Can Just Transition Cash Unleash Africa’s Renewables? – pv magazine International

From the magazine pv 06/24

Falling component costs and attractive investment conditions have made photovoltaic projects a cornerstone of new global generating capacity, but challenges remain in sub-Saharan Africa and other emerging markets.

JETPs aim to steer such markets away from oil and coal. Solar power is set to dominate sub-Saharan Africa, given its need for electricity and abundant solar radiation. Photovoltaic plants could take shape faster than thermal or large hydroelectric projects. Africa has at least 40% of the world’s solar potential, but it accounted for just 1% of capacity in 2022, according to the International Energy Agency (IEA).

While Africa accounts for just 4% of global carbon dioxide emissions, its growth trajectory is crucial to global climate policy because of its rapid population growth and the associated increase in per capita emissions as living standards rise. Africa’s population has grown from about 818 million in 2000 to 1.48 billion in 2024 and is projected to reach 2.5 billion by 2050 and 3.92 billion in 2100. Emissions could rise if Africa attracts manufacturing capacity moving out of China due to rising labor costs.

The 2015 Paris Agreement aimed to limit the increase in average global temperature this century to 1.5°C by reducing global emissions by 45% below 2010 levels by 2030 and achieving net-zero emissions by 2050. Rising emissions in Africa pose a challenge to meeting these goals.

African leaders want funding for renewable energy sources in exchange for untapped oil and coal reserves.

Western cash

The International Partners Group (IPG), made up of the governments of the UK, US, EU, France, Germany and Canada, was launched at the 2021 COP26 climate summit to deliver renewable energy investment to developing countries. It will be joined by Denmark and the Netherlands in October 2023. JETP is a central part of its strategy, acting as a conduit for Western finance.

JETPs finance low-carbon projects in exchange for commitments from recipient governments on renewable energy and power sector emissions. They are also designed to help meet the UN Sustainable Development Goals (SDGs) of providing universal access to electricity by 2030.

JETPs should “support key reforms and fund infrastructure that attracts additional investment across the energy sector,” said Theresa O’Mahony, the UK’s deputy government envoy for JETPs. They provide funding and technical assistance for clean energy generation, networks and energy storage capacity. JETPs have been agreed with Indonesia (with a budget of $20 billion), Vietnam ($15.5 billion), South Africa ($11.6 billion) and Senegal ($2.7 billion).

O’Mahony said solar energy “has an important role” in JETP because the main focus “is dependent on national plans and strategies”.

JETP programmes are financed by donor governments – including through multilateral development banks and development finance institutions – philanthropists and the private sector.

“By combining funding from multiple sources, JETP programmes help countries implement policy reforms that enable private and public investment in renewable energy and decarbonise their energy systems,” O’Mahony said.

Frequent fainting

Africa’s first JETP was signed with South Africa, the continent’s biggest power emitter, due to the fact that 85% of its 42 GW fleet of power plants is coal-fired. In 2020, the International Renewable Energy Agency (IRENA) said 49% of South Africa’s electricity could “realistically and economically” come from renewable energy sources by 2030. That was almost a third more than the target set by a government concerned about job losses in the coal industry.

Frequent power outages have caused the government to gradually shift to solar and wind power, and successful JETP funding could see other African countries follow suit. South Africa added 2.9 GW of mostly commercial and industrial (C&I) solar in 2023, for a total of 7.1 GW. The rest of Africa added 800 MW, for a total of about 9 GW.

Details of South Africa’s JETP program have not yet been finalized, but in November 2023 the presidency announced funding and tax incentives for rooftop solar installations, particularly in the coal-fired heartland of Mpumalanga, which will also receive funding for a solar research facility.

Dying coal-fired power stations with grid connections could be home to renewables. At the Komati coal-fired power station, which is closing in 2022, national utility Eskom is planning 150 MW of solar, 70 MW of wind and 150 MW of battery capacity.

IPG will fund an additional 2GW of storage for Eskom, the European Investment Bank has lent €200 million ($217 million as of 29/05/24) to the Development Bank of South Africa for solar PV and onshore wind, and the South African Electricity Regulation Amendment Act, passed in March 2024, will open up competition to coal-fired power generation.

Senegal will increase the share of renewables in its energy mix from 25.75% in 2022 to 40% by 2030 and develop a low-carbon development roadmap by the COP30 climate summit in 2025. In return, the country will receive €2.5 billion in JETP funding over three to five years in the form of grants, concessional loans and investment guarantees. Senegal had 245 MW of solar and 282 MW of other renewables in 2022. Solar deployment in Africa has been slow due to a lack of operational and maintenance capacity and spare parts supply chains, as well as regulatory support for grid operators to connect renewables.

The International Energy Agency’s Africa Energy Outlook 2022 estimates that support for African renewables could reduce the levelised cost of energy (LCOE) of solar from $31–91/MWh in 2020 to $18–49/MWh in 2030, making it the cheapest option (see chart above).

Wildschut from Scatec said pv magazine his company is “actively seeking opportunities to leverage these (JETP) initiatives to support our current and future photovoltaic projects.”

Accelerated investment

But according to Terje Osmundsen, CEO of solar developer Empower New Energy, JETP may not provide accelerated investment in fossil fuel alternatives. He wants JETP support to fund “green certificates, feed-in tariffs or carbon credits” to pay developers for every kilowatt-hour of green electricity generated, by reducing the capital costs of renewables, energy storage and grid investment. Osmundsen said each $1 billion in JETP funding could unlock 4 GW of solar at around $15 per tonne of avoided carbon dioxide to $20 per tonne of avoided carbon dioxide – around a third of the European carbon price.

Empower New Energy is evaluating Senegal’s options, but Osmundsen said JETPs must address fossil fuel subsidies, currency instability, currency regulations and the lack of net settlement. The CEO added that JETP funding should also address the millions of highly polluting diesel generators, of which there are about 40 GW in Nigeria alone.

Fabrizio Bonemazzi, training and capacity building manager at RES4AFRICA, a foundation that works to ensure access to sustainable energy in Africa, said the financing gap for African solar energy can best be closed by creating a clear and stable national regulatory framework for the energy sector that is conducive to decarbonization and sustainable electrification. This also requires investments that reduce risk through guarantee mechanisms, including grid connections, limiting excess electricity, and energy offtaker and currency risks.

By Neil Ford