The Growth of the Renewable Energy Sector in Africa: The Successes of Nationalization and the Risks of Privatization

by Nash Rougvie

Image: Black Hills Energy


What can you do?

  1. Attend protests and support mutual aid efforts organizing against IGOs like the World Bank and IMF.
  2. Vet your national representatives for their past and current policies concerning SAPs and IGOs.
  3. Attempt to further educate yourselves and others on the many other instances of SAPs having a negative impact on their respective countries.

Foundational to any view of an environmentally sustainable future are renewable energy sources. The detriments of fossil fuels – both in terms of their finite supply and the negative impact they have on the environment – have led many world leaders to search for alternatives. Renewable energy sources such as solar, wind, geothermal, and hydroelectric power are all growing in popularity around the world, and massive investment into them has been made. For example, renewable energy is a key part of Joe Biden’s sweeping infrastructure plan, and the EU’s Renewable Energy Directive is key for reaching the body’s goal of carbon neutrality by 2050. [1] [2]

The largest barrier to growing the prominence of renewable energy is the development of the infrastructure needed to support it. This acts as a barrier both in the sense that it costs a lot to develop, and that overhauling and integrating renewable energy into an already existing energy network can provide logistical challenges. Additionally, renewable alternatives tend to face fierce opposition in the political sphere from lobbyists representing other non-renewable sectors. This has prevented its widespread adoption in much of the western world, and particularly in the United States, where renewables comprise only 11% of energy use. [3]

While it may seem that these barriers would be particularly pervasive in the developing world, there is reason to be optimistic about the growth of renewable energy in Africa. One of the advantages Africa has in the development of its renewable energy sector is its lack of existing infrastructure. In many cases, renewables can be developed as the foundation of energy sectors that will serve over 4 billion people by 2100. [4] Multinational efforts such as the FEI (Facility for Energy Inclusion) have helped by investing capital into the sector’s development, while the efforts of domestic governments cannot be overlooked as well. Because of the effort being put into growing renewable energy in Africa, it is projected that half of the continent’s energy will be renewable by 2040. [5] [6]

Ethiopia

Despite being among the poorest countries on earth by GDP per capita PPP, Ethiopia is a global leader in renewable energy. [7] Ethiopia is particularly reliant on hydroelectric power. According to a study in 2012, 96% of Ethiopia’s power came from the country’s impressive network of hydroelectric infrastructure. [8] In addition to this, and in order to develop and diversify its energy sources, Ethiopia has committed to other forms of renewable energy, such as wind and geothermal sources. [9]

These efforts have been extremely consequential and equally successful. Despite the financial barriers it faces, Ethiopia has an ambitious plan to be carbon neutral by 2025. [10] Additionally, Ethiopia is far from having reached its full potential for renewable energy. As the country develops and energy demand increases, it can tap into its vast solar, wind, and geothermal reserves, of which the country has extracted less than a percent of the potential of each. [11] Because of this, Ethiopia will be able to develop on the basis of a thriving renewable energy economic sector, as it has the capacity to export its renewable energy to other countries in the area, from neighbors Sudan all the way to Yemen. Although the infrastructure to do this needs to be developed more thoroughly, it has the potential to benefit both the Ethiopian economy and the carbon footprint of the countries it exports to. [12]

While these efforts are immensely impressive, they are an exception from the global norm:a struggle to develop the scale of renewable energy. Ethiopia benefits from its massive renewable energy potential, with an environment and geography extremely conducive to extracting renewable energy.

Egypt

While not to the same degree as Ethiopia, Egypt has massive potential in the development of its renewable energy sector. Historically, the Nile River has been the driving force behind Egypt’s prosperity, but as the country continues to grow, it cannot rely as heavily on it. Not only does Egypt’s share of the Nile lack hydroelectric potential, but its flow is dictated growingly by Ethiopia. The source of the Blue Nile, which controls 80% of the volume of the total river, lies in Ethiopia, and its flow may be more and more controlled as Ethiopia continues to develop its hydroelectric infrastructure. This has been a major source of conflict, and if a compromise is not reached there could be devastating impacts not only on Egypt’s energy supply but also on its agricultural output and ability to sustain its population. [13] [14]

Because of this, Egypt has been forced to diversify its approach to renewable energy expansion. The country faces more of an uphill climb than Ethiopia, not only because of its relative lack of existing infrastructure and hydroelectric potential but also because, despite having a similar (and even smaller) population than Ethiopia, Egypt’s electricity demand is over 15 times higher. [15]

The plan for the growth of Egypt’s renewable energy sector, as well as its broad development trajectory were laid out in Egypt Vision 2030. The fifth of its nine core objectives is “integrated and sustained ecosystem,” which broadly advocates for more sustainable practices to protect the country’s fragile environment. The section reads: 

“Egypt seeks to preserve both development and the environment through the rational use of resources to preserve the rights of future generations to a safer and more efficient future. This can be achieved by addressing the impact of climate change, enhancing the resilience of ecosystems, countering natural hazards and disasters, increasing the use of renewable energy and adopting sustainable consumption and production patterns.” [16]

More specifically, Egypt has a plan to have 42% renewable energy usage by the year 2035. The plan stems from a report from IRENA, or the International Renewable Energy Agency, which makes a number of recommendations for how to reach this goal. These include the exploration of the potential of biomass as an energy source and further research to be done on the potential of solar and wind energy in the country. [17]

A Divergence in Approach

Where Egypt differs from Ethiopia, however, is in its reliance on the private sector to develop and scale the capabilities of renewable energy in the country. When the plan states that it wants to examine the potential of certain energy sources, it does so with the explicit intention of making them more marketable for private investors. In Ethiopia on the other hand, its current largest renewable infrastructure project, the Renaissance Dam, is funded heavily by taxes and bonds purchased by the general public. [18]

This is further clarified in the other recommendations of the IRENA report, which encourage “updating strategies” to “reflect the growing cost advantages” of renewable energy, and “streamlining regulation” to help make renewable energy seem more “bankable” in the country. [17] Ultimately, unlike in Ethiopia, new renewable energy infrastructure developed in Egypt will be private assets and, while reducing costs for the government, could come with a number of drawbacks.

The hands-off approach recommended here for the Egyptian government takes control away from the people, as control of the development of renewable energy lies outside of the jurisdiction of any democratic institutions. Additionally, the streamlining of regulations means that there will not be as reliable a focus for the administrators of renewable energy on the public benefit of its technology, as the primary focus will have to be on profit. This may reduce the universality of these systems, as it may not necessarily be profitable to provide the energy to Egypt’s poorer citizens who cannot afford it, despite a clear imperative to make it as accessible as possible.

Conclusion: Challenges and Takeaways

IRENA is an observing member organization of the United Nations, and provides its services in the form of hundreds of millions of dollars in concessional loans. [19] Concessional loans are structured to be more generous than market loans, which on the surface seems beneficial and fitting of projects acting in public interest. However, these loans have acted in a very predatory manner in the past, particularly when disbursed by international organizations such as the World Bank and International Monetary Fund (IMF).

These loans often come with a slew of conditionalities that exploit the nation that is receiving them. The IMF and World Bank, both of which are also affiliated with the United Nations, often act in the interests of multinational corporations, and condition their loans on “structural adjustment programs,” (SAPs) which in most cases prescribed privatization of public services as the solution to a crisis in a developing country. [19]

There are many examples of this around the world, and the detrimental effects of SAPs are well documented. For example, a report on the IMF’s impacts on health financing found that the number of conditions for IMF loans is growing, and that, out of 26 countries examined in which SAP-conditional loans were given, significant protests or riots arose in 20. [20]Another report examining the effect of SAP-conditional loans in Latin America found that a rise in conditionalities correlated to a rise in “delirious” effects on democratic institutions and processes. [21] 

In fact, the pervasive actions of the IMF have had a detrimental effect on Ethiopia in the past. Following a decade-long civil war, a new, stable government came to power in 1996. The government, despite the challenges of a large, poor, and heavily divided population, fostered impressive growth and displayed unprecedented economic stability for a country so poor. The government turned to the IMF to get loans to help develop their essential public services, such as schools and hospitals. Initially, it seemed that progress was being made, and that Ethiopia could begin spending its loans on what it pleased.

However, the IMF forced Ethiopia to take on a more austere approach to spending and taxation in order to continue receiving these critical loans. The IMF justified this position by stating that Ethiopia was too reliant on foreign aid, and that it was an unsustainable economic model. However, the country was showing impressive growth and exceptional competence, and it seemed that the loans would pay for themselves as a product of this. Despite the evidence overwhelmingly showing that Ethiopia was outperforming expectations, the conditions stood, and left the county’s public services in shatters. [22]

Ethiopia has learned from this endeavor, and for the most part has nationalized its renewable energy sector. The aforementioned potential for Ethiopia to become a major energy exporter, as well as a sense of national unity and pride fostered over the public funding of the Renaissance Dam project, are the products of the country’s shrewd commitment to nationalization. Egypt, on the other hand, is leaving itself exposed to the whims and adverse intentions of multinational corporations and the Intergovernmental Organizations – such as the World Bank, IMF, and IRENA – who help impose the former’s will.


Sources

[1] https://joebiden.com/clean-energy/

[2] https://ec.europa.eu/energy/topics/renewable-energy/renewable-energy-directive/overview_en

[3] https://www.eia.gov/tools/faqs/faq.php?id=92&t=4#:~:text=In%202019%2C%20renewable%20energy%20sources,about%2017%25%20of%20electricity%20generation.&text=Preliminary%20data.

[4] https://www.statista.com/statistics/272789/world-population-by-continent/

[5] https://projectsportal.afdb.org/dataportal/VProject/show/P-Z1-F00-063

[6] https://www.un.org/africarenewal/magazine/january-2021/push-renewables-how-africa-building-different-energy-pathway#:~:text=According%20to%20the%20International%20Energy,lead%20the%20global%20electricity%20sector.&text=Renewable%20energy%20in%20Africa%20is,of%20the%20continent%20by%202040.

[7] https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?most_recent_value_desc=true

[8] https://www.sun-connect-news.org/fileadmin/DATEIEN/PV-Industry-ET-04-09-12_final.pdf

[9] https://www.sciencedirect.com/science/article/pii/S1364032113001494

[10] https://www.adaptation-undp.org/sites/default/files/downloads/ethiopia_climate_resilient_green_economy_strategy.pdf

[11]: https://www.aimspress.com/article/doi/10.3934/energy.2021001?viewType=HTML#:~:text=Wind%20energy%20potential,GW%20installed%20capacity%20by%202018.&text=According%20to%20Ethiopia%20electric%20power,country%20is%20around%201%2C350%20GW.

[12] https://worldbulletin.dunyabulteni.net/africa/ethiopia-to-step-up-as-regional-clean-power-exporter-h159130.html

[13] https://www.newworldencyclopedia.org/entry/Blue_Nile

[14] https://www.aljazeera.com/news/2021/3/30/egypts-sisi-warns-ethiopia-dam-risks-unimaginable-instability

[15] https://www.eia.gov/international/data/world/electricity/electricity-consumption?pd=2&p=0000002&u=0&f=A&v=mapbubble&a=-&i=none&vo=value&t=C&g=00000000000000000000000000000000000000000000000001&l=249-ruvvvvvfvtvnvv1vrvvvvfvvvvvvfvvvou20evvvvvvvvvvnvvvs0008&s=315532800000&e=1546300800000&

[16] https://mped.gov.eg/EgyptVision?lang=en

[17] https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Oct/IRENA_Outlook_Egypt_2018_En_summary.pdf?la=en&hash=58DBAA614BE0675F66D3B4A2AC68833FF78700A0

[18] https://www.un.org/africarenewal/magazine/december-2014/financing-africa%E2%80%99s-massive-projects

[19] https://www.taxjustice.net/2018/07/06/the-damage-of-international-monetary-fund-conditionality-call-for-urgent-rethink/

[20] https://d3n8a8pro7vhmx.cloudfront.net/eurodad/pages/511/attachments/original/1590680908/Unhealthy_conditions.pdf?1590680908

[21] https://journals.sagepub.com/doi/pdf/10.1177/0192512109342522

[22] https://www.theatlantic.com/magazine/archive/2001/10/thanks-for-nothing/302315/