Breaking News Energy News — 05 October 2012

Like blind men describing an elephant, African pundits talk about renewables in terms of individual perceptions, needs and inclinations, and often in ways that put the overall issue completely out of perspective.

For example, academics tell us about ample solar, wind, hydro and biomass resources that, properly harnessed, could change the energy picture in Africa. Environmentalists talk about deforestation, unsustainable use of charcoal in cities and the risks associated with biofuel production. Social entrepreneurs speak of replacing kerosene with pico-solar systems. Carbon traders highlight opportunities for wind parks on growing power grids. Community activists want programmes to widen energy access with hydro, solar, wind and co-generation electricity. Climate changers talk mitigation and adaptation strategies and politicians make sweeping statements about new investment programmes.

Though the pundits are each ‘right’ in their particular prescriptions, in the noise of the discussions we end up blind to the ‘big picture’. Yes, given the proper stimuli, renewables can and will take off in Sub-Saharan Africa. Appetite and resources are clearly there.

Unfortunately, renewables are not making fast enough progress in Africa. Electricity sectors still rely primarily on petroleum, coal and large hydro. Rural areas have poor electricity access and remain overly reliant on biomass sourced from dwindling forests. Policies are murky, technical capacity is low and, where there is cash, finance terms are absurd. While power companies in Africa are starved for electricity and struggling to supply growing demand, in most countries renewables are not filling the gap fast enough and renewable energy companies are frustrated.

As is still the case in many developed countries, renewables in Africa must overcome significant financial, political and social barriers. Primary among these are a low level of understanding among all stakeholders, inertia and lack of lack of transparency from governments and lack of investment finance across the board. Despite hundreds of small ‘projects’ by committed groups, overall policy and industry infrastructure remains incomplete in most countries.

When talking of renewables, there are two key story lines: firstly, use of renewables to build power infrastructure and secondly, use of renewables to increase access to modern energy services. Renewable sector growth depends on both of these. In fact, development of renewable energy infrastructure and increased access are intertwined and cannot be seen in isolation. Renewable energy infrastructure usually predicates the use of renewables to increase access and attempted use of renewables to increase rural energy access without investment in renewable energy infrastructure has, in many places, lead to much lower impacts.

The prerequisite ‘components’ of renewable energy growth described below need to be coordinated into long-term multi-sectoral strategies. Like pieces of a puzzle, the components must be carefully fit together and staged – sometimes sequentially and sometimes as parallel activities. Each country will have a different plan drawing upon elements of these components.

Understanding the Situation and How We Got Here

Knowing where we are, and how we got here, provides us with enough perspective to plan for a renewable future. Today, Africa trails the developed world and most of southeast Asia in renewable developments. This has much to do with government policy, donor decisions made 20 years ago and a lack of attention by renewable companies themselves to Africa. It also has to do with a lack of civil society’s attention to the issue.

First, energy sectors in many countries are focused on surviving today’s power crises. Even though it may be easy to show on paper that an investment in wind or solar PV is lower cost in the long term, African energy sectors must solve problems that require immediate solutions with limited investment capacity. It is easy to see why diesel gen-sets have gained such a huge share of peak power supply all over the continent – they are cheap, flexible, manageable and immediately available. Few governments have the long-term budget (or vision) to invest in renewable solutions even if they are lower cost.

Secondly, donor-led investments in off-grid renewables are part of the market development problem. Post-Rio 1992, the Global Environment Facility (GEF) and donors largely targeted renewables in Africa for off-grid rural energy access programmes, believing that off-grid investments would be best for stimulating a scale-up of renewable energy in Africa. However, while Africa was looking off-grid, much of the rest of the world (Germany, California, Japan and lately China) were building up policies to support grid-connected renewable markets. Thus while ‘global’ renewable players focused on rapidly growing grid-connected developed-country markets, Africa focused on building off-grid renewable programmes that often foundered because they were isolated, small-scale and unattractive to international players. For example, while global solar PV installations went from 95% off-grid to 95% on-grid between 1995 and 2011, Africa spent most of its PV planning resources on expensive off-grid programs and almost nothing on plans for on-grid PV.

Thirdly, unlike much of the rest of the world, African energy sectors are haunted by centralised coal, petroleum and large hydro. Although there is quite a bit of lip service paid to renewables, actual investments by African power sectors in biomass, solar, wind, and small hydro have been much less than investments in non-renewable solutions over the past two years. Petroleum is big money in Africa and renewables have not been able to stimulate appetites of leaders in the same way that oil has. Coal and petroleum players are ‘old hands’ in Africa, but renewable companies are only beginning to learn how to operate on the continent.

Once we know where we are, we can continue the hard work of making renewables a central part of every energy discussion – and every Ministry programme.

Getting Renewables into the Mainstream

Renewables must be ‘mainstreamed’ in Africa. For this to occur, they need to move away from the periphery and be seen, and supported, as integral, indispensible components of every country’s energy sector. As well, there is a need to coordinate plans to build renewable infrastructure, increase access and address traditional biomass sectors. It is all about the message.

Mobilising a critical mass of understanding needs to occur at all levels: in civil society, in the private sector, among financial institutions, as well as among the political class. Demand for renewables by civil society will be a main part of the pull that gets Ministers of Energy to take renewables more seriously. For this to occur, renewables need a well-targeted and properly articulated continent-wide publicity campaign which informs and educates the policymakers, financiers and general populace about the critical difference support for renewables can make in increasing access to modern energy while mitigating the effects of climate change. Current pessimistic views fuelled by misinformation can only be changed by focused public education.

Key elements of the message should include:

  • Today, renewables are both on and off- grid solutions. Renewables need to move on-grid to help build grid security and to decentralise power sources. At a time when over 95% of wind and solar PV demand is on-grid, Africa must quickly take this on board and see the opportunities that renewables can offer to weak, over-stressed grids.
  • Renewable energy technologies are increasingly price competitive.
  • All sectors and income groups can participate.
  • Renewables are important components of any programme that seeks to build energy access
  • Sustainable biomass fuels (and their efficient use) are critical to universal access, the environment and to the transition to a long-term renewable future. Production and use of bioenergy will affect the environment and the ecosystem services.

Get the Policy Environment Right

Governments must give renewables the same policy attention as fossil fuels, large hydro and coal. Africa needs to actively seek investment by creating attractive investment and business environments.

Suffice to say that there are ample international experiences that can be utilised in Africa to stimulate renewable sectors, and a number of pan-African successes as well. In general, policy environments must be built on twinned approaches:

  • Strong, stable and long-term central support;
  • Well-developed renewable energy strategies for rural and urban energy access, using rural energy agencies where possible.

Electricity and petroleum sectors in Africa have a notorious lack of transparency, leading many international supporters and investors to simply ignore governance when working with countries to develop strategies for renewable development (and worse yet, unscrupulous investors and governments take advantage of shady political environments.) Instead of turning a blind eye to real issues, donors and investors must tackle the central policy and governance problems as part of their assistance packages.

Once the general public understands the central role that renewables can play in a strong energy sector – and demands the requisite investment – government will provide it. While leaning heavily on public demand, investors, multilaterals and donors should help to create conducive policy environments by betting on winners. Countries that have the best policy and roll-out strategies should win the lion’s share of global financial and capacity building support. Other countries will follow, just as they did with telecom.

Build Capacity

Developing the real potentials of renewable technologies – the operational conditions linked to infrastructure, financing and integration in power systems – requires skills and know-how. This is not limited to Sub-Saharan Africa. Experiences in places like Germany and California show that the development of renewable sectors requires continuous support for decades. Twenty years of strong support building the technical, social and economic capacity foundations will bring about changes.

In Africa, knowledge of renewables and their role in development of the energy system will have to trickle out to all sections in society. In the past, rural access-oriented approaches to renewables over-extended fragile sectors, leaving them unable to replicate small success. Because many programs built hydro mini-grids and solar markets in remote hard-to-reach locations, the private sector was unable to replicate these projects when donor or government funds ran out.

New renewable development programs must utilise the capacity of city-based companies and invite them to help tackle growing urban demand for power with decentralised renewable solutions. Capacity building programmes need to realise that all over the world, jobs follow the money, and in Africa urbanisation is an important engine of development. Successful urban companies who have helped build renewable power grids in urban areas will take solar and hydro solutions to rural areas.

Support must avoid being counterproductive. In the case of solar industries in Africa examples are found where support with good intentions has harmed an already existing market. Thus, there will be a need for types of capacity building that are multi-sectorial and practically oriented.

Paper-based support, nice-sounding political rhetoric, workshops and trade visits must increasingly be replaced with real nuts-and-bolts support to the groups that implement the projects. In short, the urgent capacity development work must be hands-on – it must take place as financed solutions are being put in place.

Mobilise the Private Sector

Of course, local, regional and international private sector interests must be the main players in execution of renewable energy programmes, and they play a key role in each of the preceding stages. There are a wide range of opportunities for the private sector that remain unexploited. Business can be developed for the sales and operation of urban solar water heaters, decentralised renewable energy mini-grids, locally produced biofuels or even for scaling up sustainable charcoal and biomass supplies. New types of ventures and innovative business models are much needed to create a competitive sustainable energy sector.

Indeed, investment in new types of renewables has the potential to open up new productive areas and expand investment frontiers in African economies and to change how cash flows and wealth is created within the country. New viable livelihoods will be created in the process.

Key to business development is how strong productive partnerships can be created between African country-based companies and international players and investors. As new businesses are started up, it is important that perspective be kept and that attention is paid to how benefits are shared. Bioenergy production in Africa has received a lot of attention both as a route to decrease oil dependency as well as a threat to biodiversity and local livelihoods. As another example, cheap solar products from the far east have flooded markets and driven local companies out of business. As is the case in all economically important sectors, there are many important discussions that need to be had about building local sectors and skills and keeping prices at an affordable level.

As was the case with the telecom sector 10 years ago, much of this will be dependent policy changes that enable the private sector to participate in decentralized and deregulated power sectors. It goes without saying that Governments must be willing to commit the necessary resources that will be required for mid-sized projects such as rural mini-grids or grid-connect solar, the price supports for biofuels or the regulation needed for sustainable charcoal to open up the next generation of renewable industries.

Inject Finance into the Sector

Access to capital at the appropriate terms and costs is a significant obstacle for the scale-up of renewables. In fact, the financing is, in many ways, available. It is more correct to say that financiers are having trouble connecting with demand. Even if the policy environment and feed-in tariffs were right (and they have a ways to go in most African countries), deals would not magically occur.

A major factor affecting financing access is the capacity of local banking institutions to assess projects. Without properly appraising technology, banks cannot shoulder financial risks. International and development finance institutions have up to now been the major sources for renewable energy project finance in Africa. These however tend to favour large-scale projects as opposed to the many smaller, decentralised or off-grid projects that local companies have the capacity to implement.

Best practices to more effectively leverage funds can be found in Africa, and will be improved upon with:

  • the establishment of technical assistance programmes for banks to assess the risks in renewable energy projects;
  • successful loan products in which local bank funds are complemented by development finance funds to share risks, for example the International Finance Corporation (IFC);
  • the Agence Francaise de Developpement (AFD) model of appraising and approving projects before sending them to local banks in East Africa.

There are already a range of carbon-based financing mechanisms such as the Clean Development Mechanism (CDM) and other voluntary schemes. These can provide important support to scaling access to renewable energy. But they need to more effectively target Africa.

We have not seen enough scaling-up of renewable projects – at least not on the order of the telecom and ICT sectors, and not on the order that needs to occur to make a difference among African communities. Successful projects or experiences are often orphaned or stranded once funding has ended – or they become donor-driven cottage industries (improved stoves, solar lanterns). The sheer number of small-scale pilot projects in the renewable energy sector is, perhaps, simply a feel-good alternative which wallpapers over the fact that real scale has not been achieved.

Scaling will occur when the demand is created, and where the policy, finance and private sector capacity are in place. In Africa, we are told that people are not concerned about green energy, and that the cost of making the transition to decentralised sustainable power is too high. However, the same officials that speak of power in terms of cents per kWh ignore the costs consumers must bear by sitting through brown-outs or investing in generator and back-up alternatives. Given the choice, a large portion of Africa’s growing business and middle class will invest in renewables.

Link with Best Internatioanl Practice

As wind, PV and other sources increasingly dominate new electricity and energy investments in Europe and the US, Africa risks being left behind. In fact, Africa has been isolated when it comes to international best practice in medium- and large-scale renewable projects. Despite the strong appetite for energy and new projects, pulling together diverse teams for frontier renewable projects is expensive, complicated and risky.

International cooperation is vital for the industry. Best practices in medium- and large-scale renewable projects are much needed in Africa and can be drawn from the international community. Thus the need to support experienced companies and expertise that can provide the needed glue which can bind together projects. Multilateral and bilateral donors have been supporting such projects and are beginning to show positive results. But much more can be done.

Regional and South-South cooperation can be encouraged to share infrastructure (interconnection), form sustainable energy partnerships and learn from successful business models implemented in similar environments.

That renewables have made a good start in Africa is undeniable. Nevertheless, the bitter truth is that the full transition to renewables in the continent is a long way off. In many African countries, governments are out of step with an international community that has fully embraced renewables. Moreover, leaders have not realised that plentiful renewables can help drive forward energy access, can help build economies and, with investment, will enable Africa to participate in the ongoing green energy revolution.

Risk-averse power sector executives and Ministers will not lead the charge for renewables in Africa. As happened in many developed countries, demand for renewables will be driven first by an educated civil society. Progressive government policy follows the demands of an educated public – and investment and private sector development follow attractive policy environments. It is therefore necessary that a multipronged strategic approach that engages a wide base be adopted by proponents of Africa’s renewable energy future.

Mark Hankins is CEO and Federico Hinrichs is project manager and consultant at African Solar Designs, Nairobi, Kenya. Mathias Gustavsson is a researcher in climate and sustainable cities at the Swedish Environmental Research Institute.

Source: Renewable Energy World 

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