Sylvain Kakou, IFC’s Country Manager for Central Africa. “Championing the power sector in Africa is crucial to spur development, and the private sector will be front and center of that drive.”
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IFC Enables Democratic Republic of Congo (DRC)
In a public-private partnership, IFC, in collaboration with the Government of the Democratic Republic of Congo (DRC), is bringing clean, solar energy to over 1.5 million homes, schools and clinics. The initiative is part of the global World Bank Group’s Scaling Mini-Grid (SMG) program. Based on a comprehensive study taken by The World Bank, the mini-grids installation will play a significant role in achieving universal access to electricity by 2030; – 40 percent of all installed capacity will come from mini-grids with the potential to provide electricity to as many as 500 million people by 2030. Mini-grids are cost-efficient and environmentally friendly, generating positive externalities. World Bank estimates 210,000 mini-grids powered by solar energy would help avoid 1.5 billion tons of CO2 emissions globally.
# Externalities at a glance
Externalities are third-party costs associated with entities not involved in producers’ and consumers’ transactions. These costs or benefits are hidden or not accounted for by the producers of goods and categorized as indirect costs. Externalities arise due to a lack of property rights leading to the tragedy of commons. Negative externalities increase the marginal social cost for the society need to be taxed equal to the marginal external cost. On the other hand, positive externalities increase the social benefit to the society upside to marginal external benefit. Such goods or services must be subsidized for the betterment of people. Check out the microeconomics’ online course on The middle Road on externalities.
# IFC & Mini Grids
IFC is the largest global development institution in emerging markets that spearheads various facets of private financing for the development sector. One key feature is blending finance through public-private partnerships to amplify capital for development work.
According to ESMAP, mini-grids will provide electricity to about half a billion people by 2030. The World Bank investment commitment in such projects is 37 projects in 33 countries, with 29 projects approved amounting to $636 million. The multilateral will rope in an additional $1.1 billion through the public-private partnership model through development partners, governments, and the private sector. The DRC project is a shot in the arm for the country as only 19 percent of the country’s population had access to electricity in 2019.
Access to electricity (% of population) – Congo, Dem. Rep.
World Bank Global Electrification Database from “Tracking SDG 7: The Energy Progress Report” led jointly by the custodian agencies: the International Energy Agency ( IEA ), the International Renewable Energy Agency ( IRENA ), the United Nations Statistics Division ( UNSD ), the World Bank and the World Health Organization ( WHO )
Installation of mini-grids will play a critical role in scaling up energy in developing nations; Asia dominates the ESMAP database of mini-grid projects installed, representing 85 percent of the global total. But this will change with 54 percent of the international mini-grids development planned in Africa. As we advance technological progression, better utilization, and proliferation, the emergence of technologies such as remote monitoring technologies and smart meters improve the reliability of mini-grids and reduce the costs of these devices. Mini-grids are much better than main grids that operate in many countries like the sub-Saharan region, having fewer outages on average. ESMAP reports that Ethiopia shows that 57.6 percent of grid-connected households face 4–14 outages a week, and 2.8 percent face more than 14 outages a week. The heightened social benefits mix well within the development sector, aiding the climate action. Subsiding mini-grids with an amount equal to its external social benefit lies within the purview of the social sector. Out of $ 28 billion spent on mini grids, only $5 billion has been spent in Africa and South Asia. (ESMAP) Its time the world gives a serious look at scaling mini-grids among emerging and frontier nations.
As energy partners of IFC, the governments of Italy and Canada are also part of SMG DRC. Other actors/entities include the Rockefeller Foundation, the Global Infrastructure Facility, the Green Climate Fund, the Sustainable Renewables Risk Mitigation Initiative (SRMI) . The Global Infrastructure Facility, a G20 initiative, provides funding and advisory support to governments and multilateral development banks on building sustainable and bankable infrastructure projects.
Key References
IFC Launches Work on Solar Mini-Grid Program to Scale Up Clean Electricity in the DRC
ESMAP – mini grids for half a billion people Market Outlook and Handbook for Decision Maker
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Photo by Abigail Clarke on Unsplash