The following markets are presented to depict the dynamics of solar across the African continent. The selection aims to offer variety: small and big markets, resource-rich and resource-poor states, and oversupplied versus undersupplied. The issues being met in these markets are common to many African countries, although the local culture of doing business varies widely from region to region.
Burkina Faso’s electricity profile and future energy plans, as presented at the forum by the country’s Minister of Energy, Bachir Ismael Ouedraogo, is characteristic of the current situation in Africa and the efforts needed to improve it.
Ouedraogo told the conference that a mere 30% of Burkina Faso’s population has access to electricity today. Of this, 60% is in urban areas, while only 5% of the rural population has access to electricity. Burkina Faso aims to achieve 60% electricity access by 2030.
Equally staggering is the fact that 50% of the country’s electricity is imported from its neighbors. The other half comes from fossil fuel plants, but this is neither environmentally sound nor economically sustainable. Ouedraogo said power generation from fossil fuels costs about $0.20 to $0.25/kWh, while independent power producer (IPP) contracts for utility-scale PV plants cost only $0.09/kWh.
This is why the country recently signed six solar deals totaling 150 MW, while Ouedraogo added that the ministry is also working with the World Bank on an additional 100 MW, for which he offered no further details. While the former is known to the PV sector, the latter is a new development and the sector is eagerly waiting to see whether and how it develops. Burkina Faso has also installed a 33 MW PV plant, financed by France’s Development Agency and the European Union. “The day when we achieve a combined solar PV and storage cost less than the fossil fuel cost, we can go totally solar,” said Ouedraogo.
Solar is the only natural resource Burkina Faso has, but nearby Nigeria is rich in both oil and gas, which account for about 10% of its gross domestic product. Nonetheless, Nigeria’s electricity sector is astonishingly small. Brazil, a country with a similar population size, generates 24 times the power of Nigeria. The country aims to diversify its energy mix by tapping cheap solar PV, and has signed 14 IPP contracts totaling 1,075 MW of capacity. Still, none of these projects had reached financial close at the time of writing.
Africa Development Bank (AfDB) sources have told pv magazine that the Nigerian government thinks the signed IPP contracts offered investors a very high tariff. Therefore, even though the government does not want to retroactively cut the tariffs, it has come up with a new plan to attract investors to accept a lower tariff. The plan envisages new guarantees that cover PV investors from the risk of the Nigerian government failing to perform its contractual obligations. The same AfDB source explained that the guarantees will be issued by the AfDB and the World Bank upon the request of the Nigerian government. To date, Nigeria has not reached an agreement with any of the investors behind the IPPs.
Nevertheless, Ije Ikoku Okeke of the Abuja Electricity Distribution Company, and Dolapo Kukoyi, of Detail Commercial Solicitors — both members of the panel discussion on Nigeria — claimed that the country’s electricity sector is currently insolvent, and the government has to reset it. “As a distribution company we are waiting for the big reset of the sector,” added Okeke.
Oil-rich Angola was until recently trying to block most foreign investors from doing business in the country. Jose Eduardo dos Santos, who until 2017 had been Angola’s president for 38 years, and his accomplices strictly controlled the country’s business activities. However, with the recent change in presidency came a new investment law as of July 2018. The legislation makes it easier for foreign companies to operate in the country.
There might be an opportunity for solar investors too, given that Angola has published a plan concerning the years 2018 to 2022 that calls for 500 MW of new renewable energy capacity. Antonio Belsa Da Costa, Angola’s Secretary of State for Energy, told the forum that the country is working with the World Bank and the AfDB to develop regulations that will govern the 500 MW investment. Da Costa added that the country has performed feasibility studies for solar and they are open as to where potential PV plants could be installed, given that the country is not greatly interconnected and there is not enough population in some places. All in all, the 500 MW action plan is a very poor target, but it also indicates that even oil-rich states cannot ignore PV.
Cape Verde is an example of how a small-sized country does not necessarily lack solar potential. Cape Verde’s Minister for Industry, Commerce and Energy Alexandre Dias Monteiro told the forum that the electrification of the nation — which spans across an archipelago of 10 volcanic islands in the Atlantic Ocean — is 93% today, up from just 30% in the 1990s. “Currently, 18% of our electricity comes from wind and only 2% comes from solar,” added Monteiro, who said that on some islands, renewable power penetration reaches 30% at times, without any storage in the system.
Cape Verde aims higher, though. By 2025 it plans to develop 160 MW of solar PV and 90 MW of wind power, in order to reach 30% renewable energy penetration on all of its islands.
Monteiro explained that the ministry has already identified the areas to develop the new solar and wind projects that will be built using IPP contracts. To tackle the intermittent nature of renewables, Cape Verde also aims to utilize 640 MWh of energy storage, mainly via batteries on the smaller islands and a pumped storage project on the largest island of Santiago. The political and economic stability of the small nation gave the forum’s delegates the confidence that Cape Verde can implement its plan.
Guinea-Bissau, a nation of 1.5 million inhabitants on West Africa’s coast, has a mere 17 MW of installed power capacity. The country had a program to install more power from 2010 to 2015, but many projects did not go forward due to political problems, said João Saad, Secretary of State for Energy.
Today, the country relies mostly on development bank funding to build new capacity, while its energy plan also relies vastly on neighboring countries (e.g., Senegal) to export electricity. Guinea-Bissau’s rural population does not benefit from grid electricity at all, said Saad.
Nevertheless, Guinea-Bissau recently tendered a 20 MW solar PV plant, which the energy minister revealed will go into construction within the next eight months. The minister did not reveal the winning company, but pv magazine has since learned that the tender was won by a Chinese company that offered a very competitive price for the power purchase agreement. Unfortunately, the country also develops diesel plants, with at least 15 MW set to start construction and 5 MW that is now being tested.
Liberia’s energy market is an extreme case, with the country grappling with a serious infrastructure deficit. Its electricity system was destroyed in the country’s civil war, which ended in 2003.
Minister of Mines and Energy Gesler Murray told the forum that the electricity generation tariff is $0.35/kWh, which is unbearably high. Murray said the country hopes that a new electricity line connecting it this year or early next year to a neighboring state will reduce the tariff. All in all, Liberia has installed 126 MW of power capacity and has set up a new institution to distribute licenses for IPPs, as it hopes to attract funding from the European Investment Bank and Germany’s development bank, KfW.
The forum’s mood for Uganda was rather uplifting following the recent news that Metka EGN, a Greek EPC, built a private 10 MW PV plant in Uganda for France’s Tryba Energy. The project will sell electricity to Uganda’s Electricity Transmission Company.
However, Uganda’s Minister for Energy and Mineral Development, Irene Muloni, rather disappointed. Muloni said her country has a poor electrification record of 27%, but it aims to reach 60% electrification within the next 10 years. To do this, Uganda wants to tap both its abundant uranium and renewable energy resources, claimed Muloni, who disappointed the PV sector not only because she lacked specific PV goals, but also because she insisted on nuclear power plans. She didn’t say how Uganda will afford to develop nuclear power, however.
Ghana and Kenya
Ghana and Kenya are two countries that have rather disappointed PV investors, and this doesn’t look likely to change soon.
Mami Dufie Ofori, of Ghana’s public utilities regulatory commission, told the forum that the regulator has told the government of Ghana that it has enough capacity. Given that the country aims to hit 10% renewables penetration by 2030, Ofori said that the energy mix will need to change. However, new renewables will need to work in tandem with the existing fossil fuel plants and cost recovery should always be considered, too.
Kenya faces similar issues. Eric Mwangi, senior advisor to Kenya’s minister of energy, told the forum that the country has 900 MW of capacity it doesn’t use. Joshua Choge, of Kenya’s Electricity Generating Company (KenGen), also added that KenGen has a mandate to provide customers with cheap and sustainable electricity. For this reason, KenGen has been commissioning large capacities of geothermal power, and will continue to do so. Therefore, it appears that geothermal power has won over solar as the cheapest and most reliable source of energy to provide to consumers.
Where the two countries match is a reluctance to adopt utility-scale solar and also the overcapacity issue. In Kenya’s case, for example, Choge said that many Kenyans use diesel and that the western part of the country is not adequately electrified.
In Ghana’s case, Husein Matar, partner at the energy and resources private equity firm Denham Capital, told the forum that despite the oversupply issue, he also sees suppressed demand, with many industries often using their own captive power (e.g., diesel) because it is cheaper than grid power. Therefore, both countries need energy strategies that address these issues, so they can then decide how they can provide customers with sources of reliable power.
Martin Haupts, CEO of Phanes Group, a solar developer and asset manager that focuses on utility-scale, distributed and off-grid projects, said that “there are three main factors we take into consideration in our selection of projects: financial viability, macro climate of the country, and impact on the community.”
Similarly, Bhavtik Vallabhjee, head of power, utilities and infrastructure at Absa Bank, told pv magazine that “for the right sponsor and the appropriately structured projects, we would look at any utility-scale, off-grid or distributed power projects.” Vallabhjee added that “many large-scale projects are project-financed, which is very credit intensive,” while “project financing demands that a multitude of risks be examined, analyzed and mitigated before financing … country risk is one of the many risks that we consider in evaluating projects to fund.”