Friday, September 22, 2023
BusinessExperts call for upgrade in capacity to deal independent power producers

Experts call for upgrade in capacity to deal independent power producers

  • UNCTAD reports 82 percent of people in LDCS out of national grid

Launching the 2017 report on Least Developed Countries (LDCs), discussants of the report, which was presented by the United Nations Conference on Trade and Development (UNCTAD) on Wednesday, noted that countries such as Ethiopia who wish to work with independent power producers (IPPs) should first capacitate their bargaining powers to benefit out of the power purchase deals. 

Gebrehiwot Ageba (PhD), director of programs at the Ethiopian Development Research Institute (EDRI), while talking about Ethiopian power sector, said that availability of finances is the critical factor that requires the involvement of foreign investors in the production and distribution of electric power in the country. However, that comes with hefty conditions, he said.

Among the conditions foreigner power producing companies require is a guaranteed power purchase agreement. He elaborates that saying “the government has to buy all the power generated”. They also require tariff to be levied in foreign currency terms. These and various conditions make it difficult to attract foreign investment in the power sector, Gebrehiwot said.

When asked what possible options and alternatives could be suggested to deal with IPP projects in Ethiopia, Gebrehiwot suggested that setting a framework and having national capacity to handle IPPs and building the negotiation power on the framework are crucial. In addition to that, well-versed experts at the national level that deeply understand the languages of power companies as well is essential for Ethiopia before entering into the complex nature of IPP contracts, he said.

Stephen Karingi, director of regional integration and trade division at the United Nations Economic Commission for Africa (UNECA) mentioned that there are some good stories out there in deploying and delivering IPP contracts in Africa. Both Karingi and experts at UNECA talked about Kenya and South Africa where renewable sources of energies have been generated via IPP contracts.

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According to the report, which looks at transforming the energy access across the world of LDCs, 82 percent of the population in rural areas have no access to electricity. Giovani Valensisi, economic affairs officer with UNCTAD, said that more than 40 percent of businesses operating in the LDCs suffer from inadequate, unreliable and unaffordable energy. Citing the report, Valensisi mentioned that on average businesses suffer 10 power outages per month. In all, 47 LDCs are falling behind the rest of the world in terms of getting power to homes and business, the report noted.

Achieving universal access to modern energy in LDCs by 2030 – as inscribed in the UN’s Sustainable Development Goals (SDGs) – seems difficult to be achieved as it has been found to be very costly for these countries to invest on. According to the report, USD 12 billion to USD 40 billion per year is estimated to cost LDCs.

Making it more difficult, donors fall short of honoring their commitments of contributions. Based on the 2011 Istanbul Program of Action for LDCs, international donors have agreed to contribute some 0.15 to 0.20 percent of their national income in aid for the years between 2011 to 2020.

However, UNCTAD unveiled that aid levels to LDCs has fallen short of the targets by USD 33 billion to USD 50 billion per year. When it comes to assistance to energy sector, available resources from the development official assistance to LDCs to the sector rests at USD three billion leaving these countries at worse choices of insufficient domestic resources and quandary and risk unsuitable debt burdens.

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