MAC: Mines and Communities

Africa's Energy Future - Down a Dark Tunnel

Published by MAC on 2011-10-10
Source: Statement (2011-09-26)

BHP Billiton's proposed Inga 3 hyropower scheme in DR Congo, and its existing Mphanda Nkugwa dam in Mozambique, are both designed to provide electricity for the company's aluminium plants.

Now, the company's plans have come under renewed fire by the former Africa programme director of the International Rivers Network.

For earlier article, see: NGOs call to halt BHP Billiton's Congo aluminium smelter

Africa's Energy Future Heading Down a Dark Tunnel

By Terri Hathaway

International Rivers Network - A guest blog by IRN's former Africa program director

26 September 2011

The Conference of Energy Ministers in Africa - a two-year old institution recognized by the African Union and donors as the official voice of Africa's energy future - recently met for the second time and released a new declaration that can fairly be called double-speak. The first half of the declaration is so great, it could have been written by a Nelson Mandela of energy. It outlines the brutal reality of Africa's energy poverty and the goals for universal access to sustainable energy across Africa by 2030.

So why are the energy ministers calling for projects set to benefit one of the world's wealthiest corporations rather than the continent's own citizens?

At the top of the plan's $19 billion list of 14 "Priority Projects" is Inga 3, a hydropower mega-project that would power a massive aluminum smelter to be built by BHP Billiton. Also included are the second phase of the notoriously corrupt Lesotho Highlands Water Project (not really an energy project at all, unless you count that a lot of its water will be used to cool dirty coal plants in South Africa), and the contentious Mphanda Nkuwa mega-dam in Mozambique, a country where three times more electricity is consumed by a BHP Billiton aluminum smelter than by Mozambicans. Billions more dollars on this list are allocated to long-distance power lines that will literally pass over thousands of African villages that will likely have to wait decades to be electrified.

These types of mega-projects do not alleviate energy poverty. Instead, these high-priced mega-projects attract corruption and corporate exploitation. They are part of a power sector which depends on, and reinforces, Africa's centralized and opaque political systems. The electricity produced attracts profit-seeking, energy-intensive industries that receive lucrative tax holidays while creating an underwhelming number of jobs.

Meanwhile, there is no consequence from the mishaps of earlier power projects to the big budgets of future plans. Energy ministers are licking their lips over Inga 3, yet no one is asking about the massive cost overruns, corruption charges and years of delays of the Inga 2 Dam rehabilitation, increasing African dependence on hydropower in a time of climate change is risky business (the continent is already beset with drought-caused blackouts) that will also make it harder for the poor to adapt to a warming world.
What's Wrong with the Plan?

Despite all the declaration's rhetoric for "sustainable energy", the high-voltage action plan does roughly three things: 1) it cynically lays out an anti-poor energy path in the name of sustainable energy; 2) it promotes using climate funds to implement this anti-poor path; and 3) it under-emphasizes real solutions to fulfilling Africa's sustainable energy targets. In short, their anti-poor action plan could do more harm than good. Some of the most egregious actions include:

The plan focuses on building regional electricity mega-projects, mostly hydropower, and using climate funds to subsidize this. These projects will feed into an electricity grid which serves a mere fraction of African citizens, most of whom already have access to electricity. Donors theorize that mega-projects can give the biggest bang for the development buck.

But they ignore the corruption and mismanagement interwoven into these big-budget projects. Donors also ignore the underwhelming track record of such projects to bring economic development. Many past projects have solidified political mal-governance, corruption and corporate exploitation rather than demonstrating political will to turn electricity into development. To date, many energy-intensive industries have set up shop in Africa, sucking up cheap electricity while underwhelming the local job market.

The plan calls for allowing African hydropower projects - the cornerstone for the anti-poor, centralized power grid - to be subsidized with carbon market funds. Carbon market funds should be earmarked for pro-poor energy projects instead, not anti-poor, big hydro.

While the declaration rightly encourages the Green Climate fund to support projects focused on adaptation to climate change, it wrongly implies that its anti-poor energy projects would meet the criteria for adaptation. An energy path dependent on hydrologically risky hydropower mega-projects works against the interests of the African majority, increasing the people's vulnerability to climate change. Asking the Green Climate fund to subsidize anti-poor energy development would pull resources away from real adaption which would help build resilience.

The declaration's call for enhanced funding for policy and institutional development activities is a little like improving the design of a bank heist. Policy and institutional development is critically needed, but if the focus remains on allocating nearly all energy resources to a centralized power grid run by national utilities, then it will only help to more effectively accomplish an anti-poor goal. One key change would be to support institutional development for community-driven rural energy cooperatives, which could more effectively reach and serve the African majority.

The Way Forward

The concern is not the priority projects' $19 billion price tag. In fact, the World Bank has calculated that Africa's energy sector requires $41 billion annually to achieve sustainable energy goals. The concern is that this top-down plan only gives a price tag to these controversial mega-projects, implying that the concrete planning of these projects are further along. It leaves one to wonder: where are the priority projects to tackle Africa's energy poverty, and what is the price tag? Here are my top four priorities for a counter-plan for a pro-poor energy future for Africa:

Pro-poor criteria: From the years that I've read, analyzed and observed the African energy sector, here are a few things to keep in mind: most Africans live in rural areas and will continue to outnumber their urban cousins for at least 20 more years. African economies depend heavily on small-scale farmers, so energy services that support small and medium agricultural production are vital. Africa is extremely vulnerable to the impacts of climate change, and an energy future should build resilience to climate change, not increase vulnerability. Unemployment in Africa is a time bomb; Africa's energy future needs to maximize job creation.

The energy sector is not an end in itself, but should be a foundation that enables the development of Africa and the self-determination of Africans. Energy investments and spending should be based on projects and an energy sector which considers pro-poor criteria: 1) the direct alleviation of energy poverty and economic poverty; 2) creation of the largest number of decent jobs; 3) greatest positive impact to building and strengthening local economies; 4) prioritizes sustainable forms of energy; 5) enables community resilience (not vulnerability) to climate change; and 6) enables citizen participation, public oversight and accountability within the energy sector.

Holistic basket of energy goods: African energy sectors have long focused on centralized electricity grids, but electricity is often not the most efficient energy form for cooking, heating, and agricultural productivity, or cost-effective way to reach rural areas. African power sectors that have adopted programs or departments on rural energy have often marginalized those programs with little political say or financial resources. National energy sectors should be organized to ensure that energy dollars get allocated beyond centralized electricity, toward smaller electricity projects and enabling the growth of decentralized electricity grids. More resources and planning are also needed to support a basket of energy goods, like decentralized energy and mini-grids for rural communities, mechanical power for rural farms; and modern cooking fuels

Accountability: Closed doors and corruption are systemic problems which have long tightened the screw on Africa's maldevelopment. Those in the business of energy mega-projects benefit from the closed door system and help to reinforce it. Public scrutiny is the strongest antidote to slow down corruption and redirect future planning in a positive way. Strengthening and expanding Africa's power grids will continue to receive a sizable allocation of spending for a sustainable energy future.To strengthen the returns on investment, the transparency and accountability of the power sector must be dramatically increased. Increased accountability will lead to power systems with better physical maintenance and fiscal governance, and a greater chance of reducing energy poverty as a result. Greater accountability will also help weed out problem projects, make big projects more effective, and give more room for the inclusion of smaller and medium sized power project options which are better suited for building local economies, spreading the electricity wealth, and enabling accountability to citizens.

Citizen Power! The declaration says that it will work in partnership with key stakeholders including business and development partners, but it doesn't say anything about the most important stakeholders, the people of Africa. The critical link to solving this challenge - as close to a silver bullet as I can see - is citizen power. African citizens will need to participate in planning their energy future. They will need to stand up to their politicians, their energy bureaucrats and their nation's donors so that they can, one day, stand with them.

Terri Hathaway is International Rivers' former Africa Program Director. She has started Energy for Africa's Kitchens, Farms & Jobs, a grassroots initiative to enable African citizens to attain control of their energy future. Email Terri at energy4africancitizens@gmail.com.

Inga 3 Hydro - International Rivers Network Briefing (as of 4 October 2011)

BHP Billiton, the world's largest mining corporation, wants to build a $5 billion aluminum smelter at the Democratic Republic of Congo's Atlantic coast. The massive smelter would consume 2,500 MW of electricity, more than DR Congo's entire current power supply. Prerequisites for the smelter include construction of the proposed $3.5 billion Inga 3. But Inga 3 and the smelter would cost Congolese citizens electricity, jobs, and development.

Building Inga 3 to power BHP Billiton's planned smelter would derail the government's commitment toward widespread electrification for its citizens. Increasing access to electricity from 6% today to 60% of the population by 2025 will require concerted state action. But the government has earned little trust to develop an energy sector which serves the people. Despite available funding, an urgent rehabilitation of the national power grid has languished since 2003 with little explanation.

BHP Billiton's proposed aluminum smelter would also create very few jobs relative to the electricity it would consume. Non-transparent power and investment contracts would further cost the Congolese people by giving undue preference to BHP Billiton. The terms of similar deals have revealed BHP Billiton's ability to short change the residents of its host countries, including South Africa.

In February 2006, BHP Billiton signed an agreement with the Congolese government to develop the aluminum smelter, which would produce 800,000 tonnes per year. In 2007, BHP Billiton agreed to finance feasibility study for the 4,500 MW Inga 3 project. BHP Billiton negotiated the proposed smelter despite the 2004 Westcor agreement between the Congolese government and four other African countries to develop and equitably share Inga 3 power. The eventual cancellation of Westcor's agreement in favor of BHP Billiton's has led to strained relationships between the Congolese government and other Westcor members.

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