Falling component costs and attractive investment regimes have made PV projects a cornerstone of new global generation capacity, but challenges remain in sub-Saharan Africa and other developing markets.
JETPs are intended to rid such markets of oil and coal. Solar energy is expected to dominate in sub-Saharan Africa, with the need for access to electricity and abundant solar radiation. PV installations can take shape faster than thermal or large hydropower projects. According to the International Energy Agency (IEA), Africa has at least 40% of the world’s solar potential, but was only responsible for 1% of capacity in 2022.
Although Africa accounts for only 4% of global CO2 emissions, its development trajectory is critical to global climate policy due to rapid population growth and an associated increase in per capita emissions as living standards rise. Africa’s population has increased from about 818 million in 2000 to 1.48 billion in 2024, and is expected to reach 2.5 billion in 2050, and 3.92 billion in 2100. Emissions could rise as Africa attracts production capacity that comes from China is leaving due to rising labor costs.
The 2015 Paris Agreement set the ambition to limit the increase in average global temperatures to 1.5 degrees Celsius this century by reducing global emissions by 45% compared to 2010 levels by 2030, and to reach net zero by 2050. Escalating African emissions pose a challenge to these countries. objectives.
Leaders on the African continent want financing for renewable energy sources in exchange for leaving oil and coal reserves untapped.
Western cash
The International Partners Group (IPG) of the governments of the United Kingdom, United States, European Union, France, Germany and Canada was established at the 2021 COP26 Climate Summit to provide renewable energy investments to developing countries, together with Denmark and the Netherlands will join in October 2023. JETPs are the centerpiece of the strategy and serve as a conduit for Western finance.
JETPs finance low-carbon projects in exchange for commitments from recipient governments on renewables and energy sector emissions. They are also designed to enable the UN Sustainable Development Goals (SDG) to provide universal access to electricity by 2030.
JETPs must “support key reforms and fund infrastructure that attracts additional investment in the energy sector,” said Theresa O’Mahony, the UK government’s deputy envoy for JETPs. They provide financial and technical assistance for clean energy generation and network and energy storage capacity. JETPs have been agreed with Indonesia (with a budget of $20 billion), Vietnam ($15.5 billion), South Africa ($11.6 billion) and also Senegal ($2.7 billion).
O’Mahony said solar energy “plays an important role” in JETPs because its primary focus “is dependent on national plans and strategies.”
JETPs are funded by donor governments – including through multilateral development banks and development finance institutions – philanthropists and the private sector.
“By bringing together financing from multiple sources, JETPs support countries in implementing policy reforms that enable private and public investments in renewable energy and the decarbonization of their energy systems,” O’Mahony said.
Frequent blackouts
The first African JETP was signed with South Africa, the continent’s largest energy sector emitter as 85% of its 42 GW fleet is coal-fired. In 2020, the International Renewable Energy Agency (IRENA) found that 49% of South Africa’s energy could “realistically and cost-effectively” come from renewables by 2030. That was almost a third higher than the target set by a government concerned about climate change. job losses in the coal industry.
Frequent power outages have led the government to gradually switch to solar and wind power, and successful JETP financing could see other African countries follow suit. South Africa added 2.9 GW of solar in 2023, mainly commercial and industrial (C&I), for a total of 7.1 GW. The rest of Africa added 800 MW, for a total of about 9 GW.
South Africa’s JETP details are yet to be finalized, but the presidency has announced funding and tax incentives for rooftop PV in November 2023 – especially in the coal region of Mpumalanga province, which will also receive funding for a solar research center energy.
Dying coal-fired power stations with grid connections could house renewable energy sources. At the Komati coal-fired power plant that closed in 2022, national utility Eskom plans 150 MW of solar power, 70 MW of wind power and 150 MW of battery capacity.
Sufficient financing
Ensuring adequate financing for African PV projects and associated network development requires collaboration between governments, international organizations, development finance institutions and the private sector, says Aidan Wildschut, communications and public affairs advisor for sub-Saharan Africa at solar energy developer Scatec in the emerging markets. Key strategies could include: establishing robust policy frameworks and strong incentive mechanisms to attract more private investment; leveraging more public-private partnerships and blended finance models to reduce and catalyze investments; improving access to concessional financing and climate finance initiatives specifically aimed at supporting African renewable energy sources; promoting capacity building and knowledge transfer to strengthen local expertise and project development capacity; and promoting regional cooperation and harmonization of energy policies to facilitate cross-border energy trade and network integration.
The IPG will finance 2 GW of additional Eskom storage, the European Investment Bank will lend €200 million ($217 million, as of 29/05/24) to the Development Bank of South Africa for PV and onshore wind energy, and the South African Electricity Regulation Legislation Amendment Act , adopted in March 2024, will open up competition to coal-fired power generation.
Senegal will increase the share of renewables in its energy mix from 25.75% in 2022 to 40% in 2030, and will establish a roadmap for low greenhouse gas development at the COP30 climate summit in 2025. In return, the country will receive €2.5 billion JETP financing over three to five years through grants, concessional loans and investment guarantees. Senegal had 245 MW of solar energy and 282 MW of other renewable energy sources in 2022. Solar uptake in Africa has been slow due to a lack of operational and maintenance capacity and supply chains for replacement parts, as well as regulatory support for grid operators to connect renewable energy sources.
The IEA’s ‘Africa Energy Outlook 2022’ report estimates that support for African renewables could reduce the levelized cost of energy (LCOE) from solar energy from between $31/MWh and $91/MWh in 2020, to between the $18/MWh and $49/MWh. MWh by 2030, making it the cheapest option (see graph above).
Scatec’s Wildschut told the story pv magazine his company is actively exploring the possibilities to exploit these [JETP] initiatives to support our existing and future PV projects.”
Accelerated investments
However, JETPs may fail to accelerate investments in alternatives to fossil fuels, said Terje Osmundsen, CEO of solar developer Empower New Energy. He wants JETP to receive support to finance a “green certificate, feed-in tariff or carbon credits” to pay developers for every kilowatt-hour of green electricity generated, through a reduction in capital costs for renewables, energy storage and network investments. Osmundsen said each billion dollars in JETP financing could unlock 4 GW of solar power for around $15 per tonne of carbon avoided to $20 per tonne of carbon avoided – about a third of European carbon trading prices.
Empower New Energy assesses Senegalese opportunities, but Osmundsen said JETPs must address fossil fuel subsidies, currency instability, currency regulation and a lack of net metering. The CEO added that JETP financing should also address millions of highly polluting diesel generators, of which there are about 40 GW in Nigeria alone.
Fabrizio Bonemazzi, training and capacity building area manager at RES4AFRICA, a foundation committed to ensuring access to sustainable energy in Africa, said the financing gap for African solar energy can best be closed by creating clear and stable national regulatory frameworks for the energy sector promoting decarbonization and sustainable electrification. It also requires reducing the risks of investments through guarantee mechanisms that cover grid connections, the curtailment of excess electricity and energy customer and currency risks.
By Neil Ford
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