DAR ES SALAAM, TANZANIA – The second round of Challenge Fund support for innovators and entrepreneurs working in the logistics and transport sector was officially announced last week in Dar es Salaam.
The Logistics Innovation for Trade (LIFT) Challenge Fund is a $16 million (Tsh.35.2 billion) grant-based financial mechanism that supports innovators with good ideas for products or services that can reduce the costs of transport and logistics in East Africa.
According to TradeMark East Africa (TMEA) which is a not-for-profit organisation funded by a range of development agencies with the aim of growing prosperity in East Africa through trade, LIFT will provide grants ranging from $ 150,000 to $ 1,000,000 (Tsh.330 million to Tsh.2.2billion respectively) to winning proposals from innovators from across the world whose project ideas will be implemented in the East African Community (EAC).
It was further revealed that the launch follows a successful inaugural round that saw 9 awards to projects that are touted deliver a significant reduction in time and transport costs in their area of operations
LIFT is a TMEA initiative managed by Nathan Associates through a Fund Management Team based in Nairobi with funding support from the UK Government’s Department for International Development (DFID). LIFT seeks to trigger and introduce innovative approaches to tackling freight and transport costs in the East Africa region.
East Africa is reported to have the highest freight and transport costs in the world; over 50% higher than the USA and Europe per kilometre. Indeed, transport costs for landlocked countries in the region can be as high as 75% of the value of exports.
Transit times have the most significant effect on exports and also result in firms having to carry higher levels of stocks making them less efficient.
Successful LIFT projects will contribute to TMEA’s objective of reducing transport time along the main East Africa transport corridors by 15% by the end of 2016.
Speaking at a side interview session after the launch, Dr. Josephat Kweka, Country Director Tanzania, TMEA said that it was their hope that the entrepreneurs and innovators of the EAC in partnership with their counterparts internationally will drive forward development through the adoption or introduction of ‘best practice’ technologies in the transport and logistics sector, enabling local businesses to compete favorably in the increasingly global economy.
“LIFT is a valuable financial instrument that supports private sector ‘can-do’ to develop and test new ideas that should reduce the cost and time of transport and logistics in the EAC and TMEA is essentially co-investing with the private sector in projects that are seen as being too risky to undertake without external sponsorship or support,” Dr. Kweka said.
LIFT Challenge Fund Manager Mr. David Mitchell emphasized the impact of the challenge fund to local entrepreneurs saying that the Challenge Fund instruments fill a significant gap in the financial support needs of private businesses and the innovators that drive business activity to greater results and efficiencies.
“This is achieved while mitigating the risks of high-return projects that mainstream banking and financial institutions tend to avoid supporting due to the uncertainties of the business proposition or a bank’s own lack of experience in the sector,” Mitchell said.
The LIFT Challenge Fund is open to businesses and individuals throughout the world that are either presently operating or intend to be based in the EAC. Businesses in the transport and logistics sector, or those that provide services to actors within it, are now being invited to submit their innovative concepts to LIFT for possible funding.
Recognising the initial promise and success of Round 1 LIFT Award winners, David added, “We have 9 Round 1 projects that confidently predict they will deliver a significant reduction in time and transport costs in their area of operations, but with a wider extrapolation of the best practices proven, it is entirely logical that trade levels and the competitiveness of regional enterprises will be enhanced”.
He said a reduction of a single day in transit times between Dar es Salaam and Kigali for example should offer a potential for a 7% increase in export volumes, thus reductions in transit costs and times will present real potential for a resulting increase in trade attached to the wider benefits of a reduction in the cost of living and a more rapid growth in the creation of new jobs across the EAC.
TMEA works closely with EAC institutions, national governments, the private sector and civil society organisations. TMEA is funded by a range of investors in development that include: Belgium, Denmark, Finland, Netherlands, Sweden and the United Kingdom.
East Africa is emerging as a “hotbed” for energy-related investments, not only for its robust economic growth, but also for its potential to become one of the largest producers and exporters of oil and natural gas in the world, research firm Frost & Sullivan reports.
In its ‘East Africa Energy’ report, the firm outlined that countries including Tanzania, Kenya, Ethiopia and Rwanda, which traditionally depended on biomass to meet most of their energy requirements, were gradually shifting to modern energy sources to meet the growing demands of the expanding urban population and the rising per capita income levels.
The analysis further highlighted that East Africa would have more than 50 000 MW of generation potential by 2030, dominated by hydropower, coal, wind, geothermal power and natural gas-based generation systems.
More than 80% of the potential gas reserves in East Africa were concentrated around Mozambique and Tanzania.
“While liquefied natural gas exports from these countries were expected no earlier than 2020, rapid development of gas power projects will provide a short-term to growing electricity demand in the region,” the report said.
The region would, therefore, provide immense opportunities for companies specialising in oil and natural gas exploration and production, power generation and associated infrastructure, as well as renewable-energy technology commercialisation.
Frost & Sullivan energy and environment senior research analyst Neeraj Sanjay Mense added that energy development was gaining priority as East African economies sought to attain middle-income status over the next decade.
“In view of this objective, governments in the region are adopting strategies to diversify the energy mix, as well as encourage private sector participation,” he said.
Investment from the private sector was also critical as the East Africa energy reserves required substantial funding to reach full potential, which could not be met by government subsidies alone.
However, the report emphasised that issues pertaining to finance, political stability and security could limit private sector participation within the region, and private players would, therefore, need to align investment strategies with the developmental plans of the respective regions to be successful.
Further, the lack of adequate infrastructure and skilled resources escalated the costs of operation and stalled energy projects. Therefore, training local workers would ultimately aid the long-term sustainability of energy businesses in East Africa.
“An adoption of mechanisms to share technical knowledge through international cooperation will ensure steady growth. Collaboration with experienced project developers will also be imperative to accelerate technological advancements and implement the respective plans within the East African energy sector,” observed Mense.
Africa is experiencing a revolution towards cleaner energy through renewables but the story has hardly been told to the world, says Achim Steiner, Executive Director of the United Nations Environment Programme (UNEP).
Steiner, who had been advocating for renewable energy at the U.N. Climate Change Conference in Lima, said Africa is on the right path toward a low carbon footprint by tapping into its plentiful renewable resources – hydro, geothermal, solar and wind.
“There is a revolution going on in the continent of Africa and the world is not noticing it. You can go to Egypt, Ethiopia, Kenya, Namibia, and Mozambique. I think we will see renewable energy being the answer to Africa’s energy problems in the next fifteen years,” Steiner said in an interview with IPS.
Sharing the example of the UNEP headquarters in Nairobi, Kenya, Steiner told IPS that the decision was taken that “if UNEP is going to be centred with its offices in the African continent on the Equator, there can be no reason why we are not using renewable energy. So we installed photovoltaic panels on our roof which we share with UN Habitat, 1200 people, and we produce 750,000 kilowatt hours of electricity every year, that is enough for the entire building to operate.”
He noted that although it will take UNEP between eight and 10 years to pay off the installation, UNEP will have over 13 years of electricity without paying monthly or annual power bills. “It is the best business proposition that a U.N. body has ever made in terms of paying for electricity for a building,” he said.
According to Steiner, the “revolution” is already happening in East Africa, especially in Kenya and Ethiopia which are both targeting renewable energy, especially geothermal energy.
“Kenya plans to triple its electricity generation up to about 6000 megawatts in the next five years. More than 90 percent of the planned power is to come from geothermal, solar and wind power,” he said.
Kenya currently runs a geothermal power development corporation which invites tenders from private investor bids and is establishing a wind power firm likely to be the largest in Africa with a capacity of 350 megawatts of power under a public-private partnership.
In Ethiopia, expansion of the Aluto-Langano geothermal power plant will increase geothermal generation capacity from the current 7 MW to 70 MW. The expansion project is being financed by the Ethiopian government (10 million dollars), a 12 million dollar grant from the Government of Japan, and a 13 million dollar loan from the World Bank.
Renewable energy has costs but also benefits
Phillip Hauser, Vice President of GDF Suez Energy Latin America, told IPS that geothermal power is a good option for countries in Africa with that potential, but it comes with risks.
“It is very site-dependent. There can be geothermal projects that are relatively cost efficient and there are others that are relatively expensive. It is a bit like the oil and gas industry. You have to find the resource and you have to develop the resource. Sometimes you might drill and you don’t find anything – that is lost investment,” Hauser told IPS.
Steiner admitted that like any other investment, renewable energy has some limitations, including the need for upfront initial capital and the cost of technology, but he said that countries with good renewable energy policies would attract the necessary private investments.
“We are moving in a direction where Africa will not have to live in a global fuel market in which one day you have to pay 120 dollars for a barrel of crude oil, then the next day you get it at 80 dollars and before you know it, it is doubled,” he said.
“So if you are in Africa and decide to exploit your wind, solar and geothermal resources, you will get yourself freedom from the global energy markets, and you will connect the majority of your people without waiting for thirty years until the power lines cross every corner of the country,” Steiner added.
A recent assessment by the International Renewable Energy Agency (IRENA) of Africa’s renewable energy future found that solar and wind power potential existed in at least 21 countries, and biomass power potential in at least 14 countries.
The agency, which supports countries in their transition to a sustainable energy future, has yet to provide a list of countries with geothermal power potential but almost all the countries around the Great Rift Valley in south-eastern Africa – Uganda, Ethiopia, Kenya and Tanzania among others – have already identified geothermal sites, with Kenya being the first to use a geothermal site to add power to its grid.
IRENA Director-General Adnan Z. Amin told IPS that the agency’s studies shows that not only can renewable energy meet the world’s rising demand, but it can do so more cheaply, while contributing to limiting global warming to under 2 degrees Celsius – the widely-cited tipping point in the climate change debate.
He said the good news in Africa is that apart from the resources that exist, there is a growing body of knowledge across African expert institutions that would help the continent to exploit its virgin renewable energy potential.
What is needed now, he explained, is for countries in Africa to develop the economic case for those resources supported by targeted government policies to help developers and financiers get projects off the ground.
The IRENA assessment found that in 2010, African countries imported 18 billion dollars’ worth of oil – more than the entire amount they received in foreign aid – while oil subsidies in Africa cost an estimated 50 billion dollars every year.
New financing models for renewable energy
According to Amin, renewable energy technologies are now the most economical solution for off-grid and mini-grid electrification in remote areas, as well as for grid extension in some cases of centralized grid supply.
He argued that rapid technological progress, combined with falling costs, a better understanding of financial risk and a growing appreciation of wider benefits mean that renewable energy would increasingly be the solution to Africa’s energy problem.
In this context, Africa could take on new financing models that “de-risk” investments in order to lower the cost of capital, which has historically been a major barrier to investment in renewable energy, and one such model would include encouragement for green bonds.
“Green bonds are the recent innovation for renewable energy investments,” said Amin. “Last year we reached about 14 billion dollars, this year there is an estimate of about 40 billion, and next year there is an estimate of about 100 billion dollars in green finance through green bonds. Why doesn’t Africa take advantage of those?” he asked.
During the conference in Lima, activist groups have been urging an end to dependence on fossil fuel- and nuclear-powered energy systems, calling for investment and policies geared toward building clean, sustainable, community-based energy solutions.
“We urgently need to decrease our energy consumption and push for a just transition to community-controlled renewable energy if we are to avoid devastating climate change,” said Susann Scherbarth, a climate justice and energy campaigner with Friends of the Earth Europe.
Godwin Ojo, Executive Director of Friends of the Earth Nigeria, told IPS that “we urgently need a transition to clean energy in developing countries and one of the best incentives is globally funded feed-in tariffs for renewable energy.”
He said policies that support feed-in tariffs and decentralized power sources should be embraced by both the most- and the least-developed nations.
Backed by a new discussion paper on a ‘global renewable energy support programme’ from the What Next Forum, activists called for decentralized energy systems – including small-scale wind, solar, biomass mini-grids communities that are not necessarily connected to a national electricity transmission grid.
Source: Oil Price.com
The East African region is leading the continent’s charge to embrace renewable energy, including solar, geothermal and wind power.
Kenya, Ethiopia and Rwanda are investing heavily in these forms of clean energy and moving away traditional hydropower sources as demand for power continues to surge and economies grow.
Countries lying on the Great Rift Valley, known for its huge geothermal power potential, are investing heavily in resource prospecting, with Kenya leading in both exploration and development. East Africa is also geographically located in the tropics, which equates to big solar potential.
“Countries in the east African region have realized the benefits of embracing renewable energy and many have drafted and put in place policy documents to guide exploitation of clean energy,” said Pavel Oimeke, director of renewable energy at Kenya’s Energy Regulatory Commission (ERC). “Many countries have also developed legislation that could see a major take-off of the sub-sector. And with funds being available, this region should see huge investments in exploitation of natural resources for power production.”
The tiny country of Rwanda is leading in solar energy, with an 8.5-MW solar farm that was commissioned in 2014. The $24 million farm in Agahozo has 2,800 solar panels. Though this may seem small compared to American or European standards, it accounts for 7 percent of the country’s installed power capacity.
Ethiopia leads in wind power with its 120-MW Ashegoda wind farm located in the north of the country, which was built in 2013. Ethiopia is already producing another 51 MW from wind generated from two different sites in the south of the capital Addis Ababa.
In Kenya, private investor Greenmillenia Energy Limited is developing a 40-MW solar plant in the north of the country that is expected to start feeding electricity to the national by grid mid-2015. Greenmillenia has applied for a generation license from the Kenya’s energy regulator ERC.
According to the World Bank, Kenya has nearly 1,000 MW of wind capacity potential, but currently only a meager 6 MW is installed on the outskirts of the capital, Nairobi. However, the country is developing what will become Africa’s largest wind farm, the 300-MW Lake Turkana Wind Power Project, which is expected to be completed in 2019. The $686 million project is financed through a consortium led by the African Development Bank (AfDB).
Kenya leads the geothermal power sector with 350 MW of capacity, and according to the ERC, Kenya has more than 10,000 MW of geothermal resource potential. Extensive resource survey work is currently taking place to the west of Nairobi.
East Africa is also investing heavily in microgrid technology in order to provide energy access to the more than 75 percent of the population that currently lives without electricity, according to international development agency Practical Action. A major part of this microgrid solution is in the use of solar energy including off-grid solar photovoltaics (PVC), according to Denise Umubyeyi, finance and business development manager at Practical Action East Africa.
“Investment in micro and mini grids plus use of solar PVC could greatly increase both penetration and access to power for millions of people,” said Umubyeyi, “and this is where governments, private sector and development partners should direct their energies.”
Source: Renewable Energy World