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AfDB Invests in Energy Efficiency, a Central Pillar for Energy Transition

AfDB Invests in Energy Efficiency, a Central Pillar for Energy Transition

“Energy efficiency is no longer an option, it is a priority because we are in a climate emergency,” says Jalel Chabchoub, chief investment officer in the African Development Bank‘s Renewable Energy and Energy Efficiency Department.

Today, we no longer talk about climate change or global warming, but rather about “climate shock,” Chabchoub continues. He encourages countries to “act at the source”, in other words, to address the demand side.

In Africa, as elsewhere, energy efficiency helps to lower energy bills, save resources and improve countries’ industrial competitiveness.

“For the public, this means lower bills and more to spend elsewhere; for energy companies, it means lower spending on production inputs, better-managed demand and better consumer purchasing power. Energy efficiency is a central driver of the energy transition,” notes Chabchoub.

Climate shock is hitting Africa hard. The continent is not alone in experiencing an increase in already high temperatures, but it is likely to face greater demand for cooling, since the building stock is expected to double by 2050, due to population growth.

For more than a decade, the African Development Bank has been stepping up its support for government-level energy efficiency policies across Africa and to the private sector through the Sustainable Energy Fund for Africa (SEFA), created in 2011. This special multi-donor fund provides financing to accelerate private-sector investment in the renewable energy and energy efficiency sectors. SEFA provides technical assistance and concessional financial instruments to remove market barriers, develop bankable projects and improve the risk profile of investments. Among other objectives, it aims to improve the efficiency of energy services through a variety of technologies and business models, including mini-grids and small-scale renewables.

One of the Bank’s strategic approaches is to promote the creation of energy efficiency public leading institutions, namely Super Energy Service Companies, or Super ESCOs. These institutions play a catalytic role in identifying energy-efficiency projects in public facilities to be implemented by the private sector under guaranteed performance through Energy Performance Contract (EnPC) schemes

Morocco was the first country to receive technical assistance to set up a Super ESCO, in February 2021. The Energy Engineering Company received a grant of  $965,000 to enable its transition to become Africa’s first Super ESCO. Once operational, it will be responsible for developing energy efficiency projects to support improvements in energy performance of public buildings and street lighting.

In Kenya, a different model has been adopted. In September 2021, SEFA provided a  $1 million grant to the Kenya Power and Lighting Company to create its Super ESCO. Housing the Super ESCO within the national electricity operator supports the development of energy-efficient projects for the benefit of the public sector, as well as the possible expansion of the services EnPC offers to the private sector. Projects focus on the rehabilitation of building, renovation of electrical air conditioning and heating systems, implementation of new efficient technologies and general system optimization.

The Bank adapts its support to countries according to their needs. It assists with identifying energy efficiency programmes and fostering a conducive environment to the development of the energy-efficiency market. In Egypt, for example, it is supporting the establishment of energy-efficiency programmes such as replacing one million refrigerators nationwide.

In Namibia, it is supporting the development of solar water heating programmes. In Mozambique, it is helping with the deployment of efficient street lighting and supporting the adoption of an on-bill financing mechanism to allow recovery of the cost of acquired energy-efficient equipment through monthly settlement of energy bills.

“Beyond energy efficiency, the African Development Bank supports renewable energy production, with the Noor Ouarzazate complex in Morocco, the Menengai geothermal project in Kenya and the Benban solar park in Egypt,” says Chabchoub.

“Energy efficiency is not just a question of financing; it is a question of leadership and willingness to move forward together to achieve goals,”  says Chabchoub, concluding, “the cleanest energy is the one you don’t use!” 

African Development Bank

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