Renewable energy has gone from fringe obsession to sought-after asset class, from socks and sandals to suit and tie. At the COP21 climate summit in Paris in December 2015, global leaders pledged a minimum $100bn in clean energy finance for developing countries by 2020.
Africa has an opportunity to lead the world and leap to a totally renewable energy base
African countries now face the challenge of creating projects that qualify for funds. As Zimbabwean telecoms tycoon Strive Masiyiwa told the conference: “Africa has an opportunity to lead the world and leap to a totally renewable energy base, in the same way as the continent has leapfrogged from fixed-line telephony straight to mobile communications.”
Certainly, the conversation around financing green energy has changed, even if development-finance institutions remain an important ‘de-risking’ component, helping to attract finance into otherwise costly projects. But even that cost base is changing.
Law firm Linklaters estimates that renewable energy production in Africa could expand five-fold between now and 2030 to 128GW as the cost of green power approaches parity with fossil fuels. For example, using the ‘levelised cost of power’ approach, which provides a way of comparing energy sources, a simple solar array today will deliver power at up to $0.36/kWh, while fossil fuels trend between $0.05/kWh and $0.15/ kWh. By 2025, according to the International Renewable Energy Agency, simple solar plants will average around $0.11/kWh.
The earth’s core energy
One energy source that is already cost competitive is geothermal, pioneered by countries including Iceland and Japan. Perched in the hills around Oita, on the Japanese archipelago, sits Kyushu Electric Power’s Hatchobaru power plant. Immense columns of steam rise serenely into the brisk mountain air from nine cooling towers.
Inside, there is a dull roar as two Mitsubishi turbines are driven by fast-rising vapour, created by water pumped kilometres down to rocks heated by magma from the earth’s core. The company is looking to develop projects in Africa. Shinji Nishida, general manager of Kyushu Electric, tells The Africa Report: “We have one engineer who has been seconded to South Africa to research potential for a plant there.”
On the continent, it is Kenya that leads the way in geothermal production, with 590MW of installed capacity. In February, an additional 29MW from a new plant in the Olkaria III geothermal complex, run by US company Ormat Technologies, brought the total output from that power station to 139MW. A year prior to that, Japanese companies, including Toyota Tsusho, handed over to the Kenyan national power company KenGen a 280MW facility at the Olkaria complex.
Olkaria III receives insurance cover from the World Bank’s Multilateral Investment Guarantee Agency, which de-risks power projects for commercial operators, helping them get paid even if the power purchaser – often an African national power company – fails to deliver.
Development-finance institutions are now getting involved in subsidising tariffs for green power projects too. Germany’s KfW’s GET FiT programme is helping pay the tariff difference on a new 10MW solar project in northern Uganda, allowing Dubai-based project developer Access Power to sell electricity to the Uganda Electricity Generation Company at $0.11/ kWh, a competitive tariff.
Access Power is working on a quick development and construction cycle, with the project taking 10 months from the signature of the power-purchasing agreement to the switching on of the plant – planned for July 2016. “We have set a precedent in Africa,” says Access Power’s chairman, Reda El Chaar.
Solar easy to integrate
He thinks the renewables environment is improving, and underlines the ease of integrating small-scale solar projects into national grids: “If you were to develop a large coal-power plant, you will usually be constrained by the grid infrastructure, which means you have to do cumbersome grid upgrades before the power plant can be built.”
The Ugandan project is also easily replicable, with both KfW and Access Power moving on to new projects on the continent. The 10MW of electricity Access Power will generate, while much smaller than a big, conventional fuel plant that pumps out 1,000MW, is still enough to power 40,000 homes.
Solar is also gaining ground at the grassroots, with entrepreneurs in Nigeria taking a house-by-house approach to selling solar panels. Solynta is a Lagos-based start-up founded in 2008 by Uvie Ugono, who left his wife and kids behind in London while he set up his company.
Solynta has installed panels that can generate more than 0.7MW of solar power from hundreds of Nigerian houses and businesses. He is targeting the huge expenditure in diesel fuel spent each year by the Nigerian public to power small generators outside their houses. Ugono explains: “The average Nigerian family spends around $200-$250 a month on fuel.”
In order to get people to stop using diesel generators, Ugono’s firm offers different financing programmes. Solynta has three principal models: one for the wealthy, who can buy a system for $15,000- $20,000 upfront; one for the mid-tier consumers, who pay a deposit of around 25%, with the balance paid over the next 12-24 months; and one for the less wealthy, who are on a ‘pay-as-you-go’ model where a one-time fee of around $500 dollars is paid and the equipment is rented.
This has struck a chord with the Nigerian public, who are famously sceptical of things that appear too good to be true. “It’s been massively popular!” grins Uguno. “It has driven demand for something like 4MW in two weeks. People tell me: ‘Come to my house, put it for me ASAP.’” He projects that Solynta will reach 10MW in installed capacity by the end of 2016, making it Nigeria’s largest solar provider, acting just at the retail scale.
Stored in the sand
Despite the enthusiasm and convenience at the household level, Africa’s power infrastructure requires a step-change to hit industrial development levels, with gaps measured in gigawatts not megawatts. Can renewables add significant production to national totals?
The Moroccan Agency for Solar Energy (MASEN) is betting it can. It is piloting a project to eventually add 500MW to Morocco’s output. The first tranche comes from the Noor-1 facility, which provides 160MW of concentrated solar power and opened to great fanfare in February 2016. It cost $709m and will provide power at $0.19/ kWh – not far off the cost of electricity from fossil fuel plants. It will, however, need 1.7m cubic metres of water to clean the reflecting panels in the dusty Ouarzazate air.
One interesting innovation at the Noor-1 plant is the use of molten sand underneath the plant to store energy for up to eight hours after sunset, according to MASEN head Mustapha Bakkoury. Storage has been one of the key stumbling blocks to widespread adoption of renewable energy sources. Here, too, there are encouraging signs, with US government researchers and Australian company Redback making simultaneous positive announcements in March of this year.
Morocco has taken the lead in putting its money where its mouth is on green energy – perhaps spurred on by a fuel import bill that has hobbled budgets in recent years. Around half of Morocco’s total energy requirements could be met by renewable energy by 2030 – a hugely ambitious 10GW. ●
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