A year of solar PV in East Africa
On a daily basis the sun provides about 10,000 times more energy to the world than we consume.
Africa has the highest concentration of solar irradiation in the world and therefore the potential of solar energy by far exceeds the potential of all other renewable sources on the continent (including hydropower). On these bare facts, one can only conclude that the potential for solar energy in Africa is enormous. Now to focus on East Africa, where solar irradiation is estimated at between 4-6 kWh/m²/day, while the region has the lowest access to electricity and the smallest per capita generation compared to all other regions of the continent. GDP in Uganda, Tanzania, Kenya and Rwanda is accelerating at an increasing rate, but so is the risk that, if electricity infrastructure fails to keep up, it will increasingly act as a ceiling on GDP growth. Climate change has led to increasingly unpredictable rainy seasons in East Africa, and with hydropower as the dominant generation resource, this has meant load shedding and reliance on costly emergency power solutions during periods of drought. At the same time the cost of solar photovoltaic (PV) technology has plummeted to below the cost of thermal power, with the cost of panels falling by 75 per cent in recent years. Could solar PV, which would be charged by the sun when river levels are down and hydro plants are ailing, be an effective instant solution to East Africa’s power needs?
East Africa benefits from huge renewable resources, all of which are under-utilised. Furthermore, East Africa is a focus for international developers (many with a proven track record in the US, Latin America, Europe or South Africa) backed by a plethora of development funds, grants and serious investors with sizeable pockets. That said, from discussions on the ground with stakeholders an imbalance between the investment resource available and the amount of viable pipeline renewable independent power projects in East Africa is highlighted.
The key cornerstones of a viable project are secure land rights, a bankable power purchase agreement (backed by government support arrangement) and a robust regulatory framework sufficient to safeguard an investment of up to 25 years. Regional governments clearly have the intent to include solar PV in the resource mix – solar PV has notably appeared on all regional energy policies – however in most instances, developers still face a number of hurdles in procuring the right to start PPA negotiations, and then exiting the negotiation process with a bankable set of project documents.
Notwithstanding such hurdles, the last year has marked substantial progress in the penetration of solar PV plants in East Africa. On February 5, 2015 the first utility scale solar PV project in East Africa was officially inaugurated in Rwanda – an 8.5 MW project developed by Gigawatt Global at the Agahozo Shalom Youth Village. This is indeed the first IPP to be operational in Rwanda, highlighting the speed at which solar PV can be developed, financed and built, and is currently providing 7 per cent of Rwanda’s electricity. A second 10MW solar PV project has since been tendered and awarded to the Goldsol II consortium. Further projects are now following in Kenya where the feed-in-tariff programme, enhanced by Kenya’s IPP track record, has attracted increasing developer interest and the first solar PV PPA is imminent. In Uganda, the GETFiT 20MW solar PV round received 24 expressions of interest before being awarded to Simba Telecoms/Building Energy and Access Power/TSK, and a further 30MW is anticipated to be tendered in the near future. In Tanzania there are various early-stage PV projects, a template solar PV PPA has been prepared and it is envisaged a small-scale competitive tender will be launched in 2016.
Focusing on solar PV project negotiations – the Gigawatt PPA took six months from start of negotiations to execution. This was due to the commitment of the teams involved and the facilitating environment of the Rwanda Development Board in setting aside sufficient time slots for meetings and bringing the various governmental institutions to the negotiating table. The Gigawatt team could therefore have one point of focus during negotiations, rather than having to correspond with several governmental institutions, and the process was streamlined.
Another time intensive stage in solar PV negotiations is dealing with the concern of the effect of the PV plant on the existing grid infrastructure, and ensuring a consensus between respective engineers on the operation of the plant which can then be documented in the PPA. Aside from the grid, the other issue faced by developers is getting the utility comfortable with the current lack of historical data which would enable the generator to accurately forecast the output of the PV plant (even in comparison to a wind plant). This then consequentially leads to the issue of how to calculate deemed delivered energy where the PV plant is unable to generate. On each of these points, developers have resorted to independent consultants to provide analysis to the utility engineers on the key facets of the operation of the plant.
Looking at the region as a whole, and the future of solar PV in East Africa is bright – large-scale competitive tenders in South Africa, Jordan and Dubai have driven down the cost of solar PV to unprecedented levels. The lowest tariff seen so far is 5.98 US cents/kWh achieved by Dubai Electricity and Water Authority in its November 2014 tender for the 100MW Mohammed bin Rashid Al Maktoum Solar Park. The average solar PV pricing for Round 3 of South Africa’s Renewable Energy Independent Power Producer Procurement Programme was approximately 7 US cents/kWh, representing a reduction of 68 per cent compared to Round 1 in 2011. Whilst the cost of deployment of solar PV in Dubai and South Africa is not directly comparable to East Africa, the downwards effect of competitive auctioning on the price of solar PV is clear. Uganda is an early promising sign of competitive auctions in East Africa, with its tender (aided by robust template project documents) resulting in a tariff of 16.37 US cents/kWh. Of this 11 US cents/kWh will be paid by Ugandan consumers, with the remainder being paid by public sector development partners. It is anticipated that Kenya, acting through its Public Private Partnerships Unit, may be next to launch a competitive tender process. Scaling Solar, an initiative launched by the World Bank Group on January 29, 2015, has been established to aid solar PV tenders in Sub-Saharan Africa. The objective of Scaling Solar is to speed up the deployment of solar PV by the engagement of several World Bank Group services and use of a standardised template project documents which are backed by World Bank partial risk guarantees, MIGA insurance and IFC funding; potentially a key step forward in commoditising solar power on the continent.
Apart from grid connected solar PV, the modular nature of PV means that it can be truly scaled up from the ground. Regionally based entrepreneurs such as Off-Grid Electric and M-KOPA solar are now providing pay-as-you go residential off-grid solutions which, together with solar charged kiosk franchises, are being progressively scaled-up and rolled out in the region.
A further development of solar PV is as a hybrid technology in conjunction with diesel in supplying power to regional intensive users. Integrating solar PV within diesel generation during peak daylight hours has the effect of driving down fuel consumption and offsetting costs. East Africa – with its energy hungry cement factories and extensive mining concessions located in remote areas beyond the grid – is a key market for this innovative technology. There is potential for IPPs, subject to an enabling regulatory framework being in place.
A key accelerator of the penetration of solar PV in Sub-Saharan Africa will be energy storage, which has the potential of turning an intermittent resource into a dispatchable resource – particularly lifting the solar generation profile into the evening peak demand period by way of a ‘time shift’. The cost of batteries required for PV energy storage is predicted to fall (echoing the fall in panel costs) and analysts have predicted a worldwide market of at least $19 billion by 2017. A small yet symbolic 250kW hybrid system (combining PV, batteries, diesel generators and grid interface) is being developed by Enertronica and Rossi Impianti in Eritrea, so placing East Africa firmly on the map for the future deployment of solar PV storage.