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Solar Investment Powers Ahead And Africa Opens Up

Solar deployment in 2018 is expected to outpace the 2017 record of 98GW, according to the latest analysis from Bloomberg New Energy Finance (BNEF). Emerging markets continue to drive growth, and the African solar market is growing rapidly.

The quarter to the end of March saw solar investment fall 19% to $37.4 billion, affected by lower unit prices for photovoltaic systems, as well by weaker activity in some markets. BNEF estimates that benchmark global dollar capital costs per MW for utility-scale solar PV have fallen 7% in the last year.

Activity in emerging markets continues to grow. China once again accounted for more than 40% of the world’s total investment in renewable energy , and large scale projects reached financial close in Morocco, Vietnam, Indonesia and Mexico.

Q1 saw the financing of very large solar parks in developing countries as cost-competitiveness continues to improve. The largest solar project reaching financial close in the early months of 2018 was the 800MW Noor Midelt portfolio in Morocco, made up of a mix of PV panels and solar thermal systems with storage. Development banks including KfW of Germany and the European Investment Bank have agreed to fund the project, which is likely to cost around $2.4 billion.

The largest conventional PV installations financed in 1Q were the 709MW NLC Tangedco portfolio in India, at an estimated $660 million, and the 404MW Acciona and Tuto Puerto Libertad project in Mexico, at $493 million.

Africa is proving to be a growth market as well and likely to drive investment numbers. The World Bank estimates that if sub-Saharan Africa’s economies had dependable electricity, GDP growth across the region could be up to 2% higher per annum than current rates. Africa is seen as an excellent home for grid scale and mini-grid power projects to reach all 1.2 billion of its inhabitants.

Allianz has just committed a $120 million 12-year loan to the Emerging Africa Infrastructure Fund (EAIF), becoming the first commercial lender to invest in the fund. To date $1.3 billion has been invested in the fund, attracting nearly $11 billion of further funding. The new tranche of $385 million in debt finance is expected to be split between transport, water and telecoms with around 50% in renewable energy. Nazmeera Moola, co-head of fixed income at fund manager Investec was quoted in the FT saying that Allianz recognised the gap between the perceived and actual risk of investing in Africa.

In Namibia, the World Bank’s Multilateral Investment Guarantee Agency (MIGA) announced its first guarantee of up to $18 million supporting the construction of two power plants. The PV plants are two of a total fourteen winning bids under the Interim Renewable Feed-in Tariff (REFIT), and the generated electricity will be sold at a price equivalent to NAD1.37 ($0.11)/KwH to NamPower, the national power utility, under individual 25-year Power Purchasing Agreements.

In Senegal meanwhile, Senegal’s Electricity Sector Regulatory Commission (CRSE) announced the results of two bids which will result in power prices of less than $0.05 per kWhr. This was supported by the World Bank’s Scaling Solar. Engie/Meridiam was awarded both projects with bids at €3.80 cents ($4.70) per kWhr for the solar plant located in Kahone and €3.98 cents ($9.92) per kWhr for the plant located in Touba. Scaling Solar is now developing over 1GW of solar power in partnership with four African countries – Zambia, Ethiopia, Madagascar and Senegal.

There is growing support for smaller scale deployment as well. UK-based BBOX has partnered with UK funding platform Lendahand and Netherlands-based Ethex to raise funds for the roll out of solar off-grid systems in Africa through its programme Energise Africa. In December 2017, the government of Togo awarded BBOXX a contract to roll out 300 000 of its solar home systems in the country in the next two years.

In other sectors, according to BNEF, wind investment increased by 10% in Q1, while biomass and waste-to-energy declined 29%, geothermal rose 39% while small hydro-electric projects of less than 50MW were down 32%. Overall, the latest quarterly figures from Bloomberg New Energy Finance (BNEF) report global clean energy investment at $61.1 billion in 1Q 2018, down 10% on the same period a year earlier.

While the figures may have fallen quarter on quarter since 2017 it seems that momentum in renewable energy continues to grow, as grid scale deployment accelerates and appetite for small scale solar investment grows.