Emerging markets attract most renewables investment

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The second edition of Climatescope, a clean energy country competitiveness index supported by the U.K. and U.S. governments, the Inter-American Development Bank Group and Bloomberg New Energy Finance, and which tracks 55 developing world nations in Africa, Asia and Latin America and the Caribbean, has found that investment in renewables in 2014 reached $126 billion, an increase of 39% on the previous year.

The increase was recorded despite the fact average gross domestic product (GDP) growth across the nations fell 0.7% to 5.7%. While this decline was most apparent in Brazil, South Africa, and China, these three nations attracted $103 billion of the $126 billion investment.

Representing an increase of 21%, 50.4 GW of new renewable capacity was added in 2014 in the 55 nations analyzed – enough to power nine million U.S. homes, states the report – 35 GW of which was installed in China. In the same timeframe, 76 new "clean energy-friendly" policies were rolled out.

According to Climatescope’s findings, declining prices are driving growth, particularly in the solar arena. Global solar PV costs are said to have fallen around 15% year on year; solar technology is also ideal in emerging markets where power prices are high and irradiance is favorable.

Solar spotlight on Africa

Globally, around 1.3 billion people are still said to be without access to electricity. Renewables are helping to address the issue, however, with solar energy again playing a leading role here, particularly with regards to off-grid.

Recent reports have pointed to the growing role solar is playing in Africa in particular, including a study released by the World Bank Group and the Global Off-Grid Lighting Association (GOGLA), in partnership with BNEF, which found that a new market, for off-grid solar products, has opened up, worth an annual $300 million, primarily driven by sales in Africa. Sterling and Wilson, meanwhile outlined its aims to install 500 MW of PV in Africa; while a US$100 million investment for renewables deployment in Rwanda and Uganda was announced.

Today’s Climatescope report, which analyzes the main Africa markets, shares further, in-depth solar details from the continent. Overall, it found that in 2014, renewable capacity increased to 4.1 GW, from 2.1 GW, of which solar accounted for 45%. Despite this, large-scale solar development has yet to take off outside South Africa, with Rwanda home to the biggest PV system – just 8.5 MW.

"One reason is that feed-in tariffs – for instance in Ghana, Nigeria and, going as far back as 2008, in Kenya – have been slow to become operational or attract investors. Another is that governments and utilities have been slow to respond to new technologies and their reductions in cost," states the report, adding, "Another still is the low capacity of the grid for utility scale additions, and the perceived difficulty of managing their variable output. This in turn presents an opportunity for off-grid clean energy technologies, especially small-scale solar coupled with battery storage."

Below are some key African solar takeaways from Climatescope:

  • Rwanda (#17 in the clean energy country competitiveness index) is looking to add 563 MW of new clean capacity and achieve energy access for 70% of its citizens by June 2018. Renewables already supply most of the country’s power, with 57% small hydro and 6% solar; the rest is mostly diesel, suggesting further potential opportunities.
  • Botswana (#47 in the clean energy country competitiveness index): Solar comprises just 0.3% of total installed capacity, while renewable energy currently makes up less than 2% of the country’s generation mix. Botswana has considered FITs but not yet implemented them due to limited technical capacity, the government’s focus on coal expansion and the potential cost. In 2012, Japan’s Itochu Corp. financed a 1 MW PV plant through a $12.5m grant. In June 2015, the government announced it would release a tender for two 50 MW solar PV plants. The country has completed feasibility studies for a 100 MW concentrated solar thermal plant and in July 2015 invited bids to build the plant.
  • Cameroon (#49 in the clean energy country competitiveness index): In 2014, JCM Greenquest Solar Corporation announced plans to build a 72 MW PV project with the support of the African Development Bank, and Joule Africa signed a memorandum of understanding to develop a 100 MW PV project.
  • Ghana (#28 in the clean energy country competitiveness index): The energy ministry has set a notional target of 500MW of installed renewable energy – roughly 10% of the energy mix – by 2020. The first utility-scale PV plant came online in late 2013. A 10-year fixed tariff for wind, solar, hydro, biomass and biogas projects also took effect that year. Interest in Ghana’s FIT sharpened after the rates were raised in September 2014. Included in the new regulations was a cap put on the size of solar PV projects to maintain grid stability. However, developers have raised concerns over the duration of the PPA as they only guarantee rates for 10 years, and the credit worthiness of the Electricity Company of Ghana, which buys 72% of all power.
  • Kenya (#6 in the clean energy country competitiveness index): Kenya’s main tool to incentivize renewable energy development is the FIT, which has spurred some renewables build – though some developers have said the FITs are not high enough for them to recover costs, in particular for solar projects. A 20-year fixed tariff for wind, solar, geothermal, hydro, biomass and biogas projects is set to be revised in Q4 2015, alongside a standardized PPA. After two rounds of revision, three more technologies (biogas, geothermal and solar PV) have been included in the FIT and some rates have been increased. IPPs had 221 MW of solar projects online or in development as of March 2015
  • Malawai (#33 in the clean energy country competitiveness index): 7% of total energy consumption from solar and wind by 2020 and 10% by 2050, based on 2003 National Energy Policy.
  • Mozambique (#41 in the clean energy country competitiveness index): By 2025, the country aims to install 100 MW of onshore wind and 125 MW of small hydro power by 2025; and plans to use solar PV and establish a FIT. To foster the development of renewable energy technologies in the country, the Ministry of Energy in 2014 launched a FIT to provide price premiums to small-scale projects from 10 kW to 10 MW for biomass, small hydro, solar and wind. Distributed solar systems have been fundamental to bring electricity to small villages, where transmission infrastructure has not arrived. Mozambique is one of the few countries in Sub-Saharan Africa to have a solar supply-chain facility. The module assembly plant near Maputo aims to produce components for the national market.
  • Senegal (#36 in the clean energy country competitiveness index): In 2015, Senegal is expected to launch the first tender within the framework of its renewable energy law, which was ratified alongside its implementing decrees in 2011-12. The law targets renewable sources covering 15% of primary energy supply (excluding biomass) by 2025. It will cover 50-100MW of solar and is supported by the World Bank. The completion of the first tender, and the commissioning of projects which already hold PPAs, could take Senegal’s on-grid renewable energy capacity from 2 MW today to at least 132 MW of solar by the end of the decade. A law passed in 2011 allowing net metering for small-scale solar thermal and PV, small hydro, biomass and marine projects. But implementation is pending. The government thus plans to add 80 MW of solar by the end of the decade. Some solar projects have already signed PPAs with the national utility, SENELEC.
  • Tanzania (#23 in the clean energy country competitiveness index): Under the Electricity Supply Industry Reform Strategy and Roadmap, published in late 2014, the government only foresees modest renewables capacity by 2025: 100 MW of solar and 200 MW each of geothermal and wind. Tanzania should soon have its first utility-scale solar plant, a 5 MW project by developer NextGen.
  • Uganda (#9 in the clean energy country competitiveness index): In 2014, Uganda added solar PV to the FIT, and aims to develop 20-30 MW in just over a year. By the end of 2014, 20MW of solar PV had been approved, with commissioning expected by 2016. The country’s GET FiT solar facility offers competitively allocated grants for on-grid PV projects and supported 20 MW of projects in 2014.
  • Zambia (#34 in the clean energy country competitiveness index): In summer 2015, the government signed an agreement for two 50 MW PV projects under the International Finance Corporation’s "Scaling Solar" program, with additional capacity mooted. The government offers tax incentives for developers of small hydro and solar projects, including import duty and VAT exemptions and tax holidays.
  • Zimbabwe (#43 in the clean energy country competitiveness index): A 20-year tariff for small hydro, wind, solar, biomass and biogas projects up to 10 MW has been proposed. Implementation remains pending the release of the national renewable energy strategy.