2 EAEP Final Report.pdf

D

SEPTEMBER 30, 2023

DISCLAIMER

This report is made possible by the support of the American People through the United States Agency for International Development (USAID). The contents of this report are the sole responsibility of RTI International and do not necessarily reflect the views of USAID or the United States Government. This report was prepared under Contract Number AID-720-674-18-D-00004 / AID-720-674-19-F-00004.

This document is intended to comply with Section 508 Standard of the Federal Acquisition Regulation. If you have any difficulties accessing this document, please contact accessibility@rti.org.

Submitted by:

CHIEF OF PARTY

RTI INTERNATIONAL

3040 East Cornwallis Road Research Triangle Park, NC 27709

Contract Number: AID-720-674-19-F-00004

DECEMBER 2018 TO SEPTEMBER 2023

POWER AFRICA

EAST AFRICA

ENERGY PROGRAM

FINAL REPORT

TABLE OF CONTENTS

EXECUTIVE SUMMARY

RESULTS SUMMARY

BURUNDI

DEMOCRATIC REPUBLIC OF CONGO

DJIBOUTI

ETHIOPIA

KENYA

RWANDA

SOMALIA

TANZANIA

UGANDA

INCREASED REGIONAL POWER TRADE

CROSS-CUTTING AND PROJECT MANAGEMENT SUPPORT

CHALLENGES

LESSONS LEARNED AND RECOMMENDATIONS

EAEP MEL RESULTS

ACRONYMS AND ABBREVIATIONS

1 POWER AFRICA EAST AFRICA ENERGY PROGRAM

EXECUTIVE SUMMARY

The Power Africa-funded East Africa Energy Program (EAEP) started in December 2018 and concluded in September 2023, serving as the United States Agency for International Development’s (USAID’s) on-grid mechanism in the region. Across nine countries, EAEP had a goal to connect 4 million East Africans to on-grid power, advance 1,500 MW of generation toward financial close, aid Power Africa 2.0’s utility strengthening initiative, and realize cross-border power trade transactions.

With EAEP’s implementing partner, RTI International, Power Africa successfully provided technical assistance across four objective areas in five years. EAEP was the second iteration of Power Africa’s implementation mechanisms, succeeding the Power Africa Transactions and Reforms Program (PATRP). EAEP built on the successes of PATRP and expanded on-grid services in new countries in the region.

This final report details, by country and region, how EAEP performed against the targets, what lessons were learned from implementation, and what recommendations for USAID’s and Power Africa’s partners would further advance the on-grid electricity sector in the region.

OBJECTIVES

EAEP focused on four technical and cross-cutting objectives over the life of the program:

• Optimized power supply at the national level to advance generation and transmission toward financial close while supporting improvement of the enabling-environment.

• Increase on-grid connections with utilities and service provider partners to advance universal access and reduce the time and cost to connect households and businesses.

• Strengthen utilities and power sector entities to improve their technical and commercial performance so as to increase reliability and delivery of power.

• Increased regional power trade between countries to relieve supply and demand imbalances and transmit cheaper, cleaner energy regionally.

• Institutional performance improvement across energy sector entities to build sustainable gains in capacity strengthening.

• Gender equity in the energy sector workforce to level the playing field for women in the industry.

• Community-engagement and investment for inclusive and socially responsible development of energy sector infrastructure.

• Environmental considerations to strengthen the energy sector’s understanding of impacts on land, climate, and wildlife. EAEP combined technical, financial, legal, and organizational expertise to co-develop activities with partners (e.g., utilities, ministries, regulators, private companies, women-in-energy networks) to deliver impactful and sustainable results.

2 POWER AFRICA EAST AFRICA ENERGY PROGRAM

OPTIMIZED POWER SUPPLY

To support Power Africa’s target of 30,000 MW in generation, EAEP targeted later-stage transactions for help them reach financial close. EAEP directly advanced a pipeline of over 1,700 MW of transactions;

however only 294 MW reached financial close during EAEP’s life of program. The remaining MW in EAEP’s pipeline will be transitioned to Power Africa’s other mechanism for future counting, and EAEP is confident they will reach financial close before the 2030 timeline. EAEP also provided commissioning support for 482 MW throughout the region as well as transmission transaction support, resulting in 109 km of transmission infrastructure deals reaching financial close and 308 km commissioned.

Additionally, EAEP progressed legal, regulatory, and policy developments across the region to attract or retain private sector investment in the sector and to improve planning for optimized power supply, demand, and trade.

TECHNOLOGY

TRANSACTIONS

SUPPORTED BY

EAEP DIRECTLY

THAT HAVE

NOT REACHED

FINANCIAL CLOSE

TRANSACTIONS

SUPPORTED

BY EAEP THAT

HAVE REACHED

FINANCIAL CLOSE

TRANSACTIONS

SUPPORTED

BY EAEP THAT

HAVE BEEN

COMMISSIONED

Hydro 103.2 1.65 0

Biomass 35 0 0

Natural Gas 0 56 0

Geothermal 318 133 248.3

Solar 858.8 104 133.5

Wind 351 0 100

Hybrid RE/RE 9 0 0

Total 1,675 MW 294.65 MW 481.8 MW

EAEP supported transactions across multiple technologies with large pipelines for renewable energy (RE).

While only 294 MW of transactions reached financial close, another 1,675 MW of transactions were supported directly by EAEP and will count toward Power Africa’s MW pipeline in the region once they close.

INCREASE ON-GRID CONNECTIONS

According to the World Bank, over 300 million Africans in East and Central Africa do not have access to electricity. To supplement the off-grid solutions provided by the Power Africa Off-Grid Program, EAEP supported utilities, small service providers, and private concession distribution companies to increase connections. Collectively, EAEP supported 5,176,390 connections with utilities across the region. Most of the countries in the region have established universal access targets but are at risk of failing to meet those targets due to challenges of funding, planning, and even community-engagement. EAEP sought to bridge gaps in capacity, equipment, and planning to advance connections for households and businesses.

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EAEP supported in-country and regional connections programming with utilities and service providers in five countries to tackle common challenges to universal access.

STRENGTHENED UTILITIES AND OTHER POWER SECTOR ENTITIES

Utilities across East Africa face financial constraints, aging infrastructure, and challenges retaining or expanding customer bases. A cycle of poor service delivery frustrates existing customers who seek alternatives and further constrains utilities’ ability to serve. EAEP supported three utilities to address performance-improvement measures in pilot zones. EAEP used embedded advisors to provide technical assistance and to conduct on-the-job training that led to revenue increases, loss reductions, and commercial improvements.

EAEP’s longest engagement was with Kenya Power, which achieved a 16 percentage-point improvement in aggregate technical, commercial, and collections (ATC&C) losses in pilot zones.

Additionally, the Ethiopia Electric Utility (EEU) achieved a 5 percentage-point improvement, and the Zanzibar Electricity Corporation (ZECO) had a 2 percentage-point improvement; note that EAEP’s assistance to both utility programs were shorter term than for Kenya Power.

Kenya

Ethiopia

Tanzania

Uganda

Rwanda

Somalia

2,261,710

1,484,016

977,666

259,923

162,411

30,664

1,000,001+

500,001-1,000,000

1500,001-500,000

0-150,000

Aggregate technical, commercial, and collections losses reduced in pilot zones

KENYA POWER AND

LIGHTING COMPANY

ETHIOPIAN ELECTRIC

UTILITY

ZANZIBAR ELECTRICITY

CORPORATION

16 percentage-point reduction from the 35% baseline

5 percentage-point reduction from 34.9% baseline

2 percentage-point reduction from 23.5% baseline

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INCREASED REGIONAL POWER TRADE

East Africa’s abundant renewable energy resources make it an ideal region for cross-border power trade. Through trade, countries can optimize generation planning for more affordable, green options rather than develop costly energy plants themselves. EAEP supported 2.38 TWh of power trade to advance in the region through the Ethiopia–Kenya power trade and Rwanda–Uganda interconnection. Both lines (see figure below) open the region up to more trade. Additionally, EAEP supported 1,530.19 km of line to be energized, tested, and commissioned.

Many cross-border lines still need early-stage and financial close support to connect East Africa fully to Central and Southern African countries.

Cross-border trade to connect across Africa. By advancing the Uganda–Rwanda and Kenya–Ethiopia lines to commissioning, Power Africa has accelerated the eventual interconnection of East Africa to Central Africa. Regional bodies are collaborating to eventually interconnect.

EgyptLibya

Southern Africa Power Pool (SAPP)

Central African Power Pool (CAPP)

Eastern Africa Power Pool (EAPP)

Commissioned lines

Not commissioned or early stage lines

Djibouti

Somalia

Kenya

Tanzania

Malawi Zambia

Zimbabwe

Mozambique eSwatini

LesothoSouth Africa

Botswana

Namibia

Uganda

Ethiopia

Sudan

Equatorial Guinea Sao-Tome and

Principe

Central African Republic

Democratic Republic of

Congo

Cameroon

Gabon Rwanda

Burundi

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CROSS-CUTTING SUPPORT

Each activity supported by EAEP integrated cross-cutting considerations into implementation and looked for opportunities to amplify gender equity, improve community-engagement, and enhance environmental awareness.

EAEP integrated these cross-cutting areas into each country section and summarized achievements in the Cross-Cutting and Project Management Support section of this report. EAEP had the unique opportunity to implement Women in Rwandan Energy (WIRE) initiative, funded by the Women’s Global Prosperity Fund.

WIRE focused on gender equity and increasing women’s roles in Rwanda’s energy sector. Through WIRE, EAEP supported 111 women—out of 154 total women apprentices—to secure full-time jobs and helped formally launch the POWERHer network for Rwandan women in energy. The lessons learned from WIRE were applied across the region with other energy sectors. Additionally, EAEP took a new approach to capacity building with application of the USAID human and institutional capacity development (HICD) model within energy sector institutions. For example, EAEP gathered representatives from across Kenya’s energy sector to self-identify performance areas for improvement and co-developed work plans to address gaps. Through routine validation workshops and check-ins, the institutions made progress on their performance scores and became equipped to manage future learning needs. Additionally, EAEP carried on PATRP’s community-engagement guidance to work with Kenya’s energy sector entities to implement best practices. EAEP was able to support policy revisions, introduction of complaints-handling mechanisms, and integration of community needs and investments into generation and transmission planning practices.

In Pako Village, Kenya, a man walks the wayleave or right-of-way of the Kenya Electricity Transmission Company Ltd. (KETRACO) towers of the 101 km Sultan Hamud–Oloitoktok transmission line project. Photo credit: EAEP

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RESULTS SUMMARY

RESULTS ON KEY PROJECT GOLS

INDICATOR TOTAL

TARGETS

% ACTUAL

VS.

TARGET

New grid actual direct connections 4 Million 5,176,390 129.4%

MW from transactions that achieved financial close 1,500 MW 294 MW 19.6%

MW that have been commissioned 750.5 MW 475.8 MW 63.4%

Amount of investment mobilized for energy investment

Not applicable (N/A) N/A

Km of new, reconstructed, rehabilitated, or upgraded transmission and distribution lines that have been energized, tested, and commissioned/installed

1,324.6 Km 1,531.2 Km 115.5%

Km of transmission and distribution power lines reached financial close 526.1 Km 109 Km 20.7%

97 32

13 297

Laws, policies, regulations, or standards to enhance energy sector governance formally proposed, adopted, or implemented

Target: 83

Host-government power sector strategic planning documents adopted, implemented, or revised

Target: 24

Competitive procurement processes for new generation capacity implemented

Target: 21

Female interns who receive EAEP gender and capacity building support

Target: 264

Burundi’s energy sector is providing unique opportunities for private companies to become involved in diversifying generation and building distribution infrastructure.

Having one of the lowest access rates in the world, Burundi is looking to replace expensive diesel generators and to connect more people and businesses to a stable grid.

Burundi has abundant unexploited renewable energy sources, including hydro, wind, and solar. However, as of 2023, installed generation capacity was approximately 74 MW, with 45 percent sourced from diesel. Of note, the available capacity is lower due to poorly functioning hydropower plants. The Government of Burundi has set the ambitious target of 30 percent access by 2030 and is supporting large hydropower projects to come online before 2026. These large, donor-financed projects will add significant energy to the grid, but they have faced delays in financial close and commissioning. Smaller developers have seen success, however. For example, in April 2022, a 7.5 MW solar project from Gigawatt Global became the first non-diesel IPP plant commissioned in the country.

This project alone increased the installed capacity of the country by 15 percent.

In 2021, Burundi advanced from Tier 3 to Tier 2 on the United States Government’s (USG’s) three-tiered Trafficking in Persons list, which made the government eligible for Power Africa support. Previously, EAEP had been restricted to working exclusively with the private sector, which meant that EAEP provided only legal services for developers looking to replicate Gigawatt Global’s success; Gigawatt Global was the only IPP to successfully close and commission a project in Burundi. After late 2021, EAEP expanded assistance to Burundi by engaging the government, the utility, Régie de Production et de Distribution de l’Eau et de l’Électricité (REGIDESO); and the regulatory agency, l’Autorité de Régulation des Secteurs de l’Eau Potable et de l’Energie (AREEN), for support. Under EAEP, Power Africa supported 45.85 MW of new generation transactions, the establishment of a private distribution utility in addition to REGIDESO, and interconnections for transmission.

BURUNDI

MW REACHED

FINANCIAL CLOSE MW COMMISSIONED MW ADDED TO PIPELINE PEOPLE TRAINED

1.65 MW 7.5 MW 44.2 MW Men: 32

Women: 5

SECTOR SUMMARY

Installed capacity 74 MW Population 12.5 million

Available capacity 40 MW Access rate (on and off) 13%

Average tariff $0.16 per kWh Active independent power producer (IPP)

Yes, multiple

7 POWER AFRICA EAST AFRICA ENERGY PROGRAM

ACTIVITIES SUMMARY

OBJECTIVE 1: OPTIMIZED POWER SUPPLY

REACHED FINANCIAL CLOSE

RUVYI HYDRO (1.65 MW). The Ruvyi hydropower project, developed by American-owned Songa Energy and Virunga Power at a cost of , reached financial close in May 2023 with an equity investment from Virunga Power. The project received legal support from EAEP, including the development of project documents:

power purchase agreement (PPA), Concession Agreement, Grid Connection Agreement, and Letter of Comfort.

The project is one of two in these companies’ portfolio (with the second project expected to reach financial close in early 2024).

ADVANCED FINANCIAL CLOSE

KIRASA ENERGY HYDRO (16 MW). EAEP supported this project for several years—starting during PATRP, when the transition was subjected to a due-diligence review (through a qualified transaction assistance tool [QTAT]) and the developer attended PATRP’s public–private partnership (PPP) training. When the developer encountered challenges on tariff negotiations with lenders, it asked EAEP to complete a financial model with a sensitivity analysis. After EAEP agreed to conduct the activity, the developer decided to use internal resources to complete the model. EAEP remained available for additional support as needed. As of August 2023, the developer was in advanced conversations with two lenders, the African Development Bank (AfDB) and Eastern and Southern African Trade and Development Bank, with financial close expected soon.

MPANDA HYDROPOWER PROJECT (10.2 MW). EAEP advanced this transaction towards financial close by completing a due diligence (QTAT) and providing legal support through a review of contract documents, the land lease, O&M and EPC agreements. Before reaching financial close, the developer will amend the project documents with the Government of Burundi based on feedback from EAEP’s legal review. As of August 2023, the developer is in conversations with lenders.

MULE HYDRO (9 MW). Like the process described above for Ruvyi, Mule’s project portfolio partner, EAEP advanced the Mule project toward financial close by providing legal support, including preparing project documents: PPA, Concession Agreement, Grid Connection Agreement, and Letter of Comfort. In August 2023, the developer was in advanced conversations with lenders.

RUZIBAZI 12 (9 MW). EAEP advanced this transaction toward financial close by completing a QTAT, and by providing legal support through a bankability review of project contract documents. To reach financial close, the developer will need to update its studies and amend the project documents based on EAEP’s legal advisory feedback. The developer was in early-stage conversations with lenders in August 2023.

COMMISSIONING SUPPORT

MUBUGA SOLAR (7.5 MW). Gigawatt Global completed the Mubuga 7.5 MW solar power project in April 2021 and immediately started supplying power to the utility, REGIDESO. However, the developer did not receive either formal acknowledgment of commercial operations from REGIDESO or a permanent commercial operations license from AREEN. To help release these items, EAEP worked with the US State Department in Burundi to write briefs for the Ambassador to advocate for the commissioning of the project, which was finally achieved in February 2022. The 7.5 MW became a significant addition to the country’s grid.

8 POWER AFRICA EAST AFRICA ENERGY PROGRAM

OPTMIZED POWER SUPPLY ACTIVITIES

In addition to supporting Burundi’s IPPs, EAEP conducted PPP & Public Finance Training in March 2023. EAEP’s legal and financial advisory teams led this in-person training on the legal and financial intricacies of energy sector PPPs. The Government of Burundi had asked EAEP to support this training with participation from the country’s PPP Unit, REGIDESO, l’Agence Burundaise de l’Électrification Rurale (ABER – rural electrification agency), AREEN, and the Ministry of Energy. The objective of the training was to strengthen the participants’ understanding of, and comfort in working with, energy sector PPPs to better position the Government of Burundi for project procurement and negotiations with private sector developers.

OBJECTIVE 1I: INCREASED ON-GRID CONNECTIONS

GRID HARMONIZATION COST BENEFIT ANALYSIS: EAEP advisors concluded that the health of Burundi’s utility, REGIDESO, could be improved if it were to reduce technical and commercial losses. Burundi will soon have new 220 kV transmission lines accompanying large donor-funded projects, such as Rusumo Falls hydro (80 MW with 26 MW for Burundi), Jiji-Mulembwe (32 MW), Ruzizi III (147 MW with 49 MW for Burundi), and an interconnector between Burundi and Rwanda. The 220 kV lines will help evacuate the power from the large generation projects; however, the limited distribution network in the country consists of varying voltages and leads to high technical losses (REGIDESO estimates at 30 percent). The Government of Burundi asked EAEP to conduct a cost–benefit analysis of projected load growth and generation capacity expansion. It became evident that building additional 110 kV lines is critical. The essential question was whether the reduced technical losses would offer enough savings to warrant investing in the network upgrade. EAEP’s findings did show that selected lines were worth the expense of upgrading, especially considering future load growth and generation plans. The Government of Burundi is now able to share the findings with donors for potential funding opportunities.

PSS®E MODELING AND CAPACITY BUILDING. During the cost–benefit analysis activity described above, it became apparent that REGIDESO lacked a PSS®E model, instead using Excel to forecast and plan for transmission and distribution network development. Although Burundi is soon to be interconnected with its neighbors, the country needs to increase its technical capacity for those transmission investments. In response to a request from the Government of Burundi, EAEP created a PSS®E model for the country’s transmission network. In July 2023, EAEP conducted a five-day in-person capacity building on the planning software and model. Attendees included personnel from the utility, regulatory agency, Ministry, and ABER. The model and capacity strengthening improved Burundi’s national and cross-border power trade capabilities. Participants, the majority of whom had no experience with the software, now are familiar with it and are able to conduct basic modeling and simulations themselves. The updated PSS®E model is a critical tool for energy planning.

Participants in EAEP public–private partnership training in Bujumbura, Burundi, in 2022. Photo credit: EAEP

9 POWER AFRICA EAST AFRICA ENERGY PROGRAM

VIRUNGA POWER CONCESSION SUPPORT. Based on 2021 World Bank data, less than 2 percent of Burundi’s rural residents had access to electricity. Although REGIDESO has been working to increase generation and transmission, the feat of electrifying the rural population remains a challenge. In May 2021, the Government of Burundi signed a memorandum of understanding (MOU) with Virunga Power granting it exclusive rights to develop a PPP proposal for rural distribution. In February 2023, EAEP’s legal advisors drafted a term sheet transitioning the MOU to a legal document and later drafted the PPP and PPA documents for the developer. EAEP also created a financial model to help Virunga Power better understand tariff options, as well as conducting a series of seminars on establishing a new utility. In December 2022, EAEP hosted a high-level energy sector dialogue in Washington, DC, which the President of Burundi attended; Virunga Power presented its latest studies. Under the planned concession, Virunga Power is expected to electrify 70 percent of the country (approximately 50,000–60,000 connections in the first two years) and was continuing to develop its business model as of August 2023.

During the December 2022 US-Africa Leader Summit in Washington DC, the President of Burundi and delegation visited representatives from USAID, Power Africa, and Virunga Power to discuss the concession progress and reaffirm a commitment to the project.

10 POWER AFRICA EAST AFRICA ENERGY PROGRAM

11 POWER AFRICA EAST AFRICA ENERGY PROGRAM

BUILDING BURUNDI’S GRID THROUGH PUBLIC–PRIVATE

PARTNERSHIP

With hilly terrain, networks of rivers, and abundant sunshine, Burundi has immense potential for domestic energy generation. Yet Burundi is among the least electrified nations in the world.

In much of the country, only 13 percent of the population has electricity access, while Burundi’s electricity generation capacity is less than half that of its similarly sized neighbor, Rwanda. More than 90 percent of households are rural, and for small-scale cooking and heating, they primarily use biomass, an energy source without much use in terms of economic development.

Burundi’s utility, Régie de Production et de Distribution de L’eau et de l’Électricité (REGIDESO), holds a monopoly on electricity transmission and distribution. Energy developer and Power Africa partner Virunga Power proposed an alternative solution: to develop a public–private partnership (PPP) for rural distribution. The advantages of this type of partnership are that private developers typically secure financing faster than public utilities, and their success is driven by a required return on their investment for profitability and long-term commercial viability. Under the Virunga Power PPP, the developer will purchase power from REGIDESO, allowing the utility to benefit from the model.

In May 2021, the Government of Burundi signed a memorandum of understanding with Virunga Power granting the company exclusive rights to develop a PPP proposal. With the window open to develop the utility model, Virunga Power collaborated with Power Africa to better understand how to build a business plan that would be accepted by the government. EAEP supported Virunga Power to complete necessary studies, analyses, and agreements to advance its business proposition and secure government buy-in. For example, Power Africa provided the company with a financial model and led a series of seminars on establishing a new private utility and a tariff for services.

EAEP’s legal advisors also worked with the government and development partners to update Burundi’s 2015 electricity law to include language on distribution PPPs. In February 2023, EAEP’s legal advisors made progress toward formalizing the PPP by creating a legal document based on the memorandum and drafting the PPP and power purchase agreements for Virunga Power.

With a goal of electrifying 70 percent of the country, including 50,000–60,000 households in the first two years of distribution, the Virunga Power PPP can leapfrog the traditional grid expansion model. It also encourages additional private sector engagement by Burundi’s energy stakeholders and shows that the government is open to sector reforms that will catalyze further development and energy access for citizens. In December 2022, Power Africa hosted a high-level energy sector dialogue in Washington, DC, attended by the President of Burundi, during which Virunga Power presented its latest studies, including those supported by EAEP. At the dialogue, the President called the Virunga Power distribution project a “win–win” for the country and the developer.

The Virunga Power PPP can serve as a model structure for replication in countries with similar access challenges. While traditional development generally focuses on electrifying and building out from a country’s capital cities, the Virunga Power model specifically targets the rural population, which has only 4 percent energy access. New access under the PPP will drive economic development by providing reliable energy to health care facilities, schools, and agriculture operations. The proposed Virunga Power PPP shows how private utilities can work hand-in-hand with national utilities to reach large rural populations in an expedient manner, jointly taking the path to universal energy access.

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Trenchworks for REGIDESO distribution expansion in Bujumbura, Burundi. With the Virunga Power PPP, scenes like this will become more common across Burundi in order to connect more homes and businesses. Photo credit: EAEP

The energy sector in the Democratic Republic of Congo (DRC) is diversifying as demand increases, but the population’s electricity access rate remains far from universal. Given increasing interest from the private sector, especially in the country’s high-potential mining industry, the Government of the DRC must align demand, potential, and affordability to expand the energy sector sustainably, for both households and industry.

With a population nearing 100 million, the largest land mass in East and Central Africa, and abundant renewable resources, DRC has the potential to be the continent’s leading energy producer. However, DRC has struggled to harness its full wind, solar, and hydropower resources, with just 1,338 MW of available generation capacity and only 19.1 percent of the population having access to electricity.

To meet these challenges, IPPs have expanded into distribution; and the national utility, Société Nationale d’Electricité (SNEL), has awarded concessions for selling power directly to consumers in the form of metro-grids. Other developers are looking to create escrow accounts with mining companies to mitigate the risk of either SNEL or the companies defaulting on utility payments.

In DRC, EAEP focused on support to IPPs to de-risk their proposed projects for investors in eastern DRC. Given EAEP’s limited presence in DRC, as well as ongoing support there from other Power Africa mechanisms, EAEP worked with IPPs such as Globeleq and East African Power to diversify generation by adding solar to the grid. In total, EAEP supported 375.3 MW of generation in DRC through legal advisory work and transaction advisory support.

Additionally, EAEP offered planning support to SNEL and other energy entities and strengthened their capacity for grid development. Through these activities, Power Africa identified clear areas for future interventions in DRC that could emphasize electricity resource planning and expanded access.

DEMOCRATIC REPUBLIC OF CONGO

MW REACHED

FINANCIAL CLOSE MW ADDED TO PIPELINE PEOPLE TRAINED

0 MW 375.3 MW Men: 22 Women: 44

SECTOR SUMMARY

Installed capacity 2,677 MW Population 95.9 million

Available capacity 1,338 MW Access rate (on and off) 19%

Average tariff $0.198 per kWh Active IPP Yes, multiple

13 POWER AFRICA EAST AFRICA ENERGY PROGRAM

ADVANCED FINANCIAL CLOSE

GREENSHARE SOLAR (100 MW). EAEP advanced this project toward financial close by studying the possibility of interconnecting the solar power project with a predominantly hydropower-based grid. The developer, Globeleq, requested this study under the premise that a positive finding could aid in proving the technical feasibility of the project as the developer sought funding. Also, as part of its progress toward financial close, Globeleq began working with the Government of DRC to ensure that risk will be properly allocated between the parties. Additionally, Globeleq will update its studies and contract documents before progressing with financing conversations with lenders and investors. As of August 2023, Globeleq had met several times with the US International Development Finance Corporation (DFC), which showed an interest in the project.

KOLWEZI SOLAR POWER PROJECT (132.9 MW) AND LIKASI SOLAR POWER PROJECT (132.9

MW). EAEP advanced both projects toward financial close with EAEP legal advisors’ review of the project’s legal contracts for the developer, East African Power, which is also a Power Africa private sector partner active across sub-Saharan Africa. Additionally, EAEP’s legal advisors developed a framework for East African Power to support an escrow model with the mining companies—the anticipated primary power consumer—to mitigate the risk of payment default by the off-taker, the national utility, SNEL. The mining region has an estimated unmet demand of 800–1,200 MW, such that the additional generation would have a significant impact on the reliability of power to the mines and local community. As of August 2023, before it could reach financial close, the developer needed to renegotiate the PPAs for both projects based on the feedback from EAEP’s legal advisors, to ensure that the contracts will be bankable and meet international standards.

OPTIMIZED POWER SUPPLY ACTIVITIES

STRENGTHENING CAPACITY IN TRANSMISSION FINANCING. In May 2023, the US Embassy in DRC and EAEP—through the Commercial Law Development Program (CLDP)—hosted a two-day capacity development program on transmission financing for DRC counterparts in Kinshasa. The event brought together international experts, regional specialists, and local leaders for an in-depth workshop on financing national transmission as well as regional interconnections and power trade. Speakers included experts from CLDP, Trinity Law Firm, the AfDB, the Tony Blair Institute, and Power Africa. Many attendees came from SNEL, the Agence de Régulation de l’Électricité (ARE), and development partners such as Proparco and private sector company AEE Power Ventures. The sessions were interactive, with great questions and dialogue from participants and speakers. The workshop was the first of a five-part capacity development series organized by Power Africa to bring USAID and donors together to hear from DRC counterparts on priorities and gaps.

PPP REGIONAL TRAINING PARTICIPATION. Between November 2020 and September 2021, EAEP conducted a regional PPP training, which was implemented by the Institute for Public–Private Partnerships (IP3). The remote training featured attendees from utilities, regulators, and ministries throughout the region and two participants from ARE, the regulatory agency. It addressed the legal and financial intricacies of energy sector PPPs, with the objective of improving stakeholders’ understanding of and confidence in working within the sector.

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Participants at the CLDP-hosted transmission financing workshop in Kinshasa, May 2023. Photo credit: CLDP

OBJECTIVE 1I: INCREASED ON-GRID CONNECTIONS

SUPPORT TO VIRUNGA ENERGIES. Support to Virunga Energies. EAEP supported Virunga Energies’ operations from 2021 through 2023. Virunga Energies, not to be confused with Virunga Power, develops hydropower projects and distributes the energy in the North Kivu region. Because of damage to SNEL’s Ruzizi 1 hydropower dam in South Kivu in 2022, caused by plastic pollution in the Ruzizi River, Virunga Energies saw a surge in demand in its service region and began looking for options to increase supply until it could complete its in-progress projects. One possibility identified as a stopgap solution was importing power from Uganda. EAEP introduced the developer to Uganda’s transmission company, Uganda Electricity Transmission Company Ltd. (UETCL), and later to the Ugandan regulator, the Electricity Regulatory Authority (ERA), in the hope of facilitating cross-border power importation. Ultimately, the developer decided against importing power from Uganda due to bureaucratic challenges on both sides of the border.

In late 2023, EAEP completed technical diagnostics for Virunga Energies related to network unreliability.

The objective of the support was to increase reliability for its 27,000 customers in North Kivu. Additionally, as Virunga Energies expands its generation capacity and increases its household connections, the support provided will directly improve network reliability. Additionally, as Virunga Energies expands its generation capacity and increases its household connections, the support provided will directly improve network reliability.

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OBJECTIVE IV: INCREASED REGIONAL POWER TRADE

NURU ENERGY SUPPORT FOR TRANSMISSION DEVELOPMENT. Starting in early 2020, EAEP supported Nuru, a private company with owners in both the United States and DRC, that wanted to expand from mini-grid development to large transmission infrastructure. Because Nuru was new to this aspect of the energy sector, EAEP supported the company by training its personnel on project financing, modeling PPP transmission options, advising on transactions, reviewing feasibility and environmental studies, and providing the grid planning software, PowerFactory DIgSILENT. The support did not lead to the development of the envisioned 400 kV Uganda–DRC interconnector but did support smaller generation advancements for strategic placement in eastern DRC.

See section on “Increased regional power trade” for information on the DRC–Tanzania interconnection prefeasibility study.

CROSS-CUTTING ACTIVITIES

GENDER EQUITY SUPPORT. EAEP sponsored two internships in DRC with Nuru. After having learned of the apprenticeship program’s success in Rwanda, Nuru requested interns for short-term assignments. EAEP could fund only two appointments; however, this model of private sector sponsorship could be replicated in future Power Africa interventions.

Members from across DRC’s energy sector and US Government representatives gathered in Kinshasa in May 2023 to share experiences and opportunities for financing transmission as part one of an ongoing capacity strengthening series. Photo credit: CLDP

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LEVERAGING INDUSTRY TO EXPAND AFFORDABLE ENERGY IN

DEMOCRATIC REPUBLIC OF THE CONGO (DRC)

With more than 100 million inhabitants, DRC is the fourth most populated country in Africa.

Unfortunately, with only 20 percent access, it is also the eighth least electrified country in the world, according to the World Bank. Eighty million Congolese are without access to energy due to insufficient installed generation and a limited grid network. The Société Nationale d’Électricité (SNEL), the national utility, offers below-cost tariffs to consumers, thereby taking a loss that limits the funds available to the company to maintain its infrastructure and equipment or to develop new generation to meet demand. Independent mini- and metro-grids have sprung up beyond the reach of SNEL’s limited network, but these relatively small projects are not a sustainable means of increasing electricity access.

Simultaneously, mining is a substantial source of revenue in DRC. Gold, diamonds, coltan, cobalt, copper, lithium, and other materials are extracted daily from the many mines dotting the country’s southeast region. Yet operations and productivity in this well-resourced area are constrained by unreliable electricity; SNEL is unable to generate enough energy to meet an estimated demand of 800–1,200 MW. As a result, the industry often relies on expensive diesel generators and has expensive options for expansion of services.

To increase generation in this important region, Power Africa private sector partner East African Power is developing the Kolwezi and Likasi solar projects. The addition of an expected

265.8 MW to the grid will significantly improve access to clean energy for the mines and the local population.

Mining companies are often reluctant to sign long-term power purchase agreements or to undergo the required due-diligence processes, so the only off-taker for power at this scale is the national utility. However, SNEL’s financial challenges limit its creditworthiness in the eyes of the private sector. As a solution, EAEP supported East African Power to develop a legal framework for creating escrow accounts with the mining companies, who will be the primary consumers of the solar power. The mining companies will pay into an escrow account for their power; the account will hold the payment until SNEL pays East African Power for the electricity. Should SNEL default on its payment, the money would be available in the escrow account to be recovered by East African Power . The mines will receive reliable power and the developer will have a payment guarantee.

The escrow model is both innovative and replicable and unlocks new opportunities for independent power producers (IPPs) in the energy sector. EAEP also began exploring a similar mechanism with another IPP in DRC. If this model proves successful, power producers can use the escrow model as a basis to expand energy access in the DRC and to cement private sector participation in the sector going forward. The model could also be used for transmission development.

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In the past five years, Djibouti’s power sector has taken steps toward its goal to be 100 percent powered by renewable energy by 2030. Advancements include 220 MW of interconnection to Ethiopia’s hydro-dominated power system (one interconnection is operational and a second is under construction), as well as development of wind, solar, waste-to-power, and geothermal generation.

Although the country has significant renewable resources, domestic electricity supply comes largely from oil-fired thermal power stations. The development of large ports in Djibouti City has driven increased demand as the country aspires to become a commercial hub in the region, given its strategic location in the Horn of Africa, at the confluence of the Red Sea and the Gulf of Aden. Renewable power development includes a 60 MW wind project, a 30 MW solar photovoltaic (PV) scheme, and a well-advanced 35 MW waste-to-energy project led by American company and IPP CR Energy Concepts (CREC Energy).

Djibouti also has high-quality geothermal resources, but significant technical and cost challenges have hindered its commercial development.

The national electricity utility, Électricité de Djibouti, has a monopoly to transmit and distribute electricity in Djibouti. It is overseen by the Ministry of Energy and Natural Resources, which determines policy.

Although legislation now allows private participation in power development, little has occurred in the way of encouraging IPPs. Similarly, despite a legislative framework to facilitate foreign direct investment, Djibouti’s administration seems reluctant to create an enabling sovereign risk environment.

EAEP visited Djibouti in December 2019 to initiate a potential support program. During the visit, the USAID Country Office and EAEP agreed that Power Africa should support the Djibouti power sector wherever there was an appetite for it. Overall, EAEP did not detect strong interest in private sector or Power Africa involvement; however, EAEP did begin to support CREC Energy.

Although EAEP was interested in assisting with some specific areas of geothermal development, the technical problems noted above were already being addressed by Power Africa. EAEP did involve Djiboutian participants in a regional PPP training program and continued to provide ongoing targeted support to CREC Energy.

DJIBOUTI

MW REACHED FINANCIAL CLOSE MW ADDED TO PIPELINE PEOPLE TRAINED

0 MW 35 MW Men: 19 Women: 6

SECTOR SUMMARY

Installed capacity 123 MW Population 1.12 million

Available capacity ~ 60 MW Access rate (on and off) 62%

Average tariff $0.28 per kWh Active IPP Yes, one active

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CREC DJIBOUTI – RENEWABLE ENERGY PARK PROJECT. The developer, CREC, progressed a waste-to-energy project that plans to use general solid waste and tires as fuel. The plant would cost about to build and would produce renewable base-load electricity of 35 MW net capacity. CREC Energy claimed the plant could consume all waste and tires in the Republic of Djibouti. EAEP continuously engaged CREC starting in November 2019 until EAEP’s conclusion regarding financial advisory and partnerships. The CREC proposal was appealing because the project could potentially solve environmental problems around waste management while also contributing to the supply of renewable energy. The CREC developers had undertaken significant feasibility work and had good support from the Djibouti government, including a feedstock supply agreement, a PPA, and an implementation agreement. CREC had also completed an environmental and social impact assessment (ESIA).

Significantly, if the CREC project were to succeed, it might be replicable in other countries.

EAEP undertook due diligence of the CREC project and developers, and CREC Energy responded to all information requests for this exercise. EAEP reviewed the critical project documentation and CREC’s financial model. EAEP advised CREC that some aspects of its project documentation might require changes to make the project bankable for typical IPP project financiers. In addition, EAEP recommended enhancements to CREC Energy’s financial model to make it useful as a “bank” model for financiers to undertake an in-depth analysis of the project. In late 2020, EAEP completed a Power Africa Environmental and Social Review Methodology (PESRM) assessment of CREC Energy’s project based on their ESIA.

During 2020, EAEP energy experts undertook the first of two assessments of CREC Energy’s technical approach. The review noted that the CREC project would use pyrolysis to convert waste to energy, and that the engineering design was quite complex. The evaluators also observed that pyrolysis has had mixed success when used in waste-to-energy applications. Despite some misgivings about CREC Energy’s choice of technology, EAEP’s assessments revealed no fatal flaws and formed the basis for a successful application to USAID to qualify the CREC project for Power Africa support.

After USAID approval, EAEP introduced the project design to several potential funders of power project feasibility and development work for IPPs, including DFC. In addition, EAEP supported InfraCo Africa—an infrastructure investment firm based in the United Kingdom—to undertake due diligence of the CREC Energy project. After the review was concluded, however, InfraCo Africa declined to proceed with financing.

EAEP concluded that the technological risk was the greatest impediment to investment. In a follow-up review, EAEP noted that the overall CREC project technology was unique; that is, whereas the individual technologies that make up the facility design are well established, they have never been assembled as part of a full system.

EAEP also recognized that CREC did not have a working pilot project that could serve as a reference for potential funders to assess commercial viability.

Despite the obstacles, the EAEP advisors indicated that the CREC project would be a tremendous asset with great potential for Djibouti if it could be built and could meet its projected results.

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EAEP built relationships at EEU and Ethiopian Electric Power (EEP) that created a pipeline of over one million new connections from 2019 through 2021 and led to buy-in for better planning for an optimized energy sector.

As EAEP was starting up in early 2018, EEU had a goal to add one million new on-grid connections per year, a pace that would propel Ethiopia toward universal access by 2030. Despite strong efforts, however, EEU was falling short of connections targets and, like most utilities in sub-Saharan Africa, needed guidance on how to reduce losses and increase revenue to support such efforts. As a result, EAEP assisted EEU to improve efficiencies, increase revenue, and roll out more connections. Because EEU had a workforce of over 20,000 employees, EAEP and EEU collaborated on a pilot approach to engage the utility personnel with strategic planning interventions to cascade training and information across the remaining regions in the country.

EAEP’s approach to EEU’s transformation plan was to conduct on-the-job training for district and service center employees from identified support areas, over multiple years. As a result of their efforts, ATC&C losses declined from 34.9 percent in September 2019 to 20.57 percent in August 2021, and revenue increased by between 2020 and 2021.

EAEP also supported a request from the Ministry of Energy, Water, and Irrigation (MoWIE) and EEP to update their master plan. This plan would become a critical enabling-environment deliverable that would dictate generation, transmission, and distribution development from 2025 through 2040. Additionally, EAEP supported MoWIE, EEP, and the regulator (Ethiopian Electricity Authority [EEA]) to advance critical policies and regulations that would unlock renewable energy transactions, including geothermal.

Despite these efforts, EAEP was not able to guide a generation transaction to financial close in Ethiopia.

The primary obstacles were capital transfer and convertibility for IPPs. Ethiopia’s negative trade balance and foreign exchange scarcity, influenced by external debt obligations, have led the National Bank of Ethiopia to establish stringent controls over foreign exchange. Additionally, EEP, responsible for off taking the output of any renewable energy projects, grapples with a financial paradox: despite significant capital expenditures on generation, transmission, and distribution, it operates with unusually low electricity tariffs.

In December 2021, EAEP stopped on-the-ground operations and activities with host-government entities (including the utilities) because of conflict in northern Ethiopia. EAEP did continue supporting private companies; advising regional initiatives; and counting connections based on previous equipment installation.

ETHIOPIA

MW

REACHED

ON-GRID

CONNECTIONS

MW

COMMISSIONED

MW

ADDED

PIPELINE

ATC&C REDUCED PEOPLE

TRAINED

0 MW 1,484,016 connections 0 MW 200 MW 5 percentage points in pilot zones

Men: 782 Women: 236

SECTOR SUMMARY

Installed capacity 5,238.5 MW Population 120.2 million

Available capacity Unknown Access rate (on and off) 56%

Average tariff $0.034 per kWh Active IPP None

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ADVANCED FINANCIAL CLOSE

SCALING SOLAR SUPPORT. In December 2019, Saudi Arabian solar developer ACWA Power secured two 125 MW solar projects, named Gad and Dicheto, under Round 1 of Ethiopia’s Scaling Solar Program. Despite the International Finance Corporation’s (IFC’s) early involvement, the projects faced financing challenges and were mutually terminated by the Ministry of Finance’s PPP Directorate General (PPPDG) and ACWA Power in May 2022. Simultaneously with the first round, PPPDG initiated Scaling Solar Round 2. This phase aimed to develop up to 500 MW of solar PV energy across four distinct projects: Weranso, Welencheti, Humera, and Mekelle. These projects, part of a infrastructure pipeline, were designed under a PPP model, following earlier energy sector deployments. The projects had secured land sites and had begun transferring land-use rights to mitigate potential risks. However, in May 2022, due to the termination of the Round 1 solar projects amid conflict in northern Ethiopia, the Round 2 projects were also suspended before they could reach the request for proposals (RFP) stage. PPPDG indicated that the projects would be re-tendered, although it provided no specific timeline. EAEP developed the required resettlement action plan (RAP) for the initial five solar projects flagged by the World Bank, resulting in the approval of a partial risk guarantee from the World Bank.