Electrifying Africa A twelve leverage points approach to finding a faster electrification rate

Mikael Rosander Jonatan Ala-Mutka

Bachelor of Science Thesis KTH School of Industrial Engineering and Management Energy Technology EGI-2017 SE-100 44 STOCKHOLM

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Bachelor of Science Thesis EGI-2017

Electrifying Africa

Mikael Rosander Jonatan Ala-Mutka

Approved Examiner Supervisor

Date Mark Howells Per Lundqvist Commissioner Contact person

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Abstract Future projections show that over 500 million people living in Sub-Saharan Africa will be without electricity in 2040 according to IEA, even though UN has set a goal of universal access to affordable, reliable and modern energy services by 2030. This shows that the rate of change is too slow and that there is a need for a greater electrification rate. In an attempt to solve this problem the 12 leverage points framework by is applied on the SSA energy to get an overview of different places to intervene in the system and what strength of leverage these hold. The result is a text analyzing leverage points within each of the 12 leverage point categories and high leverage was found in several categories. The results are subjective and the framework is evaluated in the context of these. Finally suggestions on how the framework can be improved are recommended and what types of applications for the framework that are viable. Sammanfattning Framtida projektioner pekar på att över 500 miljoner människor som bor i Sub-Sahara Afrika kommer att vara utan elektricitet 2040 enligt IEA. FN har satt ett mål om universell access till överkomlig, pålitlig och moderna energi tjänster till 2030. Denna diskrepans visar att förändringshastigheten är för långsam och att det föreligger ett behov av en högre elektrifieringstakt. I ett försök att lösa detta problem har 12 Leverage Points ramverket av Donella Meadows tillämpats på SSA energi system för att skapa en överblick över olika platser att ingripa I systemet och hur effektivt man kan ingripa vid dessa. Resultatet är en text som analyserar Leverage Points från de 12 olika Leverage Point kategorierarna och starka möjligheter för effektivt ingripande återfanns I flera kategorier. Slutligen rekommenderas förslag hur ramverket kan förbättras och vilken sorts tillämpningar av ramverket som är praktiskt.

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Table of contents Nomenclature ...... 8 1. Introduction ...... 10 1.1 Background ...... 10 1.2 Problem statement ...... 10 1.3 Goal of thesis ...... 11 1.4 Limitations ...... 12 1.5 Structure ...... 14 2. Method ...... 16 2.1 Step 1: Gathering information ...... 17 2.2 Step 2: Classification through the 12 Leverage points framework ...... 17 2.3 Step 3: Construction of a model interpreting the ...... 17 2.4 Step 4: Evaluation of the 12 leverage points framework ...... 18 2.5 Models ...... 18 2.6 The Twelve leverage point framework ...... 19 3. Context ...... 26 3.1 Economy ...... 26 3.2 Demography ...... 27 3.3 Energy in sub-Saharan Africa ...... 27 3.4 Electricity in sub-Saharan Africa ...... 29 3.5 Future Projections ...... 32 3.6 Challenges ...... 36 4. Application of the 12 Leverage points framework in the sub-Saharan African 38 4.12 Constants, parameters and numbers ...... 38 4.11 The sizes of buffers and other stabilizing stocks, relative to their flows ...... 39 4.10 The structure of material stocks and flows ...... 42 4.9 The length of delays relative to the rate of system change ...... 47 4.8 The strength of loops relative to the impacts they are trying to correct against...... 49 4.7: The gain around driving loops ...... 52 4.6 Structure of information flows ...... 55 4.5 The rules of the system ...... 57 4.4 The power to add, change, evolve or self-organize system structure ...... 59 4.3 The goals of the system...... 62

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4.2 The mindset, or paradigm, out of which the system –its goals, structure, rules, delays, parameters - arises ...... 66 4.1 The power to transcend paradigms ...... 68 5. Results and discussion ...... 70 5.1 Result 1: 12 Leverage points ...... 70 5.2 Result 2: System Dynamics model of the SSA energy system ...... 72 5.3 Result 3: Evaluation of the 12 leverage points framework ...... 75 5.4 Evaluation of our results within the 12 leverage points ...... 77 5.5 Evaluation of method ...... 78 6. Conclusions ...... 82 7. Future recommendations ...... 84 8. References ...... 86 9 Appendixes ...... 90

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Table of figures

Figure 1: Map of Africa showing sub-Saharan Africa and its main sub-regions as used within this thesis. (IEA, 2014) ...... 12 Figure 3: The focal point of the thesis lies in the intersection of Economics, Technology and management...... 13 Figure 4: The four step funnel-approach that breaks up the method...... 16 Figure 5: A conceptual stock-and-flow model of a system...... 18 Figur 6: The twelve leverage points as described by Donella Meadows. (Meadows, 2008) ...... 20 Figur 7: Population and per capita energy demand by country in sub-Saharan Africa, 2012. (IEA, 2014) ...... 28 Figur 8: Sub-Saharan Africa primary energy mix by sub-region. (IEA, 2014) ...... 28 Figur 9: Number and share of people without access to electricity by country, 2012. (IEA, 2014) ...... 29 Figure 10: Average electricity consumption per household, and region, in sub-Saharan Africa, 2012, and indicative consumption levels by appliance. (IEA, 2014) ...... 30 Figure 11: Electricity consumption in Africa by end-use sector and sub-region, 2012. (IEA, 2014) ...... 31 Figure 12: Installed grid-based capacity by type and sub-region. (IEA, 2014) ...... 31 Figure 13:Electricity demand in Africa in the New Policies Scenario (TWh). CAAGR is the compound average annual growth rate. (IEA, 2014) ...... 32 Figure 14: Electricity generation by fuel in sub-Saharan Africa in the New Policies Scenario. (IEA, 2014) ...... 33 Figure 15: The 12 leverage point categories and their corresponding amount of leverage and possibility for intervention...... 70 Figure 16 – A SWOT-analysis of the 12 leverage points framework ...... 75

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Nomenclature LP = Leverage point T&D = Transmission & Distribution SSA = Sub-Saharan Africa NFL = Negative Feedback Loops PFL = Positive Feedback Loops SWOT = Strengths, weaknesses, opportunities, threats Mtoe = Million tonnes of oil equivalent IPP = Independent power producer LNG = Liquefied Natural Gas ROI = Return on investment

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1. Introduction

1.1 Background The achievement of ensuring universal access to affordable electricity by 2030, the target of the seventh sustainable development goal (SDG 7) as set by the UNDP (United Nations, u.d.), is generally recognized as an important cornerstone for achieving the rest of the SDGs which are designed to provide a good quality of life for all human beings. For example, through access to electricity, industries gain the necessary infrastructure required to operate which sets the foundation to create employment and economic growth in poorer areas of the world. Access to electricity is also essential to healthcare-services as well as improving air quality and living conditions. The supply of food can also be increased by using electrical irrigation , and the longevity of food supplies can be increased by using electrically powered refrigeration systems. (International Renewable Energy Agency, 2016) (International Electrotechnical Commission, 2016) On top of this, and amongst others, access to electricity saves time that instead can be spent on education for example, and it is also essential when it comes to powering teaching aids in educational facilities. (FEMA, 2016) In 2012, only about one third of the entire African population had access to electricity, and electrification growth rates have barely kept up with population growth in Sub-Saharan Africa. (The World Bank, 2016). Sub Saharan Africa is the most energy poor area in the world, with more than 620 million people lacking access to electricity, nearly half of the world total, this is also the only region in the world where the number of people without access to electricity is increasing. (IEA, 2014)

1.2 Problem statement The fact that SSA will fail to achieve the goal, set by the UN, to ensure universal access to affordable, reliable and modern energy services by 2030 points towards a lack of impactful measures to drive development of the energy system quick enough. The struggle to electrify SSA stands in sharp contrast to its potential domestic electrical generation, which is significant. (IEA, 2014). With barely some 37% of its population with access to electricity (The World Bank, 2014), according to a report by McKinsey Sub-Saharan Africa’s electricity sector will need capital investment of about $835 billion by 2040 to be able to supply the continent’s growing electricity demand. (Castellano, et al., 2015) The sub Saharan African energy system is by its very extensive and complex. Adding to the complexity are the numerous local stakeholders such as government, domestic companies and population, coupled with an international interest, in form of NGOs, international aids organizations and global companies looking to intervene just to name a few. Many of these players have their own interests and view of how the system should develop and are in return affected in different ways by the consequences of choosen development path. This leads to vast amounts of information describing the African energy outlook from different perspectives and detailing it’s challenges and possibilities. (Kuo, 2015)

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The lack of transparency, clear rules and regulations, is a major threshold holding back investment. But it also makes the system even more complex to interpret as not all information is readily available, and when it is available it’s subject to change. (Castellano, et al., 2015) In the IEA 2040 projections for SSA, despite an increase in electrification through huge capital investments adding generation capacity and T&D investments, 530 million people remain without electricity access in 2040, a scenario that itself requires huge efforts to achieve – but still far short of the progress desired. (IEA, 2014) The need to drive radical change to meet demand and electrify the population combined with the many characteristics of the sub-Saharan African energy system, many of them often resisting change, plus its shear complexity and extent is at the very core of the problem statement. This calls for a method to navigate and interpret huge amounts of data available for a large basis for selection, and then to categorize and rank where to most effectively intervene in the sub Saharan African energy system.

1.3 Goal of thesis The main purpose of this thesis is to work with and evaluate the 12 leverage points framework (developed by Donella Meadows) that is designed to analyze a system and categorize its leverage points, also known as places to intervene in order to drive system change, by increasing strength into 12 levels of leverage. The complexity of Sub-Saharan Africa’s energy system makes it a suitable case to test the power of this framework. As this framework hasn’t been used in this particular application before, our first goal is to provide a new vantage point of the African energy system by identifying the different leverage points in the sub Saharan Africa energy system and classify these using the twelve leverage point framework. The application of the 12 leverage points framework doesn’t, on its own, connect leverage points to the underlying system and its dynamics. The second goal adds further value to the found leverage points by putting these into the context of the SSA energy system. This is done through a system dynamics model, incorporating a stock-and-flow model, that integrates the found leverage points and shows how these interplay with one-another and the underlying dynamics of the SSA energy system. This also provides the reader with a better overview of the system. As there are few known applications of the 12 leverage points framework, the actual application, and methodology using the 12 leverage points is evaluated as well as how well the framework actually delivered the first goal of the thesis in finding leverage points and categorizing these. The goals are listed below for easier reference in upcoming segments. 1. Identify leverage points and classify where most leverage* can be found in the Sub- Saharan Africa energy system. 2. Map the system dynamics and show how different leverage points relate to one another and the causality between them. 3. Evaluate the twelve leverage points framework and specify how well it has worked for reaching goal 1.

* When the concept of “leverage” is discussed within this thesis, what is referred to is the power to achieve change within a system. In this case, the leverage that is sought is the power to drive a faster electrification scenario.

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1.4 Limitations The thesis has four categories of limitations, firstly the geographical limitation is set. The second limitation lies in , defining the studied system through a system limit. The third limitation is set to focus the information and data gathering. Finally the fourth limitation lies in the framework and models used to interpret the system defined in limitation 1,2 and through which the information in limitation 3 is filtered. First limitation: Geographical Looking at the system, the first limitation lies in the geographical definition of Sub-Saharan Africa. The definition that is used within this thesis is the definition used by the IEA in their Africa Energy Outlook report: that is, all African countries except for north Africa (Egypt, Algeria, Libya, Morocco, Tunisia and Western Sahara). (IEA, 2014). The large geographical area of focus was mainly chosen in order to minimize the risk of not enough finding relevant information. This broadly set limitation also allows this report to explore the wider range of challenges and opportunities in the sub-Saharan African energy system as a whole. But it also forces the main discussion of this report to focus on the sub-Saharan African energy system in a broader, more general, and not as detailed sense.

Figure 1: Map of Africa showing sub-Saharan Africa and its main sub-regions as used within this thesis. (IEA, 2014) Second limitation: The Systems theory approach As the thesis focus is on electrification, the definition of the sub-Saharan African energy system used in this report refers to the socio-technical system used to provide electricity. Appendix A shows the system limit, which lies in the power system that includes the production,

-12- transmission, distribution and end-use of electricity across all sectors in Sub-Saharan Africa. Note that this doesn’t concentrate the thesis to one single power system, but rather all power systems across SSA. The thesis is not only concentrated to centralized grid power systems but also includes off-grid and mini-grid power systems. The production and final usage of coal, oil, gas, biofuels and waste does affect the system studied and these causalities are part of the analysis of the thesis, however the system limit has been chosen to greater be able to focus on the electrification, and not focus in-depth on the other primary energy flows. The figure in Appendix A gives an overview of the sub Saharan energy system including all primary energies and the red box indicates the system limit focused to the power production and end-usage.

Third limitation: Information and data gathering There are numerous aspects affecting the energy system of Sub Saharan Africa and it’s development. Information gathered for analyzing the system will be narrowed to the exploration of the intersection between economics, technology and management, rather than focusing deeper into any of these three such as doing deeper analysis on potential new renewable technologies or more advanced economic theory - but rather look at how these interplay and affect development.

Figure 2: The focal point of the thesis lies in the intersection of economics, technology and management.

Fourth limitation: Framework & models In terms of the frameworks and models that are applied, the scope of this thesis is limited to only applying the twelve leverage points framework (and its associated stock-flow model explained under ‘models’ section of this thesis). This will give a more focused approach using the framework, but is a disadvantage when evaluating the results as other models and frameworks might have provided different outcomes. It’s also a disadvantage when evaluating the framework as comparison to other models and frameworks is not possible. The application of a specific framework will generate a certain output and thus limit the results of the thesis.

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1.5 Structure The structure of this thesis is set to give the reader a clear direction throughout the thesis, where the methodology will present the tools for how the results are achieved as well as break down the structure of the order that work is done to achieve the different goals of the thesis. The system is thereafter presented, with the surroundings and context that is important, to give the reader an overview of the system, outlining its challenges and opportunities. The twelve leverage points framework is then applied on the defined system and the leverage in each of the twelve categories is presented for the interested reader to get a more nuanced view of where leverage is found. The amount of leverage in the system is summarized in the first result of the thesis, whilst the second result integrates the leverage points in a system dynamics model, showing the interplay between the leverage points found and the system presented in the context section. The third and final result presents an evaluation of the twelve leverage points framework. For the final part of the thesis a general evaluation of the results, method, conclusions and future recommendations are presented.

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2. Method The initial motivation in the choice of method was to find a pathway that will maximize the possibility to achieve the goals of the thesis in the amount of time available. This thesis is characterized in the nature of navigating the vast amounts of information and data available, owing to the complexity of the sub Saharan Africa energy system and a primary challenge will be in filtering and knowing where to focus attention. The extensive limitations where set to help with this issue. Other challenges include the fact that most previous studies employ a “big- scope” approach in which they study the Sub-Saharan energy system as a whole and on a very general level. These are challenges that are inherent to developing the context of this thesis and the method will have to be structured so that they can be overcome. Initial studies also suggest that there’s a lack of impactful action measures to drive development quick enough in the Sub- Saharan African energy system. This is, in part, where the method is expected to deliver value. To be able to use the resources and time as efficiently as possible, whilst overcoming the mentioned challenges and achieving the goals of the thesis, the devised method employs a three step funnel-approach.

Figure 3: The four step funnel-approach that breaks up the method. The purpose of the first step is to gather data in a non-subjective manner from sources in literature with a focus as defined in the limitations section. In the second step, this data will be processed using the twelve leverage point framework in order to sort out information that is relevant to finding leverage points within the sub Saharan African energy system. The expected output of the second step is leverage points that are present in the system and categorize these in order of their potential impact on the system. Thus Step I and II produces the platform from which the vast amounts of information is navigated and filtered. In step III a system dynamics model is constructed with the help of the found leverage points from step II - with the goal to show the system dynamics and give an overview of where leverage can be found within the

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2.1 Step 1: Gathering information The energy system of Sub-Saharan Africa is complex and there are vast amounts of data from different stakeholders with different vantage points and interests. Various material and literature illuminate the historical development, describe the current situation and give projections for the future development. The first part of the method consists of a context study - reading and gathering information from different sources without adding any valuation or personal interpretation. In this part the aim is to be as open-minded as possible, without any predetermined goal or values, whilst consulting many different sources for different perspectives. Information is gathered from a bulk of internationally recognized reports and articles from NGOs and Public offices such as the "Africa Energy outlook" from the International Energy Agency, data and statistics from The World Bank , and general information from the African Development Bank etc. Reports from corporations and their view on the African energy outlook are also considered in reports such as "Brighter Africa" from McKinsey Consulting group.

2.2 Step 2: Classification through the 12 Leverage points framework For the second step, the twelve leverage points framework is used to sort out large amounts of information and identify the leverage points present in the sub Saharan African energy system. The advantage of this framework is that it allows for the classification of leverage points in accordance to what power they generally hold to change the system, thus enabling the completion of the second goal of the thesis. In this step, attention will also be focused on detecting emerging patterns in the twelve leverage point framework. The purpose of this is to investigate the hypotheses put forward by Donella Meadows, such as the claim that there is an increased focus on “weaker” leverage points among stakeholders and “stronger” leverage points tend to be neglected. Attention will also be focused on identifying leverage points where change is driven in the wrong direction, or where there are conflicts of interest among different stakeholders.

This step on its own delivers a value by providing a good overview as well as a new vantage point from which to understand the Sub-Saharan African Energy system. This corresponds to the first goal of the thesis.

2.3 Step 3: Construction of a model interpreting the system dynamics For the third step, a dynamics model with foundation in a stock-and-flow model of the sub-Saharan African energy system is constructed, incorporating the leverage points that have been identified. The purpose of this is to try and map the system dynamics and show how different leverage points relate to one another and the causality between them. This corresponds to achieving the second goal of this thesis.

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2.4 Step 4: Evaluation of the 12 leverage points framework The final part of the method consists in evaluating the 12 leverage points framework that is central to the method and expected results of this thesis. The evaluation is done with a SWOT analysis, looking at the strengths, weaknesses, opportunities and threats and also a general discussion evaluating its usage.

2.5 Models Stock-and-flow model of a system The conceptual stock-and-flow model of a system is useful to explain a system through the perspective of the twelve leverage points framework. The stock-and-flow model is a type of model used within the system dynamics approach to understanding the behaviour of nonlinear and complex systems. This field of theory uses stocks, flows, feedback loops and delays in order to model different systems. (MIT System Dynamics in Education Project, 1997)

Figure 4: A conceptual stock-and-flow model of a system. In her paper, Donella Meadows refers to the “state of the system” as the standing stock that is of importance to it. This might, for example, be the amount of water in a lake, the temperature in a room or the number of individuals within a population. But the stock of the system can also be nonmaterial, and Meadows mentions self-confidence, degree of trust in public officials or perceived safety of a neighbourhood as examples. In the system there are inflows and outflows that regulate the given stock. If we take a lake as an example of a system, with the amount of water as the given stock as mentioned earlier, then we can identify certain inflows and outflows. Inflows from upstream rivers and rainfall increase the amount of water within the lake and evaporation and outflows through downstream rivers decrease it. The state of the system might sometimes be slow to react to changes in its flow of stock. This is due to the inertia that most systems possess, and it is a typical characteristic of many systems. The flow of stock can, in turn, be changed in order to steer the state of the system towards a certain goal. This can be done through so called negative feedback loops. In her paper, Meadows gives a very comprehensive example of what might actually constitute a negative feedback loop:

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“If you’re about to take a bath, you have a desired water level in mind. You plug the drain, turn on the faucet and watch until the water rises to your chosen level (until the discrepancy between the desired and the actual state of the system is zero). Then you turn the water off. If you start to get in the bath and discover that you’ve underestimated your volume and are about to produce an overflow, you can open the drain for awhile, until the water goes down to your desired level. Those are two negative feedback loops, or correcting loops, one controlling the inflow, one controlling the outflow, either or both of which you can use to bring the water level to your goal.” (Meadows, 2008) The main advantage of stock-and-flow models is that, contrary to frequently used causal loop diagrams (CLD), they take system inertia into account.

2.6 The Twelve leverage point framework The basis of the twelve leverage points framework, as described by Donella Meadows in Thinking in Systems: a Primer (Meadows, 2008), revolves around an idea shared by many involved within the field of . The idea is that within any given system, regardless of complexity, there are certain places where small shifts in the systems characteristics can have a big effect on the system as a whole. These places are commonly referred to as leverage points. “This idea is not unique to systems analysis — it’s embedded in legend. The silver bullet, the trimtab, the miracle cure, the secret passage, the magic password, the single hero who turns the tide of history. The nearly effortless way to cut through or leap over huge obstacles. We not only want to believe that there are leverage points, we want to know where they are and how to get our hands on them. Leverage points are points of power.” (Meadows, 2008) The task of finding leverage points in a given system is by no means a standardised process. There is no swift method that can tell you exactly which leverage points are present and what significance they hold before the system is studied in detail. Rather, the twelve leverage points framework gives an understanding of the leverage points that could be, and most often are, present in a system, and what significance they generally hold in relation to each other. The twelve leverage points framework constitutes a list of all leverage point categories known to be present in a given system according to Donella Meadows. These leverage point categories have been numbered according to the general significance they hold to any given system, ranging from the 12:th leverage point category, with the least significance, to the first, with the most significance. For future reference, the leverage point categories closer to leverage point category 12 will be referred to as “higher” leverage point categories, whilst the leverage point categories closer to leverage point category 1 will be referred to as “lower” leverage point categories.

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The leverage points are presented in the following figure:

Figur 5: The twelve leverage points as described by Donella Meadows. (Meadows, 2008)

Leverage point category 12 - Constants, parameters and numbers Meadows describes parameters as numbers that affect the flow of stock. Some of these are locked in and inherent to the system, and therefore can’t be changed, but this is still a very utilised leverage point. (Meadows, 2008) If we return to the example with the lake, we can easily name a few parameters. The inflow of water depends on the number of rivers that flow into it and the amount of water these rivers can transport. It is also dependant on the amount of rainfall in the area and so on. These are examples of unchangeable parameters that are physically built into the system. But what if the lake is connected to a dam? The outflow of water from the lake through this dam can now be regulated, and it depends on parameters such as the diameter of the turbine inlets and the size of the spillways for example. Meadows states that even though nearly all attention goes to changing parameters, this leverage point category is very weak. This is because changing parameters rarely changes system behaviour. “If the system is chronically stagnant, parameter changes rarely kick-start it. If it’s wildly variable, they don’t usually stabilize it. If it’s growing out of control, they don’t brake it.” (Meadows, 2008) Leverage point category 11 - The sizes of buffers and other stabilizing stocks, relative to their flows. Buffers and stabilizing stocks can have a big impact on system stability and you can often stabilize a system by increasing its buffer capacity. But too large buffers can make the system inflexible, namely, making it slow to react to changes within the system (Meadows mentions the widespread use of just-in-time strategies that businesses use to maintain inventories as a prime example). And buffers/system stocks are most often physical entities that can be very hard, if not

-20- impossible, to change. This is the reason why this leverage point category is generally considered to be of a weaker importance. (Meadows, 2008) If we return to the example of the lake, a buffer might for example be the very size of the lake, or its ability to resist acidification. If we were to build a dam in the lake, the size of the body of water behind it is of great importance to its ability to function and deliver power even though the inflow of water to the lake might have temporarily ceased. Yet the size of the dam is a physical entity, literally set in concrete, and it is therefore very difficult change. Leverage point category 10 - The structure of material stocks and flows. The physical layout and structure of the flows of stock can be of great importance to a system. For example, the choice to build a highway around a city, instead of through it (A prime example is the ongoing project called “Förbifart Stockholm” which aims to divert traffic from going through central Stockholm (Trafikverket, 2016)) can have great implications on congestion, air , travel times and public transport just to name a few examples. Though it is of great importance, this is rarely an effective leverage point category to focus on in already existing systems since the structure of a system is often very hard to alter. It is, after all, generally a physical entity. The focus should instead be put on designing the system in a proper way in the first place, and after that, understanding the limitations and bottlenecks of it so that it can be operated in a way that avoids unnecessary strain. (Meadows, 2008) Leverage point 9 - The lengths of delays, relative to the rate of system change. Delays are almost always present in the feedback loops of a system and they often cause the system state to oscillate. Timely information, and action based on that information is of great importance in any dynamic system. If there are delays in the flow of information, or in the implementation of measures intended to correct a change of the system state, the system will overshoot or undershoot its given goal. But a certain delay within a system can sometimes be favourable in order to prevent overreaction. (Meadows, 2008) A striking example of the importance of delays in feedback loops within a system can be found when studying economics on a national or international scale. The world economy is cyclical in its nature, and much of fiscal and monetary policy is focused on dampening this oscillation. But it is generally considered unwise to implement so called discretionary policy in order to achieve stabile economic growth. This is due to the fact that the world economy is an extremely and therefore it suffers from major delays, both in the collection/processing of information and in the implementation of policy (which involves immense amounts of bureaucracy). Hence, it is argued by economists that any attempt to stabilize the economy using discretionary policy instead suffers a major risk of destabilizing it even further. This is, understandably, a powerful leverage point category if change within it is achievable. But delays are often inherent to the given system and can therefore be very difficult to change which is why it is listed as a fairly weak leverage point. (Meadows, 2008) Leverage point category 8 - The strength of negative feedback loops, relative to the impacts they are trying to correct against. Meadows states that negative feedback loops can be found within almost any given system. The purpose of a negative feedback loop is to keep a system stock within certain limits. These limits are set by the goal of the negative feedback loop (ultimately the goal of the system). But Meadows also states that a negative feedback loop also needs the ability to monitor and signal

-21- system changes in order to detect deviations from this goal, and a response mechanism to counter these changes. Complex systems might have numerous negative feedback loops built into it so that it may correct itself under different circumstances. (Meadows, 2008) Examples of negative feedback loops are numerous, both in nature and within manmade systems. Predator-prey relations keep populations within certain boundaries and the frequency of an electric system is held within certain limits using the inertia of rotation masses. Meadows mentions a thermostat loop as a classic example. The goal of this system, or the thermostat setting, is monitored by the thermostat itself and any deviations from the goal is corrected through a certain mechanism (furnace, air conditioner, heat pump, fans, fuel etc). (Meadows, 2008) The strength of negative feedback loop is only of relevance when it is compared to change in the system that it is trying to correct. An increase in the change of the system requires an increase of the strength of the systems negative feedback loops. Returning to the thermostat example, Meadows states that this system might work fine on a cold day but might not have the corrective power to keep a desired indoor temperature if you were to open all the windows. (Meadows, 2008) Negative feedback loops can be more or less visible but they are almost always critical to the system. And Meadows states that this is a typical leverage point category where change is often driven in the wrong direction. This is because, instead of strengthening negative feedback loops, we tend to strip them away because they seem to be costly and aren’t used too often. Consequences of this might not be immediately noticed but in the long term we narrow the set of conditions under which the system can operate. (Meadows, 2008) To support this claim, Meadows mentions a few examples. Like how we tend to encroach on the habitats of endangered species, or how we usually don’t prioritize our own time for rest, sleep and recreation. But perhaps one of the most important negative feedback loops mentioned by Meadows is that of the democratic system which was, as she states, created to put self-correcting feedback between the people and their government. This system is highly dependent on transparency - a free, full and unbiased flow of information. And yet there is significant effort focused on limiting and biasing that flow of information which weakens this crucial feedback loop. (Meadows, 2008) Leverage point category 7 - The gain around driving positive feedback loops. A positive feedback loop is self-reinforcing, as opposed to negative feedback loops that are self- correcting. Positive feedback loops are described by Meadows as sources of growth that accelerate in and of themselves. And if this growth is unhindered, the system might be at risk of collapse. And given this nature of positive feedback loops there is very often leverage to be found in slowing them down. (Meadows, 2008) Meadows mentions a few examples of positive feedback loops: An epidemic will spread faster as more people are infected, but if this positive feedback loop is unchecked it will eventually run out of infectable people. She also mentions population and economic growth rates to be examples of positive feedback loops where steady and sustainable – rather than unchecked – growth is favourable. (Meadows, 2008)

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Another striking example is perhaps best formulated by the words of Donella Meadows herself: “there are many positive feedback loops in society that reward the winners of a competition with the resources to win even bigger next time. Systems folks call them “success to the successful” loops. Rich people collect interest; poor people pay it. Rich people pay accountants and lean on politicians to reduce their taxes; poor people can’t. Rich people give their kids inheritances and good educations; poor kids lose out. Anti-poverty programs are weak negative loops that try to counter these strong positive ones. It would be much more effective to weaken the positive loops. That’s what progressive income tax, inheritance tax, and universal high-quality public education programs are meant to do.” (Meadows, 2008) Leverage point category 6 - The structure of information flows. Meadows states that missing feedback is a common cause of system malfunction, and that there is significant leverage to be found in restoring information or adding it to places where it was not present before. The power in this leverage point category is found in the fact that redirecting information flows is much easier than reconstructing physical infrastructure. (Meadows, 2008) Meadows mentions that, for example, changing the placement of an electric meter in a house, from the basement to the front door has drastic implications for energy consumption. Meadows also mentions that overfishing can be attributed to a lack feedback from the state of the fish population to the decision to invest in fishing vessels. (she states, in the face of economic opinion, that the price of fish does not provide adequate feedback as the price of fish will rise as the fish get more scarce, and hence it becomes more profitable to catch them.) (Meadows, 2008) Leverage point category 5 - The rules of the system. Every system has a set of rules. Whether they are absolute physical laws that cannot be broken, or strong social rules such as constitutions. Meadows mentions laws, punishments, incentives and social agreements as examples of rules. Rules are very powerful leverage points if they can be changed and Meadows states that if one desires to understand the shortcomings of any given system, then attention should be paid to its rules and who has power to change them. (Meadows, 2008) Leverage point category 4 - The power to add, change, evolve, or self-organize system structure. A systems ability to evolve, advance technologically, or as Donella Meadows puts it, to self- organize is an extremely powerful leverage point category. It refers to a systems ability to radically change any item lower on this list, adding or subtracting new physical structures, feedback loops or rules. Meadows states that self-organisation is basically the combination of a basic “evolutionary raw material” – such as the four nucleobases that constitute our DNA – and a means for experimentation, testing and selection – such as mutation and natural selection. When talking about technological advance, the raw material is the body of accumulated knowledge on which human creativity, the source of experimentation, can be applied to produce whatever meets a certain need or solves a certain problem. (Meadows, 2008) Meadows states that a systems ability to self-organise constitutes its most powerful form of resilience. “A system that can evolve can survive almost any change, by changing itself.” (Meadows, 2008) Conversely, a system that is so rigid that it is unable to evolve loses this form of resilience and will have considerable trouble surviving in a changing environment. Meadows states that the

-23- obvious leverage point here is to encourage diversity and experimentation within the system. (Meadows, 2008) Leverage point category 3 - The goals of the system. The goals of the system is a leverage point category that is superior to all other items further down this list. Given a certain goal, physical stock, flows, feedback loops, information flows and self-organizing capabilities will adjust to this goal. As mentioned earlier, negative feedback loops have their goals, towards which they try to adjust the system state. These goals are important but they aren’t necessarily goals for the entire system, rather just goals for a part of the system. System-wide goals can sometimes be unintuitive and hard to find. Meadows mentions survival, resilience, differentiation and evolution as some examples of system-wide goals. (Meadows, 2008) Meadows also mentions that this is the place where key people can have immense power over a system: by defining its goals. Leverage point category 2 - The mindset or paradigm out of which the system — its goals, structure, rules, delays, parameters — arises. A paradigm can be roughly described as a set of shared beliefs about the nature of reality. Examples include religions, social agreements or scientific schools of thought. Donella Meadows states that paradigms are the sources of systems, and hence, the ruling paradigm holds enormous power over a system created within it. Paradigms might be immensely hard to change as they are deeply rooted. But at the same time, they are not physical entities, and all that it might take is a change of thought. (Meadows, 2008) “The ancient Egyptians built pyramids because they believed in an afterlife. We build skyscrapers, because we believe that space in downtown cities is enormously valuable. (Except for blighted spaces, often near the skyscrapers, which we believe are worthless.) Whether it was Copernicus and Kepler showing that the earth is not the center of the universe, or Einstein hypothesizing that matter and energy are interchangeable, or Adam Smith postulating that the selfish actions of individual players in markets wonderfully accumulate to the common good, people who have managed to intervene in systems at the level of paradigm have hit a leverage point that totally transforms systems.” (Meadows, 2008) Leverage point category 1 - The power to transcend paradigms. Donella Meadows states that the power to transcend, or to step outside the realm of any paradigm and realize that there are multiple paradigms, is a tremendous and game-changing ability. It allows the wielder to choose a paradigm that fits his or her purpose. And what might that purpose be? Now there’s a discussion that is far too philosophical in nature than what is to be expected of this paper. (Meadows, 2008)

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3. Context A fast-growing but sensitive economy, extreme population growth rates and the lowest rates of electricity access in the entire world. These are some of the main characteristics of SSA, a region with a population of a billion people and the approximate size of China, India and the contiguous United States combined. (Fischetti, 2015) But the characteristics are of course more detailed than that. Therefore this section aims to give the reader an overview of the most important dimensions affecting and shaping the SSA energy system today with a focus on economy, demography, energy in general and electricity access. It also gives an idea of future projections until 2040 and 2050. Finally it covers some of the known challenges facing the system. The main source used in this section is the IEA, African Energy Outlook report from 2014 as this is a neutral source from a trusted publisher that describes the situation for the SSA energy system in great detail. However, when possible, this section complements information from the African Energy Outlook with the latest figures from other sources such as The World Bank amongst others.

3.1 Economy Even though sub-Saharan Africa, with its population of about one billion people (The World Bank, 2015), more than doubled the size of its economy during the period 2000-2013, its total gross domestic product was still less than half that of the country of Germany, with a population of 81,7 billion, in 2015. (The World Bank, 2015) The rapid growth of the sub-Saharan African economy during the period of 2000-2013 can be contributed to several factors including population growth, urbanization, a growing middle class that is expanding domestic demand, increasing exports of resources (many of which saw rising prices during the same period), improved macroeconomic management plus a period of relative stability. Trade and foreign direct investment (FDI) also grew rapidly during the period, with commodities dominating many countries exports and China and India, amongst other emerging markets, contributing to the growth of the region (The European Union is still the largest trade partner). (IEA, 2014) However, economic growth has slowed down significantly in recent years, from 4,6% (GDP growth, annual %) in 2014 (The World Bank, 2015) to approximately 1,5% in 2016. (The World Bank, 2017). This drop is mostly the result of falling commodity prices (particularly oil and gas prices) which has been mainly affecting many of sub-Saharan Africa’s largest economies, such as South Africa, Nigeria and Angola (the three largest economies, representing about 60% of sub- Saharan Africa’s GDP), as they are heavily dependent on commodity exports. But the fall was also worsened by a severe drought that affected many countries in eastern and southern Africa. This caused a drop in agricultural production (Aceves, 2017), which in 2014 represented approximately 20% of sub-Saharan GDP output (IEA, 2014), and cutbacks in hydroelectric power generation was also suffered (Aceves, 2017) on top of general electricity shortages amongst other factors. (The World Bank, 2016) Although increasing average incomes in sub-Saharan Africa has lifted many people out of absolute poverty (defined as living on less than $1,25 per day), the region still hosts the majority of the worlds low income countries (27 out of 36 in 2014). And though the share of people living in absolute poverty has declined from 56% in 1990 to 43% in 2012, the number of people living in absolute poverty is rising, owing to the fact of rapid population growth. (The World Bank, 2016) -26-

The New Policies Scenario, as described by IEA, estimates that the sub-Saharan African economy will grow by nearly $8 trillion (expressed in year-2013 dollars, purchasing power parity terms [PPP]) by 2040. This is nearly four times its size from 2014. And in the period leading up to 2040, sub-Saharan Africa is one of the world’s fastest growing economies and the region will see its share of global GDP rise from 3% to 5%. But rapid population growth means GDP per capita will still be less than one quarter of the world average.

3.2 Demography The total population in sub-Saharan Africa was just over 1 billion people in 2015. (The World Bank, 2015) with about 396 million (about 40%) living in urban areas at that time. (Satterthwaite, 2015). Average life expectancy in the region has been rising, from about 50 years in 2000 to roughly 59 in 2015 (The World Bank, 2015) and the young working-age population is increasing. (IEA, 2014) Both of these factors contribute to a growing labour force within the region. Population growth rates in sub Saharan Africa are by far the highest of any region of the world and it is projected that the population of this region will increase by approximately 1,3 billion until 2050. (Haub & Kaneda, 2013) And by the end of this century, sub Saharan Africa will account for nearly all of the global increase in workforce (estimated at about 2 billion). (Husain, et al., 2016) This has implications for the electrification rate of the region. While nearly one billion people are projected to gain access to electricity by 2040, approximately 530 million will still remain without it. This means that electrification rates are actually lower than population growth rates, in other words; sub Saharan Africa is the only region in the world where the number of people without access to electricity is actually growing. IEA states that the rapidly growing population poses perhaps one of the most significant challenges to the sub Saharan African energy system. In particular because sub-Saharan Africa, unlike many other regions of the world, is expected so see continued and substantial growth in both rural as well as urban populations. Even though urban populations are growing more rapidly in sub-Saharan Africa than in any other world region (Rafei, 2014), the urban population share is projected to only be about 50% in 2040. (IEA, 2014) The continued and rapid growth of rural populations poses a challenge as rural areas are much harder to electrify given the fact that grid extensions, while cost effective once built, require substantial investment. (IEA, 2014)

3.3 Energy in sub-Saharan Africa When studying the SSA energy system (referring to the electric system defined in section 1.4) it is important to view it in the context of a broader energy sense. Primary energy demand in SSA was approximately 570 Mtoe in 2012, accounting for approximately 4% of the world total, and energy demand per capita is, on average, one third of the world average. There are also large differences in per-capita consumption between urban and rural areas, with populations in urban areas tending to be wealthier and having better access to energy. The energy intensity of the SSA economy is decreasing but still more than double the world average. (IEA, 2014)

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Figur 6: Population and per capita energy demand by country in sub-Saharan Africa, 2012. (IEA, 2014)

Bioenergy consumption, accounting for more than 60% of total energy use, is the fastest growing source of energy in the region. This is largely due to the traditional use of bioenergy for cooking. South Africa and Namibia are the only countries in mainland SSA where bioenergy does not dominate the primary energy mix. (IEA, 2014)

Figur 7: Sub-Saharan Africa primary energy mix by sub-region. (IEA, 2014) Many sub-Saharan countries are at an early economic development stage. This is mirrored by the fact that two thirds of total energy use is concentrated to the residential sector (predominantly for cooking). This compares to an average of 25% in other developing countries and 20% across OECD countries. Transport accounts for only 11% of final energy consumption, and productive uses, defined as industry, agriculture and services, accounts for approximately 21%. (IEA, 2014)

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3.4 Electricity in sub-Saharan Africa Electricity access In 2014, approximately 37% of the population of sub-Saharan Africa had access to electricity, with Gabon, South Africa, and Ghana representing the countries with the largest shares of people with electricity access (90%, 86% and 78% respectively). Whilst South Sudan, Burundi and Chad represent the countries with the least shares of access (5%, 7% and 8% respectively). There is a large disparity between the urban and rural access rates in sub-Saharan Africa, with the urban access rate at approximately 70% and the rural access rate as low as 18%. (The World Bank, 2014) And approximately 80% of the population without access to electricity is situated in rural areas. (IEA, 2014)

Figur 8: Number and share of people without access to electricity by country, 2012. (IEA, 2014) Electricity Demand The average residential consumption of electricity in sub-Saharan Africa is about 317 kWh/year per capita (as of 2014), this is about 7% of the consumption of the US. However, consumption varies significantly between regions. Rural consumption is substantially less than urban consumption, averaging about 50 to 100 kWh per year. An electricity consumption of 50 kWh would, for example, allow the use of a mobile phone, two fluorescent light bulbs and a fan for five hours per day. Urban households typically own more appliances which drives up their consumption. (IEA, 2014)

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Figure 9: Average electricity consumption per household, and region, in sub-Saharan Africa, 2012, and indicative consumption levels by appliance. (IEA, 2014) The demand for electricity in sub-Saharan Africa is most often limited by the lacking availability of supply. This results in consumers either not having access or not being able to consume as much as they would like. Such unmet electricity demand is troublesome to handle as it is not captured in electricity data which makes it hard to give a correct picture of overall demand. But the electricity demand that was met by grid-based, mini- and off-grid systems was 352 TWh in 2012, an increase of approximately 35% since 2000 but still substantially less than the demand in for example Korea, which has population 5% the size. The electricity demand on a per capita basis has remained relatively unchanged in recent years at close to 400 kWh, and total consumption, in turn, has been rising with the growing population size. A demand of 400kWh per capita is approximately 75% less than that of developing Asia and not even enough to power a 50W lightbulb continuously for a year. (IEA, 2014) For a comparison, the same number for Europe and Central Asia is about 5400kWh per capita. (The World Bank, 2014). The low demand for electricity is somewhat mirrored in the fact that electricity makes up about 7% of final energy consumption in sub-Saharan Africa, versus 18% globally . That number is reduced to 4% if South Africa is excluded. (IEA, 2014) Electricity consumption in sub-Saharan Africa is by far the largest within the industrial sector, particularly in mining and refining activities, accounting for 50% total consumption, though much of this industrial activity is concentrated in South Africa, Nigeria, Ghana and Mozambique. The residential sector constitutes about 27% of final electricity consumption and the service sector approximately 20%. The low residential consumption is attributable to, amongst other factors, low disposable income and the fact that there generally are few appliances per household that require electricity. An expansion in communications services, especially for mobile telephones, has resulted in increasing demand from the service sector in recent years. (IEA, 2014)

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Figure 10: Electricity consumption in Africa by end-use sector and sub-region, 2012. (IEA, 2014)

Electricity Supply The grid-based power generation capacity has been steadily increasing in sub-Saharan Africa in recent years. And in 2012, the total installed grid-based capacity reached 90 GW, a significant increase from 68 GW in 2000. About half of this capacity is situated in South Africa. Grid-based capacity consists of 45% coal-fired generation, 22% hydropower, 17% oil-fired generation, 14% gas-fired generation, 2% nuclear power and other renewable sources constitute less than one percent. (IEA, 2014)

Figure 11: Installed grid-based capacity by type and sub-region. (IEA, 2014) The total installed grid-based capacity in sub-Saharan Africa is less than half the installed capacity of Germany (which has approximately 200 GW of installed capacity). (Fraunhofer ISE, 2017) Hence, it is evident that sub-Saharan Africa is experiencing a severe shortage in electricity infrastructure. And power supply is insufficient to meet demand in most countries. And even if a grid connection is available, supply is often unreliable and there are frequent power outages. It is estimated that grid-based electricity is unavailable approximately 540 hours per year (representing about 6% of the entire year). This makes the use of costly back-up generators running on diesel or gasoline a necessity. Poor maintenance also means that the available power capacity is far less than the total installed capacity due to power generation infrastructure frequently falling into disrepair. (IEA, 2014) Other factors, such as the lack of reliable fuel supply (especially for gas- fuelled power-plants) and insufficient grid capacity, also reduce the total available capacity.

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Limitations in fuel supply is also worsened by the fact that fossil-fuelled power plants in the region largely employ low efficiency-technologies which are favoured for their low upfront capital costs. The average efficiency of gas- and coal-fired power plants in sub-Saharan Africa are 38% and 34% respectively. As a comparison, gas-fired plants in India run at efficiencies averaging 46%. (IEA, 2014) T&D losses are also very high in the region, averaging at 18% of initial generation, but in some regions reaching over 20%. (IEA, 2014) In comparison, the world average is about 8,2%. (The World Bank, 2014) These high losses further reduce the unreliability of power supply and increase the cost of the power that is actually supplied. Up until recently, must sub-Saharan countries have been developing their own power systems largely independently, with the main focus on domestic markets and resources. But there have been certain developments towards cooperation between countries in recent years. Regional cooperation, such as the building of cross-border transmission lines and forming of regional power pools has the aim of providing cooperative planning and improved physical linkages which can improve conditions for larger scale generation project such as hydroelectric plants. Four regional power pools already exist in sub-Saharan Africa today, however, only one is fully operational (the Southern African Power Pool connecting Angola, Botswana, DRC, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe) and the rest are under various stages of development. As of today, only about 7% of produced electricity is traded across national borders, the majority through the Southern African Power Pool. (Avila, et al., 2017)

3.5 Future Projections In the New Policies Scenario presented by the IEA, about 950 million people gain access to electricity in sub-Saharan Africa by 2040 but approximately 530 million remain without. This represents an electrification rate of approximately 70% for the entire region. (IEA, 2014) This means that SSA will fail to achieve the goal set by the UN to ensure universal access to affordable, reliable and modern energy services by 2030. (United Nations, u.d.) The demand for electricity is expected to increase more than threefold by 2040, reaching 1300TWh. The population that gain access to electricity during this time-period will contribute to about 20% of this increase. Industry demand, which is currently the largest, will more than double as national economies grows which boosts demand for products. Residential demand is expected to increase more than five-fold to reach 520 TWh. This is equivalent to a 6% increase per year.

Figure 12:Electricity demand in Africa in the New Policies Scenario (TWh). CAAGR is the compound average annual growth rate. (IEA, 2014)

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The new policies scenario estimates that that the total generation capacity in sub-Saharan Africa, including grid-based, mini-grid and off-grid systems, will increase to reach 385 GW by 2040. The average capacity additions made each year will increase from about 7 GW per year up until 2020 to 13 GW per year in the 2030s. This expansion in the power sector will require a substantial increase in investment: approximately $46 billion per year up until 2040. This is projected to be essentially evenly split between constructing generating capacity and T&D (transmission and distribution) infrastructure, with a focus on constructing new T&D infrastructure rather than replacing old, a characteristic that is not uncommon for countries that are expanding their grid coverage. (IEA, 2014) Fossil fueled capacity is expected to decline from 77% in 2012 to 54% in 2040. And while coal will be surpassed by both gas and hydropower in terms of installed capacity, it will still be the largest primary energy source used for production due to its role as a source of reliable baseload electricity. Oil capacity will see little change as the decrease in need for backup generation capacity, that is expected due to increasing grid reliability, is countered by an increasing use of oil- fueled capacity in off-grid and hybrid solutions for rural and peri-urban areas. The capacity corresponding to renewable production will have doubled by 2040 to make up approximately 44% of total capacity. Hydropower production will increase to about 93 GW and increase its share of total electricity supply from 22% in 2014 to 26% in 2040. Solar power (solar photovoltaics and concentrating solar power) will also see significant growth, accounting for approximately 12% of installed capacity and 6% of supplied energy. Installed wind capacity will however grow at a more modest pace, owing to the fact that alternatives prove to be more competitive. (IEA, 2014)

Figure 13: Electricity generation by fuel in sub-Saharan Africa in the New Policies Scenario. (IEA, 2014) For the future development of the electricity infrastructure, effective approaches both for urban and rural electrification must be implemented. This poses a significant challenge for the sub- Saharan African energy system as almost 80% of people lacking access to electricity within the region are in rural areas, and populations, contrary to trends in other regions of the world, are expected to rise in both urban as well as rural regions where provision of electricity access is much more difficult. Because of this, the extent to which increasing urbanization will facilitate access to electricity in sub-Saharan Africa is unclear. (IEA, 2014)

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Different approaches to electrification: • Grid-based supply The conventional way of providing access to electricity is by extension of the electric grid. Benefits to this approach include lower tariffs due to economies of scale and the ability to integrate large amounts of renewable energy. But there are also disadvantages and challenges to this approach. Large up-front costs to grid expansion often means that it is not economically viable to provide access to sparsely populated areas through this approach. And the limited ability to pay for electricity and connection fees (due to low household income) combined with small domestic market sizes restricts the ability to benefit from economies of scale and makes large-scale power generation projects economically unsustainable. The characteristics of the electric grid also means that it is preferably managed by a regulated utility. This poses a problem as regulations are often weak in sub-Saharan Africa, and utilities, as mentioned earlier, have thus been performing poorly. (Morrissey, 2017)

• Mini-grid supply A mini-grid can be defined to consist of a set of generators connected to a distribution network that supplies electricity to a local group of customers. Mini-grids may incorporate energy storage systems and can be designed to integrate with centralised power supply through the electric grid once a grid connection arrives. (Energypedia, 2017) Construction of mini-grid systems involve lower up-front costs when compared to grid-based systems but once in use, the cost of electricity supply is usually higher. This is particularly challenging given the low household income in sub-Saharan Africa. And even though the up-front investment is small compared to other methods of electrification, they might still be large in comparison to the incomes of local entrepreneurs. (Morrissey, 2017) Mini-grids are often financed through a mix of grants, subsidies, loans and private finance. In most cases, mini-grid projects get at least 30% of the funding through grants, but these are often inflexible and unable to conform to unforeseen problems or delays, and transaction costs are high, particularly for smaller scale mini-grid projects. Access to private finance is also often hard to get due to a lack of scalable business models, low returns in comparison to the risks involved and scarce examples of successful market exits. Lack of proper information is also a major deterrent for private investors. On a national and regional level, there is often a lack of information regarding grid expansion, regulations and policy. Very few African governments provide clear rules on how mini- grids will eventually be integrated into the regional grid, what standards mini-grids need to conform to in order for this to be technically feasible, and how mini-grid owners will be compensated once a grid connection arrives. On a more local level, there is generally little information regarding income levels and demand, information which is important in assessing the feasibility of mini-grid projects. Most commercial banks are also unwilling to provide credit to mini-grid developers due to the risks and uncertainties involved. (Weston, et al., 2016) • Off-grid solutions Off-grid solutions include systems such as solar home systems and solar appliances. These systems can provide electricity supply to households that are too remote to be accessed by even mini-grids. However, they suffer from a much more limited capacity,

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sufficient only for powering lighting, basic electronics, entertainment and cooling. And they also represent the most expensive forms of electricity supply. Solar home systems are also hampered by regulatory issues and risk of theft. (Morrissey, 2017) The types of access to electricity estimated by IEA in the New Policies Scenario is highly dependent on local factors such as the current state of the T&D system and plans on grid extensions, population densities, policies and access to finance. On-grid supply is the most cost- effective approach of providing access to urban areas where large concentrations of demand can justify the large up-front cost. But the most cost effective way of providing access in rural areas varies both between and within countries, and changes over time due to changing incomes and consumption patterns. The optimal mix of grid-based, mini-grid and off-grid systems is affected by factors such as population density, grid-based electricity tariffs, costs for mini-grid and off-grid technologies and the local cost of diesel. But in general, the development of Mini-grid and off- grid solutions will be crucial for the electrification of rural populations as grid connections are generally not financially viable in these areas. IEA estimates that of the 315 million people that gain access to electricity in rural areas in the New Policies scenario, 220 million (70%) will do so through off-grid and mini-grid solutions (80 and 140 million respectively). Though the majority of the total supplied electricity will still come from grid-based supply and only 20% of the increase in electricity demand forecasted by 2040 in the new policies scenario is attributable to those that gain access to it during the period. Providing this access (increasing the electrification rate from 32% today to 70% in 2040) is estimated by the IEA to require approximately $205 billion in capital investment. This investment is expected to mainly focus on supplying grid-based access (more than half of it is required for new T&D infrastructure) whilst mini- and off-grid solutions, which require less infrastructure, will account for approximately 30% of the total. (IEA, 2014) Another report from Mckinsey & Company estimates the cost of electrifying the entire SSA population at $835 Billion where $490 billion would be needed for new generation capacity, plus $345 billion for the construction of transmission and distribution infrastructure. (Castellano, et al., 2015) The same report estimates the time it takes for countries to develop from 20% to 80% electrification at approximately 25 years. What was also found was that the electrification rate follows an approximate S-shaped curve, where it takes a long time to reach 20% electrification. Electrification growth rates are faster between 20% and 80% electrification, only to slow down again during the last 20%. This is due to the fact that rural and hard to reach communities tend to represent the last section of the population that gain access to electricity. (Castellano, et al., 2015) There are a number of initiatives aimed at bridging the electrification gap and providing the necessary funding to do so. The UN program on sustainable energy for all is sparking private- sector activity in many different parts of the value chain. There is a strong push by global institutions to create an energy revolution. Power Africa program launched by former U.S. president Barack Obama in June 2013 is another attempt to enlist the private sector in the effort and garner attention on the topic. (Castellano, et al., 2015)

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3.6 Challenges The shortcomings of the infrastructure in the sub-Saharan energy system combine to produce a business environment that is unfavorable, especially for electricity companies. The reason for this is that, while end user electricity tariffs may be higher than the cost of generation, T&D losses, when added to T&D investment and retail, adds a substantial amount to the cost of electricity supply which raises tariffs in the region to an average of between $130-140/MWh, and they are in many cases among the highest in the world. IEA compares this to tariffs in Latin America, East Asia and Eastern Europe of about $80/MWh. This results in tariffs that are neither low enough to capture the demand from low income families, nor high enough to cover the cost of electricity supply and generate a desired return on capital. And the poor quality of the grid-based supply makes it hard to increase tariffs. (IEA, 2014) The International Monetary Fund noted that state- owned electricity companies operating in sub-Saharan Africa ran deficits equivalent of approximately 1,4 % of total sub-Saharan GDP. (IMF, 2013) This can be seen as a reason for low private investment into the sub-Saharan energy system. Most African countries also employ uniform national tariffs for electricity. That is, consumers are charged the same price regardless if they are supplied by a centralized grid or a mini-grid. This poses a problem for private-owned mini-grids as the cost of electricity supply through this approach is generally higher than the cost of centralized grid power. State-owned mini-grids have solved this to some extent through cross-subsidization, but they still lose a certain amount of money on every kWh sold through mini-grid supply. This seriously compromises the financial stance of many state utilities which in turn deters private investment in new capacity as state utilities often represent the only available buyer of electricity. Hence, Private-owned generation facilities and mini-grids in particular, which need to produce a certain return on investment, are therefore in need of cost-reflective tariffs. But most countries do not allow cost-reflective tariffs – a fact that impedes investment in private generation capacity and mini-grid systems. Some countries do provide specific regulations for private-owned mini-grids but the bureaucratic process of obtaining the proper licensing is often long and unclear with several agencies sharing overlapping responsibilities. (Weston, et al., 2016) The rationale behind providing this subsidy can be drawn from what most elected officials consider to be “fair”. Is it fair that poorer, rural populations should be forced to pay a higher price for electricity as a consequence of cost- reflective tariff structures? The unreliability of electricity is also currently acting as a braking force to the sub-Saharan economy with companies operating in the region experiencing estimated average losses of 4,9% of annual sales due to power outages and the subsequent use of costly back-up generation (with costs of about 300% of grid-based supply (Avila, et al., 2017)). This is often cited as a more pressing obstacle to their effective operation than even corruption or access to finance. (IEA, 2014) Most sources cite small domestic market sizes for electricity demand in sub-Saharan Africa as a major constraint for increased investment in large-scale power generation projects. IEA mentions The Democratic Republic of Congo as a prime example of a country where the exploitation of enormous power generation potential, in this case approximately 40 GW worth of hydropower along the Congo river (International Hydropower Association, 2015), has been held back by, amongst other factors, a domestic market size that is too small to justify any investment of the magnitude that is required (only 9% of the country’s population has access to electricity). (IEA,

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2014). Delivering this project could supply 13% of all of SSA total demand by 2040. (Castellano, et al., 2015) The issue with small market sizes is further worsened by the lack of creditworthy electricity buyers (off-takers). This is a serious deterrent for private investment in power generation in sub-Saharan Africa as this usually takes the form of a bilateral power purchase agreement with a national utility. (IEA, 2014) However, the poor performance and substantial risk of default for national utilities (due to poor service, low demand and an unsustainable tariff structure) introduces a further risk of non-payment for private investors as there rarely are any alternative buyers. (Africa GreenCo; The Rockefeller Foundation, 2016)

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4. Application of the 12 Leverage points framework in the sub-Saharan African energy system

In this section the 12 leverage points framework presented in section 2.6 is applied on the SSA energy system (as defined in the limitations section 1.4). The output is a discussion regarding leverage within each of the 12 categories of the framework and is presented in the following 12 sub sections – one for each category of the 12 leverage points framework. The application was done by reading through several reports outlining the energy outlook from various perspectives during which general indicators of leverage is sought within the 12 categories defined in section 2.6. Consultancy reports such as ‘Brighter Africa’ by McKinsey providing a greater focus on the interplay of economics and management. The IEA African energy outlook report from 2014 is widely used as this report is the most extensive on the subject and referred to by all other reports encountered. For each category the amount of leverage is estimated as LOW, MEDIUM or HIGH on an internal scale amongst the categories. This is representative of the effect intervention within the category could have on average in the SSA energy system. The possibility to intervene within the category is also presented as LOW, MEDIUM or HIGH, as an average across the findings within each category. The findings were condensed to portray the most frequent and promising leverage within each of the 12 categories and these are presented below.

4.12 Constants, parameters and numbers Donella Meadows states that 99% of efforts aimed at changing most systems are placed within this leverage point category. Changes in constants, parameters and numbers will drive incremental change and won’t change system behavior and drive radical change. The sources that were consulted in this thesis mainly focus on larger and more general trends. Therefore, there is not much information provided from these sources on how work is being done within this category. Many reports present big-picture ideas with an underlying need to generalize as they aim to interpret the development in SSA as one big system. The more detailed approach that is needed in order to spot and specify changes within this category, and the influence these changes has on the entire system, would make reports (this thesis included) extremely extensive. This is because very detailed technical and economic aspects would have to be looked at. But generally, when looking for leverage points in this category, everything that will incrementally change inflows and outflows to the amount of electrification, without changing underlying system behavior, can be considered a leverage point originating from this category. In general, an issue with too much reliance on leverage within this category in a system is that it diverts attention from the underlying mechanisms, and ends up treating symptoms of the problems in the system rather than tackling its source. A couple of examples where we are over reliant on the degree of leverage that this category of leverage points holds for system change include: - A change in subsidies, either increasing it or decreasing it - Incremental changes in investment

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- Incremental technological improvement, such as percentage increases in power plant efficiencies or incremental reduction of the costs for solar power

Amount of leverage: LOW – in the application no indications on higher leverage within this category was found. In accordance to theory, the amount of leverage is set to LOW as a reflection of the currently incremental change taking place within the system. Possibility to intervene: HIGH – one explanation for the high focus on this category is because it’s very easy to intervene, leverage points higher up this list requires the building of physical structures, implementation of complex mechanisms to monitor and provide new information flows, or aligning stakeholders around central goals or to deliver a project.

4.11 The sizes of buffers and other stabilizing stocks, relative to their flows The process of finding leverage points within this category requires certain interpretation of what can be regarded as a buffer or stabilizing stock within the studied system. The general characteristic that is sought after is features within the system that are able to absorb flows of stock. If streams of investment intended to increase electricity supply in the SSA energy system is considered as a stock, then the market size – or the demand for electricity – can be seen as a buffer as this decides the amount of investment the system can absorb and deliver return on before demand is fully met. For an alternative stock such as delivered electricity, the buffers would be reserve production capacity, transmission and distribution capacity or the supply of primary energy resources. The twelve leverage point framework states that there is leverage to be found within increasing the size of system buffers or stabilizing stocks. This is true for the examples of buffers mentioned above. Increasing demand or the buffer for market size Essential to adding new generation capacity is for investors and government to be able to cover their costs. An increase in demand allows for a greater scale of generation capacity to be built, and the costs can also be spread over a larger end-consumer base, thus allowing for economies of scale which is often crucial for financing power infrastructure. (Castellano, et al., 2015). Small domestic market sizes and poor interconnectivity between different national grids lie at the core of this problem. Increasing this already small buffer – increasing the demand in available markets – has certain leverage over the system. This is due to the fact that higher levels of demand, which introduces economies of scale, is what is required to make larger-scale generation projects financially viable. Economies of scale also benefit the costs for end-users as the cost of electricity production is brought down through access to cheaper energy sources such as large- scale hydropower, which has significantly lower costs compared to diesel-fired power plants. (IEA, 2014) The available demand within a market can also be increased through the aggregation of demand, such as through regional integration projects, which can provide off-takers that are critical for developing large-scale hydro assets such as those found in central Africa. These do however

-39- require a change in system structure (Leverage point category 10) by adding transmission lines across country borders. And considerable capital costs are required to build the large generation facilities, and thus there is leverage in leverage point category 10 to enable this structure. Another way to increase demand is to lower the grid connection costs for end-users, making it easier for consumers to connect to the grid. (Golumbeanu & Barnes, 2013). However, electricity demand is dictated by the availability of electricity infrastructure. An investment in Transmission and distribution infrastructure extends the grid, and by reaching more end-users more demand can be accumulated.

T&D capacity as a buffer A fundamental law governing any energy system is the preservation of energy. For electric systems this means that production has to be matched by consumption. Thus generated power needs to be transferred from the production location to a center of demand and distributed to all end-users such as households. When adding additional generation capacity to the power system the T&D allowing for the flow between power generation facilities to end-usage can be considered as a buffer. The available transmission capacity of the T&D infrastructure can be seen as a certain buffer, both if streams of investments, or the delivered electricity, are considered as stocks. This is because the state and extent of T&D infrastructure is an important factor in the sub-Saharan African energy systems ability to absorb investments in the construction of new generation capacity. As of today, poor, or non-existent, T&D infrastructure is a restricting factor for the development of new generation capacity. Transmission capacity is low which restricts grid service quality by limiting the ability to reach out to end-users. This lacking infrastructure leads to very high transmission losses (averaging 18% across SSA (IEA, 2014) which further adds to the total cost of electricity supply and makes it harder for investors to be able to recover their costs once new generation capacity is built. This, in turn, creates an environment which is simply unsuitable to absorb further addition of generation capacity if investments there are not matched by similar amounts of investment in T&D infrastructure. (IEA, 2014) This mirrors the fact that an expansion of this currently small buffer is an enabling factor for the addition of new generation capacity in the sub-Saharan African energy system as a whole. McKinsey estimates that of the 835 billion USD estimated by them to be needed to build an energy system that can meet demand by 2040, 345 billion USD needs to be spent on T&D, showing the magnitude of leverage in increasing this buffer. (Castellano, et al., 2015) Regional cooperation is one example (covered in leverage point category 10) that can create structure to connect countries and aggregate demand, and also, by creating a larger T&D system, this increases the power systems ability to absorb fluctuations in demand and production.

Number of users connected to the grid sharing costs for expansion & upgrade in T&D The importance of investing into T&D cannot be understated as shown above. The traditional way to cover maintenance costs and new investments in T&D is to share these costs over the consumer base and including them in the price for electricity. (IEA, 2014) This becomes an issue in SSA as only a small proportion of the population has a grid connection, making it difficult to collect the funding from this low consumer-base. Another issue is that electricity tariffs are

-40- already considered high by governments which leads to them subsidizing these to cover the costs caused by, amongst other factors, the poor T&D infrastructure. This, in turn, incurs losses for government utilities. Thus the number of users connected to the grid acts as a buffer to share and absorb the costs of further investment into T&D, and to share potential losses, showing the two- way causality of T&D investment and increasing demand.

Financial buffers If streams of investments are considered as the flow within the SSA energy system, and the amount of investment into the energy system is the stock, there are several financial buffers that are crucial to the development of the system. These buffers attract investments and stabilize the system around a high inflow, and low outflow of capital by reducing investment losses. A key aspect regarding the availability of finance for development is that the fiscal positions of many SSA countries puts funding for generation projects beyond their own capacities. The capital necessary is simply not available domestically within SSA, resulting in the need to acquire bilateral, multilateral and international private finance. (Castellano, et al., 2015) Critical for investors proceed with large scale power projects is to have the answers to two questions: “to whom will I be selling my electricity?” and “do they have the balance sheet to buy it?” (Castellano, et al., 2015). This can be done through the supply of credible off-takers, a power-purchase agreement that power generated will be bought by a certain party. This can facilitate IPPs to reach the critical mass of consumption required to cover the investment costs of generation. (Weston, et al., 2016) There are also suggestions, not currently implemented, to introduce intermediary financial off- takers between electricity producers and state utilities. The purpose of this intermediary off-taker would be to absorb the risks associated with direct power purchase agreements with utilities, which often suffer a considerable risk of default. (Africa GreenCo; The Rockefeller Foundation, 2016) An example of a financial buffer is the Nigerian Bulk Electricity Trader (NBET) that guaranteed to buy electricity from the generation companies and thus acting as an off-taker, but also the guarantees provided by the Nigerian government that ensured that NBET was sufficiently capitalized. (Castellano, et al., 2015)

Diverse energy mix as a buffer One of the more intuitive buffers in SSA is the supply of primary energy resources. A generally undiversified primary energy mix for electricity production, with a high dependence on fossil fuels, is most often the case in most countries in SSA. (IEA, 2014) This has implications as variability in fuel supply and prices cause multiple problems. Importing countries face supply uncertainties as fuel producers might deliberately hold in on supplies during periods of low prices, whilst electricity producers may suffer economic losses during periods of high prices (Electricity producers are exposed to this risk due to the use of uniform national tariffs). For example, Nigeria, which is heavily dependent on the oil industry, saw a 28% drop in national revenue following a steep fall in oil prices between July 2014 and January 2015. (Avila, et al., 2017) This uncertainty affects the economy of the sub-Saharan African energy system. Most countries are also locked into their choice of primary energy sources for decades which increases -41- the risk of stranded assets in the event that operating costs are no longer affordable. (Avila, et al., 2017) Diversifying the primary energy mix of sub-Saharan countries would increase their capabilities of withstanding the consequences of varying fuel supply and prices. However, powerful lock-ins in energy system infrastructure makes it difficult for individual countries to achieve change in this respect on their own within a shorter time-period. What is most often called for is instead regional cooperation: drawing on regional diversities in primary resources in order to increase this buffer. Although, this aspect is more inherent to the structure of material stocks and flows and is therefore discussed further under that section. A more diversified energy mix would allow for greater system flexibility and thus act as a buffer to variations in demand and system changes.

Amount of leverage: MEDIUM – This category outlines the possible leverage in increasing various buffer sizes such as financial and system buffers (T&D). Whilst these are necessary parts of the system in providing stability and necessary margins, they are dependent on higher categories of leverage to actually be triggered. Thus an intervention in this category won’t hold very high leverage if the underlying mechanisms such as the rules and regulations controlling the financial markets aren’t changed. Many sources state the importance of increasing these buffer sizes which increases the amount of leverage to an average of medium. Possibility to intervene: MEDIUM - While the buffers can act as incentives for a better functioning system, the diversification of the primary energy mix, or increase in T&D investment relative to generation capacity, is difficult to implement and requires the goals of the system (leverage point category three) to be set in accordance.

4.10 The structure of material stocks and flows There is some leverage to be found in the structure of material stocks and flows within the sub- Saharan African energy system. If we consider delivered electricity as a stock, then the structure of material stocks and flows would be represented by the physical power generation and T&D (transmission and distribution) infrastructure. The leverage that is being sought after here is mainly in the construction of new infrastructure where there was none before. This is because the twelve leverage point framework stresses that leverage over the structure of material stocks and flows of a system is rarely found in changing existing infrastructure, as this is often very hard, but rather in constructing it properly in the first place. And, as stated in the context, a lack of financial and electricity infrastructure is most often the case in sub-Saharan Africa. The potential to build new infrastructure needs to be analyzed in the context of geographical limitations and possibilities, such as where different kinds of primary energy is available, and how final energy consumption is spread among the urban and rural population. When looking for leverage in this category we've focused on ways to utilize the huge potential generation capacity within the system totaling at more than 1.2 terawatts of capacity (Castellano, et al., 2015). This is broken down to 400 gigawatts of gas-generated power, 350 gigawatts of hydropower and about 300 gigawatts of coal-generated power. (Castellano, et al., 2015) The underlying issue is that these resources are very concentrated to specific areas where the local demand is too low to justify the large investments needed. (IEA, 2014) Thus there is potential

-42- for huge leverage in the structure of stocks and flows by connecting this potential to concentrated places of demand such as large cities and urban areas, or energy-intensive industries such as mining or refineries. However, the large share of people living in rural areas (60%) coupled with the shear geographical extent of many countries results in very low population densities. (IEA, 2014) This makes electrification through extension of national grids very expensive in relation to the amount of people that gain access. This, in turn, prompts the need to look for different kinds of leverage to drive off-grid and mini-grid solutions for rural populations in order to provide universal access to electricity (urban and rural). Regional cooperation Pushing the structure of stocks and flows beyond the domestic power systems by extending and connecting the power grids of several countries can have a massive impact. This is done through regional cooperation – involving the forming of regional power pools and cross-border transmission networks – which is identified in literature to be a critical measure in order to increase electrification rates in sub-Saharan Africa. Regional cooperation can offer economies of scale to small countries with limited domestic demand while investment costs can be shared. (Avila, et al., 2017) It enables the construction of new large-scale generation and transmission projects, such as large-scale hydro which has significant investment costs but offer cheap electricity, by aggregating demand up to the point where a viable commercial case for investment can be made. (IEA, 2014) Regional cooperation mitigates the problems associated with the small sizes of domestic markets and the lack of credible buyers (off-takers), which reduces the uncertainty of cost-recovery for investments in power infrastructure. This creates an investment environment that is more attractive to private investment which is critical to the development of the SSA energy system. (Castellano, et al., 2015) It can also help diversify countries’ primary energy mix by drawing on regional diversities of resources and enabling a wider exploitation of intermittent sources of electricity production such as wind and solar power (a geographically larger electric grid mitigates the effects of varying local solar and wind output) and can reduce the dependence on imports of fossil fuels which protects countries’ from varying fuel prices. (Avila, et al., 2017) Geothermal resources in Kenya can for example be shared with South Africa, which is primarily using coal for electricity production and hydropower resources in Central Africa has the potential to be shared with Senegal (Castellano, et al., 2015) which is primarily using diesel. It is estimated by a report from the Programme for Infrastructure Development in Africa that a ‘moderate’ level of regional cooperation would save the end users a total of $904 billion during the period 2011-2040, or 17% of the cost of electricity, due to access to cheaper means of electricity production, specifically large-scale hydro. This ‘moderate’ scenario is considered to be the most realistic for planning purposes. (PIDA, 2011). Regional cooperation would also save $50 billion in generation capital spending while only needing an additional $9 billion for transmission. (Castellano, et al., 2015) The fact that regional cooperation can mitigate most issues associated with the previous category of leverage points makes a strong case as to why there is more leverage to be found within changing the structure of stocks and flows rather than simply increasing the system buffers. But even though this leverage point is put forward in literature as one of the more important direct measures to increase electrification in sub-Saharan Africa, it still requires large sums of

-43- investments. And the ability achieve regional cooperation rests, to some extent, on the construction of large generation facilities such as the Inga dam in Congo or grand renaissance dam in Ethiopia resulting in considerable risks, complex projects and great up-front capital costs (IEA, 2014). Regional cooperation poses some more specific challenges. Power pool member countries will have to find ways to collaborate efficiently, build mutual trust in the capabilities of each member country’s national grid system, develop the necessary expertise and work out frameworks that cover necessary legal as well as technical aspects. (Avila, et al., 2017) Some of these measures are covered in later leverage point categories. Poor existing infrastructure One key source to losses today, and difficulties to recover costs and get a ROI, is that newly built generation capacity is connected to poor grid infrastructure and the amount of electricity delivered to end-users in the grid is reduced through T&D losses (averaging at 18% across the region). The implications of this insufficient infrastructure are numerous, the increased cost of supplying electricity coupled with uniform national tariff structures, limits the ability to recover costs for investors. This additional strain on already low margins doesn’t provide strong investment signals into more expensive energy-efficient technologies, and thus, a lock-in into low-efficiency generation capacity can be seen. (Castellano, et al., 2015) The insufficient grid infrastructure, combined with existing low-efficiency generation capacity that is poorly maintained, results in electricity infrastructure frequently falling into despair. (IEA, 2014) The building of modern power plants such as those using LNG requires an experienced workforce and creation of LNG supply chains. In SSA supply chains for coal and oil are more developed and are considered easier to build than that of LNG. Also the availability of coal and oil resources leads to many countries wanting to exploit these. These fossil fueled power plants with low efficiencies are often favored due to their lower upfront capital costs (IEA, 2014). Replacing existing infrastructure is difficult and holds low leverage. As the twelve leverage points framework states, the most leverage can be found in constructing it properly in the first place. This rationale is mirrored in the fact that IEA, within their projections in the New Policies Scenario, estimates that investments in T&D infrastructure up until 2040 will be mainly focused on expansion rather than replacement. (IEA, 2014)

Making the most of existing infrastructure Whilst there may be low leverage in replacing existing infrastructure, high leverage can be found in making the most of what already exists. Extracting the maximum potential from existing assets is the cheapest way to increase electricity production, (Castellano, et al., 2015) an example of this potential is Nigeria that has about 40% of its installed capacity unavailable. (Castellano, et al., 2015) Availability improvements can be pursued through improved maintenance and fuel-conversion efficiencies and one issue is the lack of a competitive culture within incumbent utilities (Castellano, et al., 2015). State owned utilities often have a monopoly and thus a reduced incentive to keep costs down and make the most of their capacities.

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Governments have an important role to drive these efficiency improvements; acting to increase competition in the power sector through privatization or establishing IPPs (Castellano, et al., 2015) to create more competitive markets driving companies to maximize their profitability to survive. Another aspect is to give regulators more power to introduce strict performance targets within new IPP contracts, and impose gradual efficiency improvement targets for local monopolies and national utilities. (Castellano, et al., 2015) The creation of rules forcing more transparency regarding costs, coupled with incentives for efficiency performance are examples of leverage in higher categories (leverage point category 5). From McKinsey’s experiences, improvements of around 15-20% in additional capacity from maximizing the existing assets within two to three years are common. (Castellano, et al., 2015)

Structure of power markets Contrasting the structures of the power system, the non-physical flow of energy trade, and formation of power markets, is an important system structure in the SSA energy system. It acts as an enabler to make the most of existing generation capacity and bring down costs for additional generation capacity. At present, electricity trade in SSA is limited due to the fact that most countries suffer from a lack of electricity and associated infrastructure. (IEA, 2014) However regional integration and regional power pools would lead to more competitive markets with more sellers of electricity in the same system. Contrary to currently employed procedures, governments could implement a more competitive procurement process for electricity infrastructure projects, and seek least cost options. This would force incumbent utilities to come forward with more competitive agreements and enable players looking to enter the market to compete on the same terms, thus lowering the barrier for market entry. An example of this is the privatization program in Niger which has created a newly competitive power market. South Africa’s Energy Independent power producer procurement program, with multiple bidding rounds when adding new solar and wind capacity, has resulted in lowering the costs paid to IPPs, and has also allowed for new players to enter the market. (Castellano, et al., 2015) Policy and regulatory frameworks are crucial for the emergence of well-functioning energy markets, and leverage within this will be covered in leverage point category 5, the rules of the system.

Financial markets An enabler for power markets to function is the structure of financial markets. The investment climate is crucial to attract investment, and competitive power markets, where rules and regulations are transparent and players compete on the same terms, are fundamental. A major constraint in SSA is the lack of domestic sources of capital due to an undeveloped financial sector and low savings rates. (IEA, 2014) And the acquiring of third party financing of loans and guarantees requires well-functioning financial markets and viable, scalable, business models.

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There are four major business models (Castellano, et al., 2015): Public-private partnerships (PPP): A Public-private partnership, where the government holds a majority stake in the investment, has the benefits of shared risks, but often suffer from delays due to governments being slow to provide their part of the capital. Incumbent corporatization: Private sector funds are raised using existing assets as equity through infrastructure bonds or asset sales on equity markets. Independent power producers (IPP): The plants are entirely constructed by the private sector and the energy is sold through a power-purchase agreement. Market liberalization: Market liberalization is a model widely used in Europe and the US, where market signals and wholesale prices provide sufficient incentive for the private sector to invest in the power sector. However none of the SSA energy markets are in a condition to embark on full market liberalization since this won’t work in a supply constrained situation. For any of the four business models, creating an environment that will attract a broad range of private investors is essential. Long-term, clear, consistent and transparent regulations are required because of the long-term commitments often associated with power infrastructure (with 30 years or more for pay-back time) (Castellano, et al., 2015). Whilst the many different aspects in the creation and ensuring of viable financial markets holds leverage for the system structure, the true leverage lies in leverage point category 5 and 3 (rules of the system and goals of the system) in order to create these conditions and will be covered in the aforementioned sections.

Rural electrification In order to provide universal access to electricity, both urban and rural populations need to be considered. SSA is characterized by a large rural population share of 60%. (IEA, 2014). And whilst the business case for electrification in urban areas is more straightforward with more concentrated demand leading to economies of scale, the system structure for electrification of rural areas is more complex.

Rural areas can be electrified mostly through mini-grid and off-grid options as covered in the context section. Grid-based systems do provide electricity to rural populations when those communities are in close proximity to transmission lines and extending the grid to them is a viable option. However, projections for 2040 made by McKinsey, points towards only 46% of rural populations having access to electricity by that time, showing the system structure challenges in electrifying dispersed rural populations. The geographical structure makes rural electrification expensive. Urban grid connections average 750$ whilst rural connections can cost up to 2300$ due to the expensive T&D infrastructure required to deliver electricity to less dense areas. (Castellano, et al., 2015) Off-grid options cost between 1300-1900$. (Castellano, et al., 2015) The geographical structure of SSA sets a limitation to the system resulting in low leverage within this leverage point. Even though the urbanization rates in SSA are amongst the highest in the world (IEA, 2014), the huge rural population growth, resulting in 54% of rural populations remaining without access to electricity, prompts the need to look for ways to reduce the delays of rural electrification through the national grid by looking for leverage in mini- and off-grid alternatives. There is also a need to look for higher Categories of leverage such as the subsidization of renewable off-grid technology or the aligning around a central goal to electrify urban and rural populations in parallel. -46-

Amount of leverage: HIGH – The SSA energy system has an inherent lack of different structures of material stocks and flows. According to the theory, it holds higher leverage to build proper system structure in the first place rather than changing existing structures. The potential leverage within regional cooperation is among the highest found during the application of the 12 leverage points framework, and the impact of viable financial markets and competitive power markets are crucial to attract investors and the much needed capital to build an energy system to meet future demand. Possibility to intervene: MEDIUM – Intervention in this category is dependent on intervention at higher leverage point categories such as system goals and the rules of the system. However the possibility to intervene in making the most of existing infrastructure or the creation of competitive power markets is considered higher compared to categories that need vast amounts of capital and addition of physical structures such as transmission discussed in the previous leverage point category.

4.9 The length of delays relative to the rate of system change

There are numerous delays in the SSA energy system, as can be expected in a large system, such as large companies trying to adapt to ever quicker changes in the market and disruptive players, or national governments adapting to different needs within their countries. Big systems have a natural inertia, making these slower to respond to change. Delays can be divided into two categories, both delays in information, which is very connected to leverage point category 6 regarding the structure of information flows, but also delays in response. Characteristic delays in energy systems are oscillation between under-capacity and overcapacity due to long delays in addition of generation capacity, through large-scale projects, whilst forecasts for future demand are difficult to make resulting in the under-shooting or over-shooting of the response in new generation capacity. Rates of change in the SSA energy system As the rate of system change is quite slow in the development of generation capacity, the risk of over-shooting is not as big an issue; rather, the system constantly suffers from under-capacity. IEA outlines an energy system that expands rapidly, but one that still struggles to keep pace with the demands placed on it (IEA, 2014). However there are great rates of change in the studied system, with the most extreme population growth in the world, making the delays of adding additional generation capacity a huge problem. The greater quality of life and increased life-expectancy, together with a young and growing population will radically drive demand for energy in the next decades. This, Coupled with the aspiration of the continents companies and industry sector to drive economic growth, and, by their nature, energy-intensive industries such as mining, steel plants, and agriculture means there is a huge increase in future energy demand.

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It remains the key challenge to match this high increase in demand with a response in generation capacity powerful enough and timely. Many things have their natural delays which makes the outlook to find strong leverage points in this category less optimistic. The possibility to reduce the delays in the response and how much leverage there could potentially be in doing so are studied in this section. The role of electrification on the government agenda The importance of electrification hasn’t always been on the agenda of SSA governments. Since 2000, SSA has seen rapid economic growth and energy use has risen by 45%. Many governments are now intensifying their efforts to tackle the numerous regulatory and political barriers that are holding back investment in domestic energy supply (IEA, 2014). This shows that there is a delay in information on the demand for energy, resulting in the response undershooting the substantial increase in demand. Many countries, such as Angola, Cameroon, Ethiopia, Ghana, Kenya, Rwanda and South Africa, have national energy strategies, but the time horizon often varies (typically from five to twenty years), as does the extent to which these are regularly updated or systematically implemented. (IEA, 2014) Energy plans aim to trigger higher leverage point categories such as category 5, the rules of the system, through introduction and enforcing of subsidies. Thus a delay in the update of energy strategies can have wide consequences, and leverage is considerable in adding priority to more frequently updating these strategies. A delay in the response is shown through the lack of systematic implementation of said strategies. It’s also important to match addition of generation capacity with addition of transmission capacity. It has happened before in SSA energy system that generation assets could not be fully utilized because of delays in grid connections to evacuate the power. (Castellano, et al., 2015) Thus there is a need to synchronize addition of generation capacity and T&D investment and make sure there are no delays in either by taking a holistic approach in national energy plans.

Smaller off-grid solutions can reduce delays in response Off-grid solutions that may be deployed in a decentralized manner, can be deployed faster than centralized power plants, and can provide local employment for construction and maintenance, (IEA, 2014) thus creating local systems where maintenance can be delivered on site which shortens delays. This stands in stark contrast to the delays in delivering large scale generation capacity, and large T&D projects, where the time from development to deployment is several years. The delays for grid connections to reach rural populations are generally very long. This is because grid connections tend to be focused on urban, and dense, population centers where economies of scale can be achieved. And even when rural areas are electrified, the grid extension pace tends to be slow. Thus there is a need to find alternative off-grid and mini-grid solutions to shorten these delays. Large projects naturally take long time Adding to the delays of large scale projects is the fact that our system has an inherent lack of infrastructure. This holds true both within and beyond the SSA energy system. Poor roads and lack of rail-ways, for example, all contribute to the fact that when a project is initiated there is a need to build necessary infrastructure and to educate the workforce, resulting in a chain-effect that further increases the delay between identification of demand and actual delivery of a solution

-48- of supply. An example of this is the large coal capacity in southern Africa being held back by a lack of port capacity and rail infrastructure that needs to be in place first before this can be used in the energy system. The construction of this will take several years (IEA, 2014). One issue when tackling these long project delays is the need for emergency power producers (EPP) – plants that run on diesel and generate electricity at double or triple the price of grid power. These plants are needed to reduce the delays of adding generation capacity, and the time needed to build them is a few months. However this solution is not beneficial in the long-term as the costs for running a 100 MW diesel plant for one year are higher than the cost of building a gas powered plant of the same size. (Castellano, et al., 2015) The resulting infrastructure is locked-in, for years, to high tariffs, draining cash in the short term but also hampering long-term development of the sector. The procurement processes in many countries further adds time to the delays, these include onerous permitting and licensing procedures and excessive local content requirements. While these actions sometimes have developmental benefits, they add costs and often delay project completion. The cost of these delays is usually much more than the developmental benefits of the activities themselves. (Castellano, et al., 2015) A way to shorten delays is to focus on fewer projects. Governements tend to try to do too much at once, and there is a skill shortage to deliver on projects which results in all projects taking longer time. (Castellano, et al., 2015) Leverage could be found in focusing on selected projects to complete them faster and thus reduce the delays.

Amount of leverage: LOW - the huge rates of change inherent to the SSA energy system such as rapidly growing population are difficult to change as people naturally grow older. There can be some reduction in the delays for the system to respond to these changes but overall the building of power infrastructure takes a long time. Possibility to intervene: MEDIUM – while intervention within government procurement processes and the updating and systematic implementation of national energy plans is possible, intervening in the delays to add generation capacity is difficult and costly due to the nature of the very large construction projects.

4.8 The strength of negative feedback loops relative to the impacts they are trying to correct against Negative feedback loops are mechanisms in place to balance around a steady state and prevent change. As the goal of this thesis is to find leverage that can increase the electrification rate and drive the system from the current state, negative feedback, loops in their own nature, can be regarded as counterproductive to this goal. An approach has thus been chosen to try and find negative feedback loops that prevent change in the system and that tend to balance the system around its current state. The hypothesis is that there are negative feedback loops in place balancing around the current state and holding back radical development, as seen in the currently low rates of system change and the weak future projections.

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The nature of negative feedback loops is that they affect the inflows and outflows to the stock of electrification. By finding negative feedback loops that stabilize the current system state and prevent change, leverage can be found in destabilizing the system through removing the loops in place to allow for greater inflows. The removal of these mechanisms also allow for greater intervention to reduce the outflows. The SSA energy system has many negative feedback loops, which have evolved as a result of its inability to meet the total energy demand. This is a driving factor for the emergence of many sub- systems as alternatives, such as the heavy reliance on diesel back-up generators and kerosene/biofuels for cooking (IEA, 2014), with governments focusing efforts to subsidize and increase the strength of these systems in an attempt to provide access to energy for the entire population, especially those that rely on these alternatives without any other options. These subsidizations are changing revenue streams that could flow into additional generation capacity, and the promotion of alternatives lowers domestic demand for electricity that is required to proceed with large scale generation projects. Cost of electricity resulting in a conservative power agenda An example of negative feedback loops present in the system is the subsidizations in SSA, where governments spend a large part of the annual budget on subsidization of electricity ( 3-4% of the national budget spent on electricity subsidies is normal) (Castellano, et al., 2015), in an attempt to bring the end-user costs down. (IEA, 2014) The result from this is that the more electricity that is used, the higher the total cost for state utilities. As the power sector grows and more electricity is generated, the burden on the state utilities increases. There is an example for one country (country not specified in the report by McKinsey) in SSA which had a retail tariff of approximately 0.04 USD/kWh while the cost of electricity supply was 0.10-0.12 USD/kWh. The tariff isn’t cost reflective and the difference was subsidized by the government. A utility in this country wanted to add 750 MW to the grid which meant the government had to allocate 150 million USD – 300 million USD from their budget yearly to cover the costs to keep the tariffs at the same level. (Castellano, et al., 2015) Thus the government has a disincentive to increase electrification resulting in a balancing loop holding back further investment. This would result in the government spending money on alternative, more lucrative options, such as energy exports. “Although investment in new energy supply is on the rise, two out of every three dollars put into the sub-Saharan energy sector since 2000 have been committed to the development of resources for export” (IEA, 2014). The prevalence of subsidies in sub-Saharan Africa creates a significant barrier to moving away from fossil fuels. Governments spend about US$21 billion a year on fuel subsidies, including subsidies covering utility losses (Avila, et al., 2017). By straining national budgets and discouraging investment in renewable resources, the subsidies inhibit sustainable energy development. They will eventually trap the region’s energy investments in carbon-intensive technologies that could become stranded assets in the event of future climate and emissions regulations. (Avila, et al., 2017) “To close the electricity gap sustainably and cleanly, some of these investments in fossil fuel subsidies may have to be channeled to renewable energy systems.” (Avila, et al., 2017) This shows the strength of negative feedback loops. If the outflows from a sustainable energy system, such as outflows into fossil fuel subsidies, can be channeled back, it can hold huge leverage.

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Reduced industry demand as a result of poor electricity supply Energy systems are generally driven by demand, but in the SSA energy system the power supplied is expensive and unreliable, which has resulted in end-users looking for alternative options. The unreliability of power supply is identified as the most pressing obstacle to the growth of businesses within the region, ahead of access to finance and corruption. And many companies have, as a response, invested in expensive diesel generators to ensure their power supply. (IEA, 2014) This outflow of funds into diesel-generators and diesel fuel could have been a cash inflow into the power system through increased GDP. Instead, it is currently contributing to slow down change within the SSA energy system. On average, electricity produced from back-up generators is four times more expensive than grid- power. (Castellano, et al., 2015) This poor supply also makes it difficult for global companies to establish business in SSA because the energy prices will result in higher operational costs, and the uncertainty in supply results in high operational risks. (Castellano, et al., 2015) The end result is business in SSA becoming uncompetitive and initiatives not taking off as in other parts of the world. The problem is also evident for local businesses where they have difficulties growing and delivering to global markets as their domestic energy costs are too high. (Castellano, et al., 2015) Both these cases show that there could potentially be a higher demand for electricity but it’s reduced by the currently unreliable supply, resulting in actors turning to other options. Electricity tariffs are too high for residential demand, yet too low to cover costs for utilities “End-user electricity tariffs in many parts of sub-Saharan Africa do not fully reflect the cost of electricity supply. While tariffs may be higher than the average cost of generation (Figure 1.30), additional costs such as those relating to T&D losses, T&D investment and retail can add $60-$100 per MWh to the total cost of electricity supply.” (IEA, 2014) The underlying problem here lies in the T&D losses and investment costs that are shared by the relatively few users connected to the grid – another balancing loop as the fewer that are connected to the grid, the higher the costs will be. “The inability to set electricity tariffs at levels that reflect both costs and a reasonable return on capital is a major obstacle to the long-term sustainability of many utilities in sub-Saharan Africa. According to the International Monetary Fund, state-owned electricity companies across the region were, in 2010, operating with deficits equivalent to 1.4% of sub-Saharan GDP” (IEA, 2014) These losses suffered by utilities lowers their amount of capital available to do future investments into T&D which would be required to reduce the losses in the first place- resulting in a balancing loop around the currently poor T&D infrastructure. This difficulty to cover costs makes it economically unviable to add power generation capacity amongst existing and new players, as the return on investment is negative, thus steering the system towards a steady state. Lack of negative feedback loops to detect system deviation and drive a response A more reserved approach towards interpreting what leverage might be present within this category of leverage points is the identification of areas within the SSA energy system wherein a lack of negative feedback loops, that are necessary for the development of the system, can be identified. Specifically, mechanisms that can detect deviations in the rate of system change compared to the preferred rate, and adjust and deliver a response, need to be in place.

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“Many countries, such as Angola, Cameroon, Ethiopia, Ghana, Kenya, Rwanda and South Africa, have national energy strategies, but the time horizon often varies (typically from five to twenty years), as does the extent to which they are regularly updated or systematically implemented.” (IEA, 2014) This shows that there is a lack in the monitoring system to regularly update the national energy strategies, and the response system – the systematic implementation of these – is weak. Thus, there could potentially be leverage in introducing stronger negative feedback loops to balance around a steady rate of system change. Amount of leverage: HIGH – breaking these deadlocks presents huge leverage as they are currently balancing the system around a steady state of low electrification. And whilst compromises would need to be made in breaking these balancing loops, it could prove beneficial for the long-term electrification scenario of the system, there is high leverage in overcoming these challenges. Possibility to intervene: LOW – It is not an easy task to intervene within this category of leverage points as many of the negative feedback loops balancing the system around a steady state have evolved over long a time as a response to the slow development and poor infrastructure of the system. Thus, in order to break these balancing feedback loops, there is a need to intervene at higher leverage point categories. Finding solutions to these are not without compromises and will affect different stakeholders in different ways, as exemplified with electricity tariffs being too high to be affordable for most residential demand, yet too low to cover costs for utilities, whilst the governments suffer losses due to subsidies.

4.7: The gain around driving positive feedback loops In the previous section it was concluded that there are many negative feedback loops in the studied system balancing the current state, and there could be leverage in removing them. However there is potentially even greater leverage in the triggering of the many dormant positive feedback loops within our system: strong leverage points that have driven development of energy systems in the western world. But there is also certain leverage to be found in decreasing the strength of some positive feedback loops. Within the positive feedback loops category there is typically consequences of, but also leverage within the extreme changes occurring in the system, such as rapid population growth, GDP growth, and increasing energy demand rate. The amount of potential leverage found within traditional positive feedback loops driving system change in western energy systems has also been evaluated. These include: the more that gain access to electricity - the more the demand for electricity increases, the more connected to the grid – the cheaper to divide costs for expansion and system maintenance among the increased amount of users, and the correlation between economic growth and electrification. “Energy demand in sub-Saharan Africa is very low – at 570 million tonnes of oil equivalent (Mtoe) – but there are several factors pointing towards potentially rapid and prolonged growth: strong economic expansion, increasing urbanization, industrialization and modernization, a burgeoning middle class in many countries and a legacy of unmet energy demand.” (IEA, 2014)

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Population growth Strategies to slow down the positive feedback loop that is population growth, such as family planning,; the control of the number children within a family by means of artificial contraception or sterilization, is put forward as a means of helping countries in sub-Saharan Africa benefit from technological development. This is because a reduction in population growth rates enables countries to focus more investments on technology infrastructure and education amongst other benefits. (Husain, et al., 2016). Most literature emphasizes the benefits of reducing population growth rates in a broader development sense (World Health Organization, 2016). But as previously stated, rapid population growth is regarded as a major challenge for the sub-Saharan African energy system, and slowing it down will not only reduce strain on the system, but also, as stated earlier, enable an increased focus on investments in electricity infrastructure. Measures and actions needed to increase access and use of family planning include political commitment, legislative support for the autonomy of women and the implementation of service delivery strategies and policies to increase access to family planning. (African Development Bank Group, 2012) (Glick & Linnemayr, 2016) Economic growth Economic growth is a typical example of a positive feedback loop and in the case of sub-Saharan Africa, the energy system can be both a driver to, and a beneficiary of this growth as it is clear that there is a correlation between electricity supply and economic growth. (Castellano, et al., 2015). There are powerful indications that reliable energy supply plays a fundamental part in economic development and poverty reduction. This correlation is also made clear by the fact that most sub- Saharan companies cite the lack of reliable power supply as the primary constraint to their growth, even ranking it as more pressing than corruption or access to finance. (IEA, 2014). But the sub-Saharan African energy system’s dependency on investment to fund infrastructure also means that economic growth spurs development of the energy system. This causality is made clear by the fact that most sources cite the inability of sub-Saharan countries to finance the construction of infrastructure, particularly large-scale electricity generation, on their own as a major constraint to the development of the energy system. The successful development of the energy sector will be a crucial factor in determining the pace of economic and social development in Africa. Success to the successful A typical positive feedback loop is the success to the successful loop, where the more you have of something, the higher your chances are of receiving even more of it further on. (Meadows, 2008) The excerpts below give an example of such a positive feedback loop. “In a region where average incomes are low, the importance of the relationship between incomes, energy prices and energy expenditure is starkly evident. Across sub-Saharan Africa, the wealthiest 20% of households account for about half of total residential spending on energy, on average, while the poorest 20% account for around 5%.” (IEA, 2014) “Urban and rural households are also very different, with urban households typically having higher incomes and greater access to electricity services. In Rwanda, for example, more than 40% of urban households report electricity spending, while in rural areas the figure is 4%.” (IEA, 2014)

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Whilst urbanization can be a powerful catalyst to drive electrification in urban areas with better aggregated demand to gain economies of scales for utilities, it’s also important to mind the increasing disparities between the rich and the poor – where the poor are often situated in rural areas and are thus neglected if the increase in demand for electricity from the richest, and the lucrative opportunity to power urban areas, is matched only by centralized power production. Hence, efforts for rural electrification that match the strength of positive feedback loops driving urban electrification are paramount. Electrification increasing the ability of the power system to expand The ability to absorb new investment in T&D and cover T&D losses and maintenance increases with increasing electrification as costs are divided over a larger population. The more that are connected to the grid, the cheaper it becomes to expand the grid and optimize production to match demand. This is a positive feedback loop as grid expansions, in turn, provides electricity access to a further proportion of the population. The difficulties in utilizing this leverage lies in getting over the strong negative feedback loops balancing the current steady state. A reduction in the threshold for new users to connect could provide an answer as seen in the Electricity access program in Tanzania, where electrification increased from around 13% in 2008 to 24% in 2012, and a reduction in connection fees (by 40% in urban areas and 60% rural areas) was recognized as an important contributory factor (IEA, 2014). Accumulated knowledge, experience and skilled workforce to increase the capacity in SSA to deliver projects An issue covered in many publications is the need for a skilled workforce, experience in executing large-scale generation and transmission projects and knowledge transfer to deliver new projects. (Castellano, et al., 2015) (IEA, 2014). This is troublesome as all these aspects are inherently low in SSA – However, by the introduction of a higher leverage point, such as the structure of information flows, to create a sort of organizational learning system for the entire continent, this could be accumulated. This sort of system could trigger a loop where the more power projects that are completed the bigger the domestic work force is, the more experience and knowledge is accumulated and the higher the capacity to deliver new projects will be. The current cost premium for projects in Africa is around 60-100% due to project cost overruns and delays. This figure is expected to decrease significantly as more projects are built and skills are developed within each region to execute projects. (Castellano, et al., 2015) Demand increases with access The existence of a positive feedback loop is evident where the more that have access to electricity the more they will demand as 80% of the projected demand increase to 2040 is by those that already have access (IEA, 2014). It’s important to balance giving access to new users, in order to reach the goal of universal electricity access, and providing more electricity to those with existing access. This balance results in a tricky trade-off for investors looking to capture economies of scale by providing further access to urban populations (and especially provide electricity to those that already have a grid connection), while investing in T&D and new grid connections to electrify rural areas is an intervention resulting in a lower return on investment, but an increase in electrification rates.

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Amount of leverage: MEDIUM – this category of leverage points are difficult to evaluate. Some positive feedback loops provide negative leverage, such as population growth, as the more the population grows, the more difficult for the power system to cope with the increases in demand. There are some positive feedback loops that have been positive in triggering economies of scale and a larger base of users covering T&D investments, and triggering these could hold high leverage. On average though the amount of leverage is set to medium as the possibility for leverage in decreasing the population growth is difficult. Possibility to intervene: MEDIUM – This has been set to medium due to the fact that many positive feedback loops don’t need intervention. When they are triggered they will drive a positive or negative spiral for system change. However, as discussed, many of these are still dormant and there is a need to reach a certain level before they truly kick in and the intervention for these benefits are entirely dependent on other leverage point categories.

4.6 Structure of information flows The introduction of information or restoration of information flows can be a very powerful intervention as it can have a direct effect on the behavior of those exercising change in the system. When it comes to the structure of information flows there is a great deal of leverage in the studied system. This is because there are many conflicting interests in the system where different available options need to be discussed with all stakeholders to find the best alternatives. It is also important to anchor change with local communities, in rural areas in particular, so that, for example, grid extension plans are clearly communicated. Another aspect is the level of complexity of various initiatives, requiring education of the local population. This is both in order to communicate the benefits of electricity over use of other substitutes, but also to, where necessary, build the required competence to operate electricity infrastructure, especially in rural areas where the operation of mini- and off-grid solutions might require the involvement of the local population. Regarding the investment climate, there is a great need for transparency to attract investment to the region, and long-term government plans for the development of electricity infrastructure. This is both to guarantee government backing and long-term viability of projects, where large- scale projects have long pay-back times. A successful example is Nigeria’s privatization program which was well received because the government, through the Bureau of public enterprises, spent time and effort clarifying how the off-taker agreements would work, how the tariff was structured, and what would be the overall mechanisms for privatization. (Castellano, et al., 2015) Another issue for investors in calculating the net present value of projects is the lack of full overview of the cost-breakdown, this is often missing today with various fees and costs not explicitly stated. Information flows that deliver this information in an efficient and clear manner would boost investments. A key part when discussing the structure of information flows is the lack of information which is often due to a common unwillingness to be held accountable for the shortcomings of the system. This is a characteristic which is recognized in SSA in general as high levels of corruption go hand in hand with low transparency. (Banoba, 2017) This is counterproductive to the goal of attracting investment in the sub-Saharan energy system as it induces low credibility and high risk to the market.

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Communication of long-term government commitment to the power sector IEA states that transparency and increasing the access to information for stakeholders is key in increasing the availability of investment. For example, information about the pace of grid extensions is of great importance for investors trying to assess the conditions for development of future generation capacity. The communication of strategies regarding generation capacity, access and grid expansion is, for example, crucial for assuring that generation projects aren’t held back by lack of electricity demand (due to uncertainties in future access to consumers) or lack of transmission capacity, or that potential mini- or off-grid projects aren’t put off in expectation of a grid connection that is never realized. (IEA, 2014) Local governments and state utilities are also poor at providing guidance on how mini-grids might potentially be integrated into the regional grid, what technical standards that must be adhered to for this to be possible, and how mini-grid owners would be compensated should this happen (a complete lack of laws and regulations regarding this eventuality is most often the case). (Weston, et al., 2016) This kind of information is crucial for investment stakeholders and local communities as it allows them to make informed decisions about the best options for expanding electricity access. (IEA, 2014) The Africa Electrification Initiative, whose goal is to sustain a body of knowledge and a network of electrification practitioners within sub Saharan Africa, also states that the lack of practical and timely information to stakeholders is one of the main obstacles for the electrification of the region. (the Africa Electrification Initiative, 2012) An example of information that is hard to come by is for example robust and recent energy demand data, (IEA, 2014) particularly on a local level. (Weston, et al., 2016) Generally, there is also a lack of financial disclosure for companies operating in the sub Saharan African region which means that the amount of reliable financial information can fall short of any investor expectations. (Deloitte, 2015) Studies point towards that providing information and feedback to private investors, but also to local communities, can be a valuable leverage point as it opens opportunities to increase investment flows, and increases local communities’ ability to self-organize their electrification. So the leverage here lies mainly in providing transparency and communicating plans. However, shortcomings in the structure of information flows can to some degree be attributable to lacking or missing laws and regulations. As Meadows states the power within this leverage point lies within the fact that effects can be achieved without the need to change physical infrastructure in the first place. Amount of leverage: HIGH – the main barrier to investors is the political climate, low transparency and the high degree of uncertainty. It is important to introduce information flows that communicate a central long-term power sector ambition. This connects to the high leverage found in aligning around a central long-term goal, and the communication of this goal to all stakeholders would provide leverage in this category through the structure of information flows. Possibility to intervene: MEDIUM – There is a reason that some information loops are missing today, and adding these may not be a straight forward process even if there is potentially high leverage. The lack of the communication of some long-term targets, such as ambitions on how to integrate mini grids and grid extension pace can also depend that these ideas haven't been developed – thus the intervention needs rather to be done at a higher level such as the goal of the system. At the same time there isn’t much needed in order to add information flows, which makes intervention easy. The average of these conclusions put the rating to Medium.

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4.5 The rules of the system There are different levels of rules and their leverage is, in decreasing power, presented as follows: governing, natural laws – legislative laws – punishments – incentives – informal social agreements. But the power of these rules also depends on how those affecting system change view their legitimacy. Dangerous off-grid alternatives, oil theft, and illegal grid connections are all examples of cases where the rules are not followed, thus decreasing their leverage. At the same time rules, punishments, incentives such as subsidies, and targets in various energy programs, will affect previous leverage point categories by dictating the direction the system structure evolves into. Rules regarding transparency will for example impact leverage point category 6, the structure of information flows, and rules can be a response to the damage of positive feedback loops in the system, such as the reforestation initiative in Rwanda to combat unsustainable usage of charcoal and fuelwood as a substitute to electricity, driving down the forestry stock. The twelve leverage point framework states that close attention should be paid to the rules of the system, and who has power to change them, if there is a desire to understand the systems deepest malfunctions. The natural laws – absolute laws – that govern this system are of course the most powerful, the classic example being the first law of thermodynamics: the conservation of energy. But absolute laws are not places to look for leverage as these cannot be changed or even broken. The highest levels of rules that can be changed are legislative laws, or regulations. There is a tremendous amount of material and information describing this category of rules within the sub- Saharan African energy system in detail. However, a complete and thorough examination of all this information is far beyond the scope of this thesis. But certain critical and telling aspects of the laws and regulations surrounding the sub-Saharan African energy system can be identified. The, in literature, most frequently mentioned problematic with the rules regarding the sub- Saharan African energy system is connected to the tariff structure of electricity prices. As previously stated, most sub-Saharan countries have legislated uniform national tariffs which means that consumers are charged the same electricity price regardless if they live in urban areas, and are connected to the national grid where the cost to supply electricity is relatively low, or live in rural areas with mini-grid access which has higher costs associated with supply. The rationale for this legislation stems from the view of what can be considered fair; should the, generally much poorer, rural population have to pay more for electricity than urban populations? Regardless of the answer to this question, uniform national tariffs pose one of the biggest obstacles for private investment into the SSA energy system as it drastically limits the possibilities of cost recovery for energy producers. To this extent, the provision of a cost-reflective tariff structure is put forward by nearly all literary sources as one of the most effective measures to increase private investment and drive electrification in sub-Saharan Africa. The reason as to why cost-reflective tariffs are not exercised is that most public officials, who hold the power to change the laws and regulations, are more concerned with their public appeal. “For most elected officials, who have their eyes on the next election, fairness is much more important than cost recovery.” (Tenenbaum, et al., 2014) Evidently, this is a very good example where change is driven in the wrong direction, and is so done by those that have the power to change the rules of the system. Even though uniform national tariffs seem to work intuitively towards the goal of providing access to electricity to the

-57- public, what is needed, but not implemented, are laws and regulations for cost reflective tariffs that lessen the intervention potential of new government administrations. (Weston, et al., 2016) In other instances, there are issues regarding uncertainties of who holds the power to change and enforce regulations. Such as the fact that there often are numerous government agencies involved in the licensing of private mini-grid operators. And they often hold overlapping responsibilities. (Weston, et al., 2016) As such, there is clear leverage to be found in introducing a centralized regulator that has the power to define the rules of the game and shape the enabling environment around private investment in the sub-Saharan African energy system. The most important qualities for such a regulator are fairness, transparency and the ability to produce credible and predictable regulatory decisions. These are all qualities that are essential for creating the certainties around tariffs, market access and revenues that attract investment. (Eberhard, et al., 2016) Creating the foundation for power markets and financial markets As discussed in leverage point category 10, the structure of material stocks and flows, there is leverage in creating competitive power markets as well as viable financial markets. The creation and regulation of both these types of markets is highly dependent on the rules of the system. To create competitive power markets, regulators can play a key role by imposing gradual efficiency improvement targets for local utilities with monopoly, and embed strict performance targets within new IPP contracts. Government would also be important in driving efficiency improvements by changing the rules of the power sector to allow for new stakeholders to enter the market. (Castellano, et al., 2015) For the investment climate it is important to provide clear, consistent and transparent regulations. It is also important for governments to stick to policy decisions and follow through on commitments, as well as to provide long-term transparency. An example of higher rules outside the SSA energy system is the world trade organization that decreased trade tariffs to Africa. This opened up the possibility for greater investment into the SSA energy system. The effect of this is reflected, for example, in the amount of Chinese investment in Africa that went from $56 million in 1996, to $15 billion in 2011. Of these $15 billion, 65% was invested within SSA, and one third of this figure went into the power sector. Amount of leverage: HIGH – the current system rules are a major barrier to attract further investment that is necessary to radically change the system and add generation capacity. The various subsidies in place tend to promote non-sustainable energy practices and redirection of these through clever regulations and subsidies could be a cash flow into a long-term energy system Possibility to intervene: HIGH – changing the rules, unlike many other leverage point categories, doesn't require huge capital, radical transformation of infrastructure or the involvement of several stakeholders due to the concentration of power. It is easy to intervene, but it is important that the intervention done drives the system in the right direction.

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4.4 The power to add, change, evolve or self-organize system structure The power to add, change, evolve or self-organize a system structure is described within the twelve leverage point framework as an extremely powerful leverage point. It refers to a systems ability to radically change any of the previous categories of leverage, such as adding or subtracting new physical structures, feedback loops or rules. For powerful leverage in this category, the twelve leverage point framework states the need for “raw” material as a means for experimentation, testing and selection to drive system evolution. In an energy system, this can be interpreted as the capital, accumulated experience of building power system infrastructure and available technology. There is a deficit of all of these “raw” materials in the SSA energy system which can be seen as explanatory to the stagnated development rate and the current state of the system as covered in the context. To be able to experiment and test there needs to be an abundance of resources, and the selection process is determined by what is currently most urgently required by the system. If this is to meet demand placed in the short term, the system will evolve to deliver this. There is a great need for leverage in this category as the SSA energy system has a slow rate of change with aging infrastructure and a system unable to meet rapidly increasing demand. The characteristics of the SSA energy system, relating to the geography of large countries and dispersed rural populations, put forward a need for innovation through experimentation. There is also a need to change the current pathway of the system, where an unsustainable reliance on bioenergy for most of the population, coupled with the projected increases in demand, leads to deforestation, and currently contributes to 600’000 deaths from pollutants per year. (IEA, 2014) A path forward for universal access has to evolve and be different from traditional ways of electrification which have started through electrifying large urban populations (IEA, 2014). However, leverage in this category is low because the power to drive change is concentrated to a narrow set of stakeholders. And the lack of “evolutionary raw material”, in terms of capital, knowledge and technology necessary to drive electrification quickly enough and embark on a development path in building an energy system that is sustainable in the long-term, is not present. When discussing leverage within this category, several levels of the system needs to be considered. The highest level is the general energy system of SSA (not to be confused with the SSA energy system as described in section 1.4), including all primary energy sources, supply chains and end-usage in all sectors. Within this system level, there are different solutions to provide energy which can be considered as sub-systems; the centralized grid-based energy system, off-grid and mini-grid power systems and the sub-system of substitutes in the form of fuelwood, charcoal, kerosene and diesel. These sub-systems sometimes compete, and sometimes needs to be developed in parallel for a sustainable energy system in the long term. The power to add, change or evolve is very different within these sub-systems which help explain their current state and size. And leverage is found in understanding these from the perspective of the theory and increasing sustainable sub-systems (such as the SSA energy system as described in section 1.4) ability to add, change or evolve, whilst decreasing the substitute systems power to do the same. Sub-system: centralized grid systems Looking at the grid-based energy system, its characteristics are more complex and harder to intervene with compared to the other sub-systems. As an example, T&D is a shared resource used by the grid based system, thus every intervention has to be agreed upon by someone

-59- managing and overlooking the entire system. This need for coordination means it shouldn’t be too easy for actors to intervene in the system which further reduces the power to add, change or evolve. As such, a centralized grid, in its character, has low leverage for changes in its physical structure. And the buffer sizes also limit changes while regulations and rules further decrease this leverage. An example on where leverage has been added in this category is where Rwanda’s government has tried to lower the threshold to connect and expand their power grid in the Rwanda’s Electricity Access Rollout Program, which offers ready-to-use switchboards that can be paid for in instalments. They enable low-income households to connect to grid electricity without the need for expensive house wiring. This has caused electrification rates to increase rapidly in recent years (from 6% in 2008 to 17% in 2012) (IEA, 2014). This shows the strength in this leverage point by giving end-users the power to affect the evolution and expansion of the system. The complexity and challenges for adding, changing and evolving the system gets to the extreme end of the spectrum as we look at the creation of large scale generation capacity to tap into the extensive opportunities in large hydro resources such as those in central Africa. Such large-scale cross-border infrastructure investments can be secured with long-term take-or-pay contracts but they typically require political stability over many decades as a prerequisite. Moreover, development at such a scale would require modern technology and a skilled workforce. (IEA, 2014) The power to add, change or evolve is very low to deliver these large scale projects and this explains why only 5-10% of the hydro resources are exploited today. (IEA, 2014) Sub-system: off-grid, mini-grid and substitutes to electrification Compared to the centralized grid systems, off-grid, mini-grid and substitute systems has greater power to add, change or evolve, as changes in these doesn’t need the same level of coordination as they don’t affect the whole grid-based system. Addition of solar cells, small-scale wind- turbines and diesel-generators is easier than planning for the addition and integration of large- scale centralized generation capacity in the grid-based system and the degree of freedom on who can intervene in these sub-systems is also considerably higher. A key driver for evolution is survival as the twelve leverage points theory states that a system will try and evolve to meet the needs placed upon it. This can be seen in the large share of the substitutes to electricity within the SSA primary energy mix (80% of residential energy demand is from bioenergy) in the form of charcoal and fuelwood, which has evolved over decades. This has resulted in the formation of supply chains, through rural employment, for gathering fuelwood and small-scale charcoal production kilns – a sub-system often outside the formal economy and thus difficult to control through previous leverage points such as rules, regulations and subsidies. An explanation for the emergence of the substitute sub-systems is the amount of leverage in the power to add, change or evolve this system to meet the energy demand (the end-goal of any energy system), which is a lot higher than for the other sub-systems mentioned, as anyone can intervene, and the cost can be as low as “zero” if fuelwood is gathered by the end-consumer. When compared to centralized grid electrification, it is easy to understand why the leverage is higher in other sub-systems as centralized grid electrification requires more up-front capital and approval from various institutions, but also modern technology and a skilled workforce. (IEA, 2014) The different systems referring to the centralized grid electrification system, and substitute systems, define the disparities between the poorest (using the substitute system) and richest in

-60- populations (gaining grid access). The driving forces of these systems drives system change in different directions rather than forward in a cohesive effort and could be resolved in the next category of leverage points by creating a unifying long-term system goal. An example of this conflict lies in the impact of the loss of oil through theft by Nigerian oil pirates, where, if the losses were put into the energy system, they could provide all Nigerians with electricity by 2030. (IEA, 2014). The high reliance on unsustainable alternatives, such as charcoal and fuelwood – often outside the formal economy – and illegal power access connections (IEA, 2014) shows how powerful this leverage is as these systems bypass the previous leverage point categories such as the rules of the system. Leverage within this category could be found in lowering the threshold to add off-grid and mini- grid technology to rural areas, the lack of which can be attributed to a lack of knowledge and capital. (IEA, 2014) Efforts here can for example be the education of local communities to employ renewable technology to meet their energy demand. Local entrepreneurs responsible for charcoal kilns can be empowered to promote renewable solutions and be given the power to add, change or evolve these kinds of systems through education and resources. It’s important to realize that while the substitute system of charcoal and fuelwood needs to be replaced by more sustainable solutions, they hold huge informal economies and employ a great amount of people, and a transition from this system to a more sustainable one needs to be done incrementally and in a cohesive effort with the local communities as discussed in leverage point category 6, the structure of information flows. Thus All actions that increase the power to add, change or evolve sustainable off-grid systems are to be preferred rather than trying to punish and weaken the system for substitutes, such as punishing the usage of fuelwood and charcoal or closing down local charcoal refineries.

Who has the power to change? Another aspect to look at within this leverage point category is not only the power in adding, changing and evolving for different sub-systems, but the associated stakeholders that hold the power to exercise change and to which degree. In the grid-based SSA energy system this power for change is concentrated to ruling governments. This is seen in the many ways governments create various long-term energy programmes which adds and changes regulations. (IEA, 2014) In effect, these plans create new playing rules for the system and these plans are derived from national long-term targets and examples can be seen in appendix B. IEA also states that national projects often takes priority over local interests, adding further power to the system of substitutes as a response. (IEA, 2014) There have been some attempts to add leverage in this category. Electric utilities in sub-Saharan Africa are typically vertically integrated, that is, they control all levels of the supply chain: generation, transmission, and distribution. Because of the poor performance of the power sector in the region, however, many countries have attempted to unbundle their electricity utilities to allow participation by independent power producers (IPPs). IPPs are entities, usually private, that generates and sells electricity to utilities and end users. Ghana, Nigeria, and Uganda have had some success in this area. Nonetheless, as of 2014, 21 countries in the region still had state- owned and vertically integrated utilities with no private sector participation, precluding IPPs. The presence of IPPs can help reduce the perception of risk in investing in power systems in the region, and encourage private investment. To succeed, IPPs require favorable local investment

-61- climates, clear policy and regulatory frameworks, local availability of cost-competitive fuels, and effective planning, procurement, and contracting practices (Eberhard et al., 2016). Who has the power to change regarding off-grid and mini-grid systems is less clear. Part of the reason is that government don’t always have long-term grid extension plans and when these exist, it’s not clear when rural areas would be electrified. Whilst the answer to who can intervene for these systems is not always clear, and differs between the countries in SSA, there is a considerable need to create business models that allow the private sector to intervene (Castellano, et al., 2015) and with the possible involvement of several different players, the capital required can be divided over many, rather than a few, stakeholders, especially as governments don’t have the necessary funds to finance the needed development and end up subsidizing the substitute system, such as diesel or kerosene instead. (IEA, 2014) Thus there could be considerable leverage in increasing the power to add, change or evolve sustainable off-grid and mini-grid systems. The power to add, change or evolve within the substitute systems is, although, greater, as nearly anyone can intervene within this system. To connect to the discussion of leverage point category 5, there could be high leverage in giving regulators more power to write and enforce the system rules, subsidies and regulations discussed in the previous leverage point category. This enables them to take a more active role in monitoring and pursuing asset efficiency and the creation of financially viable markets. (Castellano, et al., 2015)

Amount of leverage: MEDIUM – there would be leverage in rules for the system to self-organize and evolve to meet long-term demands, rather than short-term demand - however the characteristics of power systems and its inability to evolve due to T&D limitations coupled with the need to always match production and consumption means it shouldn't be too easy for the system to evolve and for actors to intervene in the system. However, a combinatory approach to both electrify urban and rural areas through grid, off-grid could drive a quicker electrification rate, especially through weakening the power of the current un-sustainable off-grid alternatives and exchanging these for off-grid renewable solutions. Possibility to intervene: LOW – intervention in this category depends on several other leverage points and it's difficult to know where exactly to intervene within this leverage point category.

4.3 The goals of the system The theory states that system goals are found when studying system behavior. This goal can be interpreted in the behavior of the entire SSA energy sector (not just the SSA energy system as defined in section 1.4) as desperately trying to bridge the gap between energy demand and energy supply. Energy demand met by non-sustainable use of forestry stock, such as charcoal and fuelwood – resulting in the use of unhealthy cooking options leading to 600’000 deaths a year. Government subsidies in kerosene and diesel coupled with the lack of investment in electricity transmission infrastructure and poor maintenance of existing structure - all show that the system behavior is to meet the pressing demand for energy today rather than long-term sustainability. The studied SSA energy system in this thesis (production, transmission and consumption of electricity) is integrated and part of this higher driving goal for the SSA region as a whole, and the

-62- development of a power system, has been key to the growth of all modern economies. (IEA, 2014) The lack of long-term goals and initiatives to build a sustainable power system shows there is a great deal of leverage in developing and aligning actors around long-term system goals.

Difficulties to align around goals with limited resources and conflicting interests According to IEA, the primary purpose of the energy system is to contribute to a better quality of life. To those that have it, modern energy unlocks access to improved healthcare, improved education, improved economic opportunities and, even, longer life (IEA, 2014). However there is an issue as the SSA Energy system is deprived of direct investment to, not only the power sector, but other areas as well. There are pressing problems within healthcare, education and food security to name a few, and when separate to energy goals, it is easy to understand why one is prioritized over the other. However, as IEA states, access to modern energy can drive change in all these categories, and when energy goals are integrated to a bigger goal, such as to boost economic development, or reduced poverty as in Ethiopia, Ghana and South Africa (IEA, 2014), the importance of energy sector targets and their relation to development as a whole is clearer to stakeholders. Another example of the scarcity of resources affects the large hydropower potential within central Africa – which entail social and environmental concerns that need to be diligently addressed. In some cases, water availability may be limited due to requirements for other uses, such as irrigation (IEA, 2014) and goals need to be balanced to consider all stakeholders.

Difficulties in aligning around a system goal A problem for this leverage point lies in the size of the SSA energy system. It is difficult to have all stakeholders work towards a common goal for the whole of SSA as different countries have different interests and priorities, and also different prerequisites, different domestic primary energy resources, and are at different stages of economic, social and political development, as well as different end-sector usages. Thus different countries with different goals will result in sometimes opposite and unaligned driving forces for the SSA energy system as a whole. An example of this is that many countries are willing to export energy, whilst many don’t want to be reliant on imports, which inhibits cooperation. Another example is how national initiatives often take priority over local interests, rather than aligning around a common plan (IEA, 2014). However the potential of a unified system goal for SSA would facilitate efficient resource usage for sustainability, such as the regional power pools mentioned, and facilitate various other cross- country initiatives such as tapping into low-cost large hydro resources. (Castellano, et al., 2015) Parallel efforts for urban and rural, grid and off-grid, energy supply (in contrast to the normal electrification path of urban populations electrified first) derived from a universal energy access goal - could bring energy to a greater share of the poorest parts of SSA. Policy development and coordination at a continental and regional level is undertaken by the African Union (AU) and the New Partnership for Africa’s Development (NEPAD) (which have formulated the AU/NEPAD African Action Plan). Other organizations include the African Development Bank and the Program for Infrastructure Development in Africa (PIDA) who has stated a Priority Action Plan. (IEA, 2014) These efforts show the potential leverage to be found in aligning around shared system goals for the SSA energy system. Much of the policy focus at

-63- this level is on trans-national infrastructure development. (IEA, 2014) This shows the amount of leverage present in leverage point category 10 and 11 in creating system structure and increasing its associated buffers through a more connected system and aggregated demand to attract investors.

Challenges for local goals A more local issue in finding a goal for the generation of electricity is that governments wants to give access to many and thus drive end-user costs down through tariffs and regulations, however companies want a return-on-investment and higher tariffs to be able to cover their costs. this results in government costs to subsidize tariffs, losses for utilities that cannot cover their costs, and an end-user price that is higher than anywhere else in the world resulting in households still being unable to buy electricity (IEA, 2014) – this scenario, shows that there is no balance that will suit all parties and exemplifies the need for a higher goal that all stakeholders can align around. Most countries have electricity access targets and policies in place, but fewer have objectives and approaches related to clean cooking (IEA, 2014). This connects to the previous Leverage point category (LP 4, power to add, change evolve), where there is great leverage in the power to add and change within alternative solutions to electrification. If these problems are not addressed through goals specifically targeting the issues of clean cooking through electricity access and signaling intent to tackle these in the short-term and the issue of clean cooking integrated to long-term goals, there is a risk that new goals and policies only further increase the strength of leverage point category 4 for non-sustainable alternative solutions to electrification. Communication and anchorage of energy targets with local communities are key to change this situation (IEA, 2014). Long-term goals In the previous leverage point category, short-term energy supply sub-systems are in conflict with long-term grid and off-grid supply. To solve this conflict there is a considerable need for long- term goals within the SSA energy system. Numerous examples have been mentioned in previous leverage point categories where short-term solutions, or quick fixes, are chosen over what is beneficial for the SSA energy system in the long-term. Many of these solutions drain cash in the short term and hamper long-term function. The leverage in building power markets and creating a positive investment climate is covered in leverage point category 10, and whilst the rules to creating these are covered in LP category 5, these stem from long-term goals in the first place. To create the necessary long-term rules and regulations and provide long-term transparency regarding subsidization structures, (crucial to power infrastructure investments with the associated long payback time and need to calculate future revenue streams dependent on the development of subsidies and regulations), there needs to be a long term goal that drives these rules and regulations in the right direction for the long- term sustainability of the system. An example showing the comparatively low commitment amongst SSA governments towards the development of the SSA energy system is the fact that SSA governments invest only 0.5% of GDP yearly into the power sector, compared to the non- OECD average of 1.3% of GDP. (IEA, 2014) One of the most important aspects covered previously in this thesis is for governments to demonstrate political will. In order to do this, they need to keep an eye on the long term, beyond the election period of the ruling president, and prioritize efforts into the power sector. Regulators -64- can instead be given more power and further capabilities to create the environment needed for the energy sector to thrive. (Castellano, et al., 2015) All these initiatives come from a clear, long- term goal that shows commitment to the energy sector. While long-term goals hold powerful leverage, the mere existence of a policy or target is however not enough to justify high leverage, (IEA, 2014) it’s equally important that governments stick to policy decisions and get a track record of following through on commitments as nothing makes the private sector less inclined to invest than uncertainty. (Castellano, et al., 2015)

Power to change the goals It’s important to consider who has the power to set the system goal. For single countries, the ruling government has very concentrated power and this can be an explanation to the problems that drive disparities in the previous leverage point category. However the legitimacy given to ruling government affects the power of the goals that are set. If this legitimacy is not recognized by the international community, and investors, as suitable goals for long-term development, they may not be backed to the same extent as mutually accepted goals. Power of goals While meadows states that ultimate system goals are unintuitive and hard to find, explicitly stated domestic goals for the energy agenda are an important signal to the international community regarding government commitment to attract investment. This is expressed in the need for government long-term targets within the energy section, such as commitment to grid expansion and T&D maintenance, is important for stakeholders to read into the governments intentions and also for local communities and businesses to be able to make long-term decisions regarding their power supply options (IEA, 2014).

Amount of leverage: HIGH – as there is potential to affect all previous leverage points to work towards a long-term goal rather than to meet short-term demand affecting subsidies, information systems, balancing feedback loops and triggering positive feedback loops – such goal would also send signals to investors about long-term ambitions regarding the power sector and would increase the attractiveness for long-term investments in the region. Possibility to intervene: MEDIUM – The power to change and set goals is concentrated to a few, ruling governments, there are challenges in aligning around a central long-term goal, short- term issues need to be balanced. At the same time the setting of a long-term goal doesn't require much which sets the possibility to intervene to Medium – the challenges lie in discussing and bringing together several stakeholders. Also, the mere presence of a goal is not enough, the needs to be a certain capacity to deliver on these goals.

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4.2 The mindset, or paradigm, out of which the system –its goals, structure, rules, delays, parameters - arises There are different stakeholders in the studied system, with different paradigms from which the system goals and action on previous leverage point categories are derived. One key factor is that the degree and characteristic of change, that is required in the SSA energy system is different to previous western experiences of electrification. The geographical structure, with large, sparsely populated, countries and huge distances may require a different electrification strategy than required in the western world where large urban populations have been a key driver to high electrification rates. Another obstacle is the extreme population growth, combined with large dispersed rural populations driving electricity demand at an unprecedented pace. The accumulated global experience of electrification and energy systems in general, in itself, creates a paradigm for how change could be exercised. But the SSA energy system has very different, and seldom encountered, characteristics, prompting to ask the question if a new paradigm for electrification, such as a more focused approach on mini-grids and off-grid solutions, should be considered. There is also an opportunity to build an efficient energy system optimized for the entire continent of Africa. Another opportunity lies in the possibility to build a sustainable energy system directly, rather than suffer the technological lock-ins to a fossil-heavy energy system that characterizes the global energy system. These challenges, coupled with opportunities makes it very relevant to look for leverage in understanding underlying paradigms for the various stakeholders involved in driving, and affecting, the trajectory of the development of the future SSA energy system. Finding leverage points in this category is difficult and highly subjective. Especially when trying to identify what can be perceived as a paradigm, but a few examples of paradigms within which to intervene can be found below. One issue lies in that many countries don’t want to rely on their neighbors for the import of electricity and thus has sought ways to be self-sufficient; this often results instead in the import of fossil fuels with more funds allocated to the energy sector as a result. (IEA, 2014) To fulfill the potential of regional power integration covered in leverage point category 10, countries with generation potential needs to be willing to export to their neighbors and countries suffering from an energy deficit needs to be willing to import and rely on their neighbors. The fear for this cooperation lies in the risk that neighboring countries will use electricity as a political and diplomatic weapon. (Castellano, et al., 2015) Thus there would be leverage in not only understanding this paradigm but the consequences of this underlying paradigm for all parties. Another paradigm lies in elected government official focusing on winning elections and taking actions beneficial for the election period. One example is the promise of short-term solutions, such as diesel-fired power plants, that can deliver hundreds of megawatts of power to the voting public within months. (Castellano, et al., 2015) The resistance to impose cost-reflective tariffs because governments are concerned about public appeal is another example and a huge issue that has been pointed out in many previous leverage point categories. A problem here also lies in many power infrastructure projects, such as large-scale generation capacity and transmission lines, taking long time to be completed, whilst requiring huge up-front capital, thus the benefits of these constructions extend beyond the election period.

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A disclaimer is however important as these are not general trends for all counties, presidents or governments of SSA, but merely some examples found in literature. The motivation for looking for leverage within category 6, the structure of information flows, and the need to educate local communities about the hazardous effects of unclean cooking facilities, stems from the paradigm of how food is traditional cooked. Even though communities have access to modern fuels that are more efficient, cheaper, and with less hazardous effects, the traditional use of fuelwood and charcoal has been continued. A transition is thus not straightforward to cleaner cooking because of a complex relationship between solid biomass consumption, cultural factors and food choices. (IEA, 2014) The magnitude of this paradigm is shown as nearly 730 million people in SSA rely on traditional use of solid biomass for cooking, leading to 600’000 deaths yearly. (IEA, 2014) The education regarding the impact from different energy uses for cooking, discussed in leverage point category 6, could introduce further leverage by understanding and changing this underlying paradigm. Amount of leverage: HIGH – the three cases of trust between countries, government officials working for the long-term best of their countries, and understanding of choices of cooking fuels are all paramount to the foundation of the issues and opportunities covered in previous leverage point categories and thus studying and understanding these paradigms, and work to drive a change within these hold high leverage. Possibility to intervene: LOW – changing a paradigm is never an easy process, especially with several stakeholders that hold different paradigms created over long periods of time, this is why the possibility to intervene in this category is set to low.

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4.1 The power to transcend paradigms This leverage point category shows the increase in subjectivity within the framework as higher leverage point categories are covered. The ultimate leverage is more in the ability to realize the existence of several paradigms and thereafter choose a paradigm that best suits the given situation. Finding leverage points in this category becomes ever more difficult as it depends on whose paradigm is studied. And it is even more complex to interpret the actual amount of leverage present as this is related to the strength of underlying paradigm and the friction to transcend this paradigm. Given the range of possibilities and challenges shown in the previous leverage points, the ability to transcend paradigms can hold very powerful leverage, but this leverage, and the possibility to intervene, is regarded, by the authors of this thesis, to be, ultimately, impossible to quantify. The traditional western model for change in a region where a return-on-investment model is required may be need to be overlooked to drive more immediate change to help the continent accelerated economic and social development. The long-term shared benefits of a developed economy in SSA for the global economy, and the eradication of poverty could be incentives for these stakeholders. This all stems down to trying to find a common shared idea of what is the best interest for the SSA energy system and how stakeholders can together develop to reach that goal as soon as possible, both internally within the continent between countries to optimize the resource use for the continent and in an international context to find a balance between western interests for natural resources and the actual contribution to the social development of the continent. Amount of leverage: Not applicable Possibility to intervene: Not applicable

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5. Results and discussion In this section, the results of the thesis are presented. The results correspond with the goals of the thesis, as defined in section 1.3. Therefore, the results include a summary of the different leverage points that were found in section 4, the system dynamics model that was constructed to describe the SSA energy system, and a SWOT-analysis evaluating how well the twelve leverage points framework has worked when applied to the SSA energy system. These results, as well as the choice of method in this thesis, will then be discussed and evaluated.

5.1 Result 1: 12 Leverage points The table below presents an overview of the twelve different categories of leverage points. The table also includes the assessments, both regarding the possibility to intervene and the leverage to be found within each category, that were made in section 4.

Figure 14: The 12 leverage point categories and their corresponding amount of leverage and possibility for intervention. The categories of leverage points that were found to have the most leverage and the highest possibility to intervene were leverage point categories 3, 5 and 10. There are two main reasons why the category representing the rules of the system (leverage point category 5) is interpreted as the most powerful leverage point category in this case. The first reason is the fact that most sources cite the use of uniform national electricity tariffs as the most pressing obstacle to attracting further investments into the SSA energy system. A legislative intervention, through the introduction of cost-reflective tariffs, is very often put forward as perhaps the most important intervention to be made. The second reason is the relative ease of changing the rules of the system; it doesn’t require any significant investment or change of

-70- infrastructure. One of the factors holding back change within the rules of the SSA energy system is political incentives for elected officials. The assessment that the goals of the system possess great leverage was made as it was found that changes within this leverage point category has the potential to considerably affect all previous leverage point categories. The setting of long-term national and regional goals would also send signals to investors regarding the ambitions of the SSA energy system which would, in turn, benefit the investment climate. However, the potential to change system goals is constricted by several factors, such as the shear amount of different stakeholders, each with different goals, and the fact that the power to change national and regional goals is concentrated to the governments of SSA, which represent only one of the stakeholders. Leverage point category 10, the structure of material stocks and flows, or interpreted as the infrastructure of the system, has been assessed as a leverage point category where substantial amounts of leverage can be found. This is because the creation of regional power pools and transnational transmission lines is seen as a major enabler for the construction of large-scale electricity production, which would not only increase the total generation capacity but also bring the cost of production down through economies of scale. Regional cooperation will also enable countries to rid themselves of a dependence on a narrow range of primary energy resources by drawing on the larger and more diverse resource potential of entire regions. However, change in this category requires large sums of investments and poses certain challenges regarding, among other things, legislative aspects and the efficient collaboration of different countries which requires the setting of certain common goals. A more general summary of the twelve leverage points framework, as applied to the SSA energy system, would conclude that leverage can be found mostly in different actions that, in the end, attract and encourage further investments, as concluded in the context approximately 800 billion USD is needed to build a system to meet demand by 2040 according to McKinsey – far more than funds available in the national budgets of SSA countries. Small domestic market sizes can be mitigated by the introduction of additional off-takers and regional cooperation, as was stated in the texts detailing leverage point categories 11 and 10. There are also clear measures to be taken regarding the structure of information flows and rules of the system which can further contribute to a better investment climate. These mostly relate to transparency, communication of government plans and the empowering of centralized regulators. Certain leverage can also be found in decreasing the strength of the negative feedback loops that are currently acting as brakes on system change. One such example being the fact that the cost of electricity supply, coupled with uniform national tariffs, actually drives a certain disincentive for governments towards providing electricity access. Further, there is also some leverage to be found within the category of positive feedback loops, many of these can drive system change in a positive spiral such as the fact that the more people that are connected to the grid, the more can demand electricity and the greater effects of economies of scale becomes and the easier it’s to cover costs for transmission investments and maintenance amongst a larger amount of end users. However work needs to be done to get past the inertia within the current system state and leverage these strong positive loops. Ultimately, the strongest potential for leverage was found within the categories referring to the system goals and the system paradigm. As was stated earlier in this section, it was found that changing the system goals has the potential of changing all the previous leverage point categories, the amount of potential leverage increases as there seems to be no cohesive long-term system

-71- goal in place today. The same can be said of the system paradigm. The SSA energy system can be analyzed with the mindset that grid-based and mini- and off-grid electrification efforts represent two different paradigms on how electricity access should be provided, where a change towards a paradigm incorporating both of these solutions would be beneficial for reaching universal access faster.

5.2 Result 2: System Dynamics model of the SSA energy system In this section, the created conceptual system dynamics model describing the SSA energy system is presented. The system dynamics model below is built around a stock-and-flow model (shown in orange in the model). The stock-and-flow model was constructed to highlight the most important aspects of the system studied, the stock of electrification and the flows that increase and decrease the electrification. The stock-and-flow model is encompassed by different components within the SSA energy system that don’t directly affect a specific flow, with the purpose to provide a more comprehensive picture of the SSA energy system. The resulting model shows the causalities between different leverage points and how these interplay with other factors, whilst drawing of the benefits of a stock-and-flow model to show how these ultimately affect the flows and increase or decrease the stock of electrification. The model was constructed using the information and findings detailed in previous sections of the thesis.

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Figure 14: A system dynamics model of the SSA energy system incorporating a stock-and-flow model and a causal loop diagram.

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By studying the causalities surrounding the most powerful leverage point category presented in the previous section, category 5: rules of the system, the model shows that the current use of uniform national tariffs (the rules of the system) coupled with the fact that old electricity infrastructure incurs significant loss rates, affects the ability to cover costs for private investors and national utilities. This, in turn, decreases the return on investment (ROI) that can be made which seriously affects the investment climate of the SSA energy system. This means that while uniform national tariffs do decrease the tariff cost of electricity for the end-user, it incurs government costs which, in the end, leads to national utilities running a great risk of default. The result of this is a decrease in both government and private investment. The goals of the system, described as the second most powerful leverage point in the previous results, are not clearly visible within this model. This is because most system-wide goals can be seen as affecting the system at a higher level according to the theory, and thus linked by causality to many different components of the model, rendering a visual inclusion in the model difficult as this could make the model less visually clear. Examples of which components the system goals are connected to are the direct effect they have on government investment by affecting the priority of investment into new generation capacity and T&D, the investment and political climat by demonstrating political will, a strong signal to investors, and even affect the efforts towards regional cooperation. The leverage point referring to regional cooperation, which can be regarded as the most powerful leverage within leverage point category 10: The structure of material stocks and flows, aggregates demand through the construction of cross-border transmission lines and the formation of regional power-pools. This aggregated demand increases the governments’ incentives to invest in the SSA energy system. It also benefits the investment climate of the SSA energy system by increasing demand enough to make a viable commercial case to invest in large-scale electricity production facilities such as larger hydroelectric plants. Regional cooperation can also help achieve economies of scale by providing access to cheaper means of electricity production and reaching out to a larger consumer-base which dilutes the cost of T&D investments and maintenance. This decreases the electricity tariff costs for end-consumers. But regional cooperation, as stated earlier, requires a certain trust that exporting nations will not use the dependency of importing nations as a political weapon. Regional cooperation also requires significant infrastructure investments.

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5.3 Result 3: Evaluation of the 12 leverage points framework The evaluation of the twelve leverage points framework was done through a SWOT-analysis. The SWOT-analysis captures the strengths, weaknesses, opportunities and threats that were found when the twelve leverage points framework was used in this thesis.

SWOT-Analysis of the 12 leverage points framework

Figure 15 – A SWOT-analysis of the 12 leverage points framework

The main strength of the twelve leverage points framework is the fact that it provides a structured approach towards finding leverage points within a system. It is somewhat integrated with the stock-and-flow model of a system, and through this fact it is able to describe certain areas within a system – such as the flows of stock, delays or feedback loops – where leverage may be found. The framework also indicates the general amount of leverage to be found within different areas of a system by dividing these into leverage point categories, and thus it shows where to intervene to most effectively drive system change. The framework integrates both hard (buffer sizes and system structure) and soft (more philosophical such as paradigm) perspectives. This dynamic has proven to be vital within this thesis as a significant amount of leverage over the SSA energy system has been found outside the boundaries of the systems’ physical form. While the framework provides certain structure to the search for leverage points, it does not represent an exact formula or guide on how to find them, and hence, the system still has to be studied in detail for the framework to be successfully applied. This is something that is stated by

-75- the theory behind the framework from the outset and it was also confirmed in the application in this thesis as an extensive amount of information had to be studied and processed. This, in turn, calls for an effective method for gathering information to be built around the framework. The framework doesn’t provide any numerical evaluation of the studied system which inhibits any sensitivity analysis from being made. It instead presents a more explanatory description of a system. This means that the application of the framework is open to a certain degree of interpretation. This was also experienced during the writing of this thesis as a considerable amount of time had to be spent on exploring the different ways in which the framework could be interpreted and applied. The application of the twelve leverage point framework poses an opportunity to get a different perspective on the ways to achieve change within a system as opposed to the conduction of a mere literature study. And through a proper application of the framework, there is a possibility to identify areas within a system where change can be effectively and radically driven, and where efforts can thereafter be focused. The main risk that is suffered when applying the twelve leverage point framework is that the results generated may be subjective in nature and highly dependent on personal interpretation. This was experienced during the assessment of the leverage to be found within each category, and the ease of intervention within each leverage point category. The assessment was not easy make, and if this thesis was to be reproduced, it is likely that a different assessment would be made. Further, some leverage points can seem counterintuitive, an example in the SSA energy system is the current use of uniform national tariffs, whilst the intention to lower the cost of electricity for the end-users, the end result is not sustainable for the long-term development of the power sector. Thus there is a certain risk of leveraging the system in the wrong direction once leverage points are found. Overall the SWOT analysis shows several strengths, weaknesses, opportunities and threats. To the positives the framework does provide a new perspective to show leverage in a system with the opportunity to find strong leverage points. However the results are not always intuitive and doesn’t give a sense of causalities. Another backside is the need to develop a method around the framework for gathering information about a system and the classification of the information into the 12 leverage point categories – a process that has shown to be very time consuming. If there is time available and a system is studied with other tools and models giving a sense of the systems numerical nature and connection to surrounding system dynamics, the 12 leverage point framework can serve a good complement. In systems with large inertia, that are slow to change and where actions results in incremental change, and where there is a need to find new ideas on where to look for strong leverage to drive radical change, the 12 leverage points framework is a good fit.

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5.4 Evaluation of our results within the 12 leverage points One of the main goals of this thesis was to identify leverage points present within the SSA energy system and classify where most leverage can be found. Results were delivered in the application of the 12 leverage points of section 4 and result 1 in section 5.1. In this section these results will be evaluated. How viable are the results?

The subjectivity of both the framework, and the results, calls for a discussion to be made regarding the viability of the results that were generated. Do the results paint a complete and accurate picture of all the leverage points present within the SSA energy system and the leverage to be found within them? The short answer to this question would be no. This thesis attempted to interpret a large and complex system (SSA energy system) using a framework which, as stated in the previous section, is open to interpretation. Given this fact, the accurate description and evaluation of all the leverage points present within this system cannot be considered as a feasible goal. The results that were generated should instead be seen as a modest interpretation of where leverage to drive electrification can be found in the SSA energy system, and how different areas of intervention interplay with the different components in this system. What can be stated however is that the results do mirror the larger consensus on where efforts should be focused in order to drive electrification in SSA. But this stems from the fact that the larger consensus formed the very base of the information that was processed within this thesis. This means that the results can be regarded as somewhat biased towards providing a perspective on the system, and the ways to achieve change within it, that doesn’t differ significantly from previous studies. It is also worth to mention that it was increasingly harder to find and interpret reliable information the further down the twelve leverage point categories. Therefore, the discussion becomes increasingly subjective and debatable in leverage point categories 1-4 in particular. How well do the results correspond with the underlying theory? Many of the characteristics that were found in the SSA energy system do comply with the underlying systems theory put forward within the twelve leverage point framework. However, there are some deviations. Most notably, the most powerful leverage points did not follow the general order put forward within the theory as the category representing the rules of the system was evaluated as the most powerful leverage point category for SSA rather than the power to transcend paradigms, although this is also due to the difficulty in interpreting and finding information regarding the power to transcend paradigms. The potential leverage evaluated to be present within each category did however show a somewhat increasing trend. But the results from the rating of the possibility to intervene within each category followed an opposite, decreasing trend. This deviation from what was to be expected can however be explained to some extent by the theory behind the twelve leverage point framework. It is stated that most of the higher (starting with leverage point category 12 and decreasing), and less effective, leverage point categories often correspond to physical entities such as infrastructure or characteristics that are literally built in to the system. As such, structural lock-ins present the consequence that change is hard to achieve within a system where the physical structure is already set. The theory behind the framework also states that most leverage can be found in constructing the system properly in the first place. This possibility and leverage is predominantly the case in SSA. Even though the current electricity infrastructure is inefficient in many respects, the core of the

-77- problem stated within this thesis is the very lack of infrastructure. This means that change is easier to drive within this category as infrastructure won’t be replaced, but instead extended. As was stated earlier, it was increasingly difficult to find useful information the further the work progressed down the list of the twelve leverage point framework. This indicates a general tendency for stakeholders to focus attention and efforts on higher, and generally less effective leverage points which strengthens one of the hypotheses put forward by the twelve leverage point framework. More specifically, the framework states that most interventions within a system are generally focused on the higher and weaker categories of leverage points. How could the results be used? The results that were generated can be used to get an overview and introduction to where leverage to drive a faster electrification rate could be found within the SSA energy system. The results can also be used as a benchmark for further studies of the twelve leverage point framework and its appropriate application on other systems. How could the results be improved? As was previously stated, the twelve leverage point framework poses an opportunity to get a different perspective on the ways to achieve change within a system as opposed to the conduction of a conventional literature study. However, the results presented by the application of the framework can, as was previously mentioned, be considered to be somewhat biased due to the nature of the sources of information that was used. It was also previously mentioned that it became increasingly harder to find useful information the further the work with this thesis progressed towards the lower, more powerful, but increasingly subjective leverage point categories. Both of the problematics presented above could be mitigated by the use of first-hand information sources, such as interviews or workshops with key stakeholders. Through the use of such means, a more tailored approach towards attaining relevant information can be applied by focusing questions towards delivering new information that sheds light on the more subjective aspects of a system presented within the twelve leverage point framework such as paradigms. The reason why such sources were not consulted in this thesis was simply due to a lack of time.

5.5 Evaluation of method In this section the method used that is structured around the application of the twelve leverage point framework, is evaluated and discussed. The section also includes a description of how the method has changed over the course of work with this thesis. The aim is to provide an overview of what approaches were considered and why they were ultimately reconsidered. Hopefully, this will provide valuable information for the further application of the twelve leverage point framework as it will give an idea of which methods would be suitable, or unsuitable, to pursue. The main challenges that were encountered during the course of work with this thesis was the complexity of the SSA energy system and the fact that there are few examples of the twelve leverage point framework being applied to similar systems, the closest example found being a paper that tries to identify leverage points in order to protect aquifers in the water-energy nexus. (Jarvie, 2013) Because of this, the method within which the framework was applied has experienced an iterative process with three iterations as it was unclear what approach would be suitable from the outset.

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First iteration The first iteration of the method involved a study of the context of the SSA energy system and a subsequent application of the twelve leverage point framework much like the method that was ultimately used. However, the output that was expected from the application of the framework was essentially a comprehensive matrix detailing all the leverage points present and the power that each leverage point had on the system, not just the power of each leverage point category as is presented in the results. The purpose of constructing this matrix was to be able to spot any trends or patterns. The three strongest leverage points would then be chosen from this matrix and efforts would be focused on conducting a deeper and more qualitative analysis of them. This analysis would also incorporate information sourced from interviews of key figures to further complement information found in literature. The twelve leverage point framework would then be evaluated. Second iteration The second iteration involved a change of direction to exclude interviews from the method. The reason for this was that the application of the twelve leverage point framework was considerably more time-consuming than what was first expected. Therefore, the process of contacting interview subjects, arranging meetings, going on interviews and processing the attained information was considered to be far too inefficient with respect to the limited amount of time left. Efforts would instead be focused on providing further quality to the remaining parts of the thesis. Third iteration The third and final iteration saw the in depth analysis replaced by the construction of a system dynamics model, and the matrix that was detailed in the first iteration was changed to only incorporate an evaluation of the leverage and the possibility to intervene within each category of leverage points. The reason behind this change was that the application of the framework did not consistently generate a list of different leverage points as expected. Some categories of the framework, when studied in the SSA energy system, produced more of a discussion rather than a clear list of different leverage points. The choice of producing a system dynamics model of the SSA energy system rather than conducting a more in-depth analysis of three select leverage points was motivated by the notion that this would add further value and clarity to the thesis by showing the underlying dynamics of the SSA energy system and how different leverage points affect one another. Therefore the in depth analysis was abandoned due to time constraints.

Evaluation of the final method The method that was ultimately used managed to achieve the goals stated within section 1.3. However, certain aspects of this method could have been improved. First of all, the addition of a more thorough pilot study could have had certain benefits. With a focus on interviews, such a study could have helped narrow the admittedly ambitious scope, both in a geographical and system definition sense. This would mean that the method wouldn’t require as much of an explorative approach and be defined at an earlier stage. Due to the extensive scope and the explorative approach that had to be applied, a considerable amount of literature had to be studied. The extent of some of the reports and studies consulted meant that an extensive amount of time had to be put into studying a limited set of sources, such

-79- as the Africa Energy Outlook report from IEA. (IEA, 2014) While such reports can be considered as very reliable sources of information, value can always be added by increasing the amount of sources that are consulted. For example; due to political factors, many sources may refrain from explicitly discussing sensitive subjects such as corruption. This highlights the need to consult various sources, and not only larger NGOs that have to take political considerations into account. This Is partly balanced by the extensive use of ‘Brighter Africa’ from consultancy firm McKinsey (Castellano, et al., 2015) that outlines more explicit measures for change from an economic and management perspective. Finding useful information is particularly hard when studying the SSA energy system as there is a general lack of it, and the information that is found is rarely up to date. Another problem is the fact that many reports and articles reference the same sources, the most frequently used source being the Africa Energy Outlook report. This further limits the ability to diversify the sourcing of information. In a more general sense, the results would probably have benefited from incorporating interviews as a source of information. The method that was used could have been extended by integrating numerical models supplementing the twelve leverage point framework. Examples could include investment calculations, macroeconomic models or simulations of power pools and electricity production. However, this was left out of the scope of this thesis as it would only provide depth on certain parts of the system dynamics. Further steps that could have been added to the method if time wasn’t a factor include the in-depth analysis that was abandoned in the third iteration. Also, the analysis of the framework could have been supplemented by the application and comparison of other system theories such as the theory of reverse salients implemented by, for example, Thomas Hughes to analyze the development of early direct-current electricity systems. (Hughes, 1983)

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6. Conclusions The state of the SSA energy system today, characterized by insufficient generation capacity to meet demand, and future projections that point towards leaving more than 530 million people in Africa without electricity by 2040, shows that change is too incremental and that there is a urgent need to find stronger leverage for more radical system change that can present a more positive outlook. The results of this thesis show that this leverage could exist in the SSA energy system amongst many different categories of leverage points and with different possibilities to intervene and affect radical change. Whilst the results generated are highly correlated to the high degree of interpretation required using the framework, and not always straight-forward intuitive they do show signs of strong leverage that is unexploited within the system such as regional cooperation, long-term system goal, imposing cost-reflective tariffs, empowering regulators to create a viable investment climate and competitive power markets and triggering positive feedback loops. However the subjectivity within the results needs to be considered when using them. The application of the twelve leverage points framework on a large and complex system such as the SSA energy system is difficult and time consuming and the scope needs to be considered in relation to the time available. Also, the suitability of using the framework needs to be evaluated in context to the desired end results. Even though the challenges faced using the twelve leverage points framework were numerous and required lots of flexibility within the methodology when proceeding with the thesis the authors believe a framework of the kind used, that aims to find higher degrees of leverage compared to traditional models, is necessary to find a scenario for more radical change and that is capable to electrify more of the SSA population in a shorter time.

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7. Future recommendations It’s highly recommended to apply a framework such as the 12 leverage points to a system with similar challenges to the SSA energy system; characterized by a strong inertia, an inherently slow development rate and a complex system structure where finding strong leverage is unintuitive. The framework can potentially provide interventions that hold strong leverage to a low intervention cost, which is crucial for driving change in systems with limited resources. For successful application of the 12 leverage points framework, a strong foundation in the construction of the method is recommended. Time spent before starting the application can drive the results in a desirable direction and create a methodology that saves time during the application. The ambition of the end results needs to be put in context with the time available, as experience from application in this thesis showed that huge amounts of information needed to be processed just to get an overview of each of the 12 leverage point categories. The consideration of using interviews in a pilot study to narrow the scope and determine the viability of using the framework on the studied system is highly recommended. It’s also important to prepared for, that, no matter how well a foundation is constructed, there is no straight-forward approach to break down information about a system and generate a list of leverage points, and when working with this framework it’s important to be open-minded and not be reluctant to let the method evolve over the course of findings as learning becomes more intensified the more that the framework is applied. Depending on the purpose of the application, there are cases where the 12 leverage points framework used has a huge need to be complemented by other models – such as looking for leverage points with the aim to actually leverage them. The findings from the 12 leverage points framework isolated from the context are not a recipe on where and how to intervene in a system and don’t tell what consequences leverage has on other parts of the system. The dynamics of the system could be broken down and interpreted in a Casual loop diagram model connected to the leverage points that have been found. Only then can the system, where the leverage is, how great leverage there is, and the consequences of intervening at a leverage point in the system be understood at a more complete level.

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9 Appendixes Appendix A:

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Appendix B:

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