REEEP

Austria promotes CDM in Africa

Vienna, 12.09.2007

Interview with Austrian Environment Ministry's Traude Wollansky

If you do not have access to electricity, it makes sense to turn to the wood that surrounds you for energy. In many parts of Africa, it is not unusual to see some villagers strolling into the woods, chopping down trees or branches, covering them up and lighting them. After a patient wait lasting a few days they will find that the pile of wood has become charcoal.

It is an easy solution. Used throughout the continent, charcoal is a versatile source of fuel for cooking. The fumes are a health risk and release large amounts of greenhouse gases.  Few governments in Africa, though, have taken the trouble to help people manage charcoal production and burning practices more effectively. But a new capacity building project in Uganda funded by the Austrian government in the context of the Austrian JI/CDM-Programme aims not only to do just that, but to use the experience to help earn carbon credits while also helping break through the barriers holding back more African CDM projects of different kinds.

“Most of these regions are basically blank on the map as far as CDM is concerned. We want to help develop an energy efficient method for producing charcoal and avoiding methane emissions, but we are also interested in hydropower, biodiesel and biogas” says Gertraud Wollansky, an executive at the Austrian Environment Ministry, which is drawing on the resources of multilateral clean energy organisation the Renewable Energy and Energy Efficiency Partnership (REEEP) for the project.

The Nile experience

There are good reasons for choosing Uganda, which is already pioneering one of the few African CDM projects that are not based in Tunisia or South Africa. Engineers working on the West Nile Electrification Project (WNEP) have constructed a 3.5 MW hydropower plant on the banks of the White Nile (a tributary of the main river Nile) which flows out from Lake Victoria in the heart of the continent. That project has received funding from the World Bank and other international organisations and will cut demand for diesel and thermal power as well as kerosene and paraffin. It will also avoid transport emissions from fuel trucks.

It is one of the building blocks used by Wollansky and her colleagues, giving them more knowledge, and enabling them to create another project. That in turn will provide the team with new insights, eventually perhaps creating a domino effect. 

“The project that is finally selected will be a pilot in the sense that we hope that if we can demonstrate that a project really works, other projects will be able to follow this example and can use the experience we’ve gained,” she explains. Three other countries, in which the Ministry is also working in conjunction with REEEP, are equally suitable candidates for similar groundbreaking projects: Ethopia, Ghana and Tanzania. In Ghana, they are interested in introducing more methane capture and biogeneration as well as helping fuel switching from oil to gas.

Dam busting

None of these countries are secure places to operate in, regardless of whether the project in question relates to clean energy or other industries.  Control Risks, a consultancy that estimates the risk of investing in different countries all over the world, says Uganda and Ethiopia present a high security risk (alongside Zimbabwe, Israel and Russia) while Ghana and Tanzania present a medium security risk. The estimates are based on the effectiveness of the rule of law, government stability, likely damage to infrastructure and other considerations.

“Very few African countries have the kind of credit ratings which will allow loans to get through,” says Wollansky, pointing out one of the main financial barriers affecting clean energy development.  Hence, they need support, which the Austrian government will provide by following the project right through to its final stages. 

A WNEP executive elaborates further on Uganda: “the lack of a capital market available to Independent Power Producers (IPPs), the utility company’s inability to provide the required financing, the consumers’ low ability to pay, and the high upfront investment would preclude the WNEP from coming to fruition,” he explains, referring also to particularly risky energy and infrastructure sectors in Uganda as well as inflation and currency risks. 

Moody’s and other agencies have not even rated Uganda, because of political and socio-economic instability. Security is an important issue considering the history of political instability in the Great Lakes Region over the last decades.  But the four countries in question have been selected because they – unlike some other African countries - have a well functioning Designated National Authority (DNA) set up to deal with CDM project applications, despite their fragile financial climate. That means that REEEP and the Austrian team will not be building from scratch and this in turn will enable them to reach their targets in the two years that are available; there are more synergies with these countries than with others in the region.  Fast developing nations like China and India have set up DNAs some years ago and their institutions are better acquainted with the CDM. They also have a store of the required skills available on the spot and a less bumpy investment climate.  These are core reasons why they constantly leapfrog other developing nations.

“African countries need to have enough resources to prepare the project and overcome several bureaucratic constraints”, says Wollansky. Of the four she is dealing with, she observes: “even if they have the skills available, the connection to CDM-related knowledge is not often there.” Thus, the consortium will be aiming to fill in these gaps in order to help lay the foundations for greater skills, administrative and intellectual capacity for more clean energy.

Missing links

According to Wollansky, the relations with the Ugandan DNA are “well advanced”. One of the tasks is to build links between different elements of the project – for instance between the capacity building activities (relating to administration and skills) and the actual project construction itself, or between different pools of expertise. 

REEEP’s work in Africa will provide a useful source of information and act as a communication tool.  “We’ll be using the network REEEP has in Africa to establish contacts to distribute the knowledge.  We want to start pilots that can be multiplied on the ground, and REEEP can play a big role in the multiplication effect,” she comments.

As the WNEP executive notes, there is plenty more potential for hydropower in the West Nile region which in the first instance could help develop agricultural businesses; these pay high energy bills and experience regular power cuts at peak periods because of a lack of capacity. In the longer term, Wollansky visualises several small-scale power projects (below 15MW) as well as efficient charcoal production, though the transaction costs for these are often nearly as high as for the larger-scale projects. However, the CDM procedures for smaller projects are simpler.

“We are not exclusively focussing on small scale projects in our African initiative, we would welcome large scale as well. As it is, there are simply more small scale than large scale project opportunities offered in Africa,” says Wollansky. Small or large, by improving the disjointed work often carried out by different elements in a project’s development, it is expected that some of the transaction costs will eventually be cut.