Telephonic Media Briefing with Mr. Andrew M. Herscowitz, Coordinator for Power Africa Pretoria, South Africa, September 12, 2017
At any given time, 3,000 or 4,000 megawatts of power are actually being generated and I think people are only paying for about 1,800 megawatts
Moderator: Today, we are joined by Andrew Herscowitz, U.S. Coordinator for Power Africa, a U.S. government-led initiative to double access to electricity in sub-Saharan Africa by 2030. Mr. Herscowitz will discuss the recent release of 2017 Power Africa annual report and Power Africa’s results to date. Mr. Herscowitz is speaking to us from Pretoria, South Africa. With that, I would like to ask Mr. Herscowitz for his opening remarks.
Mr. Herscowitz: Thank you very much. Thank you everyone for taking the time to show interest in Power Africa and provide the support that many of you have been supporting in covering Power Africa. We’re very excited about this annual report, because what it shows is that we are on track to achieve the goals that we set forth to achieve when it was first launched four years ago. The trajectory remains good, the methodology that we use to figure out whether or not we will be able to achieve the goals, are proving to be accurate. But we’ve also learned quite a bit. And I think we’re going to continue to figure out how we need to change tack a little bit as well. To give everyone some perspective, when Power Africa first was launched, our goal was 10,000 megawatts and 20 million connections in just a few countries. We quickly tripled our goal after the first year because we saw that the system was working. So now the goal is 30,000 megawatts and 60 million connections by 2030.
Initially, we didn’t have an end date. It was once we tripled the goal that we said, “Alright. This is working and people expect us to have an end date.” And that’s why we have the 2030 goal. And also, just to avoid any confusion, there’s also the Electrify Africa Act, which the U.S. Congress passed unanimously in 2016, which has the goal of having us add 20,000 megawatts and 50 million people getting electrical connection by 2020. The goals are consistent, if you put this on the same trajectory, but if there’s any confusion I’m happy to explain that, the difference between 50 million people versus 60 million connections. We base it on the assumption that there’s five people per household in Africa.
So where are we? We’re at about 80 projects that have reached financial close so far, that comprise 7,200 megawatts. About three quarters of the projects are renewable projects, and by megawatts, about three quarters of those projects are gas projects. And the reason is that a lot of the large generation projects do involve gas and hydropower. What we are seeing, though, it’s trending up in the size of the renewable projects as well. A lot of countries for the first time are doing solar and wind projects, and starting off with smaller projects. And once they do competitive tenders and even non-competitive deals, the negotiated deals, move forward and countries become more and more familiar with the technology, they’re willing to scale up their technology as well.
Some of the big successes that we’ve seen: Power Africa, in coordination with World Bank and International Finance Corporation, large-scaling solar to Zambia, where we saw the price of solar coming down to between six and eight cents a kilowatt-hour. The winning quote, having the Corbetti geothermal project in Ethiopia move forward as well. It’s been a long haul, but we’ve seen some progress. We’re seen inexpensive solar power being offered in Senegal. One of the trends that we’re seeing if you look at our app, which is available online, it’s available in the Apple Store - the Power Africa Tracking Tool- it shows that we’re tracking over 400 transactions, those are the ones that we’re telling people about publicly, these are projects that have some level of social-environmental due diligence. And those deals themselves add up to more than 33,000 megawatts. Now, we don’t assume that every single one of those projects actually will reach financial close and be built. Internally, we’re tracking a total of over 700 deals that comprise nearly 70,000 megawatts. And using our methodology, where we have seen that not every deal will get across the finish line, it shows that we are on track.
Now, what are some of the trends that we’re seeing? Power Africa was heavily focused on trying to move deals forward and generating a lot of deals, initially. But we’re seeing, in a lot of countries, the demand for the power might not necessarily be keeping up with the deal flow. We’re also seeing countries that are negotiating much harder on price. The projects in Zambia, for example, have made a lot of countries, not want that to accept renewable energy for the prices that they were willing to accept a few years ago. But it’s positive and it’s negative. It’s positive in that ultimately, the consumer will derive benefit and lower cost of power, but the downside is that a lot of these projects are getting stuck because the actual cost of delivering that power may not be as low as what some of the countries are hoping to get.
So on the whole, Power Africa remains on track. On the connection side, we see tremendous growth in the companies that are providing solar home systems, the pay-as-you-go models, where people in peri-urban and rural areas are able to get access, not just a simple tower and light bulbs, but to clothing irons and electric razors, and televisions, radio chargers, all with a small solar panel that costs them less than $2 a day, sometimes less than 50 cents a day. We’re seeing these companies really start to take off. They’ve been taking off in East Africa for a while, and Power Africa has helped to bring companies now to West Africa, so we see tremendous potential for expansion.
In terms of grid connections, that remains a significant challenge. Part of the challenge is that the distribution companies, many countries still are not able to charge the actual cost of power, which puts them in difficult financial straits. Power Africa continues to provide support to many distribution companies. In Nigeria, for example, we sent teams into three of the distribution companies to help them turn things around. In one of the companies, for example, they reduced their losses from 54% to 40% in just a few months. That’s real money that can go back into the company to buy smart meters and to make sure that they’re achieving collections from actual customers.
So Power Africa, in partnership with all of our - we now have over 150 public and private partners - who collectively have committed over $54 billion to help achieve our goals - we’re working very well in sync with all of them. The U.S. Government’s not necessarily in the lead on everything, and that’s our model. We want the private sector, not other partners, to take the lead. But also what we’re trying to do is provide private sector solutions to those problems that have 600 million people in sub-Saharan Africa who still do not have access to electricity.
Moderator: Thank you, Mr. Herscowitz. We will now begin the question and answer portion of today’s call. For those asking questions, please state your name and affiliation and limit yourself to one question related to the topic of today’s briefing: the 2017 Power Africa annual report and Power Africa’s results to date.
With that, our first question comes in from Mrs. Houni Ahamed-Mikidache, Editor of Era Environment in Paris. She asks, would it be possible to have the details of the two grant agreements that were signed by the U.S. African Development Foundation? Will $100,000 be dedicated for Power Africa in Uganda, and how will women in Uganda benefit from this fund?
Mr. Herscowitz: Sure, there were two grants. Now, just to be clear, the U.S. African Development Foundation has provided many grants. It’s a critical tool to advancing Power Africa’s goals, because what we do is we work with local communities to help provide solutions that are scalable. In Uganda, the limited energy challenge is part of U.S. African Development Foundation’s Off-Grid Energy Challenge, which was launched in 2016. One of the grants was to Maria Bawubya, who’s the chairperson of the Joint Energy and Environment Project, or JEEP. It’s a 100% women-owned enterprise in central Uganda. With the grant, JEEP will install six green power units in the Kalangala district. It’s an island district in Lake Victoria. Fishing is a main industry there, and the hope is that this grant will be able to do things such as cold storage and producing ice, which will benefit many of the people in the community, including women.
Also, the other recipient of a grant from U.S. ADF was Ashika Masoki, who is the CEO of Conservation and Development Uganda, Limited, CODE Uganda. It’s a majority-owned women enterprise in Western Uganda, you know, the surrounding parts where there’s a limited amount of firewood. Women walk long distances in search of firewood and cooking material, and with the grant, they’ll be able to sell, initially, 350 agro-eco kits that are comprised of a mixture of agricultural inputs, solar lanterns, cook stoves that provide alternative and safer fuel sources.
Moderator: Thank you. Our next question comes from Christine Holzbauer, West African Correspondent, Groupe IC Publications, Paris. She asks how will Power Africa eventually cooperate or include other big foreign or domestic programs to light up Africa?
Mr. Herscowitz: Power Africa already does. We have 14 bilateral and multilateral partners, including Agence Française de Développement. The African Development Bank was one of the first supporters of Power Africa; they made a $2 billion commitment to Power Africa, and they’ve already exceeded their commitment in terms of financing towards projects. The World Bank is one of the early supporters; also committed $5 billion towards Power Africa’s goals. We have partnerships with the European Union, they distributed $10 million to the Electrify utilities, which is providing financing and grants for renewable projects across the continent. We have partnerships with the U.K., with UKAID, particularly in the off-grid stage. We have partnerships with Canada, with Japan, with Norway, with Sweden. Sweden has committed over $1 billion to Power Africa shortly after it was launched. We’ve been working very closely with them in Zambia and elsewhere.
So what Power Africa does, as I mentioned before, is our goal isn’t for the U.S. Government to be doing everything. It’s to be working with our partners to figure out who can do what best, and how can we complement one another’s efforts.
Moderator: Thank you very much. Our next question will go to Kevin Kelley, Correspondent of Nation Media Group in New York. Operator, please open the line.
Media: Yeah, hi, thanks. I guess I’m able to be heard. So, thank you for doing this today. I have a question regarding the future of Power Africa. So, as far as I know, President Trump has said nothing at all about the program, and I’m not fully apprised as to what the Republican majority in both the House and Senate intend to do about Power Africa. Mr. Herscowitz, do you think that the new administration will carry this initiative forward? Thanks.
Mr. Herscowitz: So, first, I want to be clear: the Electrify Africa Act, which passed in 2016, was sponsored by numerous Republicans, in the House and the Senate, and it passed both houses of Congress unanimously. So we enjoy widespread bipartisan support. Secretary of State Tillerson, Deputy Secretary of State Sullivan, and USAID Administrator Mark Green all have made statements in support of Power Africa, and indicated that they intend to continue Power Africa and it has continued. We continue to get funding under this new administration. In our annual report, you’ll note that the cover note is written by USAID’s new Administrator, Ambassador Mark Green, who is an appointee under this administration. So I think that what we’re looking at, I think a lot of people in the new administration are particularly intrigued by Power Africa because of its way of trying to harness private sector funding to advance development goals.
Senator Perdue from Georgia made a comment early on after President Trump addressed our Congress, shortly after he took office. He got a question about how the U.S. Government intends to fund the large domestic infrastructure project, and his response was to cite Power Africa as an example of how private sector funding can be used to advance certain goals. When you think of Power Africa, if you add up the total value of the 80 projects that have reached financial close, they’re worth over $14 billion. In terms of how much taxpayer money has been spent to help achieve those goals, it’s much smaller. We’re looking at a leverage of anywhere from 50:1 of 100:1 of private sector funding to taxpayer funding. So this is a model that many in the administration really like and want to see continue.
Moderator: Thank you very much. Our next question will go to the listening party at the United States Embassy in Windhoek, Namibia. Operator, can you open the line, please?
Media: Good afternoon.
Mr. Herscowitz: Hello.
Media: Hello? Good afternoon.
Mr. Herscowitz: Hello.
Media: How are you?
Mr. Herscowitz: Good thank you. How are you?
Media: I’m fine, thank you. I’m [inaudible] calling from [inaudible], Namibia. I would like to know, what are the projects under way for Namibia with regards to Power Africa?
Mr. Herscowitz: I’m sorry, the question once again, was the projects, you’re saying, for Namibia?
Media: Yeah, involved, yeah, projects interesting to Namibia.
Mr. Herscowitz: Sure. So, we recently launched the Southern Africa Energy Program. And if you look at our application, there's 16 projects that we're currently tracking in Namibia for potential support, everything from solar to gas and other types of projects. So our team has been going back and forth to Namibia to see what type of support the government would like to help advance their goals of adding new power there, but it still remains in development.
Moderator: Thank you. Just as a reminder, to ask a question, please press *1 on your phone. State your name and affiliation before asking your question. Next I would like to read a question from Terence Creamer, Editor at Creamer Media in South Africa. He asks, what does Power Africa make of recent developments in the Southern African renewables market, specifically, where there has been a two-year hiatus in the signing of renewables PPAs?
Mr. Herscowitz: Okay. So we actually are remaining cautiously optimistic that the projects will move forward as recently announced towards the end of October. South Africa's been an absolute leader in the renewable energy market for several years now. I think not just the other African countries, but globally people can look at South Africa's Renewable IPP Office and learn a lot from them. So, while I think many people have had some issues with the delays that have been taking place, I think it's given people a chance to take a breather also, to assess what the demand is and what the pricing should be, and I think that people have had an opportunity to reflect, and so we remain hopeful that these projects will in fact move forward and it will stimulate the market quite a bit more.
Moderator: Thank you. As a follow up, he also asks, what are your views on South Africa’s post-procurement cap - again, in terms of pricing - being imposed of any signing of these PPAs? So a bit more, I guess, on some of the pricing issues.
Mr. Herscowitz: Sure, this is an issue for the IPP office to negotiate with the independent power producers in order to meet their financial close deadline.
Moderator: Okay. I'd like to ask, in which countries have you seen the most significant impact of your work at Power Africa, and can you provide examples of that impact?
Mr. Herscowitz: Sure. We've seen significant impact in many countries, but very different types of impact. If you look at Liberia, for example, the Mount Coffee hydro project was completely installed. This is a country that only had 2% access to electricity, and only 20 megawatts of power, and since the Millennium Challenge Corporation, this is one of the U.S. government agencies that are part of Power Africa, stepped in to try to get Mount Coffee back on track, it's now operational. Now, there's still a lot of progress to be made there, but that's significant in terms of quadrupling the size, the amount of power that's available in the country. Now we've got to solve the transmission-distribution problems.
Then you look at a country like Zambia, where they did not have any renewable power before, and now they're getting ready to move forward with these major solar projects. We’re seeing the lowest cost of power we’ve ever seen in the world.
Then you look at Ethiopia. Ethiopia's not there quite yet in terms of doing independent power projects, but they’re getting very, very close. And as soon as that Corbetti thermal transaction reaches financial close, that'll open the floodgates to other investments as well. We're also working in Ethiopia to design the first-ever competitive tender.
One of the things that strikes me is every month, we get reports from our teams who are on the ground in the field about what's going on with specific projects, what new developments are happening. When you look at that, one month I noticed that two different partners of Power Africa had gone into countries and offered solar power for less than ten cents a kilowatt hour. That's on a non-competitive basis. So several years ago, ago, before Power Africa’s launch, most of these products would have been, companies would have been offering power at 20 cents a kilowatt hour. We're now realizing that the competitive environment that Power Africa has helped create, and the amount of information that we're sharing, we're realizing that, alright, if we want to get in and we want to deliver power quickly, we need to be able to offer it at a very, very competitive price. So the governments and the consumers are benefitting from this.
Nigeria, I mentioned - you know, in Nigeria there's still a lot of work to do. We've got a country that has 12,000 megawatts of installed generation capacity. At any given time, 3,000 or 4,000 megawatts of power are actually being generated and I think people are only paying for about 1,800 megawatts. So even adding more power isn’t necessarily a solution. We have to solve the transmission-distribution issues there, and we're working very hard to do that and we continue so successfully.
Moderator: Thank you. And our last question: you've mentioned a number of "Power Africa Partners". Can you describe what types of organizations become partners and what role they play in helping the initiative reach its goals?
Mr. Herscowitz: So, one of the things that Power Africa prides itself in is the diversity of its partners, because we have something on our website called the Power Africa Toolbox. The Toolbox comprises all the different types of assistance that can be available, because our motto is to work with the private sector to figure out what are the obstacles to the deals, and how can we help them reach into the Toolbox to help them overcome those obstacles. Those obstacles might be financing, they might be legal assistance that is needed, it might be technical assistance, it might be a political push.
Part of this Toolbox includes the solutions also that some of our partners provide. We have private equity firms that are our partners. We have banks that are providing financing and we're providing the guarantees for that financing, whether it's for on-grid projects or off-grid projects. It could be a project developer that's doing the first-ever solar project in the country. You get a company like Gigawatt Global in Rwanda, which is the first-ever grid-level solar project in Rwanda - that's one of our partners. A company likes GreenWish, which just did 30 megawatts of solar power in Senegal. They did that with some financing from the U.S. Government and other assistance from Power Africa. So when we enter into the partnership, we ask our partners to make one of three commitments: a commitment to adding megawatts, a commitment to adding connections, or a commitment to financing. And then we hold them to that and check in with them on a regular basis to see how they're moving towards achieving those goals, and also to see if there's something that we can provide from our very, very broad toolbox of U.S. Government agencies and bilateral, multilateral partners, to help them move their deals forward.
Moderator: Great. Thank you very much, and thank you to everyone who's participated. Mr. Herscowitz has to leave us a little bit early today. Do you have any final words for our journalists today? With that, I believe Mr. Herscowitz does not have any closing remarks. So with that, I would like to thank Mr. Herscowitz, U.S. Coordinator for Power Africa, for joining us, and thank all of our callers for participating. If you have any questions about today’s call, you may contact the Africa Regional Media Hub at email@example.com. Thank you very much.
Distributed by APO Group on behalf of Africa Regional Media Hub.