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Energizing Somalia: A Nation Ready for Energy Investors

Chabala Walter:

Conventional energy sources based on coal, gas, and oil remain the most widely used energy inputs in spurring economic growth in the majority of the world economies.  However, these sources also come with their fair share of negative impacts majorly on the environment. It is for this reason that the world’s thinking is turning towards the renewable energy resources. The social, environmental, and economic problems can be omitted by use of renewable energy sources because these resources are considered environment-friendly, having no or little emission of exhaust and poisonous gases like carbon dioxide, carbon monoxide, sulfur dioxide etc. Let me paint the picture for you.

According to the Centre for Climate and Energy Solutions, renewable energy is the fastest-growing energy source globally and in the United States. Renewables made up 26.2 percent of global electricity generation in 2018. That’s expected to rise to 45 percent by 2040. Most of the increase projected to come from solar, wind, and hydropower.

Here in Somalia and according to a study conducted by the African Development Bank, Somalia has the highest resource potential of any African nation for onshore wind power and could generate between 30,000 to 45,000 MW. Solar power could potentially generate an excess of 2,000 kWh/m2.  

Sectoral Context.

According to Power Africa, only 15% of Somalia’s total population currently has access to electricity: 1% in Rural and 35% in urban areas with those with access in urban areas paying some of the highest tariffs in the world for limited and sometimes unreliable services. Painfully too, businesses bear a heavy burden as they are either forced to curtail their productivity due to electricity costs or in some cases consider moving operations to other countries with more affordable electricity services. The strain of limited and expensive electricity is also felt by households, health facilities, and schools. In effect, the environment takes a serious beating as the population resorts to firewood and charcoal as main sources of energy in their homes leading to widespread deforestation.

Today, in urban areas, diesel-powered mini-grids owned by private entities or NGOs constitute most of the power supply. Though estimates vary, the total operational generating capacity across Somalia is estimated at around 103MW in 2015 with 270,000 connections. The AfDB estimates installed capacity at 11.4MW in Puntland and 45.5MW in South-Central. Somaliland had a 46.5MW annual installed capacity in 2016. The Somaliland Electricity Association (SEA) supplies 95 percent of mini-grid electricity in Somaliland. Composed of twelve members, it also sets tariffs and promotes renewables.

What ails Somalia’s electrification can broadly be categorized as lack of access, extremely high costs, and low reliability. Only a small minority of households and businesses in the country have access to electricity. This energy deficit burden in Somalia that stems from the factors above, continues to weigh heavily on: the economy, the environment, and the provision of basic services. While electricity has the potential to transform Somalia, without prompt and substantial change or investment in the sector, it will continue to be a constraining factor for further development and impede opportunities for growth.

This fact impedes the development of new businesses and threatens the thriving business development that is starting to take shape. The high cost of electricity devours Somali business margins at such a high rate that to remain competitive, production costs must be offset in disproportionately lower raw material or labor costs. Imports are produced more cheaply simply because overhead costs are lower abroad.

“Somalia gets on average 2,900 to 3,100 hours per year of sunlight. It has one of the highest daily averages of total solar radiation in the world. The yearly average solar radiation for Hargeisa is 6.4kWh/m2/day. Furthermore, the average yearly temperature in the country is 27 °C, a reasonable temperature to permit a satisfactory operation life of solar PV systems,”

World Bank report

Win –Win Opportunities Abound

Being a country that is steadily emerging from the ravages of conflict and war, the model most common here is a decentralized, private supply of energy using relatively small generators. As in Somalia, small private energy providers have equally thrived in countries that emerged from conflicts such as Lebanon, Cambodia, and Sri Lanka.  Experts in the energy field concur that larger energy utilities that are the norm in more stable countries are vulnerable in conflict areas for two reasons. First, large generators and unified grids are usually public and suffer during conflicts from the diversion of public funds to military spending. Second, consolidated energy markets usually have fewer generators that are located farther from consumers. These are easy targets for groups engaged in the fighting, which can make the entire electrical system vulnerable to disruption.

As such, Somalia is fertile and ripe for private investors in this sector. Be it locals, Somalis in the Diaspora, and/or foreigners, this sector abounds with opportunity. In the absence of government-provided electricity services, small, medium, and even large independent power providers (IPPs) can step in to address the dearth of electricity by creating small power generation companies.

But even more importantly and given the data that supports the same is investment focused on renewables. Somalia is particularly well endowed in the wind and solar energy resources. Although wind speeds vary seasonally, according to Abdilahi et al who draw on data from NASA; wind speeds are sufficiently strong throughout the year to support wind-generated energy. A commonly cited statistic is that half of the country has wind speeds greater than 6 meters per second, which are excellent for electric energy production.

Solar energy is also a viable option throughout the country. According to a previous World Bank report, “Somalia gets on average 2,900 to 3,100 hours per year of sunlight. It has one of the highest daily averages of total solar radiation in the world. The yearly average solar radiation for Hargeisa is 6.4kWh/m2/day. Furthermore, the average yearly temperature in the country is 27 °C, a reasonable temperature to permit a satisfactory operation life of solar PV systems,” the report concludes.

These two energy sources are not only plentiful in Somalia but they are also becoming a more financially attractive option. Renewable energy options have and continue to come down in cost due to a number of factors. These include: efficiency from technology, falling financing costs from reduced risk perceptions and falling prices of PV modules, etc.

So, to you the agile entrepreneur seeking out a place to invest your coin, I say unto you; every morning you have two choices: continue to sleep with your dreams or wake up and chase them. To set you off, I will leave you with the words of the great civil rights movement leader Martin Luther King, Jr; who said, at times you don’t have to see the whole staircase, just take the first step. 

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