Africa presents a troubling paradox: it's the second largest continent in terms of both size and population (one map shows it housing China, India, the US, Spain, France, Germany, Italy, Switzerland, the Netherlands, eastern Europe, Japan and others - with space to spare). It has vast natural resources and a massive labour force. It has sunny climes (solar), major water systems (hydro) and long coastlines (wind). Yet, two-thirds of the continent's people are without access to electricity. In some regions, it's as low as 5% of the population.
Between these two extremes lies a world of opportunities and technologies that could make Africa a wellspring of energy innovation in future. That is if it can mobilise the funds, policy structure and government support needed to foster the fledgling industry.
Predictions seem positive, however, with analyst firm Frost & Sullivan identifying the need for rural electrification as one of the key drivers for renewable energy development on the continent.
In a report on megatrends in Africa, released this month, the firm noted that total investment into renewable energy in Africa was $3.6 billion by 2010 and is expected to grow to $57.7 billion by 2020. Major growth sectors include wind, solar, and geothermal power, as well as foreign direct investment into energy and power infrastructure.
Frost says developing the continent's renewables sector will help diversify the generation mix, increase security of supply, and reduce dependency on a single feedstock (something SA is only too familiar with, given the country's almost complete reliance on coal).
Dominic Goncalves, Africa energy and power systems (EPS) analyst at Frost & Sullivan, says in cases where the population is not connected to the grid, it's often faster to roll out renewable solutions. Small communities can be powered by micro hydro systems, for example, and individual households can run off small solar photovoltaic (PV) installations.
In a recently published assessment by the UN's World Energy Outlook, it was predicted that if the target of 100% electricity access by 2030 was achieved, 70% of the new access will be in the form of mini grid or off-grid solutions.
Fellow EPS industry analyst Gareth Blackenberg notes that African countries are rich in energy assets, both in the form of fossil fuels (natural gas, oil and coal) and renewables (wind, geothermal and solar).
“It will eventually come down to countries utilising their competitive advantage in resources they're strong in, such as Ghana leveraging its gas and oil reserves, or north Africa exploiting its solar and wind potential.”
The cost of PV is coming down at the same rate as flat-screen TVs.
Paul Eardley-Taylor, Standard Bank
Goncalves believes that in the same way mobile phones leap-frogged PCs, so renewable energy could leapfrog fossil fuels when it comes to rural electrification. In more developed, industrialised regions, however, fossil fuels will remain the source of large-scale generating power, he adds.
According to Blackenberg, the landscape is slowly changing across Africa, as private companies see opportunities to establish a presence on the continent. “There are lots of international players lobbying on the ground who see opportunities either as suppliers of equipment, or as partners in the development of projects.”
Big wind power companies such as Vestas, Suzlon and Goldwind have set up offices in SA in the past year, with Suzlon SA CEO Silas Zimu saying in May that if the local venture goes well, it will consider expanding into the rest of Africa.
“What SA could do is establish manufacturing facilities for products such as CSP [concentrated solar power] components and wind turbine blades, to help set the country up as a gateway for the rest of Africa,” says Blackenberg.
Goncalves adds that because SA is coming late to the party, it can ensure top-level renewable outlay by learning lessons from similar programmes in other countries, such as Germany and Spain.
Long walk to clarity
At a recent debate on renewable energy's progress in SA, held by EE Publishers, speakers highlighted the fact that SA was lagging behind in implementing renewables, with less than 0.05% of the country's electricity coming from clean sources.
The slow uptake of renewable energy is largely due to the uncertainty surrounding the policy framework for buying and selling RE, which has been caught up in endless draft documents, consultations, tariff revisions and delays.
The target of 10 000GWh of renewable energy by 2013 was set out in the Renewable Energy White Paper in 2003 already, but nearly a decade later, no concrete power purchaser agreements had been signed, and the rules of the game were still unclear.
Until recently, renewable energy in SA was structured around the Renewable Energy Feed-In Tariffs (Refit), published in 2009, which outlined fixed tariffs for various technologies. Numerous false starts plagued developers and investors, whose progress stalled while policy guidelines were debated and reworked.
In 2010, the integrated resource plan for electricity (IRP 2010) was published, earmarking 42% of new generation capacity (more than 17 000MW) being added in the next 20 years for renewable sources.
Then, in March this year, national energy regulator Nersa surprised the industry by proposing to revise tariffs significantly downward from those published in 2009. Nersa's call for a review of the tariffs, to be released in June, caused alarm in an already anxious industry.
In May, energy minister Dipuo Peters released the electricity regulations for new generation capacity, with no mention of Refit, and National Treasury called the programme “illegal”, casting further doubt on power purchasing policy. Disputed issues included the legality of Refit, national competition requirements, and the jurisdiction of the DOE and regulator. When Nersa missed the June tariff review deadline, concern grew over the likelihood of a bidding process replacing Refit.
On 3 August, the DOE issued a call for proposals for renewable energy projects, introducing a two-stage procurement process. Under the new Independent Power Producers Procurement Programme (IPPPP), developers' bids will be assessed based on legal, environmental and financial criteria (stage one), and price and economic-development objectives (stage two).
The department also increased procurement capacity for renewables from 1 025MW to 3 725MW, shared across various technologies. The biggest share goes to onshore wind (1 850MW) and solar PV (1 450MW), with 200MW for CSP, 12.5MW for both biomass and biogas, 25MW for landfill gas, 75MW for small hydro, and 100MW for small-scale projects of less than 5MW.
Many hopeful IPPs had been preparing for a request for proposals under the Refit programme for months or years, and there was criticism that the process was unfair and unilaterally handed down. Nersa raised a number of issues with the minister regarding the legal aspects and decision to abandon Refit, but has ultimately given the programme its blessing.
This seems to be an attitude shared among many in the industry, with those initially shocked by the policy changes taking them onboard, and grateful to finally be able to move forward.
Sunny outlook
Paul Eardley-Taylor, head of energy, utilities and infrastructure coverage at Standard Bank, considers SA the most exciting renewable energy space in the world, and says the sector is a lot more competitive than people think.
However, the targets set out in the IPPPP will require substantial investments, he says, noting that $10 billion to $11 billion of committed capital would be needed, in addition to $3 billion to $3.5 billion in equity. “It will require a lot of work, but if this capital is raised it will bring major benefits for SA, and could create thousands of jobs around the country.”
Eardley-Taylor adds that the speed with which PV has gained importance in SA is “remarkable”, with no doubt the technology would reach grid parity within a decade. “The cost of PV is coming down at the same rate as flat-screen TVs - about 28% to 30% per annum.”
Goncalves agrees, noting that solar PV is set to reach grid parity in some countries by 2016 and others by 2020.
Johan van den Berg, CEO of the South African Wind Energy Association, points out that not having power is up to 100 times more expensive than having it, citing the 2008 blackouts, which cost the country R75/kWh.
However, implementing renewable energy will not come without significant expense, he adds.
“Wind and solar PV alone will require an investment of R350 billion by 2030, or R18 billion per annum. Eskom does not have the money, so we have to look at the private sector.”
In addition, Van den Berg notes that barriers to entry in the new IPPPP are significant, with the need to pay a non-refundable fee of R15 000 simply to gain access to bidding documentation. Bidders also have to secure a guaranteed amount of R100 000 for every megawatt of capacity they plan to supply.
Eskom does not have the money, so we have to look at the private sector.
Johan van den Berg, SAWEA
Goncalves says this challenge extends to the rest of Africa, and will be one of the greatest hurdles in rolling out widespread renewable energy solutions.
“The costs of projects are enormous and they require lots of funding to get them going. Even in rural communities where it's cheaper to install renewable energy, people are living way below the poverty line, and donor money is a key driver in making it happen.”
The other determining factor is political will, with leadership and national policy heavily influencing the failure or success of the renewables market in a given country.
But the biggest test for renewable energy on the continent, says Goncalves, is the steep learning curve. “There's not a lot of knowledge on implementing renewable programmes, and often expertise has to be brought in.”
As the renewable energy sector slowly gathers steam across Africa, current projects are likely to be as scaled up and new ones rolled out. Several countries already have significant projects in the pipeline, such as Kenya, with a wind farm planned near Lake Turkana; and Morocco (the Koudia Al Baida wind farm is the largest in Africa). The Desertec project will also see solar and wind farms in the Sahara connected to grid power supplying Europe and north Africa.
Blackenberg points out that the anticipated economic development in Africa will go hand-in-hand with increased energy demand. “Going forward, as the continent develops, there will be lots of resources available, lots of people available, and lots of potential for transforming the energy landscape.”
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