Inga I Damm, with the feed channel for Inga II in the foreground. Credit: alaindg / GNU License, however, in order for the Grand Inga Project to successfully attract the massive funding it needs, it must address issues of justice and ethics that stem primarily from, but also from, the problematic governance context of the Democratic Republic of the Congo Concerns about ensuring the “Only transition” of the energy sector.
Inga Falls, located on the Congo River in the Democratic Republic of the Congo, is the world’s largest hydropower site with 40,000 MW of potential generation capacity. In comparison, the installed capacity in the whole of sub-Saharan Africa (excluding South Africa) is only 80,000 MW.
The Democratic Republic of the Congo itself has one of the lowest electricity access rates in the world and the third largest poor population. Given these numbers, many have dreamed of tapping the hydropower potential in Inga to produce clean renewable electricity for both the DRC and Africa by and large.
Unfortunately, Inga’s progress has been hampered by the huge market risks associated with selling its massive electricity production across Africa (as well as the DRC’s governance challenges). However, as I wrote in a recent article, adding green hydrogen production may help the project overcome this marketing barrier as the electricity is sent to nearby factories to produce hydrogen which is then sent to creditworthy markets in Europe and can be delivered elsewhere.
There is growing interest in green hydrogen as a low-carbon fuel for use in transport and industry. Since it is produced by electrolysis of water with electricity from hydropower or other renewable energies, it causes only low greenhouse gas emissions. Strengthening climate commitments is expected to fuel growth in green hydrogen demand, which could reach $ 300 billion annually in exports by 2050.
Fortescue appears to be taking advantage of this potential demand to propose a hydrogen export configuration designed to make the Inga project more attractive to investors. But for this new approach to mobilizing the billions of dollars needed by investors, the project must also address equity and ethical concerns that could otherwise create three different but interrelated risks.
The first is an emerging risk related to sales. Justice, ethics and general equity considerations are increasingly important in climate change efforts. Concern about these issues is likely to grow over the next decade into demands that any fuel that is offered as green to serve climate goals is produced in a manner that also meets justice and ethical considerations.
The increasing international pressures that the DRC’s cobalt production is facing from child labor and other issues indicates these types of emerging but growing non-financial risks that can affect the commercialization of a commodity. The implication for the Inga project is that its developers must ensure that their green hydrogen is not polluted by equity or ethical issues. . . because “contaminated green hydrogen” may be difficult to sell on the energy markets of the future in Europe, despite its climatic advantages.
Second, unfair treatment of local communities or the wider Democratic Republic of the Congo society in connection with the project can lead to demonstrations, riots and other actions that may disrupt the construction and operation of the project. Although this business interruption risk is concentrated in the Democratic Republic of the Congo, it also extends to demonstrations along the supply chain (e.g. in European cities importing the hydrogen).
Third, failure to address equity and ethics issues can increase reputational risk for investors, especially given the growing interest in environmental, social and governance (ESG) performance. This will be a particularly important consideration for those investors drawn by the green energy attributes of the project, including many mutual funds and commercial banks, as well as climate finance providers.
A multi-pronged approach is needed to address these equity and ethical issues. Most importantly:
The project must manage its environmental and social impact and ensure that the affected local population is treated appropriately and fairly. This treatment of the local population is an area of particular concern given the two previous failures in this regard related to the construction of Inga’s two existing smaller dams and the continuing governance issues facing the Democratic Republic of the Congo.
An advantage of the hydrogen configuration is that it limits the need for transmission lines, which are often the cause of diverse biodiversity and other problems, but which would leave other significant potential environmental impacts.
In general, meaningful consultation with and participation of local communities in the project and the engagement of a broad cross-section of civil society organizations in the DRC and the population will be crucial. Intimidation of community leaders and other stakeholders by government agencies must be avoided.
A significant portion of Inga’s electricity production should be devoted to increasing the DRC’s dire electricity access rate and serving local businesses. If, on the other hand, practically all of Inga’s electricity were used for hydrogen exports, there would be criticism from a only transition Perspective that the continent’s renewable energies will be used to power Europe and other countries instead of electrifying Africa. Fortunately, Inga can produce enough electricity to run both hydrogen production and locally oriented productive applications.
While the project could catalyze significant employment in the Democratic Republic of the Congo (especially during construction), this is unlikely to be enough to address concerns about fair distribution of benefits. Inga is a national treasure and its development should benefit all equally.
For this reason, a portion of the project’s revenue should fund programs that benefit the people of the Democratic Republic of the Congo in general, not just a small elite. To that end, the broader framework of Grand Inga should include mechanisms to channel this revenue into poverty alleviation and broad development programs across the country. In addition, both the billion-dollar initial investments and the subsequent project sales must be protected from corruption. The problems of the DRC’s cobalt and other industries must be avoided.
In order to implement these measures, the project developers and the government of the Democratic Republic of the Congo must involve a large number of partners. This group includes multilateral development banks (such as the World Bank and the African Development Bank), local and international civil society, and the international community in general (including the DRC’s bilateral development partners from the European Union and the US).
The ability of project developers to raise the necessary funding and to build and operate the facilities will depend in part on their success in solving equity and ethical issues. Fortescue’s announcement brings Grand Inga’s dream closer to reality, but also makes design elements addressing these non-financial considerations more urgent.
Philippe Benoit has more than 20 years of experience in international finance, including as an investment banker and at the World Bank (where he worked on Inga). He is currently Managing Director – Energy and Sustainability at Global Infrastructure Advisory Services 2050.
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