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IRENA and UNDP’s Africa Centre for Sustainable Development outline why significant investment is needed to transform Africa’s energy system

Falling technology costs have made renewable energy a cost-effective way to generate power in countries all over the world, which would drive further development and improved economy. Despite the tremendous efforts that have been deployed at national and regional levels, 580 million Africans still do not have access to modern sources of electricity. A strategic partnership between IRENA and the United Nations Development Programme (UNDP) is working to solve this challenge by unlocking the capital necessary to help Africa realise its full renewable energy and economic potentials.

IRENA’s Scaling Up Renewable Energy Deployment in Africa shows that Africa has the potential to install 310 gigawatts of clean renewable power—or half the continent’s total electricity generation capacity—to meet nearly a quarter of its energy needs by 2030. It is therefore crucial for Africa to step up its efforts to generate significant investments and business opportunities to boost the growth of renewable energy in the continent.

Working together, IRENA and the UNDP through its Africa Centre for Sustainable Development (ACSD) co-presented the case for unlocking the renewable energy potential in Africa through increasing investments flows, during the 12th Africa Energy Indaba in Cape Town in February 2020. IRENA estimates that Africa requires an annual investment of USD 70 billion in renewable energy projects until 2030 for clean energy transformation to take place. The clean energy access would increase energy security, create green jobs, and support key developing outcomes such as improved healthcare and education. Additionally, renewable energy deployment would curb the rising carbon emissions and enhance Africa’s resilience to climate change impacts.

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My friends and I were planning a sailing trip in Croatia for later this spring. We started to worry about COVID-19-related travel disruption but felt a sense of security remembering we had travel insurance. We inquired, and the insurer pointed to two French words buried in the policy: force majeure.

Economic disruptions are cascading globally as a result of COVID-19. For infrastructure investors, the sudden evaporation of demand is colliding with cost increases, or at least cost uncertainty. Once these economic realities become balance sheet realities, a “tidal wave” will come into view that risks overwhelming the legal system with contract disputes.

Courts rely on precedent to adjudicate contract disputes. So do investors, understanding that all outcomes can never be specified in infinite detail. Force majeure clauses are catch-all buckets for big, unlikely events. The World Bank’s Model Contract Database gives one example of a definition: earthquakes, floods, fire, plague, acts of God, and other natural disasters. In many public infrastructure projects, governments indemnify senior lenders against payment disruption caused by force majeure. Where those guarantees aren't in place, we can expect legal disputes between counterparties to exacerbate systemic risk. But governments can go further to mitigate systemic risk than simply standing behind existing force majeure guarantees.

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Leveraging the advances of the information revolution, private energy companies are finding ever more innovative ways to effectively target customers around the world. These days, geospatial imagery and machine learning technologies tell us more than ever before about who has electricity, where they are, and how they are accessing it. New micro-level survey data gives us new insights on energy usage and the impacts of enhanced energy access. Thanks to cheap solar, plummeting battery costs, deep mobile connectivity and smart distributed power systems that can be monitored and managed from afar, there are ever-increasing modalities for delivering electricity beyond the grid.

Public policy, in stark contrast, is struggling to keep up with these rapid-fire developments. For many government agencies responsible for their country’s electrification vision and implementation, this deluge of data and innovation has been met with paralysis. A 2017 World Bank report found only half of 35 sub-Saharan African countries surveyed had electrification plans – and those plans that do exist have rarely offered an evidence-based vision for energy access, even as they articulate ambitious universal electrification targets.

This disconnect between government and the private sector can translate into inefficient capital allocation, the development of unsustainable energy systems, fewer people and businesses ultimately gaining access in low- and middle-income countries, and the cementing of deep inequalities in opportunities for development. Vast amounts of potential human capacity and productivity are being left untapped.

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Many parts of the world are currently locking down in an intense effort to contain COVID-19 before it takes too many lives. These have created dramatic – albeit necessary – economic effects. With these immediate impacts and near- to medium-term uncertainties in mind, we spoke to four PAYGo operators this week to understand how the pandemic is impacting their customer base and operations, and how they are responding. This post explores how the pandemic may impact these operators and their customers, and introduces ways providers can prepare for and mitigate negative impacts on their operations and portfolios.

 

Let’s start with those most vulnerable to the impact of COVID-19: PAYGo customers

Various characteristics of PAYGo households make them especially vulnerable to the negative impacts of the pandemic, which will likely affect their ability to pay for services. To start, these households tend to be rural and lower- to middle-income. Rural areas, on average, have a much harder time accessing necessary healthcare and will be especially vulnerable to the pandemic. Infections and social distancing may also create changes in food availability, forcing PAYGo customers to make difficult financial trade-offs. If customers or their family members are exposed to the virus there might be a near-term need for funds to cover medical costs – they will have to dip into savings, reduce consumption, liquidate assets, or take on new economic activities. Travel restrictions will make it more difficult to reach mobile money agents or other pay points, which could affect income from remittances and the ability to cash-in to digital wallets. Those same remittances are likely to be restricted as relatives in cities or overseas see their own incomes reduced by layoffs or furloughs.

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