The main reason for expanding the program is that costs have come down dramatically, especially for PV where the average bidding tariff dropped 68 % between round 1 and round 3. Second, the South African government has recognised that renewables and especially PV can be built and scaled up rapidly to meet the country’s growing electricity deficit. No other power generation technology shares this flexibility. Third, the strategy to ensure socio-economic benefits has proved a success, with local content promised by bidders increasing from an average of 21.7% in round one to 46.9% in round three. Job creation has jumped from 4,200 to more than 11,000 in round 3, according to the Department of Energy. The new jobs are too a large extent created in areas marked by high unemployment and socio-economic challenges.
Unfortunately, the upgrading of the electricity grid required to accommodate the many wind and solar projects is taking more time than foreseen, mainly as a result of the dire financial challenges facing national utility company Eskom.
West Africa
The Rainbow Nation’s success story has not yet led sister nations across the continent to follow suit, with the exception of Rwanda, Mauritania and Morocco, which completed or started construction of utility-scale solar plants in 2014. Nevertheless, I believe this is set to change in 2015. A large number of countries across Africa have announced targets for renewable energy, and prepared regulatory changes to accommodate private Independent Power Producers (IPPs) in the renewable energy sector. It is furthermore an unhappy fact that several regions in Africa suffer from more severe droughts and more unpredictable rainfall than they are used to, significantly reducing the number of kilowatt-hours supplied by the hydroelectric power plants across Africa.
Mali is an example of a country suffering from erratic rainfall and hence increasingly variable hydropower production. Heavy fuel oil and diesel account for more than 50 % of the country’s power production. Mali was one of the first countries in Africa to lay out a solar plan and invite private developers to develop and propose projects. Unfortunately, the process suffered a setback because of the 2012 coup d’état following the Islamist and Tuareg revolts in the North. However, this year Mali authorities seem determined to implement decisions that could lead to the construction of West Africa’s first large-scale solar power plant starting in 2015.
Neighbouring countries in West Africa are working to make progress in 2015 as well. Solar PV appears particularly attractive in this region due to its high reliance on diesel and heavy oil for power generation.
Sub-Sahara
Beyond South Africa, Nigeria is the Sub-Saharan country with the largest potential for utility-scale solar PV. Several solar projects in the 50–100 MW range saw progress on the ground last year, mostly in the northern and eastern regions where insolation is high and energy is expensive. Hopefully the recent successful Parliamentary elections will contribute to a gradual weakening of Boko Haram and improvement in the investment climate in these most needy regions.
Further south, the stakeholders in the sunny country of Namibia have been hesitating a long time, but the country should see its first large-scale project concluded this year. Nampower has decided to carry out a 3 x 10 MW solar PV tender, and a few other projects are making progress as well.
Utility-scale solar power is also coming to Eastern Africa, although with less urgency than in the rest of Africa due to the availability of alternative generation options. Uganda recently announced the results of its first solar IPP tender, the so-called GetFit program limited to projects up to 5 MW, supported by European donors Germany, Norway and others. New tenders will follow the construction in 2015 of the first 20 MW, according to the Ministry of Energy. In Kenya and Mozambique, it is expected that the first large scale solar PV projects will be approved in 2015.
Northern Africa
Finally, to obtain a real appreciation of the solar growth potential in Africa, we should look to Northern Africa, notably Morocco and Egypt. Morocco, determined to move forward with its ambitious plan to install 2000 MW of solar power by 2020, is currently building its first 160 MW solar thermal power plant as part of the 500 MW NOOR Ouarzazate complex. Construction of the remaining 350 MW is set to start in 2015, following the successful fund-raising with international development banks concluded recently. Regarding PV, the Moroccan Agency for Solar Energy (MASEN) recently invited bidders to qualify for the installation of the first 50 MW. At present, the country meets 95% of its primary power demand through external sources. Its goal is to source 42% of its power from renewables by the end of the decade.
However, the biggest surprise in 2015 may come from Cairo, where the government led by Abdel Fattah al-Sisi is attacking the country’s power crisis. In the summer of 2014, large parts of the country suffered from blackouts lasting hours at a time, creating enormous frustration and losses in the business sector. Peak demand hit levels 20% higher than the mainly gas-fuelled power stations could provide. Furthermore, Egypt’s domestic gas resources are on the decline, forcing the country to look for increased imports of gas and fuel to meet the growing power demand.
Against this background, the government of Egypt has invited proposals from foreign wind and solar producers for the construction of 2 x 2000 MW utility-scale PV and wind power respectively, as well as 300 MW of decentralized solar PV. Cairo aims for a rapid deployment, with the first contracts signed and construction already starting in 2015. Looking to 2022, the Government has set the very ambitious target of 20 percent of electricity demand from renewables, which would require Egypt to install close to 8-9 GW solar PV the coming 6-7 years. To meet this goal, Egypt will need to attract foreign investments in the range of $12-13 billion.
Financing key
As the McKinsey report makes clear, financing will be key to the success of solar power growth in Africa. In this context the new "Scaling Solar" initiative by the World Bank Group looks to be an important initiative. Scaling Solar is meant to be a "one stop shop" to help governments mobilize privately funded grid-connected solar projects at competitive tariffs that can be operational within two years. The initiative combines World Bank guarantees, MIGA investment guarantees, and IFC (International Finance Corporation) financing to mobilize privately funded solar projects to be connected to the grid. A simplified process and suite of contract templates significantly speeds this process to enable initial electricity production to begin within two years of initiating an engagement.
According to the International Energy Agency (IEA) the average cost of solar power in Africa would be cut in half if the continent could obtain the same cost of capital as in Germany. More initiatives like Scaling Solar are therefore required to support the low-carbon expansion of Africa’s power sector. The main challenge facing developing nations is the competition for scarce funds and government guarantees. Therefore, capital-intensive investments in low-carbon energy tend not to be prioritized when competing with needs that are more urgent. On the other hand, governments in wealthy countries, pension funds and sovereign funds should look at renewable infrastructure assets in emerging markets as an opportunity to attract higher returns than they can get in mature markets while at the same time enabling the low-carbon transformation.
The challenges described here highlight the importance of the ongoing discussions on improved climate finance in the context of the international climate negotiations. In addition to the financing mechanisms at UN level (Green Fund, CDM+, etc.), national development banks and export credit agencies can play a vital role in this area.
The potential can be illustrated by an example: If for example the Norwegian Export Credit Guarantee Agency (GIEK) were enabled to underwrite the financing of hydropower, solar and wind plants in Sub-Saharan Africa countries with an exposure of up to say 50 billion NOK, this could lead to more than 100 billion NOK in total additional investment in renewables in those countries. Such financing could result in an additional generation capacity of 8–10 GW of green power, resulting in annual reductions of CO₂ emissions in the range of 7–8 million tons.
In other words, the message to governments and negotiators on the road to the Paris climate summit should be simple and straightforward: Give Africa access to green financing, and Africa will help green the world.
