The African continent, with a population exceeding one billion people and an estimated combined economy of USD1.5 trillion1, presents huge opportunities for investors, developers and operators across the renewable energy sector.
Renewable energy is already giving millions of people in Africa access to electricity for the first time. However, across the continent over 640 million Africans still have no access to electricity. This equates to approximately 40% of the population having access to electricity. Per capita consumption of electricity in sub-Saharan Africa (excluding South Africa) is 180 kWh, compared to 13,000 kWh per capita in the United States and 6,500 kWh in Europe2.
Generation and distribution of electricity is fundamental to unlocking economic potential, with the development of renewable energy projects and innovative electricity distribution strategies of central importance to the delivery of the economic and socio-political objectives of central governments.
As we reported in our previous edition, activity in the sector has and continues to grow rapidly, with countries such as Ghana and Kenya each adding hundreds of MW of increased production through recent or soon-to-be operational wind and solar plants. Ethiopia, with the support of the International Finance Corporation, recently initiated Round 2 of Scaling Solar seeking to cover 6 new projects with a total capacity of up to 750MW. Ethiopia is the fourth country in Africa to join the IFC’s Scaling Solar programme. Uganda and Zambia, like the more established programmes in Ethiopia and Kenya, are encouraging the development of geothermal energy projects.
The recent implementation of legal reforms to energy markets in Angola and Botswana highlights the drive of central governments to provide legislative support for ambitious renewable energy development initiatives.
There is the potential for significant further growth – the African continent is rich with the resources needed to produce renewable energy, including solar, there is an estimated 10 terawatts of potential capacity or more. It is therefore unsurprising that many investors, developers and entrepreneurs continue to prioritize African markets and the vast and diverse opportunities which they represent for the renewable energy sector.
DLA Piper is proud to release the second edition of Renewable Energy in Africa, updating the many changes that have occurred since our last edition This publication remains an ambitious task, seeking to summarise each country's regulatory environment for renewable energy, highlight the key policy objectives for national governments and provide insight into the projects which are expected to deliver these goals. The guide showcases the diverse approach to renewable energy being adopted across the African continent, and the legal, economic and technological developments being implemented in the following countries:
The Angolan government's proposals to facilitate USD18 billion of investment in renewable energy by 2025 are an ambitious vision for addressing the impact felt from the rebalancing of the global oil market. A program of hydroelectric generation projects supported by interconnectors for the country's existing distribution networks are intended to enhance capacity over the coming years.
Legislative changes introduced in 2016 have opened the country's energy market to independent producers. However, the development of renewable energy projects backed by private investors in a country historically dependent on state production remains challenging for the recently formed Botswana Energy Regulatory Authority.
A landlocked country at the heart of Africa's Great Lakes Region, Burundi holds significant potential for the development of renewable energy which the Government's "Burundi Vision 2025" framework seeks to utilize in order to develop sustainable ecological growth. A number of national and regional hydro and solar power projects currently under construction are anticipated to increase capacity by 300MW by 2020, helping to boost access to electricity from levels which are currently amongst the lowest globally.
Although the dominant energy source in Ethiopia is hydropower, which represents 90% of the installed generation capacity, the Ethiopian government is seeking to diversify with increased investment in wind and geothermal production technologies which is recognised as crucial to support the government's National Electrification Programme that aims to attain universal access to electricity through a combination of on-grid and off-grid systems.
Despite established renewable energy production facilities and a widespread distribution network providing 82.5% of the population with access to electricity, Ghana's power demands continue to outstrip supply, however installed capacity had increased as at the end of 2018 to 4,562MWTo help meet the growing requirement, proposals to develop a number of wind and solar farms are being implemented with a 225MW wind farm under development and a 100MW solar project proposed for the Upper West Region of the country. In September 2018, a further 20MW solar plant was commissioned at Gomoa Onyadze in the Central Region of Ghana.
The enactment of the Energy Act, 2019, will see KPLC’s monopoly broken as electricity distribution and retail supply may be carried out by other players. This move is expected to result in an increase in competition in the distribution and retail supply of electricity and improve the quality of service in the power sector. Additionally the Kenyan government in partnership with the World Bank, launched the Kenya National Electrification Strategy (KNES) in December 2018, which provides a roadmap for universal access by 2022.
Formation of the Mauritius Renewable Energy Agency in 2016 has provided a focus point for the further development of renewable energy sources to support the country's stable, investor-friendly economy. The home solar project was launched in May 2018. This project aims at installing solar photovoltaic systems on rooftops of 10 000 households in Social Category tariff 110A as part of the Mauritian government’s efforts to alleviate poverty whilst contributing to the national target of achieving 35% of renewable electricity in the energy mix by 2025.
Morocco is highly dependent on imported hydrocarbon energy to generate electricity, with approximately 96% of its energy needs being sourced externally. To meet the increasing local demand, Morocco implemented a new energy strategy in 2009, aiming to secure its supply, to ensure power was priced competitively and to protect the environment by using local energy resources, including renewables. Morocco has committed to increasing the share of renewables in its energy mix to 42% by 2020, then rising to 52% by 2030.
The country's objective of enabling access to electricity for 50% of the population by 2023 and universal electricity access by 2030 is coupled with its strategic policy of developing the renewable energy sector. The government has commissioned a Renewable Energy of Mozambique Atlas and an accompanying portfolio of potential development sites, which highlight the potential of the country's renewable sector. Tariff regimes, tax benefits and regulatory measures are currently under development to provide a legal and economic framework to attract investment.
Namibia's vast potential to support solar and wind power electricity generation is seen to be an effective means of limiting the impact of climate change and providing a platform for the country's socio-economic development. Completion of the country's first wind plant will complement the solar and hydro schemes already in operation, improving the diversity of renewable technologies being utilized in Namibia.
The Nigerian government's execution of Power Purchase Agreements with a total value of US$1.76 billion will facilitate the generation of an additional 1,125MW of solar power. The program gives a clear indication of the government's intention to tap into the country's renewable energy potential in order to achieve its objective of generating 20% of national electricity supplied from renewable sources by 2030. Noteworthy is the recently consummated debt financing transaction wherein North South Power Company Limited, raised over N8.50 billion from a green infrastructure bond. This is the first certified green corporate bond and the longest tenured (15 years) corporate bond issued in the Nigeria debt capital markets.
Economic growth in Senegal has recently accelerated, reaching about 6.5% in the past two years making Senegal one of the best performing economies in Sub-Saharan Africa. Government policy has set the objective of achieving a non-biomass commercial energy independence rate of at least 15% by 2025, due to the contribution of renewable energies and biofuels.
Although it provides a regulatory and economic framework which is attractive to private investment, South Africa's electricity market remains highly concentrated, with the state-owned Eskom responsible for the generation and transmission of 95% of the country's electricity consumption. Recent attempts to implement the government's Renewable Energy Independent Power Producer Procurement Programme have brought Eskom's role in the market under increased political and judicial focus, the full consequences of which are yet to be determined.
With access to electricity currently standing at 36% of the population, the Tanzanian government's Power Systems Master Plan seeks to improve generation and transmission infrastructure in a manner that utilizes the country's significant renewable energy resources. In order to support this objective, the country's regulatory system allows and encourages private investment, helping to stimulate the market for hydro and solar schemes.
Uganda's renewable energy resources are estimated to provide the potential for 5,300MW of additional capacity. Despite a range of operational biomass, hydro, solar and geothermal production plants, this potential remains largely unexploited, putting pressure on efforts to keep pace with growing electricity demand and the government's target of achieving a rural electrification rate of 22% by 2022. Uganda has developed standardised power purchase agreements and is developing a renewable energy feed-in-tariff as instruments to help promote privates sector participation in the generation of electricity from renewable sources.
This year saw ZESCO apply to the Energy Regulation Board for an upward adjustment of its electricity tariffs citing prevailing economic conditions, system customer base expansion, and the rising cost of power from its new infrastructure and independent power producers (IPPs) as the underlying factors. The application is yet to be determined by the ERB. The outcome of the "cost of service" survey into electricity tariffs in Zambia is still awaited, it is unclear when this will be available.
Zimbabwe faces electricity supply challenges as a result of aging generation infrastructure and increasing demand. The country's strong potential for hydro and solar schemes is seen as key to the successful development of a diversified electricity generation which enables Zimbabwe to meet its target of reducing emissions by 33% (relative to a business as usual baseline) by 2030.
No publication can fully capture the breadth and diversity of the opportunities which the African continent offers for the renewable energy sector. However, we hope this guide provides an introduction to the key aspects of the legal framework and commercial activity in the 17 countries presented. We would welcome any feedback on this publication and we would be happy to discuss the changing landscape of these countries at any time. If you have a specific query concerning renewable energy in Africa, we would be very pleased to discuss it with you; we have experienced teams in each jurisdiction, spanning all aspects of the renewable energy sector.