Africa presents an attractive climate for renewable energy projects with its rich natural resources and a lack of existing large-scale energy infrastructures that can often stand in the way of development. However, the African markets have a huge electricity supply deficit and only half the population currently has regular access to electricity.
The DWF Renewable Energy in Africa report was compiled by market research company Winmark following interviews and focus groups with senior experts in the African renewable energy market including senior representatives from Yingli Namene Solar, Vensys, EleQtra and Greenmatch. The participants were able to provide first-hand advice on how to navigate the diverse mixture of markets, opportunities, and political and investment climates in Africa in order to capitalise on the exciting opportunities.
By far the biggest challenge highlighted by the research was the finance and bankability elements of any project. Investors are often reluctant to commit at an early stage due to the high risks and potential low returns, however, projects have a greater chance of success if developers have access to funds at the beginning. Some of the solutions highlighted in the research include investigating innovative financing methods such as aggregation to help a project get off the ground and enable investors to get on board early; using alternative funding models such as crowdfunding and blockchain; ensuring community buy-in by involving local people at the outset; and mitigating certain risks through Power Purchase Agreements (PPAs).
The other significant challenges identified include the site selection and planning of a project. The political stability of a country or region can make or break a project and so careful scoping of the political landscape and potential for future disruption is vital. It is also important to ensure good transport and infrastructure links and to choose effective partners who have comprehensive local knowledge and contacts.
The experts agreed that once a project is financed, technical on-the-ground risks regarding construction and installation are relatively minor assuming the right people are in place with the necessary skills, commitment and project management experience.
David Gilchrist, Corporate and Energy Partner at DWF, said:
"There has never been a more positive environment for businesses interested in global investment in renewable energy and Africa presents a particularly exciting prospect for further investment growth. We recognised the mismatch between the demand for and suitability of renewable energy in Africa with the amount of active projects coming to fruition."
Christian Hellmund, Partner for Energy & Renewables at DWF, said:
"We wanted to look into why more renewable energy sites were not being successfully set up on the continent and how our clients can overcome the barriers that are present to utilise the valuable natural resources and provide a much needed solution for local communities. Despite the significant challenges there are plenty of reasons to be optimistic about the future of renewable energy projects in Africa."
About the research:
The research concentrated on eight countries: Egypt, Ghana, Kenya, Morocco, Senegal, South Africa, Tanzania, and Zambia. Fifteen long-form interviews were completed and two focus groups were held with representatives from the following organisations: Yingli Namene Solar, Terrawatt Initiative, Unisun, Vensys, Enerparc, Ricardo, Nordic Power Partners, Buffalo Energy, Solinc East Africa, UK Export Finance, Actis, EleQtra, Greenmatch, SecondNature, Merlin Partners, Tripos Consulting, Africa Risk Consulting, INTECH Risk Management, European Bank for Reconstruction & Development.