A project that aims to increase the access of underserved populations to electricity services, through priority investments in the northeastern African state of Djibouti, has attracted World Bank support. The project will also increase reliability of electricity services, through the development of alternative sources of production and targeted technical assistance and improve efficiency of the electricity utility, through technical assistance.
The credit, from the International Development Association (IDA), the World Bank’s concessionary lending arm, carries a 0.75% service fee, and has a 40-year maturity including a 10-year grace period.
The project includes three components:
(i) The expansion of electricity distribution covers investments for the extension of the distribution network of Djibouti Ville to reach a number of currently unserved public and residential neighborhoods of Balbala (including PK12), a large low-income area in the westem outskirts of Djibouti Ville.
(ii) Introduction of a pilot wind farm near Arta, a small town west of Djibouti Ville that is connected to the capital city’s grid.
(iii) Technical assistance focusing on targeted studies aimed at enhancing sector reliability, efficiency and performance.
“Poverty studies have shown a strong correlation between electricity access and poverty in Djibouti. Some 43% of urban households do not have access to electricity, and 70% of these households are among the poor,” says Anna Bjerde, task team leader. “We hope that this project will serve as a catalyst for additional financing and development support.”
This project supports the government’s efforts to reduce the cost of electricity in Djibouti and contribute to the country’s overall economic growth. It supplements other bank support in the power sector, where through the GEF, the bank is assisting the government in identifying the potential for larger scale development of its renewable energy sources and the potential for improved energy efficiency.
Djibouti is characterised by having neither fossil resources nor hydroelectric potential. Such a situation leads to a strong dependency on imported oil products (mostly imported from Saudi Arabia and Dubai), and to a high cost of energy.
Both factors make access to modern energy particularly challenging, especially in rural areas and for the poor. Additionally, the power sector in Djibouti faces numerous and complex challenges many that are of structural and macro-economic nature, including the high wage bill, overstaffing and the high taxation on imported petroleum products.
Electricity access is almost non-existent in rural areas, with the exception of a few small towns and of some villages that financed their own generators. A large majority (99.5%) of the urban population that has access to electricity uses it as their primary source for lighting. Though expensive, kerosene is commonly used for the other domestic needs (eg, cooking).
Djibouti shows good potential for renewable energy development, especially in geothermal, solar and wind. While exploratory feasibility projects have been undertaken to various degrees of advancement, no operational use of these renewable sources has been made possible to this day and no viable short-term application has yet been assessed or presented.