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Facing the African market

Facing the African market

A path strategy for the most promising solar market

 

Introduction

 

About 95% of the world’s 1.2 billion people without grid access live in Sub-Saharan Africa and South and East Asia, with the remainder spread almost equally across Middle East, Central Asia and Latin America. From an electricity-access point of view, Sub-Saharan Africa’s situation is the world’s worst. It has 13 percent of the world’s population, but 48 percent of the share of the global population without access to electricity. This means that almost 600 million people in Sub-Saharan Africa lack access to electricity.

Sub-Saharan Africa will consume nearly 1,600 terawatt hours of electricity by 2040, four times what was used in 2010 and as much as India and Latin America combined did in 2010 (see figure). The investments needed to reach this production level in 2040 would be $490 billion for new generating capacity, plus another $345 billion for transmission and distribution. As the World Bank notes, solar PV can already deliver power at less than 15US¢/kWh with long-term price certainty in Africa, but many African countries still rely on diesel-fired power that costs more than 25US¢/kWh and is subject to global oil price volatility.

 

New “post-incentives” Solar era

Solar Market has finally entered in the post-incentives era. After many years of important growths, thanks to public incentives, the solar market is ready to become a cost-competitive technology, competing with conventional sources. Thanks to PV system prices decrease and due to consequent achievement of the so-called grid-parity, Solar energy is expected to live a “second life” in all emerging countries/market that need energy not for speculative aims, but for real macro-economic factors. Africa, according to the main analysts, is for sure one of those areas. We are going to switch the general approach. No more speculative and financial aims, but industrial and macro-economics needs. This mechanism is able to facilitate the growth of the real economies, creating the basis for a strong development.

 

Barriers and acceleration factors

With more solar resources than anywhere else in the world, with steadily growing economies, and with massive shortages of power, the markets in Africa are almost ready to start. But Africa needs solar entrepreneurs that can convince the buyers and it needs the type of aggressive green investment that took place in the 1990s in Europe. We would like to be the ones. Power sectors must change too to allow new segments of the population to profit from and participate in electricity production. This is the promising future of solar in Africa. There is evidence of a transition towards more market-based diffusion and private-sector involvement for PV systems for private consumers, institutions and villages.

 

Importance of Financial tools

Investors developing private solar projects in Africa are often deterred by a variety of obstacles, including the unique features and structures of the different markets, high transaction costs, heavily negotiated agreements, and high perceived risk and cost of capital

The main challenge facing developing nations is the competition for scarce funds and government guarantees. Therefore, capital-intensive investments in low-carbon energy tend not to be prioritized when competing with needs that are more urgent. On the other hand, governments in wealthy countries, pension funds and sovereign funds should look at renewable infrastructure assets in emerging markets as an opportunity to attract higher returns than they can get in mature markets while at the same time enabling the low-carbon transformation.

 

The OFF Grid & Hybrid market

In regions like rural Africa, where the power grid is lacking, an entirely new strategy has had to be developed. Off-grid renewable energy systems are directly needed to connect this vast number of people with a source of electricity. What has changed is that new renewable solutions are cheaper, cleaner and better to produce electricity without reliance on imported/transported fuels. Due to this development, off-grid renewable energy systems are now seen as a potential replacements for both traditional diesel-based off-grid systems and for existing grid systems. Off-grid solar products and services markets are achieving larger scale. The latest Bloomberg energy Finance report about Off grid market talks about a fourfold increase by 2020, from 25 million households up to 100 million, with a sales growth at 34% reaching 3.1 billion of sales value

 

General guidelines for African Market

Even if Africa region has its unique features, there are some “winning” factors that can be brought into Africa in order to accelerate the market development. From a financial point of view, the inclusion of dedicated financing facilities is surely a way to enhance the market growth. For example, Scaling Solar initiative by IFC aims to create a viable market for private solar power projects in Africa. Another important factor regards the general legal framework. It’s quite difficult to develop a business sector as Energy without a real market liberalization, and clear, consistent, and transparent Regulations. As well as attractive PPA values according to the real local market conditions and harmonized and proper remunerations schemes. In terms of policies and guidelines, renewables should become fully part of the national strategies, fixing long-term targets to achieve. I would finally add the importance of the existing infrastructures, especially the electricity distribution grid, and, finally, a strong commitment to fight corruption in order to encourage fair bidding conditions for competitive tenders for PPAs.

 

The ENERRAY’s challenge lies in integrating the most advanced technologies, providing quality installations and technical reliability at best. We can deliver both Micro/Residential and Utility Scale systems by customizing the best solution by offering the chance to integrate solar energy with smart battery storage and/or diesel generators in Hybrid systems making the most cost-effective clean energy solution ever.

A path strategy for the most promising solar market

 

Introduction

 

About 95% of the world’s 1.2 billion people without grid access live in Sub-Saharan Africa and South and East Asia, with the remainder spread almost equally across Middle East, Central Asia and Latin America. From an electricity-access point of view, Sub-Saharan Africa’s situation is the world’s worst. It has 13 percent of the world’s population, but 48 percent of the share of the global population without access to electricity. This means that almost 600 million people in Sub-Saharan Africa lack access to electricity.

Sub-Saharan Africa will consume nearly 1,600 terawatt hours of electricity by 2040, four times what was used in 2010 and as much as India and Latin America combined did in 2010 (see figure). The investments needed to reach this production level in 2040 would be $490 billion for new generating capacity, plus another $345 billion for transmission and distribution. As the World Bank notes, solar PV can already deliver power at less than 15US¢/kWh with long-term price certainty in Africa, but many African countries still rely on diesel-fired power that costs more than 25US¢/kWh and is subject to global oil price volatility.

 

New “post-incentives” Solar era

Solar Market has finally entered in the post-incentives era. After many years of important growths, thanks to public incentives, the solar market is ready to become a cost-competitive technology, competing with conventional sources. Thanks to PV system prices decrease and due to consequent achievement of the so-called grid-parity, Solar energy is expected to live a “second life” in all emerging countries/market that need energy not for speculative aims, but for real macro-economic factors. Africa, according to the main analysts, is for sure one of those areas. We are going to switch the general approach. No more speculative and financial aims, but industrial and macro-economics needs. This mechanism is able to facilitate the growth of the real economies, creating the basis for a strong development.

 

Barriers and acceleration factors

With more solar resources than anywhere else in the world, with steadily growing economies, and with massive shortages of power, the markets in Africa are almost ready to start. But Africa needs solar entrepreneurs that can convince the buyers and it needs the type of aggressive green investment that took place in the 1990s in Europe. We would like to be the ones. Power sectors must change too to allow new segments of the population to profit from and participate in electricity production. This is the promising future of solar in Africa. There is evidence of a transition towards more market-based diffusion and private-sector involvement for PV systems for private consumers, institutions and villages.

 

Importance of Financial tools

Investors developing private solar projects in Africa are often deterred by a variety of obstacles, including the unique features and structures of the different markets, high transaction costs, heavily negotiated agreements, and high perceived risk and cost of capital

The main challenge facing developing nations is the competition for scarce funds and government guarantees. Therefore, capital-intensive investments in low-carbon energy tend not to be prioritized when competing with needs that are more urgent. On the other hand, governments in wealthy countries, pension funds and sovereign funds should look at renewable infrastructure assets in emerging markets as an opportunity to attract higher returns than they can get in mature markets while at the same time enabling the low-carbon transformation.

 

The OFF Grid & Hybrid market

In regions like rural Africa, where the power grid is lacking, an entirely new strategy has had to be developed. Off-grid renewable energy systems are directly needed to connect this vast number of people with a source of electricity. What has changed is that new renewable solutions are cheaper, cleaner and better to produce electricity without reliance on imported/transported fuels. Due to this development, off-grid renewable energy systems are now seen as a potential replacements for both traditional diesel-based off-grid systems and for existing grid systems. Off-grid solar products and services markets are achieving larger scale. The latest Bloomberg energy Finance report about Off grid market talks about a fourfold increase by 2020, from 25 million households up to 100 million, with a sales growth at 34% reaching 3.1 billion of sales value

 

General guidelines for African Market

Even if Africa region has its unique features, there are some “winning” factors that can be brought into Africa in order to accelerate the market development. From a financial point of view, the inclusion of dedicated financing facilities is surely a way to enhance the market growth. For example, Scaling Solar initiative by IFC aims to create a viable market for private solar power projects in Africa. Another important factor regards the general legal framework. It’s quite difficult to develop a business sector as Energy without a real market liberalization, and clear, consistent, and transparent Regulations. As well as attractive PPA values according to the real local market conditions and harmonized and proper remunerations schemes. In terms of policies and guidelines, renewables should become fully part of the national strategies, fixing long-term targets to achieve. I would finally add the importance of the existing infrastructures, especially the electricity distribution grid, and, finally, a strong commitment to fight corruption in order to encourage fair bidding conditions for competitive tenders for PPAs.

 

The ENERRAY’s challenge lies in integrating the most advanced technologies, providing quality installations and technical reliability at best. We can deliver both Micro/Residential and Utility Scale systems by customizing the best solution by offering the chance to integrate solar energy with smart battery storage and/or diesel generators in Hybrid systems making the most cost-effective clean energy solution ever.

 

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