Talks

IFC’s Scaling Solar solutions across Africa

 By Nicholas Newman

The International Finance Corporation‘s (IFC) Scaling Solar procurement program is developing over 1,000 megawatts of solar power in four African countries – Zambia, Ethiopia, Madagascar and Senegal. Part of the World Bank, the International Finance Corporation (IFC) provides financial and advisory support to Africa’s governments, utilities and independent power producers (IPPs) to develop solar power generation…

Solar procurement program

The Scaling Solar program encompasses a comprehensive package of technical support, document templates, pre-approved financing, insurance products and guarantees that make it easier for African governments to develop large-scale solar projects with private financing. The Scaling Solar program has the financing support of The United States Agency for International Development’s (USAID) Power Africa, the Private Infrastructure Development Group, the Ministry of Foreign Affairs of the Netherlands, the Ministry of Foreign Affairs of Denmark and the UK Department for International Development. The Scaling Solar project in Senegal also received generous support from The Rockefeller Foundation.
These international finance corporations combine best-in-class procurement practices based on the experience the IFC and World Bank have gained in the past three decades. Programs are adjusted to meet the specific requirements and needs of the project involved.
An increasing number of African governments and utilities are taking an interest in adding grid-scale solar to their electricity mix because of a rapid decline in the cost of such technologies. The availability of a reliable and affordable energy supply is essential for business investment and employment and is directly linked to an increase in GDP growth. According to CEO of Nigeria’s Dangote Group, Aliko Dangote, “In Africa, only in South Africa and Ethiopia, we don’t produce power. In all the other countries, we produce our own power for our businesses”.

Scaling Solar: a one-stop shop for fast, affordable solar power

Challenges

There are many challenges facing governments and investors seeking to invest in grid-scale solar projects, including ones of institutional capacity and issues of scale, competition, transaction costs and risk.
In terms of institutional capacity, many governments do not have the required skills and experience to manage and negotiate private-power concessions. Some countries don’t have the market size to make such grid-scale projects viable, while other countries, such as South Sudan, have a high-risk credit rating that can deter investors. Nor does it help that in some countries, power projects are not competitively tendered, and investment or trust is low, causing transaction costs that are above market rates. Beyond that, according to Transparency International, Africa is still the worst-performing region in terms of corruption.
For many governments in Africa, there is often the problem of institutional capacity and confidence, which makes them unable to work constructively with independent power producers in a way that ensures a viable cost-effective solar solution. According to the IFC, its Scaling Solar program tackles the institutional capacity and confidence issues that many African governments face by providing a tried and tested template for conducting competitive bidding processes and for engaging contractually with independent power producers. In effect, the IFC is providing the processes and procedures required to ensure the acquisition of financial backing of a grid-scale solar project. In addition, the IFC is providing its management expertise and debt financing services where required to ensure such projects move ahead. Solar projects can also get climate-related funding from the World Bank when they fulfill the World Bank’s objectives of supporting power-generation solutions that either avoid or displace greenhouse gas emissions. For independent power producers, having the IFC and the World Bank involved improves the financial attractiveness and bankability of such projects. Moreover, IFC’s financial management experience can help shorten the completion time of a project from five years to just two years.

scaling-solar-solutions-africa
Solar power has enormous potential as an energy source in emerging markets (scalingsolar.org)

Zambia

In Zambia, the first $60 million, 54 megawatt solar-plant project in the south of the country, is being developed by a consortium comprising Neoen and First Solar. It has reached financial close and is in construction.
The second Zambian project is the 34 megawatt solar PV plant known as Ngonye, in the Lusaka South multi-facility economic zone. It has been promoted by Italian energy utility Enel and Zambia’s industrial development Corporation. Funding comes from a variety of sources, including $40 million from Enel, $11.75 million in loans from the European Investment Bank, $12 million from IFC-Canada Climate Change Program and up to $11.75 million from the European Investment Bank. Both plants have a 25-year power purchase agreement with ZESCO, the country’s government-owned utility company; the first plant will sell power at 6.02 US cents per kilowatt-hour and the second at 7.84 US cents per kilowatt-hour, respectively.

Senegal

Senegal, under the International Finance Corporation solar-procurement program, has funded two solar projects with a combined capacity of 16 megawatts. The independent power producers’ promoters involved are ENGIE and MERIDIAM. One plant at Kahone will supply electricity at just 3.80 Euro cents per kilowatt-hour, while the plant at Touba will sell electricity at €3.98 (roughly 5 US cents) per kilowatt-hour to Senelec, the national electricity company of Senegal. Once these plants are built, Senegal’s electricity customers will enjoy some of the cheapest electricity produced in the West African region. IFC CEO Philippe Le Houérou said, “In Senegal, Scaling Solar once again shows that this innovative approach brings together the IFC and the World Bank, investors and governments in a transparent, streamlined, and competitive process. The result is great deals for consumers. Scaling Solar is the poster child for creating markets for clean and affordable energy for Africa.” Solar projects can also get climate-related funding from the World Bank when they fulfill the World Bank’s objectives of supporting power-generation solutions that either avoid or displace greenhouse gas emissions. For independent power producers, having the IFC and the World Bank involved improves the financial attractiveness and bankability of such projects. Moreover, IFC’s financial management experience can help shorten the completion time of a project from five years to just two years.

scaling-solar-solutions-africa
Senegal has funded two solar projects with a combined capacity of 16 megawatts (scalingsolar.org)

Elsewhere in Africa

Already both Madagascar and Ethiopia are involved in the Scaling Solar program and several other African countries have expressed an interest in utilizing a similar framework in the coming years. State-run utility Ethiopian Electric Power recently announced the list of prequalified bidders for the country’s 250 megawatts under the Scaling Solar tender.
Meanwhile, the IFC is considering whether it should consider battery-storage technologies as a component in such programs, providing a valuable backup for solar plants when there is no sun to assure grid stability and to supply the peak market. This could be especially useful given that the cost of energy-storage technology has dramatically fallen in the past decade and is likely to continue to fall.

READ MORE: Unlocking Africa’s solar potential by Robin Wylie

about the author
Nicholas Newman
Freelance energy journalist and copywriter who regularly writes for AFRELEC, Economist, Energy World, EER, Petroleum Review, PGJ, E&P, Oil Review Africa, Oil Review Middle East. Shale Gas Guide. https://nicholasnewman.contently.com/