Tackling Energy Poverty Through an Energy Mix
- August 3, 2016
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Back in April, the 2016 White House Science Fair showcased the United States’ most inspiring young scientists. Some of these bright teens have taken it upon themselves to solve a global energy crisis, making energy more accessible and helping power developing countries. Kimberly Te and Christine Yoo, team prize winners of the 2015 Siemens Competition, worked with microbial fuel cells to generate electricity while also removing pollution. Meanwhile, Hannah Herbst, winner of the Discovery Education 3M 2015 Young Scientist Challenge, built an ocean energy probe to bring electricity to developing countries.
“Energy poverty,” or a lack of access to modern energy services, is a major problem across the world. You may be surprised to learn that approximately one in seven people globally do not have access to electricity, mostly in Africa and developing Asia. For example, in Nigeria, Africa’s most populated country, it is estimated that only 35% of its population has access to electricity. For the percentage that does have access to electricity, power can be inconsistent with repeated outages causing industrial and residential consumers to operate via high cost generators. Energy poverty in Nigeria, and the rest of sub-Saharan Africa, is handicapping the entire region’s economic development.
While renewable energy can and should play an important role in solving energy poverty in countries such as Nigeria, we should not ignore the major benefits clean fossil fuels can also bring. Todd Moss, COO at the Center for Global Development (CGD) states, “To help meet demand, the U.S. must rethink how it supports energy investment in developing economies.” He explains that, by boosting, not restricting investment in natural gas-fired generation, energy poor countries and millions of people worldwide can effectively receive electricity access.
In fact, in 2013, President Obama launched Power Africa, a U.S. government initiative supporting economic growth and development in Africa by increasing access to clean power. The initiative has helped transactions, expected to generate over 4,100 MW of new power generation throughout sub-Saharan Africa, reach financial close. Power Africa has forged strategic partnerships with more than 100 private sector partners to maximize impact and accelerate investment. It is imperative that the public and private sectors continue working together, as they are through Power Africa, to utilize the full mix of clean energy sources to help alleviate energy poverty.
Investors, such as the Financial Services Division of Siemens (SFS), can play an important part in combating energy poverty by investing capital in clean energy projects. For example, Siemens was recently selected as the preferred equipment supplier for its first power generation project in Nigeria – the Azura-EDO IPP power plant – a combined 1,500MW simple cycle gas power plant. SFS has also been involved in the structuring of the project’s financing and is contributing $50 million to help fund the development, construction and operation of the project’s 459 MW first phase. The Azura project is estimated to create over 1,000 jobs and provide more dependable energy to support the country’s long-term development plans. Projects like these can be replicated so Nigeria can continue to improve the quality of life for its people.
In Bangladesh, 50% of the population still has no access to electricity. Over the past several years, Siemens has supplied power and gas technology for seven different energy projects in the country and has just announced its eighth project, the Bibiyana South combined cycle plant. Along with the seven other plants, a total capacity of around 2.5 gigawatts (GW) of electricity will be generated. SFS will also be providing debt capital solutions to the Sirajgani II power project in Bangladesh, the second of these projects to benefit from SFS’ capital support. Siemens’ ability to be a one-stop shop for developers, offering tailored packages of equipment and financing, supports the successful development of these important projects.
In energy-impoverished locations, public-private partnerships (PPPs) such as these can help by sharing project risk expertise and providing tailor-made equity and debt finance packages. Intelligent financing and improved risk-sharing strategies will create increasingly robust projects, attracting new investors while supporting projects from the initial investment stage through completion. Captive financiers, such as SFS, are often best positioned to provide the necessary equipment, services and financing solutions to ensure the overall success of these important infrastructure projects in countries where they are critically needed.