African Development Bank’s $4.3b Clean Technology Fund to power Africa

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The African Development Bank (AfDB) says its $4.3 billion Clean Technology Fund will help in solving some of Africa’s energy problems through the use of clean energy.

According to the AfDB, the shift to clean energy solutions will enable Africa to take advantage of concessional resources available, which reduce costs and risks of such investments while at the same time provide leverage for mobilizing private sector resources.

The Fund which is expected to mobilize at least four times the amount for investments in energy efficiency, renewable energy and sustainable transport, the Bank says it will provide funds that will meet current and future demands on a sustainable basis of a country’s energy problems.

“For Africa, the average total cost of electricity is extremely high: $0.18 per kWh, compared with a rate $0.04 per kWh in Asia $0.07 in South and East Asia,” the AfDB said at a seminar themed “Powering Africa: Financing Energy and Green Growth,” held on June 8, 2011 during the 2011 Annual Meetings of the AfDB.

The Bank says Africa’s energy problems are due to insufficient use of budgets for energy investment, inadequate maintenance, lack of efficiency and losses in distribution; and electricity pricing below the cost of production, which encourages waste.

In a landmark decision, the African Development Bank (AfDB) intends to extend a financial package totaling $365 million to South Africa in order to help the country green its energy sector. The financial package includes a loan of $265 million approved by the AfDB’s Board of Directors on May 30, 2011, as well as a $100 million concessional loan from the Clean Technology Fund, the Bank says.

This will support South Africa’s national electricity utility, Eskom, in implementing a $1.3 billion renewable energy project introducing concentrated solar power to sub-Sahara Africa and the first utility-scale wind power plant to South Africa.

Suggesting some solutions to the continent’s energy deficit, the AfDB said abundant natural resources in Africa, coupled with the development of innovative financial instruments to combat climate change, “make the continent capable of significantly reducing its energy deficit.”

It therefore urged developing countries to rely first on hydroelectric power even though construction costs are high, operating costs remain low and the price is generally competitive.

In a related development, the AfDB has pleaded for an African Green Fund.

Aly Abou-Sabaa, Chairman of the Climate Change Coordination Committee at the African Development Bank (AfDB) says Africa could do much more to tackle climate change through the establishment of a continent-specific green fund.

Climate variability already has significant economic costs throughout Africa, with models indicating that economic losses in Africa could be equivalent to annual losses in GDP of 1.5 to 3% by 2030.

“Africa is the continent most impacted by climate change”, reminded Mr Abou-Sabaa.

The fund is to address the needs of low-carbon growth in Africa.

Adaptation and mitigation come at additional costs. Recent estimates have put the incremental adaptation/mitigation costs and resources needed to put Africa on a low-carbon growth pathway at about $22–31 billion per year by 2015 and $52–68 billion per year by 2030, the AfDB said.

This fund would provide for the development of a low carbon and climate-resilient economy, making Africa a pivotal partner in the global effort to fight the effects of climate change, concluded the AfDB manager.

The Bank is currently consulting with partners to have a better understanding of what constitutes acceptable design and access parameters for the fund and its function under the overall scheme of the Green Climate Fund.

By Ekow Quandzie

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