A significant market is emerging across the continent for renewables-based commercial and industrial (C&I) energy projects. In all but a handful of markets, the talk is of a potential that will soon be measured in gigawatts, rather than the usual dozens (at most) of megawatts of an established business. As Kenya-based Astonfield Solar’s chairman Ameet Shah puts it, the technology is still in its early days – as in some cases is the quality of its delivery to clients – but the C&I industry will reach lift-off even before the ‘transformational’ 24-hour storage becomes the norm. The industry, Shah says, is at a stage “like the transition from Nokia [mobile telephones] to the smartphone”.
There are several reasons for this trend, which is exciting banks, development finance institutions and private equity investors, as well as companies looking for reliable, cost-effective power supply. Corporate investors’ lack of trust in the ability of national grids to deliver sustainable electricity is undoubtedly a factor. This has been most apparent in South Africa, where Eskom’s problems have fed demand for independent solutions, led by rooftop solar.
The previous administration saw this as a threat, introducing amendments in November 2017 to the 2006 Electricity Regulation Act to curtail growth in South African C&I. The sector grew to an estimated 250MW of off-grid and embedded solar power built in 2017, from around 120MW in 2016, according to embedded power pioneer Aurora Power Solutions director Chris Haw (AE 358/11). But South African growth continues, as Aurora’s symbolic contract to shift Robben Island’s power supply from diesel to renewables attests. A number of investors have told African Energy they are looking into South African C&I investments, which might then be rolled out elsewhere on the continent.
Banks are providing more funds in the shape of longer-term facilities. South Africa’s Nedbank has had a C&I unit for the past 18 months, with the expectation of significant growth to come. Sunfunder has a new $85m fund which will offer much longer term eight-year money; this is supported by the US Overseas Private Investment Corporation, which is keen to support more C&I and other off-grid schemes. Sunfunder is looking for C&I to become 50% of its portfolio.
Astonfield Solar is supported by Agence Française de Développement under the Sunref II Programme, which has committed $70m-plus in bilateral credit lines to Kenyan partner banks for on-lending at long tenor and subsidised rates to local companies and for lenders/owners engineer services. Other financiers are coming into the sector. Zurich-based asset manager responsAbility has signed a $4m debt facility agreement with German solar technology company Redavia’s Ghanaian subsidiary to finance distributed power projects for C&I customers. The vehicle for this financing is a responsAbility-managed climate fund, the Industrialising Africa Solar Funding Platform.
Some governments have seen C&I projects as a trend to promote in developing their energy mix. In Morocco, the renewable energy Law 13-09 opened the way for cement producers and other industrial companies to install ever larger solar and wind plants – a significant step towards ending the state utility’s traditional monopoly on generation (AE 337/10).
Other governments are being encouraged to promote C&I investment to drive their wider industrialisation ambitions. Promoters say the schemes enable companies to replace expensive day-time grid power with captive solar power. Companies like CrossBoundary Energy are offering clients in Kenya power purchase agreements that include a fixed discount to the grid cost. Ashton Solar is offering Kenyan clients a levelised cost of energy of $0.04-$0.08/kWh, which it compares with the $0.12-$0.15/kWh cost of grid energy.
Nonetheless there are pitfalls in the market that must be overcome. One executive observed that contractors too often “say one thing and sell another”, leaving clients with malfunctioning equipment. Increasingly, clients are bringing in owners’ engineers and demanding performance guarantees, which is essential if the market is to grow.
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