The mood at the Africa Energy Forum, a show dedicated to energy projects in Africa, that took place for three days in the end of June in London was uplifting. Visitors came in large numbers, the forum’s grounds were busy with companies showcasing their latest technologies, and the seminars depicted the highs and lows of investing in Africa today. Still, despite the continent’s huge energy potential, the show highlighted why international initiatives, such as the U.S. Agency for International Development’s Power Africa program, are so crucial to kick-start Africa’s clean energy revolution.
“Reaching financing closure deals for energy projects in Africa has been slow in the last year,” Andrew Herscowitz, U.S. President Barack Obama’s coordinator for Power Africa and Trade Africa, told the event. This is mainly due to macroeconomic conditions; for example many African governments not having enough money to invest in infrastructure projects, Herscowitz added. Furthermore, some countries have specific issues to face, like in the case of Nigeria, which experiences currency hurdles.
The exemption to this general outlook is Zambia, where a recent tender of solar PV projects supported by World Bank’s “Scaling Solar” program led to record-low tariffs, Herscowitz said. Ethiopia too, he added, has announced tenders for solar power projects.
In the following months specifically, Africa is expected to generate good news regarding the development of clean energy, Herscowitz said. Firstly, we expect to see investors to return to Nigeria since the currency issue appears to be on the right path; secondly, Ethiopia is expected to implement the solar tenders it announced; while thirdly, Zambia is going to produce more positive news, this time regarding wind energy projects that are near financial closure, Herscowitz said.
Perhaps the most positive development is that increasingly renewable energy systems can be cost-competitive with fossil fuels projects. However, Herscowitz warned, costs are not going to decrease if investors are scared to invest. “For this reason, we keep asking African policy makers to not change the rules of the game,” he said, “because investors need a stable and predictable landscape, not a policy roller-coaster.”
African Energy Needs Stability and Predictability
Progress takes time to achieve.
“You can’t expect the Power Africa initiative to be launched and then suddenly change to occur,” Herscowitz said. “Stakeholders need to be patient, while, very significant, is to build human capacity too.” For this reason, “we do our work by developing partnerships, e.g., between private equity funds, developers and others.”
Jasandra Nyker, CEO of BioTherm Energy, a South African renewable energy development platform, who also participated at the Africa Energy Forum, agreed with Herscowitz.
“Power Africa connects us to the right stakeholders,” while for renewable energy to flourish in Africa, developers and investors need transparency and stable and predictable regulatory policies that lead to bankable projects, Nyker said.
Venu Nambiar, SunPower’s senior vice president for Asia, Middle East and Africa’s power plants, added that Power Africa’s technical assistance matters too.
“Funds come from equity and lenders, so we need Power Africa to secure that the financial structure is right,” Nambiar said. Lida Fitts, regional director for Sub-Saharan Africa at the U.S. trade and development agency, added that “we [the agency] de-risk projects by putting forward initial financing for projects.”
Nevertheless, Silar Mzingeli Zimu, special energy advisor to the South African president, said that African nations “need to understand that to develop our economy we need to develop our electricity. And we must take quick decisions because we need to see development now and in the following 20 years.”
Lead image credit: Ilias Tsagas.
A few key attendees of the Africa Energy Forum participated in a Renewable Energy World editorial webcast, High-yield Project Investment Opportunities in the African Renewable Energy Sector, in late June. Click here to register and watch the replay.