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January 2020

Bright Perspectives for
Solar Power in Africa?

Middle East & Africa Energy
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Auteur
Mahaut de Fougières
Mahaut de Fougières
Head of the International Politics Program

Mahaut de Fougières était responsable du programme Politique internationale jusqu'à Février 2023. Dans ce cadre, elle pilote les travaux de l'Institut Montaigne sur la défense, la politique étrangère, l'Afrique et le Moyen-Orient, et mène des projets transversaux au sein du pôle international. Auparavant, elle était chargée d'études sur les questions internationales, depuis 2018.

Diplômée de King's College London et de University College London (UCL) en relations internationales, elle a également étudié à l'université américaine de Beyrouth (AUB).

Taskforce

The opinions expressed in this report do not bind these persons or the institutions of which they are members.

Co-authors

  • Antoine Huard, President, France Territoire Solaire, International Director, Générale du Solaire
  • Benjamin Fremaux, Senior Fellow, Institut Montaigne

People consulted

  • Thierry Barbaut, Head of Digital Affairs, ONG La Guilde
  • Daniel Bour, President, Enerplan
  • Cyril Carabot, Secretary General and in charge of international relations, Syndicat des énergies renouvelables
  • Hadrien Clément, President, Orion Solaire
  • Thierry Déau, Founder and President, Meridiam
  • Bertrand Deroubaix, Public Affairs Director, Total
  • Christophe Fleurence, Vice-President, Business Development Africa, Total Eren
  • Caroline Frontigny, Co-founder and President, upOwa
  • Jeremy Gasc, Project Manager in the Energy division, AFD
  • Jean-François Gouedard, Director at the Directorate-General, Vinci
  • Alain Grandjean, Founding Partner, Carbone 4
  • Christian de Gromard, Energy Advisor, AFD
  • Nicolas Guichard, Deputy Head of Directorate for Energy, AFD
  • Stéphane His, Senior Expert – Climate Change, AFD
  • Leila Hubeaut, Partner, Dentons
  • Xavier Mallet, Strategy Manager, BU Africa, Engie
  • Olivier Mélédo, Partner, Mayer Brown
  • Ousseynou Nakoulima, Director of Renewable Energy, Banque africaine de développement
  • Jean-Jacques Ngono, Managing Partner Africa, Finergreen
  • Pierre-Louis Pernet, Former Project Officer, Commission de régulation de l’énergie
  • Quentin Perret, ministère de la Transition écologique et solidaire
  • Jean-Pascal Pham-Ba, Secretary General, Terrawatt Initiative
  • Hacina Py, Head of Export Finance, Société Générale
  • Jean-Louis Ricaud, President, ABTECH
  • Philippe Rougé, Business Development Manager, division Energy Management, Siemens SAS
  • Abdoulaye Toure, International Project Manager Africa, Quadran International
Download
  • Policy Paper (98 pages)

    • 645 million is the number of Africans without access to a source of electricity. And this figure will automatically continue to rise as population growth outstrips new power generation capacity. Pumping fresh water, running medical dispensaries, allowing children to do their homework in the evening or having access to the internet: no economic or human development is possible without energy. In order to meet the future needs of these inhabitants, the rapid development of electricity production is essential.

    Photovoltaic solar energy (or electricity produced from solar energy) represents a promising solution because it allows the rapid deployment, on a very large scale, of carbon-free and economically accessible energy. The advantages of photovoltaics are well known. However, to date, an insignificant number of solar power plants have been built in Africa.

    The objective of this policy paper is to identify the challenges to the deployment of solar energy in Africa and to propose concrete solutions enabling it to be deployed and thus to meet the demographic and climatic challenges of the African continent. While it is important to reduce the CO2 emissions of countries such as France - which accounts for 1.2% of global emissions -, or Germany - 2.7% - one of the priorities of global climate policy must also aim to contain future emissions by the inhabitants of the African continent, without hindering its economic development.

    Bright Perspectives for Solar Power in Africa?

    Electricity generation in Africa faces several challenges

    • It is still rare in most sub-Saharan African countries. Only 32% of the population has access to it according to the African Development Bank. This is the lowest rate in the world, even though the needs are considerable, with a constantly growing population (390 million more inhabitants in 2017 than in 2000);
       
    • Current capacities are limited. The 48 countries of sub-Saharan Africa have only 46 gigawatts of installed capacity for a population of more than 1 billion. In comparison, Spain has 106 gigawatts for a population of 45 million;
       
    • Electricity is expensive, its production cost is between 0.20 and 0.50 USD/kWh, which is very high compared to the world average of around 0.10 USD/kWh.

    Solar energy is made for the African continent…

    In view of these difficulties, solar energy represents a solution particularly adapted to the needs and specificities of African countries:

    • the continent benefits from a privileged sunshine;
       
    • solar energy is competitive, which makes it attractive compared to thermal solutions;
       
    • it is simple to operate and quick to build;
       
    • it adapts to all the realities on the ground, from the solar kit equipping an isolated household, to the gigantic solar farm supplying entire cities;
       
    • it can operate outside the transmission and distribution networks and thus supply isolated populations without waiting for the long and costly deployment of high-voltage lines.

    … but the African continent is still not ready for solar energy

    If solar energy seems to be perfectly adapted to the needs of African countries, how can we explain that so few photovoltaic projects have been implemented? We have identified a number of challenges.

    • Existing financing tools are not adapted to the capital-intensive nature and small size of solar power plants. Since most of their cost is concentrated on the initial investment, which is then redeemed over several decades, solar projects require long-term visibility. Guarantees must therefore be granted to companies wishing to invest in solar energy in Africa to cover this initial cost. However, the guarantee tools that exist today are incompatible with the specificity of solar power plants, especially their small size.
       
    • The policy of subsidies indiscriminately pursued by some governments and development banks generates a price signal, which is certainly very attractive, but artificial. Subsidized initiatives in the field of solar energy have harmful collateral effects: they set reference prices that are unattainable without subsidies, thus making any other privately financed project in the region unattainable. In doing so, they discourage private developers from continuing to take risks in undertaking new projects in these countries.
       
    • Finally, the almost systematic use of tenders to identify and select solar projects is problematic. On the one hand, cumbersome procedures, disproportionate to the size of most projects, lead to longer delays and higher costs. On the other hand, in anticipation of price reductions for solar panels, applicants have an incentive to underbid, so that in many cases the winning projects are not economically viable and never see the light of day.

    Our recommendations to facilitate the deployment of solar energy on the African continent

    1
    Adapt financing to the capital-intensive nature and small size of solar projects.
    In detail

    Recommendation n°1 - Promote planning efforts, a prerequisite for the development of solar energy, notably by adapting regulatory frameworks to the specificity of solar projects.

    Recommendation n°2 - Facilitate access to financing. In particular, to set up standardised documentation that would be available free of charge and accepted by all parties, and to reduce the cost of examining files by adapting the requirements of the donors to the size of the projects.

    Recommendation n°3 - Reduce the cost of financing: facilitate access to credit enhancement tools (guarantees, insurance) and make concessional loans accessible to these projects.

    2
    Restrict government subsidies where they create market distortions.
    In detail

    Recommendation n°4 - Verify the absence of any private project in a given area before considering the implementation of a public project.

    Recommendation n°5 - Limit artificial price signals as much as possible: avoid subsidies (for studies, land, connection, etc.) that may discourage private investment.

    Recommendation n°6 - Promote enhanced collaboration between public and private funds: target public funds on projects that do not attract private funds such as medium and low voltage network infrastructures, the provision of credit enhancement tools for public counterparts or support for capacity building.

    3
    Limit the almost exclusive use of tendering, especially in less mature market contexts and for small projects.
    In detail

    Recommendation n°7 - Favour mechanisms adapted to the size of projects and the context of less mature markets.

    Recommendation n°8 - Support the first developments, by making available to governments and contractors the expertise they may lack, and then by organising the transfer of skills in order to create a genuine and sustainable industrial sector.

    Recommendation n°9 - Once the market is more mature, gradually consider bidding mechanisms, but limit them to large-scale projects.

    Mahaut de Fougières
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