Dubai company leads way in bid to boost African renewables sector

CAPE TOWN // A UAE firm is set to make one of the largest private investments ever in the fast-growing African energy sector.

Access Power, based in Dubai, has started a US$500 million investment roll-out to fund, develop and operate renewable energy projects in Africa.

The firm has also just awarded a US$7m prize to three companies that took part in a competition for proposals for energy provision ideas that drew more than 50 entrants. On Wednesday in London Access said the Africa-focused start-ups AGES, Mentach and Stucky had won for bids to provide 100 megawatts to 340 000 homes in Nigeria, Madagascar and Sierra Leone.

All three winners are, as with other projects sponsored by Access, developing renewables. The UK’s AGES will build a 25MW solar project in Sierra Leone; Nigeria’s Mentach a 50MW wind farm in Nigeria; and the Swiss firm Stucky a 25MW hybrid (hydro and solar) project in Madagascar

The prize, together with the company’s investment fund, is intended to draw energy entrepreneurs and provide projects that underpin Access’ long-term goal to become an pan-African power provider.

“Our aim is to become a private utility with power assets spread all across the African continent,” the Access Power executive chairman Reda El Chaar tells The National. “We intend to deliver sustainable and affordable power to a market where this has been lacking.”

According to the global consulting firm PwC about two thirds of Africa’s population – about 634 million people – are without electricity.

In recent years electricity-poor sub-Saharan Africa has attracted private equity investors such as the Wall Street firm Blackstone, which helped to fund the $800m Bujagali dam in Uganda and is also putting billions more into energy projects.

In May this year the London-based but Africa-focused Standard Chartered bank said it would partner the US government to invest $60m in the Zambian energy sector.

Meanwhile, Nigeria, with a population of 180 million people but half the electricity supply of Abu Dhabi, sold off its entire network of power stations and grid in 2013.

Access Power is the latest private independent power producer to take on the African energy sector. The company was set up in 2012 to focus on emerging economies.

“We are considering places that are not saturated – where there are not a lot of players,” Mr El Chaar says.

Already the company is constructing the 10MW solar plant in Soroti, northern Uganda – approximately enough for 40,000 fully electrified homes – which is the current largest privately funded independent solar project in east Africa and the largest in sub-Saharan Africa outside South Africa. Uganda is heavily dependent on hydro dam power and in times of drought suffers regular electricity shortages.

Adding solar to the local energy mix means less water will be needed during the day, helping to conserve it for use after sunset.

An even larger programme is Access’ funding of a Nigerian solar project for a $100m scheme to build a 50MW solar power plant in Kaduna state.

Like Uganda, Nigeria has irregular electricity supply and people are largely dependent on generators, which can cost hundreds of dollars in fuel per month. That is beyond the reach of many in a country where, according to SalarySurvey, the average monthly salary is $297.

Solar would not provide “baseload” – ie 24/7 – power but during daylight hours it will greatly reduce the dependence on diesel as a fuel source.

Funding for such projects is all important. Mr El Chaar says one of the criteria for taking on projects is that they need to be fully self-sustaining. “The projects must be able to recover costs and support themselves without subsidies.”

Access Power is currently operational in 17 African countries . Offering the $7m prize was not just a marketing strategy. More than anything it helped to get word out that people with ideas should get in touch, Mr El Chaar says.

“It’s like crowd sourcing – we invite people to come forward with ideas for projects. These are often entrepreneurs with good ideas but who lack technical and financial support to complete them. This prize will help some of those projects become a reality.”

It is probably time to acknowledge that for much of Africa a grid-based energy system, such as that enjoyed in developed markets, is a fading dream. Instead of large-scale power plants the future is brightest for smaller units that can be scaled up over time. For this, renewables are ideal.

“‘All or nothing’ approaches that focus primarily on the national grid are increasingly out of step with what is now possible in power technology,” says Angeli Hoekstra, a power and utility specialist for PwC Africa.

“Advances in technology are rapidly changing the options available beyond the grid.”

Ms Hoekstra adds that falling solar technology costs and access to mobile technology, which has made the purchase of pre-paid electricity easier, means small-grid electrification has arrived. This is one of the factors drawing in private equity investors.

Underpinning the electrification process getting underway is the ability of people to pay. It is not just that the African middle class is growing, but also the sheer lack of banking infrastructure that held back commerce is now much less of a factor. In South Africa consumers can order prepaid electricity via their phones, for instance.

“Together with access to mobile technology and mobile payment systems for micro-loans, a new era has arrived for beyond the grid electrification,” Ms Hoekstra says.

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