Scaling Solar to help make solar power much cheaper for emerging economies

A total of $6.9 trillion of energy investment will be made globally in the next five years to support a growing population, and a further $3.2 trillion to make those investments green according to a report by Bloomberg New Energy Finance, Ceres and Ken Locklin. World Economic Forum also says that in addition to boosting energy alternatives such as solar and wind, political will and international cooperation will be needed to help the globe avert climate change repercussions. Solar, which reaches 80% grid parity next year (globally), has been, by far, the fastest growing type of renewable energy targeted to help avert the crisis. Africa has received massive funding from developed countries, which have now pledged $100 billion with China also increasing its investments, but the cost of solar alternatives (large-scale and mega solar projects) remain so high that it discourages large scale adoption and...even more investments.

That won't last for long, it seems.

Scaling Solar, a World Bank initiative helping countries to lower further the cost of solar energy, will build a 45 megawatt power plant in Zambia in collaboration with France-based Neoen SAS and U.S.-based First Solar, and another 50 MW solar photovoltaic power project parks awarded to Enel Green Power to be based at the Multi Facility Economic Zone in Zambia. The cost of power from the two solar plant will be below 8 cents per kilowatt hour (USD 0.0602), the lowest cost offered in the sub-Sahara Africa, which compares favorably with oil-based power.

This is after Enel and First Solar and Neon won the bid in the recently held auction in Zambia by Industrial Development Corporation who signed an agreement with World Bank to fast track the project. The power will be sold through ZESCO, Zambia’s national power utility. The rates will remain unchanged though for 25 years in the independent power purchase agreement. The initiative will also promote access to power for the masses in the country, and boost the energy mix to help the country cut down emissions.

“There is no solar on the grid in Zambia,” said Dan Croft, senior investment officer for energy at the IFC in Johannesburg told Bloomberg. “When you think of a market tailor-made for solar power, it would be there.”

Scaling Solar is targeting at developing a total of 600 MW worth of solar power projects and the two projects in Zambia are their inaugural, in a country where 94 percent of power is generated from hydro sources. They are also the first large-scale solar projects in Zambia under IPP arrangement. Another 200MW facility auction is planned within a year.

“It is not designed for Africa,” said Jamie Fergusson, global sector lead for renewable energy at International Finance Corporation. “It is designed for countries with limited independent power producer experience and with single-buyer markets, where the buyer of power is a publicly-owned utility.”

How it works

Scaling Solar will bring World Bank Group services under one roof to advise companies about the right size and location of solar power plants, advise them on simple and rapid tendering, give them access to documentation that helps eliminate lengthy negotiations and help speed up financing. They will also help through competitive financing, insurance, risk management and credit enhancement. It will help firms negotiate the small and distinct power markets.

An important issue with developing mega and large-scale solar power projects in Africa has been the long period that these power projects usually take before reaching the actual power generation stage, with some taking more than five years to mature: with assistance from starting from project preparation to financing to construction, Scaling Solar claims to quicken the process for up to two years.

Scaling Solar was developed with the motive of advancing solar power, but more importantly, the competitive auctions and bidding, will help deal with claims by about associated 'political risks' hence making these markets more favorable for investors. Their assistance will help cut down the lengthy process of negotiating power-purchase deals.

Overall, this could help firms reduce the cost of doing projects since individually negotiated contracts always carry high costs. The cost is also usually heightened by poor credit utility in addition to the political risks. The largest of project risks being political risks, it is understandable why climate change mitigation will require political will to succeed.

Spreading to other countries

The project is also spreading to other countries, with Senegal and Madagascar already participating, which could help develop 850 MW solar capacity in the three countries. Senegal will start with a 200 megawatts of solar power plant while Madagascar a 30-40 megawatt solar facility through the program. Scaling Solar was planning to add another fourth sub-Saharan country by September.

Scaling Solar will also help governments in emerging economies to negotiate private power concessions with international private firms and to manage the structure.

“It is now possible for governments across sub-Saharan Africa to look first to solar power as a solution for inexpensive, quick-to-build power -- something unimaginable outside of South Africa until now.” Still some professionals feel that Africa should be willing to pay for its own green projects. “The Many barriers are political,” said Carlos Lopes, Executive Secretary of the United Nations Economic Commission for Africa (UNECA) told The New Times. “You need to convince the country that this is the best way for the future and if you see that countries that have made this a national policy, they understand the challenges.”

It is a partnership of Ministry of Foreign Affairs of the Netherlands and Denmark, USAID’s Power Africa Initiative, U.S.’s Department for International Development and Infrastructure Development Collaboration Partnership Fund.

However, Carlos thinks that Africa should finance its own green projects in addition to looking to Green Fund.

“Look, our pension funds are $250 billion dollars that are not properly used in Africa, and our reserves are being put in vehicles whose return is 0.5 per cent. We should put money where it should be.” This is because Green Finance, which refers to funding targeted at promoting developing of renewable energy (from for instance Green Climate Fund, Global Environmental Facility, UNEP, and other private sector and multilateral financial institutions), is inadequate.

"When you look at all these, you ask yourself how much money has come out of these bodies and it is very little, and very complex to get,” he added.