Hydropower plays a key role in all of the African Development Bank’s High 5 priority areas that are intended to support the continent’s achievement of the UN Sustainability Goals.
This is according to Batchi Baldeh, Director Power Systems Development at the AfDB, who took part in a live discussion presented by the Africa Energy Forum on “Overcoming Development and Environmental challenges to unlock Hydropower’s Potential in Africa,” as part of the current Digital Energy Festival for Africa.
A key resource across across the continent, providing the vast majority of electricity generation in countries such as Ethiopia, Malawi, Mozambique, Namibia and Zambia, hydropower is also a complex resource to implement with a comparatively lengthy development process, environmental and a lack of development capital to be overcome.
“AfDB is the continent’s bank,” said Baldeh, “we offer various financial instruments across the project cycle for both private sector and public sector operations. Our strategic framework for power is based on the High 5s which are to Light up and Power Africa; Feed Africa; Industrialize Africa; Integrate Africa; and Improve the living conditions of Africans and hydropower plays a key role in all of those High 5s.”
Africa’s staggering hydropower potential
“When talking about the potential for hydropower for Africa, the numbers are just staggering,” was the opinion of Malik Faraoun, director at power project developer Themis Energy.
The company is exclusively focused on developing hydropower projects in sub-Saharan Africa with a portfolio comprising around 539MW worth of projects, including in Côte d’Ivoire, Togo, Madagascar and Cameroon.
“On the one hand you have 90% of the hydro potential that remains untapped on the continent. On the other hand you have 600-million people who do not have access to electricity. So how do we reconcile those two?” asked Faraoun.
“There are certainly some barriers that are manmade, such as dealing with regulations, and other that are made by nature. But increasingly we are seeing other types of barriers related to the environment and social issues that pose challenges to hydropower.”
With regards to barriers when it comes to the bankability of hydropower projects, Baldeh said an important aspect of the project preparation, apart from getting feasibility studies and project development finance in place, was the power purchase agreement. “Once you produce power, you have to make sure it gets to anchor off takers who are credible and able to pay their bills.
“The main risk for hydropower projects is the environmental footprint, because the dam could be several kilometres long, storing millions of cubic litres of water, so the impact could be on thousands of people across huge areas that must be compensated.”
Faraoun said that hydropower projects are unique compared to other technologies. “Typically hydropower projects require a long lead time before you are able to construct. The reason is that there are just too many uncertainties related to hydrology, which ultimately impact the duration of power, the revenues, the geology and also the environmental and social aspects.
“So there is a lot of work required to be done upstream in order to have a bankable project by reducing some of these uncertainties.
“We as developers therefore require a more predictable framework for implementing the project, meaning that the interaction with the host government needs to be positive and that some of the uncertainties have to be addressed at the beginning.”
He said that depending on the topography of a region, the environmental and social impact on a local community would vary. “In West Africa, where the topography is flatter, the size of the reservoirs are bigger. That means that you will impact the population that is around the reservoir. It also means that there could be an impact on the environment and the biodiversity.”
He added: “For us as developers, we have seen that we are not only technical implementers or financial engineers, we are becoming more and more ENS experts because the ENS issues need to be at the forefront of the design of the project. That is why we try to tackle the ENS aspect as early as possible in the project stage.”
Regional trading important
Responding to an audience question whether any specific countries on the continent were particularly supportive of hydropower projects, the AfDB’s Baldeh stated: “What is important, that a country and regional economic community and power pool have a risk-cost masterplan that makes sense, taking into account the ideal generation mix, looking at how technologies are changing and disrupting the power value chain.
“Here I have in mind solar and wind, which are intermittent but not dispatchable. Power trading across regions is also extremely important.”
The Themis director emphasised that some parts of Africa are very different with more or less hydropower potential. “Every hydropower unique, no project is similar.”
“We say that 90% is not tapped in,” he explained, “but with some of the sites you have viability issues depending on topography, geology and the environmental impact that projects may entail.”
The 200 MW Sahofika project in Madagascar is one of the biggest projects in the company’s portfolio and “this is the largest, single private sector investment in the country.”
Faraoun said the enormous but untapped potential of the DRC’s 3GW Inga hydropower project calls for more collaboration, “because when it comes to projects that are bigger than 100 and 200MW and above it’s really important that there is a pool of investors, financiers and institutions that are able to collaborate for the project to be successful.
“We always try to partner with the best suited institutions.”
The discussion also focused on the effect of climate change and resultant droughts, particularly in East Africa, on the continent’s water resources and the bankability of hydropower projects.
“It is in the detail of the risk allocation and the project structuring,” said Baldeh.
“In East Africa specifically you have the hydro and a lot of geothermal, which is also dispatchable, and renewables. So there is a broad mix there. But what we have seen is many countries are trying to have their own energy security resulting in overcapacity in some countries or clusters of countries and deficits in others.
“So it would make a lot of sense to look at this more closely where we will facilitate mutually beneficial electricity trade as the country and region transitions more quickly to greener growth. And these work streams are being looked at by the bank and other development partners.
“No development partner and country can do it alone. We need partnerships where the savings to the importing countries and the revenues to the exporting countries are highlighted so that you have alternative development paths.”
The discussion was led by François-Guilhem Vaissier, a partner at the law firm White & Case.
For more information on the exciting and packed programme and to register for the Digital Energy Festival for Africa:
– Africa Energy Forum sessions, click here
– Oil & Gas Council sessions, click here
– African Utility Week & POWERGEN Africa sessions, click here – FREE access
– ESI Africa sessions, click here – FREE access
The Digital Energy Festival is hosted jointly by four of Clarion Events’ leading energy brands Africa Energy Forum, African Utility Week & POWERGEN Africa and the Oil & Gas Council’s Africa Assembly and the leading energy journal ESI Africa providing six weeks of compelling content until 26 November.