Despite regulatory ambiguities, the general consensus from industry stakeholders at this year’s Solar Energy UK | Clean Energy Live exhibition is that Africa’s solar sector is ripe for new entrants, posing a significant opportunity that should not be missed.
It is undeniable that there is necessity for a solar solution: 1.3 billion people in the world are without access to electricity, with more than half of those being found in Sub Saharan Africa. Further, Nigeria, one of the most developed African countries, only recently signed its first ever solar PPA a few months ago; after wading through regulatory red tape and broken promises. Moreover, in Nigeria, just 42% of inhabitants have access to electricity but 90% of the country’s power does come from renewable energy sources. Continuing a strong foray into a clean and secure energy future, the Nigerian government initiated reforms to the country’s feed-in tariff in June 2015; and planted the seeds for utility-scale solar partnerships to be formed.
Potential? Certainly. But how can market entrants take advantage of such a blatant need for cheap, clean electricity – whilst battling issues that the African energy sector has been struggling with for years, that include regulatory ambiguities, lack of financing, inadequate data and insufficient skills?
A coalition of solar companies emphasised during the show that the first of several key ingredients for success on the continent is establishing relationships with local partners.
“It is critical to form collaborations in Africa to realise opportunities,” stated Chijoke Mama, CEO of Nigerian energy firm Energydatar.
“It’s important to develop relationships with stakeholders in the country – with installers, sales representatives and local producers,” Anthony Brennan, technical sales engineer at UK distributor Wind & Sun, told PV Tech. “Also try and offer training and get face-to-face contact initially. Also try also to understand the culture in the country – both the general culture and the religious culture because that can help get across barriers,” he added.
Africa-Europe Renewable Energy Programme (RECP) project manager Jan Cloin also emphasised the need to tackle the skills shortage through education. “The RECP has made it a priority to work with universities to provide skills training and vocational training as well.”
Overcoming regulatory risk
It is no secret that the majority of governments in Africa take a ‘hands off’ approach to supporting or subsidising the development of renewables. It is therefore up to willing participants to find ways to overcome this.
Daniel Davies, head of hybrid systems at Britain’s Solarcentury agreed with the idea of taking a more interpersonal approach to penetrating the market: “Addressing the regulatory risk is not about prescribing what regulations should be in place but sharing knowledge. We should adopt softer solutions to the risk by engaging with the process; joining the local solar community and investing in training and development.”
Overcoming regulatory ambiguities, in fact, is pivotal in order to surmount legacy fossil fuels such as diesel and kerosene dominating the energy landscape. “There is a huge potential for residential solar but the regulatory landscape is not clear,” explained Mama. “People rely on diesel as it is easy to acquire but the operational cost is high. If the right strategy comes to market, there is money to be spent on energy. There is a big opportunity but a bit gap too, that needs to be closed.”
This leads onto the next way that entrants can penetrate the African market – and that is tackling the lack of financing. In the developing world, cash is king; which causes many global financial institutions to have issues with the quality of guarantees, with very few trusting in their bankability.
Therefore, in the absence of hard-to-come-by third party financing, Solarcentury use their own funds to build up a portfolio of projects and bundle them with an acceptable PPA contract where the clients are towards the higher end of the credit scale. Solarcentury have also created an initiative known as SunStep that offers a PPA for projects too small to qualify for traditional project finance and standardises the process right from initial inquiry right up until the final project. It reduces development costs and helps clients to understand the required detail. “The only way to address this type of opportunity is to standardise the process,” added Davies.
However, the natural PV cost decline that is sweeping the globe will help with the value proposition of solar in Africa more so than any external financing could. “The key success factor for PV is competing on levelised cost of electricity (LCOE) – the cost has to be minimised to make solar competitive,” said Stephan Padlewski from DuPont, who also added that thinking needs to shift from dollars per Watt peak to dollars per kilo-watt hours.
First Solar director John Eccles also emphasised this point; pointing out that “PV cost declines provide a degree of certainty.”
As Africa is still a relatively untapped market due to the aforementioned chronic issues, a big barrier to penetrating the market is beating that inertia of being the first one to enter the unknown.
“One of the main challenges of winning business is that no one wants to go first. There is this caution about being the guinea pig,” said Davies. “There is this inertia surrounding finance and the high cost of development.”
Understandably, there are very real challenges related to market size and market maturity, but the best way to beat this is to lead by example; inertia will be addressed when there are projects that people can visit as proof that success in the market is doable. “Faith in technology helps in driving clients who are fearful,” said Davies.
The issue then circles back to one of education and bringing awareness. Evidently, there are ways willing entrants can surmount the issues that have prevented Africa exploiting its massive solar potential for so long. An opportunity has certainly arisen – with Africa’s rooftop solar sector “set to explode” as Davies confirms.
For more information on the issues discussed here, visit Solar Media’s Clean Energy Summit Africa website to register your interest in the summit event to be held 4-6 April 2017 in Accra, Ghana.