The year 2018 saw USD 2.8 billion spent on RE projects in sub-Saharan Africa – a regional record and some USD 600 million more than the previous year
The year 2018 saw USD 2.8 billion spent on renewable (RE) projects in sub-Saharan Africa (excluding South Africa) – a regional record and some USD 600 million more than the previous year, according to a new report published by research company BloombergNEF (BNEF). More renewables investment flowing to sub-Saharan African countries than ever before is a testament to how cheaper technology, investor familiarity, and subsidy schemes are helping clean energy spread across the continent.
The report added that as investors cast a wider net, projects are being built outside of mature markets such as South Africa. Many utility-scale solar projects are being developed in countries that have not built much renewables infrastructure to date. Some 1.2 GW of PV is expected to come online in 2021 outside of South Africa – that is more than twice the amount commissioned in 2018.
Country-level targets and incentives are backed by assistance from multilateral, which remains a key source of finance and has helped roll out renewable energy auction programs. The World Bank’s Scaling Solar program, for instance, awarded just under 400 MW of solar capacity over 2015-18, equivalent to 39 percent of the total installed outside of South Africa over the same period. Such auctions have yielded some of the world’s lowest bid prices for solar power – several projects have won capacity at prices under USD 0.04/kWh.
The report further added that such auctions are often like a double-edged. On the one hand, they prove that large-scale renewables can be procured throughout the region and help develop local familiarity with clean energy. Many are bundled with features designed to reduce project costs and risk, such as pre-secured sites. Yet, as BNEF analyst Antoine Vagneur-Jones pointed out, “that helps lower prices, but can also lead to government expecting to procure power at the same rates for projects that are not backed by such frameworks.”
Other hurdles remain to be overcome. Several sub-Saharan African countries sport an apparent surplus in installed power generation capacity. Taken at face value, this can weaken the case for adding renewables. But plant availability issues and transmission constraints mean that the gap between supply and demand is often less clear than it would seem.
Developers having access to guarantees and hard currency lowers barriers to investment, but risk perceptions are such that access to local financing for large-scale renewables remains a distant prospect. Yet recurrent shortages of hydropower and a shift away from financing coal by such backers as the African Development Bank (AfDB) are increasing the attractiveness of clean energy.