Solar in Sub-Saharan Africa – A Bright Future?
With capital costs falling and the technology ever improving, concentrating solar power (CSP) and solar photovoltaic (PV) technologies present increasingly enticing investment opportunities for a number of emerging economies; not least in Sub-Saharan Africa where various nations are stepping up their renewable energy projects. Nowhere is this more evident than in South Africa, which intends to increase the country’s renewable energy generation by 3,725MW with the continued roll-out of its REIPP programme.
Solar technology is increasingly seen as a low-risk investment. In a region scoring high for insolation, the sustained fall in capital costs (the price of solar panels alone have fallen by over three quarters since 2010) and lack of a fuel charge component means that the technology is insulated to a large degree from world commodity price fluctuation.
With storage solutions ever improving, this can only increase solar’s attraction as a long-term investment for Sub-Saharan nations where 620 million people are estimated to live without access to electricity.
With investment in renewables rising nearly 70% in Africa as a whole to over US$5 billion in 2015, there are a number of positive developments for CSP and PV technology.
One such development has been the number of initiatives bearing fruit since the US launched its Power Africa initiative back in 2013. Amidst a backdrop of global market uncertainty, the end of 2015 saw OPIC’s support and signing of loan documentation (worth US$400 million) in respect of the Redstone 100MW CSP project in South Africa, whilst the World Bank’s “Scaling Solar Initiative” kicked off 2016 with significant interest in the development of two 50MW solar PV IPPs in Zambia.
Meanwhile, February 2016 saw the beginning of the construction of a 10MW solar PV plant in Uganda. This is projected to be the largest project in the Eastern region of Sub-Saharan Africa once complete; a positive precursor for things to come.
Market outlook - the road ahead
While determining just how current financial market uncertainty will impact the development of solar technology for Sub-Saharan Africa in 2016 is premature, the long-term trend looks positive.
The slowdown in China’s economy will no doubt have certain near-term ramifications (Chinese lenders including ICBC were particularly active in the region during 2015). However, the increasing diversification and competitiveness in the sector — with involvement from US, Europe and Gulf-based sponsors — speaks for a progressively robust future for solar power in Sub-Saharan Africa.