuring and reform efforts in Sub-Saharan Africa which has somewhat improved power service delivery in urban areas and capital cities, existing national and international electricity sector data suggest that an ever increasing share of the African rural populations has been left in the dark.   As in most transitional arrangements with vested interests at stake, the trial and error sector reform process has strained the working relationships among various actors resulting in: (i) Rural Electrification Agencies competing with National Directorates of Energy for the day-to-day execution of a few rural electricity access investment projects indicating, perhaps, that the policy formulation tasks seem to have had less appeal than anticipated at the inception of the reform.  At the same time, close scrutiny of the sector’s poor financial performance would reveal that KWh tax payments passing through the Banking system in a number of countries would be seized by the Commercial Banks to settle interest arrears on outstanding government debt; (ii) the candid observation that, for the most part,  these Rural Electrification Agencies are still operating in a policy vacuum to the extent that fiscal policy is still lacking and tariff regimes inadequate or fuzzy at best; (iii) various Power Utilities off-setting government taxes against electricity bill payment arrears from the Public sector; and (iv) the RE (Renewable Energy) sector being marginally promoted on an ad-hoc/informal basis for the simple reason that only very few or none of the recently established Rural Electrification Agencies in Sub-Saharan Africa appear to have the development of Renewable energy solutions as a component of their principal mandate.

In addition to worsening the illiquid tax collection by governments and adding to the difficult treasury management situation of many Sub-Saharan African countries, it is quite clear that under the above circumstances, the status quo will not level the playing field between RE solutions and conventional energies.   The transition from a framework based on public monopoly of both urban and rural power supply to an integrated framework of multiple private operators being invited to contribute more resources to decentralized off-grid rural electrification projects based on renewables, ought to be accompanied by enforceable rules of conduct, targeted technical assistance to promote RE solutions such as Micro-hydro as advocated in a recent UNDP-GEF project, through technical design/implementation guidelines, efficient tariff/pricing schemes and proven cost recovery  mechanisms. This is necessary to avoid a break-down of cooperation and discipline among stakeholders.

The evidence

Scrutiny of the microhydro portfolio in 10 African countries (Mali, Togo, Benin, Cameroon, Gabon, Congo-Brazzaville, RCA, Burundi, Rwanda, DRC) reveals that, in many instances, current government applied subsidy rates on conventional diesel fired generation would be reduced by no less than 20% to 30% and – at times – reduced by 4 or 5 fold if the Micro-hydro option is used.  The evaluation and the examination of the relevant load profiles would exhibit the possibility of significant load curve improvements through productive end-uses activities during the regular business hours which could also lead to more revenue increase for the Plant operators irrespective of whether these are community-based associations, NGOs or private actors. This can help put in better focus the importance of disentangling rural access projects for urban and commercially viable on-grid extension projects from initiatives that require grass-root involvement and targeted expertise that tends to be rather scarce.  If the first best alternative of no government subsidy at all cannot realistically be achieved for off-grid decentralized electrification owing to the many trade-offs and underlying structural weakness of the African economies and business environment, this comprehensive assessment has made a compelling and conceptually clean case:  Renewable energy solutions and Micro-hydro  in particular (with limited targeted subsidy) stands out to be the second best alternative ranked above Diesel captive generation in much of Africa today.   Financial savings amounting to millions of US$ in the aggregate could in turn translate to further investment in both rural electricity or be put to use to improve the performance of most national utilities.  UNDP field Offices are now mulling over their strategy to assist the governments that have expressed needs for capacity building and training to improve their electricity sector governance structure and operations.

Figure 1. Overall project coordination and implementation arrangements.