Developers are beginning to find there is plenty of space for solar between North and South Africa.
Today, at the COP21 in Paris, the Climate Investor One facility was officially launched by the Dutch Minister for Foreign Trade and Development Cooperation, Mrs. Lilianne Ploumen. Representatives of the United Kingdom’s Department of Energy & Climate Change (DECC) and Denmark's Export Credit Agency (EKF) attended the ceremony.
The end of the first week of the Paris climate talks is approaching, with limited progress reported so far. Carbon Pulse continues to publish updates throughout the day of key developments in the negotiations as well as on the sidelines.
Over the next few years the Netherlands is to provide access to green energy for 50 million of the world’s poorest people. The plan is outlined by foreign trade and development minister Lilianne Ploumen in the government’s response to an independent evaluation of her climate policy, which was sent to the House of Representatives yesterday.
The conditions in the Vietnamese markets including its high solar irradiation, growing electricity demand, and potential risks associated to energy generation through carbon-based fuels, provide an excellent potential for the development of solar PV projects.
Thailand’s 2014 military coup has had “virtually no impact on the legal side,” insiders say.
“Arise, shine for your light has come,” reads a sign at the entrance to the first major solar power farm in east Africa. The 8.5 megawatt (MW) power plant in Rwanda is designed so that, from a bird’s-eye view, it resembles the shape of the African continent. “Right now we’re in Somalia,” jokes Twaha Twagirimana, the plant supervisor, during a walkabout of the 17-hectare site.
A carbon tax law currently under discussion in South Africa will likely benefit solar even though there is uncertainty over some details.
With the ongoing talks in Paris on Climate Change and new energy crises happening as the region prepares for its summer, it becomes clear that clean energy is on top of the minds of stakeholders in the Southern African region.
Latin American solar markets in Brazil, Chile, Colombia and Central America are garnering plenty of attention. Where is next?
We all know the story of how mobile phones took off in emerging markets. Suddenly small cocoa farmers in Africa who never had a landline or a computer were checking commodity prices on their smartphones.
U2 frontman Bono pays a visit to American-owned Gigawatt Global facility in Rwanda.
DFIs have been investing for some time to support African infrastructure development. As financing becomes more available and new players are emerging, governments and DFIs must focus on nurturing new projects.
by Mike Stone and Jason Deign, Solarplaza
As emerging market banks gradually grow used to solar, the bankability issue for developers is increasingly around off-takers and currency, not projects.
The growing popularity of solar investments means bankability issues for emerging market PV developers are increasingly revolving around the quality of off-takers rather than projects.
In regions such as West Africa, for example, “there are a lot of off-takers without a credit standing,” said Ragnar Gerig, director of energy for Africa and Asia at Deutsche Investitions- und Entwicklungsgesellschaft (DEG), the German Investment and Development Corporation.
“We see the environments solar is going into are more and more challenging,” he said.
Getting funding for projects is still difficult in many emerging markets, he noted, although he said: “Solar is now, for any country, the easiest energy to invest in. The prices for solar have come down in the last 10 years by nearly 90%. Equipment is quite competitive.”
A further complication in emerging market risk assessments is that in many countries, including relativity major markets such as South Africa, power-purchase agreements tend to be in local currencies, which can expose project owners to currency fluctuation risks.
These considerations are beginning to emerge at the same time as there is growing acceptance of solar by local lenders in many emerging markets, as well as increasing awareness of ways in which developers can make project more attractive to funders.
This is succeeding in attracting significant new investment to the market.
In fact, “solar power is the leading sector for money committed during 2014,” revealed the 2015 edition of the Renewables Global Status Report from REN21, “receiving more than 55% (USD 149.6 billion) of total new investment in renewable power and fuels.”
The popularity of solar is being buoyed by initiatives such as a programme by the International Renewable Energy Agency (IRENA) to work with local financial institutions in Africa and India on improving the investment climate for PV.
Henning Wuester, IRENA’s director of knowledge, policy and finance, said: “In addition to strengthening due diligence and project preparation, developers can reduce perceived risks by working with public finance institutions through on-lending or co-lending schemes.”
Another risk-reduction measure developers can take is employing tried-and-tested technology rather than chancing new, unproven developments.
If the technology has credible certifications for reliability, this helps strengthen the business case, said Mark Barineaux, a solar analyst at Lux Research.
Finally, an increasingly popular way of raising cash without potential headaches and red tape is to establish a yieldco. The flotation of TerraForm Power on NASDAQ brought parent company SunEdison USD$533 million in net proceeds, for example.
This kind of money can be put to use developing projects in areas where local banks may fear to tread, and may well become a key part of the future of funding renewable projects in evolving markets.
In any case, the idea that solar is perceived as unproven, untried and therefore risky outside of more mature markets is rapidly becoming outmoded, said SunEdison founder Jigar Shah, who is now president of Generate Capital.
Instead, when considering investment in any type of project in some emerging markets, Shah said: "Anything past five years is risky because of currency risk and political risk. So 20-year investments are the problem, not solar per se.”
Concerns over low-quality components being used in the scramble to finish plants comes amid questions of what bankability really means.
Up from just 5% in 2013, the International Renewable Energy Agency (IRENA) says renewable energies could meet 22% of Africa’s energy needs by 2030.
As a development bank, FMO routinely carries out impact studies, in order to assess the value and impact of FMO’s investment in a certain area.
The UK government commits £50 million to the Climate Development and Finance Facility to help developing countries tackle climate change
The appetite for solar may be growing in new markets, but that does not mean local funding is always easy. The ability to bring international funding looks set to remain a critical success factor for developers in emerging markets even as industry bankability grows elsewhere. “If you look at what has been happening in emerging markets, on projects currently being built, the big majority have international financing… mainly multilateral financing,” said Josefin Berg, senior analyst for solar demand at IHS Technology.
The Inter-American Development Bank (IDB) has approved a USD 55.7 million loan from its ordinary capital to finance the construction, operation and maintenance of six solar photovoltaic (PV) plants and their related facilities in Uruguay.