Three-quarters of Sub-Saharan Africa still has no access to electricity, but with renewables enabling power to be transmitted to the remotest of communities, could the clean energy sector hold the answer to Africa’s power needs?

For a continent so rich in natural resources Africa suffers from a chronic shortage of power. The continent may boast some of the world’s leading exporters of coal, oil and gas – commodities that countries in other continents import to feed their own demand for power – but, according to the World Bank, only 24 per cent of those living in Sub-Saharan Africa have access to electricity and even those that do have to put up with blackouts on a regular basis.

Much is being done in a bid to rectify this situation. In 2013 US President Barack Obama launched his Power Africa initiative with the specific aim of doubling access to power in Sub-Saharan Africa while the UN’s Sustainable Energy for All project was dubbed ‘a game changer for Africa’ by the former president of the African Development Bank, Donald Kaberuka.

Yet the state of the power infrastructure across the continent means it is still difficult to transmit the electricity generated in large-scale gas or coal-fired power stations, especially to remote areas.

Universal access to power will therefore remain something of a pipedream – unless a way can be found to take power to Africa’s most rural communities. Which is where renewable energy comes in.

The green agenda

Governments across Africa have put in place ambitious renewable-energy targets, with Nigeria aiming to have ten per cent of its energy consumption met by renewable sources by 2025, Kenya planning to generate 19,200 MW of clean energy by 2030, and Morocco looking to have renewables account for half its energy mix by 2030.

The environmental case for renewables is an obvious one. Shamilah Grimwood, a Cape Town-based partner at South African firm Bowman Gilfillan, notes that currently ‘in Sub-Saharan Africa, and particularly in South Africa, the generation mix is largely coal’ – a highly polluting fuel.

The rush to renewables is not being driven by environmental considerations alone. Indeed, as London-based Herbert Smith Freehills partner Martin Kavanagh says, the fact that small power plants can be built on hills or in jungles is one of clean energy’s major plus points. Being able to attract finance for such projects is another.
‘With renewables you don’t have to transport the fuel [to the plant] because it’s sun, water or wind, and because the plants can be built all over the place in relatively small sites you don’t have to transport the electricity so far,’ Kavanagh says. ‘Most countries can’t afford to build a coal-fired power station without funding, which you don’t get for coal, but many international donors, such as the World Bank, are interested in renewables.’

While the upfront costs of renewables projects can be high on a per-megawatt basis, especially as developers may need to meet the cost of building roads to transport equipment such as turbines, the overall cost is lower as the fuel is essentially free.

This, says Joe Tato, a New York-based partner and Global Co-Chair of DLA Piper’s Energy Sector, works in favour of rural communities that may be too remote to be connected to the grid. ‘The projects can be small so they’re not as capital intensive and they can come online quicker,’ he says. ‘Given the need for power outside major cities, where the cost of new transmission infrastructure to connect to the grid may be prohibitive, it seems that from a cost perspective, and with the decline in the pricing of solar panels and wind turbines, there will be a greater likelihood of
rural electrification.’

Pricing power

Renewables projects started making an impact in Africa following the launch of South Africa’s Renewable Energy Independent Power Producer Procurement Program (REIPPPP) in 2011.

Initially the cost of funding these projects was relatively high, with investments of
$3–5m per megawatt being common. As the programme was unproven, the first round of REIPPPP bidding attracted mainly South African backers, with the likes of Rand Merchant Bank, Industrial Development Corporation of South Africa and Nedbank providing much of the debt finance.

With the success of the first REIPPPProunds coming hand-in-hand with the falling cost of wind turbines and solar panels, bidding for the third and fourth rounds attracted a more international mix of investors. Germany’s Deutsche Bank and KfW Bankengruppe, the US Government’s Overseas Private Investment Corporation, and UK-headquartered Barclays have all got involved.

The mix of South Africa’s success, lower upfront costs and more interest from financial backers means that REIPPPP-style programmes are being rolled out across Africa, with countries including Ghana, Kenya, Morocco, Namibia and Uganda all embracing renewables projects of some shape or form.

‘African governments in the past four to five years have been reforming their electricity laws to promote renewables projects,’ says Delphine Siino Courtin, a partner at Clifford Chance in Paris.

The ‘success of the South African programme is repeating itself in places like Uganda’, says Grimwood at Bowman Gilfillan. ‘Other countries have taken on board the South African planning and procurement style and are trying to replicate that into programmes that are well-run and
well-resourced,’ she adds.

Njau Mukuha, a partner at Coulson Harney in Kenya, agrees, noting that in his country a number of policies have been put in place to encourage investment in green energy.

‘The government has come up with a feed-in tariff programme to encourage independent power producers to set up projects in the renewables space,’ he says. ‘So far that’s been going very well and there have been quite a few.’

No silver bullet

If the fuel is there for the taking and governments and financial backers are on board, are renewables on the cusp of solving Africa’s power-supply problems? In a word: no. Sarah Fitts, a partner at Debevoise & Plimpton in New York and the North American Regional Representative on the IBA Power Law Committee, points out that, as is the case in the US, ‘the rate of increase of renewables has been exceptionally strong over a fairly short period’ in Africa.

‘However, the starting number is very small and a 300 per cent increase of a small number is still a small number as compared against total energy already installed and total unmet demand,’ she continues. ‘Having said that, there are some exceptionally interesting and challenging projects that could be
real game changers.’

Part of the appeal of such projects is that the plants can be built virtually anywhere, but Mukuha at Coulson Harny points out that that benefit is moot if there is no land available to build the actual plants on. ‘A major difficulty is land, which is a scant resource here [in Kenya],’ he says. ‘Historically there have been challenges to land ownership, with questions over whether the local population hold the titles, and in remote areas that
can be a problem.’

It is not a problem that’s peculiar to Kenya. Tom Sipemba, a partner at Tanzanian firm East African Law Chambers, says the same issues are at play in his country.
‘The challenge is access to land because these kinds of project need a chunk of land,’ he says. ‘It’s been a challenge especially when it comes to compensation. The land is effectively held by the president as a trustee and the citizens are given the right to use it. In the villages most of the land has to be converted [to build on] and the villagers have to be given compensation, but there’s a feeling among the people that the compensation is small. That could be because they think when they see a big project that it means big money.’

Whether or not villagers are sceptical of the compensation being offered, there have been moves from governments to foster community engagement in any potential projects. While this shows a willingness to take local people’s views into account, Coulson Harney partner Rainbow Field notes that it ‘can sometimes slow down the process’.

This is on top of processes that mean reaching the development stage of a project can take a considerable amount of time. Grimwood notes that it took South Africa over a decade to make its REIPPPP work, while Tato at DLA Piper says that knowing there is sun and wind aplenty does not mean a project will necessarily work. ‘You need to do a fair amount of study on wind patterns or solar hours so these projects need a bit of lead time,’ he says. ‘This doesn’t happen overnight. It takes a fair amount of time and deliberation for a government to come out with a well thought-out strategy.’

Infrastructure upgrade

While small plants can bring electricity to the areas in which they are built, another issue hampering the wide roll-out of renewable energy projects is the fact that many of the national grids on the continent are not capable of taking the additional supply on board, either because the transmission lines do not exist or they are so dated they cannot cope with the extra capacity. Bringing electricity to specific rural locales is one thing, but when entire nations are screaming out for reliable power supplies the need to electrify cities and other centres of industry is also a key consideration. ‘We’re going towards a trend where governments are launching major projects, like 1,000MW of wind or solar, because those are the ones that are going to attract investors,’ says Siino Courtin at Clifford Chance. ‘These projects allow for electricity to be produced in different places in the country so its easier to distribute it, but in some countries the grid is still so underdeveloped that it couldn’t take 800MW of wind in one go.’

This is the case in Tanzania, whose government has drawn up plans to upgrade its grid infrastructure in light of the number of renewables projects that are being mooted. ‘The grid infrastructure has been a challenge because it has been there for some time,’ says Sipemba at East African Law Chambers. ‘The government is planning to improve the national grid and the plan is to start in 2018. The reason is that there are projects in the pipeline and if we have that much power we need to be able to transmit it.’

While the Kenyan government may have committed to funding this itself, not all African nations have the ability to pay for such infrastructure upgrades, especially those whose national income streams have been ravaged by the fall in commodity prices.

As Grimwood says: ‘The problem is that we’re dealing with very old transmission infrastructure. It’s not just a question of connecting to the grid, but of who is going to build those grids and who is going to finance that because that work doesn’t attract private funding at all and I don’t know that any country in Africa is looking at privatising that.’

Mind the gap

Renewables may offer some hope for remote African communities that have been cut off from mainstream power supplies, but as Norton Rose Fulbright partner Chris Down says, ‘a power system cannot operate on renewables alone’.

Siino Courtin agrees, noting that
‘the reality is that most of those countries need a lot of electricity and renewables is not there in terms of the technology and price competition’.

‘There’s a desire to promote and develop renewables projects, but the reality is that those countries need so much base load that they’ll continue to develop conventional power plants too,’ she adds.

This is certainly the case in Tanzania, which is looking to up its gas-fired generation thanks in part to the unreliability of hydro, which accounts for just over a third of its electricity generation. ‘Hydro is our main source, but now we’re moving to gas,’ says Sipemba.
‘Gas was discovered in the south of the country and development of our first
gas-powered plant is under way. The intention of the government is to move away from hydro because we have unreliable rainfalls and that leads to power shortages.’

Down at Norton Rose Fulbright agrees that gas will continue to dominate across the continent, with the move towards meeting individual countries’ renewables targets likely to be a slow one. ‘There will continue to be investment in a mix of technologies for the foreseeable future, but as renewables prices continue to fall they will take up more of the generation mix,’ he says.

And so the question of how to distribute the power generated in traditional plants to the widest possible consumer base is raised again. With individual governments, many of which are suffering in the wake of the crash in commodity prices, facing a major bill for facilitating the transmission of that power, it doesn’t look like Africa’s energy gap is going to be closed any time soon.

Professor Lanre Fagbohun, Vice-Chancellor of Lagos State University and Vice-Chair of the IBA Africa Regional Forum, sums it up when he says: ‘The main barriers are lack of effective political leadership in a number of countries while the ability to finance necessary infrastructure is a problem. The lack of coherence of policies in many countries constitutes huge risks for potential investors and many African countries are yet to put in place the kind of legislation that would make the environment conducive for the huge investment that is required to be deployed.’

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Margaret Taylor is a freelance journalist and can be contacted at mags.taylor@icloud.com