A stable coherent long-term government energy policy was essential to boost energy transition investments in Africa, experts said at the first-ever Investment Forum for Accelerated Partnership for Renewables in Africa (Apra) convened on Monday in Nairobi, Kenya.
Despite being home to 17% of the global population, Africa receives less than 2% of worldwide investments in renewable energy in the last two decades.
Barbara von Toll, the Regional Director for East Africa, KfW-DEG, said the German state-owned bank of DEG had a balance sheet of €10 billion (R191bn) worldwide, with €2bn in Africa of which half a billion was in the energy sector. There were 14 projects outstanding in total. And during the past two or three decades they had financed up to five gigawatts of energy in Africa.
She said as lenders KfW-DEG looked at the long-term strategy of the country or the whole energy system.
“I mean goals, commitments and measures, not only for investments into renewable energy, but also investments into supporting infrastructure, be it utilities to grant access to renewable energy and strengthen the power power pool, or investments into modern storage systems,” Von Toll explained.
There also needed to be favourable regulatory frameworks such as clear and long-term policies to create consistency over time and encourage the cooperation between the public and private sectors.
Martin Nagell, Advisor, Office of the CEO, Masdar, "We invested into mature markets and some of the most technologically advanced projects in world...We then took these learnings and tried to apply them to the markets that were core to us starting with the United Arab Emirates and that has been the strategy ever since“
He said Masdar didn’t wait for regulation to come to place.
“We approach a country... and then we sign up an agreement for a large project and we then work with the host government in the country to make the project bankable also with our development banking partners. None of our projects have defaulted.”
Soumya Banerjee, the regional Industry Manager, Infrastructure and Natural Resources Eastern Africa of the International Finance Corporation (IFC), said key investment considerations consisted of “Was this project needed? Where will this project fit in the long run? Is it sustainable.”
The IFC when investing also looked at if the tariff was competitive, saying that it had to be competitive for at least 20 years. The tariff process also had to be transparent.
Banerjee said payments had to be guaranteed so projects were not stranded assets.
Edward Claessen, the head of the Regional Hub for Eastern Africa, European Investment Bank, said a stable and clear regulatory framework was essential. Credit worthiness of offtaker was important as was strengthening of grid. Local communities also needed a buy in.
Hussein Matar, the senior director of business development at AMEA Power, said the bankability of a project had to be considered when investing.
Firstly the agreement had to be a take or pay agreement. A take-or-pay clause in a contract stipulates that a buyer will take an agreed-upon amount of a commodity from a seller on a certain date or pay a set penalty fee if it does not.
Tariff expectation within the government needed to match what the country was able to provide in terms of financial institutions and the risks associated with the country.
He said for example, in Egypt it cost 2 cents a kilowatt hour on a 500 Megawatt solar project, but this outcome was due to the debt package they got in Egypt. The
Aisma Vitina, the head of Apra Secretariat at the Danish Energy Agency, said in Botswana had a solid framework yet its energy auctions had failed. However, from 2011 and 2015 the energy auctions that South Africa had achieved was world class and a success. Planning and procurement needed to be well planned, she said.
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