Authors : Joz Coetzer, Smita Vassan
Affiliated organization : Withe & Case
Type of publication : Article
Date of publication : September 2018
Concerns about carbon emissions from traditional coal-fired power stations coupled with a projected tripling in African energy demand by 2030 make renewable energy essential to power generation on the continent. Lack of access to electricity is only one challenge that Africa faces, but it is one of the most significant obstacles to socio-economic development.
Africa currently accounts for one-sixth of the world’s population. However, it generates only 4 percent of the world’s electricity. Furthermore, South Africa and the countries north of the Sahara account for three-quarters of the continent’s energy consumption. Close to 600 million Africans have no access to electricity, and 780 million rely on traditional solid biomass for cooking (mainly fuelwood and agricultural waste). Nearly 80 percent of those lacking access to power across sub-Saharan Africa live in rural areas.
A study by the University of California, Berkeley mapping out the location and energy potential of renewable energy sources in eastern and southern Africa shows that, although the energy generation resources are vast, they are not evenly distributed. The study indicates significant possibilities for wind, solar PV and solar CSP technology.
Hydro-electricity offers viable solutions for up to one-third of the African nations. In a continent where many regions are plagued by frequent and severe drought, though, the use of rivers for power generation can be controversial. Environmental and socio-economic impacts of inundating large catchment areas also mitigate against large hydropower projects where other viable options exist. As with other models of centralized power generation, distribution networks associated with large hydropower projects are expensive to construct and maintain. They also represent security risks in parts of the continent where social unrest exists.
Climate change is now at the forefront of discussions globally and widely recognized as a problem demanding coordinated global action. Concern has mounted as its effects have become more evident across the northern hemisphere, with parts of Europe and North America experiencing some of the warmest summers on record and traditionally cold regions like Siberia experiencing unprecedented heatwaves. In many parts of the world, including Africa, movements promoting environmental sustainability and environmental consciousness are gaining momentum.
Africa, as a continent, clearly needs to contribute to mitigating the impact of climate change, too. Key to this is switching, wherever possible, from coal-fired generation to renewable energy generation.
The Paris Agreement deals with greenhouse-gas-emissions mitigation, adaptation and finance, starting in the year 2020. It requires that each country determine, plan and regularly report on the contribution that it will make to mitigate global warming. Although no mechanism exists to compel nations to set specific targets by a particular date, the expectation is that targets should exceed those previously established.
South Africa’s Renewable Energy Independent Power Program (REIPPP), viewed as a major success for renewable energy procurement globally, has been an influencing and guiding factor for other African countries in their development of similar renewable energy programs.
Ninety-five projects have been initiated by independent power producers (IPPs) since the commencement of the REIPPP. Existing projects concluded under the earlier bid rounds are now fully operational, with a new tranche of projects under Round 4 now heading toward financial closure.
In Uganda, the GET FiT Uganda initiative aims to achieve an installed capacity of 158 MWs of clean renewable energy added to their national grid through the implementation of 17 projects under this initiative. The main objective of the GET FiT Program is to assist East African nations in pursuing a climate-resilient low-carbon development path to promote growth, reduce poverty and assist in the best way possible with climate change mitigation.
The Batoka Gorge hydroelectric power project is just one way in which partnerships by African states are emerging in the renewables space. This US$4.5 billion hydroelectric project on the Zambezi River that borders Zambia and Zimbabwe is expected to generate 1,600 MWs of electricity, to be shared in equal portions among both states.
Ethiopia’s main source of electricity generation is from hydroelectric power stations. Once completed, The Grand Ethiopian Renaissance Dam will be able to generate 6,450 MWs, being one of the largest hydropower dams in Africa.
Africa, as a continent, clearly needs to contribute to mitigating the impact of climate change, too. Key to this is switching, wherever possible, from coal-fired generation to renewable energy generation
Botswana imports a large percentage of its energy from the Southern African Power Pool. With the Southern African region now experiencing a power deficit, the initiative to get Botswana to internally generate its own electricity is now more prominent. Private sector participation in electricity generation was enabled by the amendment to the Electricity Supply Act during 2016. Conversely, Mozambique has an installed generation capacity of around 2,905.45 MWs from a combination of hydro, solar, gas, wind, geothermal and coal sources, though only a quarter of the population has access to electricity.
Morocco has targeted increasing electricity generation from renewable energy sources to 52 percent of total generation capacity by 2030. Kenya’s renewable energy sector is well established and accounts for about 77 percent of the electricity purchased. Geothermal and hydro-power contribute the bulk of Kenya’s renewable energy production.
Investing in african renewable energy projects
Aligning with the 2030 vision to energize and “light up” Africa and the African Union’s Agenda 2063, more renewable energy sources are being actively explored. Driven by their own concerns of corporate governance as well as the proven economic viability of renewable resources, funders are proving less inclined to finance coal-fired power stations. Consequently, Africa’s adoption of renewable energy projects is accelerating.
The World Bank has estimated that US$43 billion per year of investment is required for infrastructure in the power sector, while the African Development Bank and the United Nations Environment Programme (UNEP) estimate a need for a package of US$41 billion per year to finance the development of the energy sector in Africa.
So how does Africa secure these funds?
Development finance institutions have expressed great interest in addressing the renewed urgency to light up and power the continent. Energy is at the core of the African Development Bank’s economic transformation agenda, and the Bank has more than US$12 billion worth of investment commitments to the sector between 2016 and 2020. The World Bank’s implementation of the Africa Climate Business Plan includes a plan to apply US$16 billion towards renewable energy projects in Africa.
Angola’s 2025 goal is to provide modern electricity to about 60 percent of its population and the country has about US$18 billion of renewable energy investments underway as part of that strategy.
Morocco is another example of an African country that is taking active steps to enhance investment in renewable energy projects. Morocco is liberalizing its renewables sector, including by increasing the minimum threshold for hydro-power plants from 12 MWs to 30 MWs and by establishing the Moroccan Agency for Solar Energy to carry out programs for solar energy generation for up to 2,000 MWs.
African governments also need to continue to improve their ability to attract financing for these crucial projects by improving their regulatory and political frameworks, affording funding institutions and investors a stable environment to undertake projects, and becoming more environmentally sustainable in the long run.
With African states recognizing their renewable energy generation capacity, and in so doing taking action to implement the necessary reforms to make foreign investment possible, opportunities for investment in Africa will continue to expand. Progressive regulatory reform, especially around the establishment of independent power producer (IPP) programs, would accelerate that momentum. Attractive returns on investment, coupled with steadily improving risk, suggest that Africa will continue to attract investment into its renewable energy sector in the coming years.
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