Top Renewable Energy Investment Destinations In Africa

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Green energy will supply half of Africa’s new power generation by 2040, according to an October International Energy Agency report.

Now, Climatescope 2014 — an interactive “one-stop” online tool from Bloomberg New Energy Finance — gives potential investors a specific breakdown of the renewable energy investment opportunities in 55 countries, including 19 in Africa.

Bloomberg ranks each country on the list based on various factors including its clean energy investment policy; its market conditions; the structure of its power sector; the number and makeup of local companies operating in clean energy; and efforts toward reduction of greenhouse gas emissions.

The U.K. Department for International Development, Multilateral Investment Fund and U.S. Power Africa commissioned the project to analyze and rank development scenarios for solar, wind, small hydro, geothermal, biomass, and other renewable energy technologies.

Climatescope was originally developed in 2012 to evaluate 26 countries in Latin America and the Caribbean. This year, thanks to additional support from groups including the U.S. Agency for International Development, the project was expanded to include 19 countries in Africa, 10 in Asia, 15 provinces in China and 10 states in India.

“Climatescope is a critical resource for the Power Africa initiative and our partners, providing an in-depth and objective evaluation of low-carbon energy opportunities in emerging markets including Africa,” said Rajiv Shah, administrator for the U.S. Agency for International Development, in a statement.

The 19 African nations ranked by the Climatescope 2014 Africa Focus  are all sub-Saharan and focused in the continent’s eastern, western and southern regions.

According to Climatescope, developing countries’ renewable energy capacity grew 143 percent between 2008 and 2013 compared to the wealthier Western nations in the Organization for Economic Cooperation and Development (OECD) which saw only 84 percent growth. This was while total grid power capacity for the nations covered under the Climatescope breakdown rose over 30 percent, but grew only 9.6 percent for the OECD countries.

Climatescope ranked countries using 22 indicators which fall into four metrics: “policy and regulation, clean energy penetration, price attractiveness, and market size expectation. Each category contributed with varying weights to the overall Enabling Framework parameter score. Five of the 22 indicators were applied exclusively to countries which were assessed under the off-grid focus methodology.”

The project focused on all forms of renewable energy except for very large hydroelectric power plants, which can take years to install compared to wind. Wind projects can take two-to-three years and solar needs just a few months.

China scored the highest. “China is the largest manufacturer of wind and solar equipment in the world, has the largest demand market for wind and solar equipment, and has taken major strides to improve its domestic policy framework,” the report sai.

Brazil came in second.

South Africa ranked third thanks to the scale of its renewable energy investment.

“South Africa is the region’s clear leader for clean energy development. The country had a record $10 billion in investment in 2012 and 2013 after launching its Renewable Energy Independent Power Producer Program (REIPPP),” Jennifer MacDonald at Bloomberg New Energy Finance told AFKInsider.

In fact, more than half the total power capacity installed in sub-Saharan Africa is in South Africa, according to Climatescope, with the country’s 37.7 gigawatts from coal plants alone adding up to more capacity than all the other 18 African countries report put together.

Thanks mostly to their renewable energy development policies and networks of service-provider value chains, Kenya and Uganda also made it into the top 10.

As an early adopter of clean energy policy, Kenya ranked No. 7, MacDonald told AFKInsider. Uganda, the bigger surprise, ranked No. 10 thanks to new policy efforts and the presence of local businesses in clean energy sectors.

Nigeria – which is second only to South Africa in terms of installed power systems at 10.2 gigawatts — and Ghana were the highest-ranking West African countries. Both have introduced power sector reforms and feed-in tariffs, but have yet to record an influx of investment. Both are likely to see an uptick in the near term, with significant project pipelines emerging.

Tanzania was the highest finisher on its distributed energy policy. Its efforts since 2008 have produced an impressive pipeline of small power projects, MacDonald told AFKInsider.

The Tanzanian Government is pursuing its ambitious “Big Results Now” plan to improve the electric power supply nationwide as part of an effort to become a middle-income country by 2025. That plan is receiving support from both the African Development Bank and U.S. Government through the Power Africa initiative launched by President Barack Obama in 2013.

Early in November, U.S. Treasury Secretary Jacob Lew visited the Sokoine electricity supply substation in the Ilala District of Dar es Salaam, Tanzania. When completed in June 2015, it will provide reliable energy to residents and businesses in Dar es Salaam’s city center.

The expansion of the substation and construction of one of its control rooms is among several current projects scheduled under the African Development Bank’s (AfDB) Electricity V project — launched in 2008 — to put more electricity into service in Arusha, Dar es Salaam, Mwanza and in the Shinyanga region. The Electricity V project includes technical assistance, project engineering, supervision and management of the construction of electricity distribution networks and power substations to extend and improve electricity supplies to economic regions and households in rural towns, “peri-urban” areas and the district headquarters.

The African Development Bank has infused $50 million into the Electricity V project. The U.S. is also involved, injecting a $42.4 million African Development Fund loan and a $2.9-million African Development Fund grant – which account for nearly 90 percent of the total project cost.

Despite the current development challenges, the Ebola-ravaged countries of Sierra Leone and Liberia also made the list of 19 African nations.

The report does note that other than South Africa, the other 18 African nations were assessed using Climatescope’s “off-grid focus” methodology. For those countries, the survey’s focused more on questions of energy access and the role that clean energy can play.

The report also notes that no African countries other than South Africa scored highly on the greenhouse gas management activities and policy indicators because there are few clean development mechanism carbon emissions reduction policies or corporate strategies in place.

Nevertheless, the region is on track to add more renewable energy in 2014 alone than in the previous 14 years.

An August Bloomberg New Energy Finance report indicated that over the next two years, South Africa is expected to install 3.9 gigawatts of renewable energy, mostly in the form of wind and solar, while Kenya is set to install 1.4 gigawatts.

Ethiopia, expected to install almost 570 megawatts over the next two years, also made Climatescopes’ list of 19 African nations, according to the August report.

Ethiopia was ranked No. 19. Its relative surge in investment – $1.5 billion since 2006 – has mostly been through state procurement (and Chinese financing) rather than private investment, Bloomberg’s MacDonald told AFKInsider.

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