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Africa is set to embark on an unprecedented expansion of energy demand driven by their growing populations, fast growing economies, and improved living standards in the next decade. As urbanization and climate change rapidlyincrease the need for cooling in Africa, a strong focus on efficient cooling solutions is crucial for tempering the growth of electricity demand while ensuring an appropriate level of energy services. Currently, only aroundoneinthirteen households owns an air conditionerin Africa. According to the International Energy Agency (IEA), ownership of air conditioners in Africacould increase by around 17 million to 40 million and the stock of refrigerators by over 80 million to nearly 200 million by 2030. As a result, electricity demand for the household appliances could more than double from around 160 TWh to 350 TWh in Africa.

The market penetration level of efficient cooling products is low in Africa. This provides the African market with considerable leapfrogging opportunities for energy efficient cooling programs.We have two major policy tools to promote energy efficiency (EE) at the level of end users:

1 – Minimum Energy Performance Standards (MEPS) which aims to specify the minimum level of energy performance that manufactured/imported products must meet or exceed to be in the market

2 – Energy Labelling Schemes which provide energy performance/consumption information to consumers, either by comparing the ratings of EE performance or by showing the best-in-class endorsement.

Although EE standards and labelling programmes now have been widespread across the world, only around 40% of African countries have adopted mandatory MEPS for cooling equipment or are planning to do so, and around 20% for refrigeration. Based on the IEA estimate, adoption of more stringent policies to improve the EE of cooling solutions, either through appliances standards or building codes, could avoid almost 20 TWh of demand in Africa by 2030, equivalent to the average generation from around 4 400 MW of gas fired power plant capacity, the construction of which would cost USD 2.7 billion.

Acquisition cost is often the first challenge of promoting efficient cooling equipment comparing to the standard one. Although efficient appliances provide the most cost-effective option, given the lifetime cost including the acquisition and operation costs, the end user’s decision is largely based only on the acquisition cost.

There fore, incentivizing the adoption of the EE products should at first “correct” the end-users’myopic behavior through information provision and awareness raising. Meanwhile, dedicated financing mechanisms should also be in place to monetize the value of energy savings to support the EE market transformation.

The other challenge lies onthe institutional side, where often lack of capacity requires extensive capacity building and resources for operation alization and enforcement of the EE standards.

Most of African EE regional institutions are involved in harmonization of regional standards across countries to help reduce the compliance cost, foster the local manufacturing capacity, and avoid dumping inefficient appliances in their respective jurisdictions. Also, through regional coordination, most of African countries can have access to regional test laboratories, one of the pillars needed for a successful MEPS and labeling program implementation.

This regional dimension is important to establish a region-wide database for collecting and recording EE information of appliances and equipment, particularly a unified system to record appliances energy performance, manage compliance and provide decision tools for MEPS threshold adjustment and labelling upgrade.

While standards setting is an important layer of the EE market, developing and implementing financing programs is necessary to transform end users’ decision making. On-bill financing may provide a financing model suitable for African countries because it allows the utility to participate in the upfront cost of the acquisition of EE products, which is then repaid on the utility bill.

More importantly, this scheme can engage multiple stakeholders to address chronic barriers associated with equipment quality, guaranteed savings, and affordability. In this regard, the African Development Bank has already launched a few initiatives, to allow public and private entities to design, develop and implement on-bill financing schemes for efficient cooling appliances program in the residential, commercial, and public sectors.

Yang Liu,

Principal Economist, African Development Bank

Jalel Chabchoub,

Chief Investment Officer, African Development Bank