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Abu Dhabi, UAEMonday 25 June 2018

While coal is a dirty word to some, Africa is relying on it

African Development Bank backs coal and it should be seen as critical to the continent’s development, says chief executive of the World Coal Association

The Lethabo coal-fired power station near Sasolburg, South Africa. The ADB is backing Africa's push for electrification through coal. Siphiwe Sibeko/Reuters
The Lethabo coal-fired power station near Sasolburg, South Africa. The ADB is backing Africa's push for electrification through coal. Siphiwe Sibeko/Reuters

One by one international financiers are pledging to end coal energy finance but the Africa Development Bank (ADB) remains a holdout and continues to fund projects on the world's most electricity-poor continent.

In April HSBC said it would no longer fund coal-fired power plants, joining its international peers including the World Bank and International Monetary Fund in rejecting fossil fuel-based electricity.

It was coal, however, that underpinned the industrial revolution that changed the West from an agrarian backwater to the technological master of the world for the past three centuries. In recent decades emerging markets such as China have also embraced coal to power the factories that transformed it, and other Asian economies, into industrial powerhouses.

The UAE, along with other Arabian Gulf nations, is also to introduce coal to its energy mix; The 2,400 megawatt Hassyan clean coal power station in Saih Shuaib, Dubai is nearing completion at a cost of around $3.4 billion.

From its headquarters in Abidjan on the Ivory Coast the ADB is one of Africa's major investors with loan capital of around $32bn. For its part the bank wants coal to be part of Africa's electrical future. The ABD's president confirmed that coal would be included in future energy funding options.

"Africa must develop its energy sector with what it has," said Akinwumi Adesina. "Endowed with many different energy sources - both renewable and conventional - Africa needs a balanced energy mix."

Battered

ADB figures show the continent has the lowest electrification rate in the world, with consumption per capita estimated at 613 kilowatt hours per person per year, barely enough to run a refrigerator. Europe, meanwhile, consumes 6,500 kWh per person a year, and in the US it's even higher at 13,000 kWh.

Africa's energy provision is dire. Nigeria, the most populated country on the continent with 150 million people, routinely struggles to distribute 5,000MW a day - less than half the 12,500MW Abu Dhabi can produce for its relatively tiny population of 1.1 million.

Nigeria can in fact produce an extra 2,000MW a day, but cannot distribute it because it lacks the transmission infrastructure to get it to customers.

Africa loses up to 4 per cent of its annual gross domestic product from energy bottlenecks and inefficiencies the ADB says. More than a century after the light bulb was invented, 645 million of its people still have no electricity.

The global coal industry, battered as it has been by bad press such as images of smog-blankets over Chinese cities, is naturally happy to have a few friends left. Most institutions including the World Bank now only back renewables such as wind and solar and no longer support coal. This puts the ADB at odds with most of its global financial peers.

"This natural resource should be seen as critical to the continent’s development," says Benjamin Sporton, chief executive of the World Coal Association. "The fuel currently provides 41 per cent of the world’s electricity."

Environmental concerns can be addressed with new technologies that remove sulphur, nitrogen oxides and particulate matter, the nasty stuff that earned coal such a bad reputation. The Hassyan project in Dubai will incorporate this technology in its design.

"These improvements to the efficiency of coal-fired power plants can significantly reduce CO2 emissions by up to 35 per cent compared to older technology," Mr Sporton says.

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In the meantime, the ADB is moving ahead cautiously with coal funding. In early May it approved a grant of $1.5 million seed money for a coal project in Nigeria, in Jigawa State in the north.

Currently Jigawa is entirely dependent on renewables, also mostly funded by the ADB, and has three solar plants and some hydro capacity. The drawback, of course, is intermittancy, with hours of darkness taking solar offline. Hydro, too, is vulnerable to drought, which means those who can afford it rely on petrol generators to power their businesses and homes when the sun goes down.

The ABD is also gearing up to finance a coal plant in Senegal on the African west coast. The plant will be built by Indian firm Jindal Steel & Power which will construct a $558m, 350MW coal-based power plant.

In Kenya, plans to build a $2bn power station in the port city of Lamu are also gathering momentum - as is fierce criticism of the plan. The project will be funded and built by Chinese contractors and banks, together with the ADB. Initially Kenya had sought help from the IMF, World Bank and other mostly western based lenders but was rebuffed.

Environmental groups are upset. "This is deeply disappointing, that the bank for Africans should decide to go this route," says Makoma Lekalakala, director of Johannesburg Earthlife Africa. "We are a continent rich in resources such as sunlight. We don't need coal."

Discontent

Ms Lekalakala says that African countries should concentrate on renewables, building multiple sources such as wind and hydro to help patch over intermittancy.

"Support for renewables should be all over Africa. We should be 100 per cent clean," she says.

For now, this argument is unlikely to persuade the ADB, that worries Africa will continue to fall behind the rest of the world. As it does so, simmering discontent will fuel rebellions and civil conflict up and down the continent.

Movements such as the extremist group Boko Haram that plague Nigeria thrive when poverty is endemic.

"To be very frank and direct, only terrorists prosper in the dark," Mr Adesina says.