Mitigating GHGs with Solar Power in Africa

Ming Yang, Robert K. Dixon, Yun WuGlobal Environment Facility/World Bank Group,1818 H Street, NW Washington, D.C., 20433

Mamadou DiarraDepartment of Studies and Engineering, NIGELEC, BP:11202, Niamey, NIGER

IntroductionSolar power: powerful weapon to reduce greenhouse gas (GHGs).

IEA (2008) projected that 11% (4754TWh) of the global electricity demand until 2050 could be provided from solar energy in order to reduce 50% of GHG emissions.

Besides photovoltaic panels, CSP plants are estimated to produce about 46% (2200 TWh) of the projected amount of solar power annually.

From 1999 to 2001, the Global Environment Facility (GEF), the World Bank and Eskom Enterprises, jointly financed a study entitled “CSP-Africa".

IEA (2008) recognize that the African continent has the greatest potential for using solar PV and CSP.

The GEF has supported the development and deployment of technologies with low GHG emissions that were not yet commercial, but showed promise of becoming so in the future (Diarra et al, 2001).

Objectives

1. To identify key issues in financing CSP plants in Africa.

2. To demonstrate the GEF’s investment in CSP plants in Africa and its impacts on climate change mitigation.

3. To present GEF/World Bank’s projects in South Africa, Egypt and Morocco as case studies.

1. GEF Project in South Africa

South Africa is a substantial emitter of greenhouse gases

89% of carbon emissions from energy related activities in Southern Africa (Energy research centre, 2007).

The country’s power generation is heavily dependent on coal. 95% of national power demand is supplied by the predominantly coal-based utility Eskom.

2. Financing Structure of the CSP project in South Africa (1/2)

Figure 1: Financing structure of the GEF project in South Africa

2. Financing Structure of the CSP project in South Africa (2/2)

Financial mechanism How the GEF resolved the issues

South Africa, Egypt, and Morocco

Insufficient financing secured;

Lack of private investment

Leverage in public and private investment

High financial risk Mitigated through investigation of replacement solutions and cost; demonstration of critical components

Table 3: Financial mechanism issues and the GEF projects’ contributions to addressing them.

3. GEF project in Morocco

Electricity demand increased at a fast speed of 8.2% annually from 2000 to 2006.

Morocco is heavily relying on energy imports with 95% of its energy need, dominantly from fossil fuels source.

The GHG emissions provided of fossil fuel have grown at an average rate of 6.3% annually from 2000.

In November 2009, the government initiated a Moroccan Solar Plan aiming at a 42% renewable energy target by 2020 and a 2000 MW capacity for solar power including CSP by 2020.

4. Financing Structure of the CSP project in Morocco

Total cost: US$ 114.36 millionCo-financed by equity from the plant owner, and the preferential loan from the AfDB.

Figure 2: Financing structure of the CSP project in Morocco

5. GEF project in Egypt

Egypt ranks the 11th fastest growing GHG emission in the world.

Its CO2 emission increases of 7% annually since 2000.

The CSP project was designed as Integrated Solar Combined-Cycle with a capacity of 150 MW including 20 MW from solar.

6. Financing structure of the CSP project in Egypt

Project cost: US$147 million

The local cost is estimated to be 20% of the total investment. GEF grant shares USD 49.8 million of the total cost.

Figure 3 Financing structure of the GEF project in Egypt

7. Interrelation of the three CSP projects

Entering the GEF work program: Morocco (1999), Egypt (2004).

Morocco and Egypt projects contribute to Operational Program 7’s goal of reducing long-term costs of low GHG emitting energy technologies.

The South Africa project evaluates economic, environmental, and social aspects of the STE technology. It benefits the Egypt and Morocco projects in terms of identifying impediments to sustainable deployment.

Different from the South Africa project, the Egypt and Morocco projects looked at the market and cost reduction potentials of STE technologies.

8. GEF contributions on CSP projects in Africa

The GEF plays a catalytic role in developing the solar industry.

The projects:• generate domestic side benefits (improved air

quality and/or reduced fuel cost due to capacity expansion).

• are instrumental for future CSP projects worldwide.

They provide momentum for the development of global solar market, and reveal the barriers in earlier stages of CSP projects.

9. Barriers removed from the GEF projects:

The major barriers of the three projects include:

• reduced private sector interest,

• higher than expected capital cost,

• weak institutional capacity,

• inadequate market access,

• uncertain regulatory reform, and

• underdeveloped transmission infrastructure.

9. Barriers removed from the GEF projects:

Therefore, the GEF program helps mitigate the risks by removing their barriers in the areas of:

• Capacity building,

• Technology transfer,

• Policy framework, and

• Financing mechanism.

a.) Capacity building

Capacity restriction and a lack of industrial infrastructure are big hurdles for new technology.

Building broad-scale capacity of key stakeholders is critical to project design and implementation of new technology penetration in developing countries.

Stakeholders can then be provided with knowledge of the new technology for risk analysis, project implementation and monitoring.

Supports and participation from stakeholders and communities can greatly catalyze market entry of CSP technologies.

Capacity building issues

How the GEF built capacity

SOUTH AFRICALack of tech know-how and expertise

Developing local expertise, know-how, and intellectual capital

Low industry response Facilitating establishment of local manufacturing enterprises to take advantage of CSP projects

EGYPTLack of infrastructure Trade of power, adding transmission projects to buy down the market access

risk for potential private investors

Low industry response/interest

Moving towards increased private sector participation (varying electricity market characteristics and different types of implementation models);

Corporatizing of private sector and public enterprises; andGaining momentum on private sector development of renewable energy.

MOROCCOLow capacity of power trade Between countries

Adding transmission projects

Institutional frame in host country for the electricity market

Enhancing interconnection with Spain, Algeria;

Developing and extending grid towards the center and the east; and;

Modernizing national dispatching

Table 1: Capacity building issues and the GEF projects’ contributions to addressing them

b.) Technology transfer

The lack of CSP technology application from developed countries has impaired credibility of the technology in developing countries, and the lack of knowledge and expertise in host countries makes it even harder to implement.

Without participation and advocates of new technology, the CSP technology transfer can be difficult.

Table 4: Technology transfer issues and the GEF projects’ contributions to addressing them

Technology transfer issues How the GEF resolved the issues

South AfricaLack of knowledge and awareness of the technology

Research, development, demonstration, testing of diff technologies; establishment of testing and certification facilities, development of local standards and codes; education, training, and information dissemination programs

Egypt & MoroccoEconomic and institutional barriers Mitigated through capacity building and financing mechanism

Lack of knowledge and awareness of the technology;

Transfer of know-how and learning: Training of staff in CSP operations; monitoring/evaluation and dissemination of performance results to support future replication;

Limited public acceptance of ISCC Research, development, demonstration, testing of diff technologies; establishment of testing and certification facilities, development of local standards and codes; education, training, and information dissemination programs

c.) PolicyThe GEF has implemented energy policies and/or energy efficiency policies in the three countries and encourages solar power to meet the targets set by each government.

Table 2: Policy issues and the GEF projects’ contributions to addressing them

Policy issues How the GEF resolved the issues

SOUTH AFRICA

Lack of supportive framework for CSP Implements SA’s energy policy, and the energy efficiency policy; Encourages renewable energy to meet the targets set by the government;

EGYPT

Existing energy subsidy Project implementation under reform program of reducing energy subsidies

Lack of regulatory framework for CSP Implemented Egypt’s energy policy: renewable energy share target of 20% by 2020; Gained more experience on enabling environment

MOROCCOExisting Energy subsidy Energy subsidies are low by regional standards

Lack of regulatory framework Implemented energy policy:

Moroccan solar plan of achieving 42% renewable energy target by 2020 and 2000 MW solar power target by 2020

More experience on enabling environment;

d.) Financing Mechanism

There is strong need for national or regional loan guaranteed programs and long-term financing mechanisms to ensure sustainable deployment of CSP.

Cooperation with bilateral and/or multilateral financial mechanisms, such as Clean Development Mechanism, diversifies the financial risk from single institutes and reduces the inherent financial risk of new technologies.

The GEF is able to mitigate high financial risks through mobilizing private sector participation, investigating alternative solutions and costs, and leveraging public and private investment.

Table 3: Financial mechanism issues and the GEF projects’ contributions to addressing them

Financial mechanism How the GEF resolved the issues

South Africa, Egypt, and Morocco

Insufficient financing secured;

Lack of private investment

Leverage in public and private investment

High financial risk Mitigated through investigation of replacement solutions and cost; demonstration of critical components

9. Conclusions

The GEF has experienced difficulties and learned valuable lessons.

Developing new, large-scale technologies in developing countries has various challenges: lack of appropriate policy, legislation, institutional structures, human resources, capital resources, and industrial partners.

The GEF will continue to facilitate the establishment of financing mechanisms to sustain future funds, encourage communications among CSP host countries, continue to develop local know-how and intellectual capital, and integrate solar projects into a broader international power generation pool.

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