AFRICANGLOBE – An energy treaty between the DRC and South Africa breathes life into the long-delayed Grand Inga Dam project, offering a potential energy boost for southern Africa.
South Africa’s new energy treaty with the Democratic Republic of Congo has prompted a fresh round of talk about the mother of all infrastructure projects: the Inga dams.
Harnessing the power of Africa’s second biggest river after the Nile, and the world’s second largest by volume after the Amazon, Inga is an ensemble of hydropower installations on the Congo River which, at a cost of around $80bn, would be the biggest such project in the world.
Two existing dams – Inga I and II – have been running for 40 and 30 years respectively, but have underperformed due to lack of upkeep. The hope is that Inga III, combined with renovation work on the existing projects, and the construction of a further four to six dams and related infrastructures, will culminate in a 40,000MW hydro system whose output will be double that of China’s Three Gorges Dam. The energy would be cheap by any standards, let alone green ones; less than 0.02-3$/kWh, compared to 0.40 – 1.00$/kWh for solar and 0.10 – 0.15$/kWh for wind – and would save 100m tonnes of fossil fuel burning every year.
To date, the mega-project has been all potential and no progress.
However, the new treaty with South Africa breathes life into Inga III, which is a critical piece of the puzzle. The agreement gives the project a credible off-taker in Eskom, the South African state-owned energy company. Feasibility studies have been carried out, and a bidding process, which started in 2010 with the prequalification of six consortiums, has now been whittled down to three: China’s Sinohydro and Three Gorges Corporation; Actividades de Construcion y Servicios, Eurofinsa and AEE from Spain; and Daewoo-Posco from South Korea.
If successful, the Inga project will also help the World Bank show it is serious about reducing its lending to fossil fuel developments. The institution wants to leave dirty fuels behind, publishing vocal predictions about climate change and recently agreeing to restrict financing of coal-fired power to countries with no feasible alternatives. But greening is hard to do. In 2010, $6bn of the $10bn lent by the World Bank to energy still went to fossil fuel projects.
Hydro provides a way to reduce coal-lending while still pushing the kind of game-changing energy projects that Africa needs. In addition to Inga, the bank is getting behind the Batoka Gorge and Mphanda Nkuwa dams on the Zambezi.
But hydro mega projects in politically volatile nations like DRC are hard to cost and plan. The financing of Inga I and II was revised up 80 percent, from $226.7m to $460.2m. Some wonder at the wisdom of shoehorning $80bn into a highly centralised project in a country whose government ranks 160 out of 176 in Transparency International’s Corruption Perceptions Index.
Critics say large hydro projects are ill-suited to sparsely populated regions like southern Africa, since the grid system either does not exist or cannot reach all of the populations; they would rather see the money spent on smaller, off-grid solutions that get energy straight to the poorest, instead of feeding Eskom and the mining industry.
The World Bank is staying put, and says that Eskom and the DRC mining sector are crucial participants if private money is to be crowded in.
The viability of Inga took a hit when BHP Billiton last year shelved plans to build a smelter in the region. Aid, in the form of concessional debt, can only contribute around 10-25 percent of the cost.
“This project will not happen without private sector financing,” says Meike van Ginneken, the World Bank’s sector manager for energy in west and central Africa. “Even all the donors combined would never be able to finance it, let alone the government of the DRC. So you will have to make it a bankable project and in order to do that, one of the key factors is to have credible off-takers.”
The strength of commercial interest in Inga suggests it is not the kind of white elephant project that public sector actors have invested in across Africa in the past. Inga III is “definitely of interest in the long-term [for South Africa]” says Anton Eberhard, an energy expert from the University of Cape Town. “Its price is likely to be competitive compared to other non-coal options such as nuclear, gas or other imports.”
It would certainly be a development game-changer for the region. The DRC mining industry remains the only real engine of growth for a country with little other revenue sources at present. A burst of cheap power could help the country extract its cobalt, tantalum, diamond and copper reserves. Ms van Ginneken adds that revenues from the Inga project will support the government budget and therefore public spending, although the country’s governance is a work in progress.
Little wonder the DRC government wants to get going. It says building will start by 2015.
By: Adam Green