Around 600 million people in Africa still have no access to electricity, a figure that could reach 700 million by 2023. Over the past few years, the use of renewable energy sources, which remains marginal in Africa, has emerged as a promising remedy to this situation.
There have been a few initial victories: in the area of solar energy, the installed solar capacity was multiplied by four in the past two years and private investments by 10 between 2009 and 2014. Over 350 projects are currently ongoing across the continent. However, “many programs have been launched, but completing them is a real problem,” notes Abdou Diop, managing partner at Mazars.
“There is a paradox,” explains Bertrand de La Borde, senior manager and Head of Infrastructure, Africa, at the International Finance Corporation (IFC). “The needs are enormous, with a growing population, economies in need of energy, major solar potential, and increasingly competitive costs and technologies. And yet, with only a few exceptions, very few projects come to fruition.”
Lack of strategy
What can be done, then, to speed up solar deployment? “The greatest factor obstructing or slowing its growth is the lack of a mixed energy strategy within the states,” explains Thierry Déau, founder and CEO of Meridiam, a world leader in long-term private investment in public infrastructure. “There are also interconnection problems. Building power stations everywhere is great, but they have to be connected to networks, which do not always have sufficient capacity. This is all organized a bit backwards: we build the power station before thinking about how to connect it.”
In the same vein, Mustapha Bakkoury, Chairman of the board of Masen, the Moroccan Solar Energy Agency, mentions the “need for public engagement at the highest level to ensure lasting deployment.”
Three players have a key role, says Charlotte Aubin-Kalaidjian: “First, governments need to implement strong renewable energy policies and commitments, in addition to technical knowledge of their network, without forgetting legal and contractual abilities to negotiate,” emphasizes the founder and CEO of GreenWish Partners. “Next, the private sector must also have the required technical and legal skills, in addition to financial capabilities. Finally, international donors are indispensable, since long-term financing is needed, and, undoubtedly with the exception of Morocco and South Africa, only development banks offer any. Yet they still base their procedures on larger, more complex projects, in the hydroelectric industry for example. They deserve to be adapted.”
Jean-Pascal Pham-Ba, Secretary General of the Terrawatt initiative, emphasizes that “the spirit of innovation must be shared by these players. Relationships between the various stakeholders need to be well-organized.”
Intelligent mutual agreements
Innovation is crucial, but so is the ability to adapt to local conditions. On this topic, Mustapha Bakkoury even mentions flexibility. Are calls for tenders a good thing? “Yes, but when a country is just getting started, they are not a mandatory step,” opines Amadou Hott, Vice President of the ADB.
“We can have a balanced agreement. We aren’t going to spend two years on calls for tenders for 20 MW, 50 MW, or 100 MW.”
“What GreenWish Partners achieved in Senegal in twelve months would not have been possible without a call for tenders,” adds Charlotte Aubin. “We worked out the kinks, which enabled us to reproduce the operation. Many calls for tenders are only open to players of a certain size; locals are left out.” An important financier in this industry, the IFC sometimes grants solar markets by mutual agreement, most notably in Mozambique and Burkina Faso. Acting by mutual agreement intelligently seems to be indispensable to speed up the process, but it is important to proceed with caution.
“Solar energy is technically simple, so any clown who has set up a solar panel on his roof in Europe thinks he can come develop projects in Africa,” jokes Thierry Déau. “Hence the highly variable quality of the solar developers there. Calls for tenders make it possible to prepare files and sort through them.”
They could also make it possible to more easily industrialize solar power in Africa. This forced standardization could prove to be crucial to developing innovative financial techniques in the sector, such as securitization or co-financing.
For Amadou Hott, this standardization also involves greater transparency in terms of price, conditions, and cost of debt, most notably on the international level.
Public support for off-grid power
The off-grid offering clearly seems to be inescapable in order to meet demand as quickly as possible. A success story for renewable energies in Africa, Morocco was an early tester of off-grid power.
“We experimented with rural electrification in the 1990s, which enabled us to progress from 50% electrification to 97%,” recalls Mustapha Bakkoury. “Photovoltaic systems were set up in 100,000 households. However, we faced a real challenge from having not taken certain social aspects into account: some people refused these systems, which they saw as a life sentence to having no network connection.”
For the Moroccan business leader, off-grid energy can also help relieve networks, through hot water or public lighting.
For his part, Amadou Hott calls for governments to provide greater support for off-grid solutions: “They must place off-grid and non-grid power on the same level and adopt a clear strategic plan for off-grid,” he says. “That’s what Rwanda and Ethiopia have done.” For Mustapha Bakkoury, the challenge is enormous, even more so than we think: “Renewable energy must be used as a true driver of economic development. It must provide power, not just electricity.”
This article is a summary of discussions that took place at the 2018 Africa CEO Forum. It was written by the Africa CEO Forum team and published by our partner, Jeune Afrique.