KEY ISSUES IN THE ENERGY SECTOR IN AFRICA AND PLANNED ACTIONS TO IMPROVE ENERGY SECURITY

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KEY ISSUES IN THE ENERGY SECTOR IN AFRICA AND
PLANNED ACTIONS TO IMPROVE ENERGY SECURITY

• PRESENTED BY HON. DAUDI MIGEREKO, MP
• MINISTER OF ENERGY MINERAL DEVELOPMENT
• THE REPUBLIC OF UGANDA
• CHAIRPERSON FORUM OF ENERGY MINISTERS OF AFRICA
• MEETING OF INFRASTRUCTURE CONSORTIUM FOR
  AFRICA AND ENERGY MINISTERS OF AFRICA
• ADDIS ABABA, ETHIOPIA
• June 20, 2006

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CONTENT

• Introduction
• Key Issues Behind the Current Electricity
  Shortage in Africa
• Way Forward
• Short Term Measures
• Medium to Long Term Measures
• Suggested Actions by FEMA

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INTRODUCTION

• The Energy Ministers of Africa welcome the
  formation of the Infrastructure Consortium for
  Africa and are glad to note that the Consortium
  found it fitting to organise this side event to
  discuss this important subject of Energy Security
  in Africa.

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• Energy Ministers from Africa, confronted with the
  challenges of insecurity of energy supply and the
  need to scale up energy access so that the
  Millennium Development Goals (MDGs) can be met,
  decided to form a Ministers forum called the
  Forum of Energy Ministers of Africa (FEMA).

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• The Forum provides a platform for political
  leadership and policy direction in the energy
  sector for collaboration and the exchange of
  experiences and for advocacy in the provision,
  access, use and management of energy resources
  for sustainable social and economic development.

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KEY ISSUES BEHIND THE CURRENT ELECTRICITY
SHORTAGE IN AFRICA

• The African Continent is currently facing a
  critical shortage of electricity supply. This has
  been brought about by a number factors which
  include the following

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Decline in investment in Energy Infrastructure

• There has been a decline or lack of investment in
  electric power generation, transmission and
  distribution infrastructure in the region.
• Energy investments from ODA to Africa have been
  on the decline in the last 10 15 years from
  US1.4 billion per annum to as low as US 100
  million per annum.
• The low and declining public expenditure in
  infrastructure for selected African countries is
  shown on next slide.

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While public expenditure in other sectors was
increasing for infrastructure it has been
decreasing see below
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• Direct foreign investments (DFIs), which had been
  anticipated to flow into the reformed power
  sectors did not materialize to anticipated
  levels.
• Although several African countries reformed their
  power sectors, it has been established that
  foreign investment (both debt and equity) in the
  power sector is strongly influenced by external
  factors like appetite of offshore capital
  markets, environmental lobby groups and world
  politics.

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Electricity supply situation has been exacerbated
by climatic conditions

• Taking the East African region as an example, the
  prolonged drought which has persisted since 2003
  has had a heavy toll on the electricity supply in
  Uganda, Tanzania, Kenya and Rwanda.
• To mitigate the problem, these countries have
  resorted to installing expensive thermal
  generation capacity to replace the lost
  hydropower supply.
• This involves huge expenditure in foreign
  exchange, wear and tear of the roads and
  increased environmental pollution.

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Rise of Oil Prices on International Market

• The oil prices on the international market are
  steadily rising with serious consequences for
  land locked countries. This has had a negative
  impact on the economies of African countries,
  especially those which import all their petroleum
  products.

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Lack of Regional Power supply infrastructure

• Until recently, most African countries have
  been developing power supply for domestic
  consumption only. This makes these projects
  unattractive for financing. Consequently, even
  the regional power supply infrastructure remains
  largely undeveloped.

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WAY FORWARD

• In order to address the above constraints, we
  need to take measures on the continent which are
  both short term as well as medium to Long term

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Short Term Measures

• i) In the short term, efforts have to be made to
  reduce the losses in the power distribution
  networks and also to institute energy efficiency
  measures to reduce power wastage.
• To overcome the barriers of disseminating energy
  efficiency technologies, Governments have to put
  in place appropriate incentives which will make
  energy efficient technologies more affordable and
  accessible.

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• ii) The other short term measure is the
  development of locally available renewable energy
  resources which provide least cost solutions for
  meeting electricity supply needs.
• These renewable energy resources could play a key
  role in meeting energy supply for rural
  communities.
• As in the case of energy efficiency measures,
  appropriate incentives have to be put in place to
  facilitate the development of renewable energy
  resources.
• These resources include among others, solar
  power, modern biomass, wind and hydropower.

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• iii) National Governments should prioritise
  energy in their poverty eradication strategy
  papers so as to attract financing. For many
  countries on the continent, energy has not been
  among the top priorities yet it is a key input to
  poverty eradication.
• iv) Domestic resource mobilization and
  development of financial instruments to
  facilitate investment in the energy sector should
  be mainstreamed by African Governments. This
  should make it easy for the Consortium to come up
  with innovative products for the energy sector.

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Medium to Long Term

• i) In the medium to long term, there is need to
  develop the existing large hydropower potential
  and oil and gas projects on the continent as
  regional projects to serve the continent.
• ii) To facilitate power trade, there is need to
  fast track the interconnection of the electricity
  grid system on the continent so that electricity
  can flow from regions with a surplus to those
  with deficits. The same goes for oil and gas
  pipelines.

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Suggested Actions by FEMA

• FEMA supports Governments to take leadership in
  accessing investment and financing for either
  public investment or through public/private
  partnerships.
• To achieve this, FEMA will liaise with relevant
  organisations to organise and actively
  participate in forums for dialogue with the
  private sector, multilateral financing agencies
  and donor community.

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• FEMA will also collaborate with national
  governments and sub-regional bodies to ensure
  that power sector reforms improve efficiency,
  yield growth and sustainable development.
• We Propose that FEMA and the Infrastructure
  Consortium should undertake a comprehensive
  analysis of the African power shortage which
  will also propose a menu of proven response
  options which will ensure energy security in
  Africa.
• Finally, FEMA recommends that the Consortium
  should prioritise energy in its investment plans
  as it is the engine of growth and expansion for
  the other infrastructure projects.
• This will necessitate establishment of an Energy
  Investment Fund (EIF).
• The Fund, when established, will be instrumental
  in addressing the current and future electricity
  supply shortage on the continent.

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Thank you for your attention!