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Sunday, May 22, 2011

Cape Verde's biggest natural resources can lead to privatization opportunities

Cape Verde's biggest natural resources are the sun and the wind. This may sound funny at first blush, but it is not only true, a deeper examination of these resource attributes with which the country is more abundantly blessed that most other locations on earth suggests that there may be a way to efficiently harness these natural commodities for the benefit of the population and the economy.

Think about it. Many of the hurricanes that eventually blow through the Caribbean, US and Mexico are born just south of the Cape Verde islands. Some of the best windsurfing in the world is available right here on Cape Verde's shores. And the islands are blessed with year-round sunshine!

The two biggest complaints you will hear about Cape Verde's public utility infrastructure are a lack of adequate water supply and a lack of adequate supply of electricity. Let us leave the topic of water for another day. On the matter of electricity, there would seem to be an opportunity to augment the country's current electric services with electricity obtained by converting wind and solar power into electric power. Notwithstanding that many businesses, large and small, already use diesel-powered backup generators out of necessity.

While there have been previous attempts at harnessing wind power and smaller forays into solar power, my sense is that these were undertaken at a time when the technology in both solar and solar energy was less advanced. I would suspect that a business feasibility analysis of the prospects for supplemental electric power would be cheaper and more profitable than any studies done earlier, even ten years ago. Second, given the current electricity infrastructure, which is old and increasingly overtaxed due to the population growth and the rapidly increasing demands of the tourism industry, I would be willing to bet that a wind- & solar-base initiative would be more efficiently (provide electricity at a lower cost per kW). I am quite confident in my prognosis given the billions of dollars that have been pouring into clean/renewable energy innovation as well as the increasing number of private projects that have been undertaken across the United States and other countries.

Such a project would not have to compete with the government provided public utility but could be used to supply needed services for a fee that would be profitable to the supplier and cheaper for the government to purchase rather than attempt to supply via the current infrastructure. A large energy project would also relieve the burden on the existing infrastructure and presumably reduce the costs of keeping the existing services maintained. In the best case, the cost of electricity can be brought down as the supply is increased. This would be especially important given the current modest inflationary increases of prices in the economy that are driven by the recent worldwide increases in prices of oil.

In a sense, this is a form of privatization of the electric utilities without having to actually sell off existing services. Instead, the government would be increasingly handing off a share of the role of providing reliable electricity to private investors. The Cape Verde government could benefit immensely if it more aggressively pursues these types of infrastructure efforts. Everyone benefits.

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