World Bank suggests private energy generation to close electricity access gaps

The World Bank has said that private energy generation could be a solution to address electricity access in Sub-Saharan African countries.

The multilateral lender disclosed this in its April 2023 Africa’s Pulse report, suggesting that a policy landscape should be supported to be amenable to private energy generation.

What needs to be done

However, to fully harness the potential of private energy generation, a supportive policy environment is crucial. This includes policies and regulations that encourage private investment in the energy sector, promote competition, and protect consumer rights. There may also be a need for public-private partnerships to leverage the strengths of both sectors and ensure sustainable and equitable access to electricity.

According to the report, Sub-Saharan African countries could benefit from this solution in two ways:

Enabling operations in the mining sector as anchor clients and the opportunities they may find to supply surrounding communities while alleviating the energy bottleneck that has become a deterrent to mining companies.
Also, the move to private generation enables firms to supply excess electricity to surrounding communities in schools, hospitals, and households.

Tips for power utility companies

The World Bank said that mining as anchor clients can also help boost the finances of power utilities and reduce the risk of investments such as in renewable power generation. This has become necessary because the sub-Saharan African region has recorded widespread investment growth deceleration in recent years.

This varies from country to country depending on the extent of resource abundance and fragility. This has made it difficult for a lot of SSA countries to increase resource revenues needed to expand their electricity access base for their growing populations. According to the report, oil-abundant countries exhibit the largest and most persistent downswing in investment relative to the other groups. Part of the report said:

“After exhibiting annual average growth of nearly 8% from 2010 to 2013, oil-abundant countries on average have experienced a contraction in investment since the 2014 to 2015 plunge in international oil prices. The downturn in investment is also sharp among metal-abundant countries in the region, although coming from a higher growth rate at the beginning of the 2010s.”

The World Bank report observes that slower growth of investment in the region is holding back long-term growth of potential output and per capita income, as well as progress on meeting the Sustainable Development Goals (SDGs).

The multilateral lender recommends the improvement of the efficiency of spending among policymakers, especially as SSA countries face substantial financing needs, limited fiscal space, and rising borrowing costs.

According to the World Bank report, some action steps taken by government representatives in SSA countries to scale up financing, especially for increased electricity access include:

Additional financing from the private sector and the international community
Accelerating reforms to improve the institutions that support private sector growth

Developing local capital markets

Improving the quantity and quality of public infrastructure
Enhancing the efficiency of utilities
Strengthening domestic resource mobilization.

What you should know

The World Bank supports the use of natural gas and renewable energy technologies in closing Africa’s electricity gaps.