Three articles on plans to dam the Congo River.
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Africa Energy Intelligence, N� 676
30/05/2012
CONGO-K
Big cash input for Inga
The World Bank is putting together a $43 million technical assistance
package for Congo-K�s energy ministry that will be put to the
institution�s board in a year�s time. It will be rounded out by a
further $20 million loan from the African Development Bank. The money
will go towards forming a legal and institutional framework for the
huge Inga 3 dam project on the Congo River, a framework that will
enable the Bank to continue funding the project (it is scheduled to
offer financial guarantees for Inga 3, or may even acquire a direct
stake in it). To be sure, Inga 3 will be promoted as a public/private
partnership: the dam and adjacent canals will belong to the government
and be financed out of public funds, but the power plant is to be
private. To deal with such a complex set-up, the Bank wants Congo to
set up an �Inga 3 authority� to manage the site and act as interface
with the private operator.
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http://mg.co.za/article/2012-05-12-drc-short-circuits-power-supply
DRC short-circuits power supply
12 May 2012 02:51 - Roman Grynberg
Southern African countries bear the brunt of ambitious plans gone
awry, writes Roman Grynberg.
For many years the Democratic Republic of Congo (DRC) has proposed the
development of new hydropower plants along the Congo River.
In the early post-independence phase, it developed the Inga I and II
dams, which supplied the country with what has become increasingly
intermittent hydroelectric power.
The government now wants to develop the Inga III dam on the river,
which will produce somewhere between 4000MW and 5000MW of electricity
a year.
But the intentions of the DRC go well beyond this. Over time, it wants
to develop the Grand Inga Dam project, which will provide 40000MW of
electricity at a staggering cost of $80-billion to $100-billion. The
dam will be twice as large as the Three Gorges Dam in China � the
world�s largest in terms of electricity production.
The World Bank estimates that the Congo River, if properly used, could
generate up to 100 000MW of electricity a year � enough to supply the
entire Africa for decades to come.
When South Africa began running out of electricity from its ageing
thermal plants at the beginning of this century, a new project,
Westcor, was established in 2003 to bring the DRC�s vast hydroelectric
resources to an increasingly energy-starved Southern Africa.
Memorandum of understanding
The project had the backing of the New Partnership for Africa�s
Development and the Southern African Development Community (SADC) and
would have directed electricity through a new western corridor to
Angola, Namibia, Botswana and South Africa.
The SADC members even signed an interutility memorandum of
understanding and an intergovernmental memorandum of understanding
with the DRC to develop the Inga III dam. Namibia, Botswana and Angola
were to share 1000MW of the project when it peaked in 2015.
With the DRC winding down from the largest war in Africa�s history,
there was no way it could develop such a project alone � and so its
neighbours agreed to buy the electricity and help to develop the dam.
Initially all seemed well, but cheap electric power results in a
fiendish �addiction� for big users and the worst �addict� is probably
the aluminium industry.
About 60% of the cost of aluminium is the electricity used to refine
it. As a result, mining companies are willing to ship their bauxite
to the most remote locations to take advantage of cheap power.
In Mozambique, BHP Billiton managed to use a large amount of that
nation�s cheap electricity from the Cahora Bassa Dam to power the
Mozal I and II project�s smelters. The Mozal plants produce 500000
tonnes of aluminium a year. By the mid-2000s the Mozambican government
made it clear that it had no interest in the further expansion of
Mozal III because there was not enough electricity available.
Embedded derivative
In the late 1990s, Mozambique � desperate for investment after its
economy had been virtually destroyed by decades of the liberation
struggle and civil war � had agreed to give the company a 50-year tax
holiday in terms of which it would only pay taxes on 1% of turnover.
The company could use what Eskom proudly advertised as the cheapest
electricity in the world through an opaque financial instrument called
an embedded derivative, which linked the price that BHP Billiton paid
to Eskom to the price of aluminium and the value of the United States
dollar.
Eskom lost R9.5-billion in 2009 as aluminium prices and the value of
the dollar collapsed. But the power utility, unlike the government of
Mozambique, was able to renegotiate what had been a bad deal with BHP
Billiton.
However, BHP Billiton knew that Southern Africa was running out of
cheap electricity and, like all �addicts�, went elsewhere for a fix �
to the next nearest source of cheap power, the DRC, which, like
Mozambique a decade earlier, was war-ravaged and desperate for
investment.
BHP Billiton agreed to build a $2.5-billion smelter near Inga III and
to develop the dam, thereby undermining supply to the Westcor partners.
Predictions
The DRC�s four neighbours, which by then had poured a great deal of
money into Westcor, were not amused. Pat Naidoo, then-chief executive
of Westcor, was quoted as saying in 2009: �The DRC government has said
to us that they would like to take on the development of the Inga III
on their own in order to cater for the supplies of, principally, BHP
Billiton�s energy demand for its proposed smelter. So they would
develop the power station themselves, which is very unlikely.�
In 2010 Westcor, after having swallowed millions of rand, vanished
into history. Naidoo was proved correct in his predictions because, in
March, BHP Billiton opted out of the Inga III project, saying the
economics were unfavourable.
Perhaps, after weighing the risk of investing in a country that was
ready to pull the plug on its neighbours, it realised that it was
unwilling to take the risk of having the DRC change its mind again.
Ironically, in the past few weeks DRC ambassadors and representatives
have been going around the region desperately looking for customers to
buy electricity from Inga III. It will have to find them before anyone
will consider funding the $5-billion to $8-billion project.
It is now proposing what is reported to be an �Eastcor� project, which
would include Zambia. In the meantime, Botswana appears to have
learned its lesson and has built a 600MW thermal power station at
Moropule and is planning a further 600MW later this decade to meet its
growing energy demands.
Grand Inga
This is fine for Botswana, which has vast coal reserves, but quite
another matter for countries such as Namibia, which is short of energy
and � presumably out of desperation � is reported to be considering
buying electricity from the DRC.
The DRC�s ambassador in Namibia, Kaboba Wa-Kimba, reportedly said:
�South Africa has already indicated that they want 1700MW from the DRC
and an agreement to this effect was signed in November 2011.� It has
also been reported that President Jacob Zuma and the DRC�s president,
Joseph Kabila, are expected to sign an agreement this year on
developing the $100-billion Grand Inga dam.
If this is the case, Zuma will need to explain where he sees Grand
Inga fitting into Eskom�s long-term power supply plans. The parastatal
has resisted attempts by Botswana over the past few years to sell
large volumes of coal-powered electricity from CIC Corp�s Mmambula
thermal coal mine. Hydropower is, of course, much cheaper than coal.
The World Bank, the African Development Bank and regional bodies are
now pushing regional power integration at the cost of prudence and
good sense.
In the wake of the Westcor fiasco, the DRC cannot be regarded as a
credible partner and it is imprudent to rely on it for electricity to
fuel development. But some countries have short memories and will not
wean themselves off offers of cheap power no matter what has been done
to them in the recent past.
Perhaps the only real lesson from this sad attempt at regional power
integration is �fool me once, shame on you; fool me twice, shame on me!�
These are the views of Professor Roman Grynberg and not necessarily
those of the Botswana Institute for Development Policy Analysis, where
he is employed
---------------
http://www.ipsnews.net/news.asp?idnews=107815
World Bank Accused of Ignoring Lessons on Mega Infrastructure
By Carey L. Biron
WASHINGTON, May 16, 2012 (IPS) - In a renewed funding focus on large-
scale infrastructure, the World Bank, Group of 20 (G20) countries and
other multilateral groups are wilfully overlooking lessons learned
decades ago, a new report by International Rivers warns.
In recent months, the report notes, infrastructure has again become a
"buzzword of the current development debate".
The issue also looks set to figure large in upcoming discussions in
Mexico among the G20 and in Rio de Janeiro for the United Nations
Conference on Sustainable Development, but could spark a rethink
following new World Bank President Jim Yong Kim's assumption of
leadership in June.
"Past energy, water and transport strategies have neglected the
poorest population groups, and taken a heavy toll on affected people
and the environment," states the report, noting that new strategies
that don't specifically address the needs of the poor risk
"entrench(ing) the power of privileged groups".
Infrastructure has always been a key development concern. But while
large-scale projects for decades constituted a funding priority for
the World Bank, such lending took a backseat during the 1990s.
This policy move coincided with increasingly vocal criticism of the
social, environmental and financial costs at stake with such mega
projects. Such mobilising seemed to have an effect, as through the
1990s the World Bank scaled back its development of massive
infrastructure.
Now, that appears to have come to an end. "Infrastructure lending has
once again become the World Bank's core business," notes the report,
titled "Infrastructure for Whom?"
Apparently motivated by the G20, in late 2011 a series of new policy
papers charted a wholesale return to large-scale infrastructure as a
development strategy by the multilaterals.
Large, privately funded, centraliSed projects, the argument suggests,
will result in lower overall costs of primary services, such as
electricity. But the evidence does not bear out the contention that
investment in large projects has a resulting impact on the poor.
While the recent World Bank policy paper highlights the Inga dam in
the Democratic Republic of Congo � the largest hydroelectric
installation in the world � as exemplary of its newfound focus, the
International Rivers researchers point out that billions of dollars in
investment in the site over the past 50 years has left 94 percent of
the country without access to electricity.
In the past, the Bank itself has admitted to overdependence on the
idea that such mega investment would "trickle down" to local
communities. But little in the new documents suggests that this lesson
has informed current policymaking.
"Many communities want investments in infrastructure and other
development, but top-down approaches are no longer being tolerated,"
Andy White, a coordinator with the Rights and Resources Initiative
here in Washington, told IPS. "Unfortunately, many projects already
underway are being planned without due consideration of local peoples'
rights or the environmental consequences."
Observers are likewise dubious at the prospect of increased dependency
on private investment. While the Bank has set a goal of doubling
current levels of public-private partnerships (PPPs), it admits that
doing so is based on its own budgetary problems, as is the larger push
towards consolidation into larger projects.
Yet private investment has traditionally tended to centre almost
exclusively on urban and middle-class segments of a population, often
further marginalising the impoverished communities in whose name
development projects are typically undertaken.
"While we recognise the need for better infrastructure and private-
sector investment in developing countries, market forces alone will
not automatically make basic services affordable to those that need
them the most," Asif Saleh, with BRAC, a global development
organisation based in Dhaka, told IPS.
"Market-based solutions will require some level of protection for the
poor � at least for a certain period, until economic growth in the
given region becomes more inclusive. If we want to ensure that
inclusivity, it's important also to focus on creating opportunity from
the bottom up."
Conflicts of interest
PPPs might well be increasingly important development tools in the
current context of economic downturn and austerity. Andy White notes
that "done correctly, this influx of investment provides an
opportunity to clarify land rights and advance equitable development
across developing countries' landscapes."
Yet many warn that such an approach would need to include a
simultaneous priority on accountability. Large-scale projects, after
all, are notoriously problematic in allowing for public oversight.
"In constructing PPPs, there are inherent conflicts of interest,"
Michelle Chan, with Friends of the Earth U.S., told IPS. "Once you mix
in a significant participation from the private sector, there is going
to be a bias against the levels of transparency that you would expect
from a publicly funded project."
Chan says that while infrastructure is clearly critical for
development, it is disheartening to see that the World Bank "continues
to be biased towards new mega projects that often benefit industry
over people".
She points to a new 600-megawatt power plant in Kosovo that would burn
lignite, the dirtiest form of coal. Despite clear environmental
concerns, the Bank is currently considering funding the project.
"For the Bank, it is easier to fund a massive, polluting plant like
this, rather than deal with the fact that Kosovo loses half of its
energy due to simple inefficiencies," Chan says. "The World Bank needs
to get better at distributed energy, rather than continuing on this
path of centralised infrastructure."
International Rivers likewise points to a finding by the International
Energy Agency that 70 percent of rural areas would be best served by
electrification through distributed solutions.
"Such bottom-up solutions", the report concludes, "offer a better way
to address the basic needs of the rural poor than the large regional
projects proposed by the G20 and the development banks."
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