Can Africa make the big switch? - African Business Magazine
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Can Africa make the big switch?

Can Africa make the big switch?

The African Development Bank (AfDB) approved a €115m loan to help fund the construction of the 300 MW Lake Turkana Wind Power Project in the northwest of Kenya. The government of Spain has agreed to lend $178m to fund the construction of a 428km transmission line to connect the project to the national grid of Kenya.

While a renewable energy revolution has yet to take off in Africa, the seeds of a possible revolution are finally being sown. Large-scale wind and solar power projects are being developed in several countries and many governments now include renewable energy technologies in their power generation plans.

International financial organisations and donor groups are providing some of the funding, while the African continent is appearing on the radar for many global turbine and photovoltaic (PV) manufacturers for the first time.

Africa’s wind, geothermal, biomass and particularly solar power potential has been the subject of countless academic studies but investment had been limited until relatively recently. The only countries really to source a significant proportion of their power requirements from renewables have been Egypt and Morocco, with wind farms, and Kenya, which has led the way in developing geothermal power plants. However, two developments have really changed the sector’s prospects: the availability of international funding and South Africa’s decision to source most new generating capacity from renewable energy over the next two decades.

Wind power

The wind power sector is developing along rather different lines in Africa than in most other parts of the world. Governments usually subsidise wind farm power production through a system known as feed-in tariffs, while project size usually increases over time. Those projects that are under development in sub-Saharan Africa, however, are mostly funded externally and are surprisingly large for first incursions into the industry. For instance, in late April, the African Development Bank (AfDB) approved a €115m loan to help fund the construction of the 300 MW Lake Turkana Wind Power Project in the northwest of Kenya.

The AfDB will also provide a risk guarantee to speed up development. The project is being developed by a consortium of Kenyan and Dutch investors, while Danish manufacturer Vestas is supplying 365 turbines with a capacity of 850 kW. In addition, the government of Spain has agreed to lend $178m to fund the construction of a 428 km transmission line to connect the project to the national grid. All electricity will be sold to the Kenya Power and Lighting Company (KPLC) under a 20-year power-purchase agreement at a cost of $0.10/kWh.

African wind power potential is mainly concentrated in coastal areas, including North Africa, the Horn of Africa, the Indian Ocean states and South Africa. Substantial inland potential is limited to a handful of areas, including Chad, Kenya, Lesotho and Ethiopia. At the start of 2012, 50% of Africa’s commercial wind-power generating capacity was located in Egypt, with another 40% in Morocco and 5% in Tunisia.

A total of 44 GW of new wind-power generating capacity was completed around the world last year, taking the global total to 280 GW. Just 100 MW, or 0.2% of this, was installed in Africa, mainly in Ethiopia and Tunisia.

Egypt is expected to maintain its lead in the sector, as the ministry of electricity and energy has launched a tender for a 25-year build-own-operate (BOO) contract for a 250 MW wind power scheme. A power purchase agreement with Egyptian Electricity Holding Company (EEHC) will be provided as part of the deal. Moreover, Cairo continues to guarantee access to the national grid for any new wind farms.

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Written by African Business Magazine

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