ADB Approves $415m Grant to Support Energy Security

Power-Afghanistan-08-December-2016

The Asian Development Bank (ADB) has approved a $415 million USD grant to boost Afghanistan’s energy supply and strengthen the country’s cross-border trade in energy.

“Insufficient energy supplies constrain growth and income opportunities that can fuel ethnic and regional tensions, as well as insecurity,” said Asad Aleem, Senior Energy Specialist in ADB’s Afghanistan Resident Mission.

“This assistance will support the government’s $10.1 billion national energy supply program, which aims to expand power supply to boost economic growth and cut poverty,” Aleem said.

Afghanistan has seen energy demand grow by almost twice its economic growth rate from 2005 to 2012, with the country sourcing around 80 percent of its total supplies from neighboring countries. Reliance on energy imports, the small size of the domestic market, limitations in transmission and distribution networks, and governance and financing weaknesses leave energy security highly vulnerable.

The national grid is also not synchronized with the systems of the four countries – Iran, Tajikistan, Turkmenistan, and Uzbekistan – from which Afghanistan imports power, resulting in higher costs and reduced reliability of supply.

The project will finance the new 500-megawatt back-to-back converter station – a critical step towards expanded power imports – at Dashte Alwan to connect a new 500-kilovolt interconnection line with Turkmenistan with another 500-kilovolt line stretching to Kabul.

The converter will allow Turkmen power into the Afghan grid under the 10-year power purchase and sales agreement signed in November 2015 between the two countries.

In addition, it will construct a 180-kilometer 220-kilovot transmission line from Doshi to Bamiyan to expand the grid to at least eight additional provinces and distribute power to nearly 150,000 people.

The assistance comprises $188.23 million USD from the Asian Development Fund, $1 million USD from the People’s Republic of China Regional Cooperation and Poverty Reduction Fund, and $225.77 million USD co-financing from the Afghanistan Infrastructure Trust Fund (AITF), which will be administered by ADB.

ADB’s is Afghanistan’s largest development partner in the energy sector with cumulative grant assistance of nearly $2.2 billion USD all of which is on budget with the government.

Its support is crucial given the government’s limited resources and the constraints on private investment. The program is supporting targets of the government’s national energy supply program, which include increasing the country’s electrification rate from 30 percent to 83 percent and lifting the share of domestic generation from 20 percent to 67 percent by 2030.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB in December 2016 will mark 50 years of development partnership in the region. It is owned by 67 members – 48 from the region.

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