Renewable Energy in Africa

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The African continent, with a population exceeding one billion people and an estimated combined economy of US$1.5 trillion1, presents huge opportunities for investors, developers and operators across the renewable energy sector.

Renewable energy is already giving millions of people in Africa access to electricity for the first time. However, across the continent over 640 million Africans still have no access to electricity. This equates to approximately forty percent of the population having access to electricity. Per capita consumption of electricity in sub-Saharan Africa (excluding South Africa) is 180 kWh, compared to 13,000 kWh per capita in the United States and 6,500 kWh in Europe2.

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Creation and distribution of electricity is fundamental to unlocking economic potential, with the development of renewable energy projects and innovative electricity distribution strategies of central importance to the delivery of the economic and socio-political objectives of central governments.

Activity in the sector has grown rapidly with countries such as Ghana, Kenya and Zambia each adding hundreds of MW of increased production through recent or soon to be operational wind and solar plants. The Grand Ethiopian Renaissance Dam being constructed will add a further 6000MW of production to Ethiopia’s network and continues the region’s established tradition of hydroelectric energy schemes.

The recent implementation of legal reforms to energy markets in Angola and Botswana highlights the drive of central governments to provide legislative support for ambitious renewable energy development programs. Whilst the continued expansion of South Africa’s extensive Renewable Energy Independent Power Producer Procurement Programme signposts the future potential for private investors in the region.

There is the potential for significant further growth – the African continent is rich with the resources needed to produce renewable energy. It is therefore unsurprising that many investors, developers and entrepreneurs have begun to prioritise African markets and the vast and diverse opportunities which they represent for the renewable energy sector.

The Guide

DLA Piper is proud to release the first edition of Renewable Energy Africa. This publication is an ambitious task, seeking to summarise each country’s regulatory environment for renewable energy, highlight the key policy objectives for national governments and provide insight into the projects which are anticipated to deliver these goals.

The guide showcases the diverse approach to renewable energy being adopted across the African continent, and the legal, economic and technological developments being implemented in the following countries:

Angola

The Angolan government’s proposals to facilitate US$18 billion of investment in renewable energy by 2025 are an ambitious vision for addressing the impact felt by the country from the rebalancing of the global oil market. A programme of hydroelectric generation projects supported by interconnectors for the country’s existing distribution networks are intended to enhance capacity over the coming years.
 

Botswana

Legislative changes introduced in 2016 have opened the country’s energy market to independent producers. However, the development of renewable energy projects backed by private investors in a country historically dependent on state production remains highly challenging for the recently formed Botswana Energy Regulatory Authority.
     

Ethiopia

The continued expansion of the country’s hydroelectric programme has not been without controversy – raising concerns within Ethiopia’s agricultural sector and the Egyptian hydroelectric industry as to the potential impact of the Grand Renaissance Dam. However, further expansion of the sector along with increased investment in wind and geothermal production technologies is seen as crucial to support the government’s National Electrification Programme that aims to attain universal access to electricity through a combination of on-grid and off-grid systems.
 

Ghana

Despite established renewable energy production facilities and a widespread distribution network providing 82.5 percent of the population with access to electricity, Ghana’s power demands continue to outstrip supply. To help meet the growing requirement, proposals to develop a number of wind and solar farms are being progressed with a 225MW wind farm under development and a 100MW solar project proposed for the Upper West Region of the country.
     

Kenya

The reduction of connection charges and end-user tariffs for both domestic and commercial/industrial consumers is anticipated to alleviate the country’s current low levels of electrification and improve access to existing geothermal, hydro and solar projects through a combination of mini-grid and off-grid solutions. The Government aims to generate an additional new capacity of 2,700 MW by year 2020 and reach universal access by the same year. The Kenyan Government has also announced plans to implement an energy auction system for renewable energy projects which will replace the current feed-in-tariff (FiT). It is expected that a competitive auction system will offer lower tariffs to consumers.
 

Mauritius

Formation of the Mauritius Renewable Energy Agency in 2016 has provided a focus point for the further development of renewable energy sources to support the country’s stable, investor friendly, economy. Increased solar and wind programmes are anticipated to supplement Mauritius’ existing bagasse and hydroelectric production schemes.
     

Morocco

Morocco is highly dependent on imported hydrocarbon energy to generate electricity with approximately 96 per cent of its energy needs being sourced externally. To meet the increasing local demand of energy, Morocco implemented a new energy strategy in 2009, aiming to secure its supply, to ensure power was priced competitively and to protect the environment by using local energy resources, including renewables. Morocco has committed to increasing the share of renewables in its energy mix to 42 percent by 2020, then rising to 52 percent by 2030.
 

Mozambique

The country’s objective of enabling access to electricity for 50 percent of the population by 2023 and universal electricity access by 2030 is coupled with its strategic policy of developing the renewable energy sector. The government commissioned Renewable Energy of Mozambique Atlas and accompanying portfolio of potential development sites highlight the potential of the country’s renewable sector, with tariff regimes, tax benefits and regulatory measures currently under development to provide a legal and economic framework to attract investment.
     

Nigeria

The execution by the Nigerian government of Power Purchase Agreements with a total value of US$1.76 billion will facilitate the additional of 1,125MW of solar power generation. The programme gives a clear indication of the government’s intention to tap into the country’s renewable energy potential in order to achieve its objective of generating 20 percent of national electricity supplied from renewable sources by 2030.
 

Senegal

Economic growth in Senegal has recently accelerated, reaching about 6.5 percent in the past two years making Senegal one of the best performing economies in Sub-Saharan Africa. Government policy has set the objective of achieving a non-biomass commercial energy independence rate of at least 15 percent by 2025, due to the contribution of renewable energies and biofuels.

     

South Africa

Although providing a regulatory and economic framework which is attractive to private investment, South Africa’s electricity market remains highly concentrated with the state owned Eskom responsible for the generation and transmission of 95 percent of the country’s electricity consumption. Recent attempts to implement the government’s Renewable Energy Independent Power Producer Procurement Programme have brought Eskom’s role in the market under increased political and judicial focus, the full consequences of which are yet to be determined.
 

Zambia

Low national electricity tariffs, a lack of grid interconnectivity and bankability issues are considered the primary obstacles to achieving the objectives of the government’s National Energy Policy and Rural Electrification Master Plan of increasing access to electricity by 2030. The development of a Renewable Energy Feed-in-Tariff and tax incentives for electricity generators are anticipated to help address these issues but remain subject to current political and economic constraints.

Conclusion

The guide sets out to provide an overview of the market conditions in each country, drawing on the expertise and insight of our market leading team within DLA Piper and DLA Piper Africa, to give a reference tool for anyone with an interest in renewable energy projects in those countries. No publication can fully capture the breadth and diversity of the opportunities which the African continent offers for the renewable energy sector. However, we consider that the information presented here will assist the reader to gain understanding of the key aspects of the legal framework and commercial activity in the 12 countries presented. We would welcome any feedback on this publication and be happy to discuss the changing landscape of these countries at any time. If you have a specific query concerning renewable energy in Africa, we would be very pleased to discuss it with you; we have experienced teams in each jurisdiction and expertise spanning all aspects of the renewable energy sector.


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1. Statistics from the World Bank Databank, May 2018 (figures relate to Sub-Saharan Africa).
2. Statistics from the Africa Development Bank, May 2018