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Home Business Aviation

Solar eclipses traditional power in sub-Saharan Africa

4 years ago
in Aviation, Energy, highlights, Home, home-news, latest News
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Africa’s largest solar park, Benban, in Egypt, is in line with many solar projects seen the world over. It is a large-scale state utility project providing 1.5GW to the national electricity grid. 

Across the Sahara desert, solar energy has begun to package itself as the mirror inverse: small-scale projects on off-grid distribution networks.  

The off-grid solar sector has grown tremendously over the past 10 years into a $1.75bn annual market, serving 420 million users, according to a 2020 World Bank report. From 2017 to 2019, revenues grew rapidly by an annual 30%, while sales volumes grew at 10%

With one of the highest solar potentials in the world, the case for implementing solar power in Africa requires little persuasion. Touted as a real solution to energy poverty in a region where the rural access to electricity remains low, off-grid solar services — whether industrial, commercial or residential — are gaining traction.

Many foreign energy companies, investors and start-ups have pegged this as a growing market ripe for experimentation, while other investors still hold fast to utility-scale projects, despite the perceived risk.

‘Opposite’ to Europe

Benjamin Attia, senior research analyst at Wood Mackenzie, tells fDi that, unlike other markets, the grid is often controlled by a single state-owned utility and the development timeline can easily take twice what is needed elsewhere in the renewables space.

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“We see many more projects announced that go through the development process and don’t end up being built,” he says. “Most sub-Saharan markets have single-buyer state utilities, and all but three are loss-making on every kWh they sell. Most are in fiscal distress. All this to say that they typically don’t make very good counterparties to power purchase agreements,” he adds.

Read: Dangote Refinery on track to be the 5th largest company in Africa

The result of this is that the centre of activity in the renewable energy sector in sub-Saharan Africa is off-grid, with many donor and multinational organisations flooding in to support this. In March, the World Bank approved $22.5m in additional financing to support the development of the off-grid solar market in western and central Africa. 

Mr Attia remarks that there has been a lot of strategic investment from a “very broad cast of characters”, from oil giants such as Shell to the Mitsubishi Corporation, pointing to a transformation of the utility business. The largest distributor of solar home systems in west Africa, he says, is TotalEnergies.

“This is inevitable,” says Prashant Khorana, a director in the power and renewables consulting arm of Wood Mackenzie’s energy transition team. He expects there will be more gigawatts of production capacity added away from the utility: “There is demand and scalable demand will come from some of these private operators. This is the opposite to Europe, [where] it’s a buyers’ market. That’s not necessarily the case [in sub-Saharan Africa].”

Leapfrogging traditional power

Karl Boyce, chief executive of UK-based Arc Power, says that it is this quality that gives the region its edge over other markets. “I think there’s an advantage leapfrogging that traditional grid structure with distributed power, and that’s what we’re addressing,” he says.

Arc Power has set up 75% of the AC solar mini-grid connections in Rwanda, where their primary focus is, with plans to expand into Malawi and Uganda this year.

“We originally looked at utility scale renewables, but actually if you look at a lot of countries in Africa, just the grid infrastructure wouldn’t cope with it. That’s why there’s been this realisation that decentralised power is the only way to go,” Mr Boyce says.

Norman Moyo, chief executive of Distributed Power Africa, a developer of solar energy projects on the continent and subsidiary of Mauritius-based Econet Global, says “the biggest challenge in renewable energy adoption is access to affordable capital”. 

“Although the pace of change does not match the power crisis, we are seeing very encouraging progress and engagements with regulators and governments,” Mr Moyo says.

Sticking with utility

But sub-Saharan Africa is far from monolithic, and there are still several foreign investors betting on utility projects elsewhere in the region. 

In March 2020, French independent power producer Akuo Energy brought the country’s first large-scale solar park in Mali online, which now powers the equivalent of 91,000 homes every year.

“With the commissioning of [the Kita solar plant, we have reached the] first milestone that shows that it is indeed possible to develop projects in the country,” Akuo’s chief executive Eric Scotto told fDi. 

The Zambian government launched its feed-in-tariff strategy ‘Get FiT’ in 2018. The largest in the region, it awarded 120MW in solar tender projects the following year, in a bid to increase electricity generation and diversify its power mix away from hydropower. 

Last year, the country’s state-owned electricity company Zesco partnered with PowerChina to add 600MW to the grid, through three 200MW solar parks at a total value of $548m. This follows the China Jiangxi Corporation for International Economic and Technical Co-operation’s completion of the 50MW Garissa solar power station in northeast Kenya — one of the largest in central and eastern Africa — in 2019.

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Different kind of FDI

Rasmus Lema, associate professor in innovation and development at Aalborg University Business School, Denmark, and Padmasai Lakshmi Bhamidipati, a postdoctoral researcher at UNEP DTU Partnership, who recently penned a paper on the rapid increase of Chinese involvement in large-scale renewable-energy infrastructure projects in Africa, contend that this is a “completely different kind of FDI”.

At the heart of the issue is the fact that, unlike typical renewable projects — which bring together a whole host of different donors, financiers, and engineering, procurement and construction (EPC) contractors — projects with Chinese energy companies have Chinese financing, Chinese engineering, procurement and construction, and Chinese technology suppliers. 

This raises the question as to whether these bundled projects become “enclave” projects and offer little lasting impact to the local community, Ms Bhamidipati asserts.

The main concern is that renewables in Africa are being dominated by foreign companies, Mr Lema says. “The jury is still out on how dominant China is going to be. In terms of electrification and getting prices down, China is extremely important.”

Given the scale of the energy crisis in the region, the arrival of expertise, technology and power is necessary. Yet the population is exploding so fast that these alternative energy solutions need to outpace such demographic issues if they’re really going to solve the region’s power problems, many reaffirm.

Africa needs a high-energy future to industrialise and withstand the impact of climate change, Mr Attia says. “The trajectory is not nearly steep enough. The primary solution is renewables, but the pace is much too slow,” he says.

Source: fdiintelligence
Via: norvanreports
Tags: Africa’s largest solar parkSolarSub-Saharan Africa
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