AREI: Solid funding promises to accelerate transformation of Africa’s energy landscape

AREI: Solid funding promises to accelerate transformation of Africa’s energy landscape

A new African Renewable Energy Initiative launched at the COP21 was welcomed as a potential game changer for the energy landscape of Africa.

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A new African Renewable Energy Initiative (AREI), launched at the recent Climate Change Conference in Paris, was welcomed as a potential game changer for the energy landscape of Africa.

Several countries and organizations made financial commitments to support the green energy project. Canada pledged $150 million. France said it would provide €2 billion by 2020. The EU and Sweden pledged $10 billion to the initiative with Germany contributing an additional €3 billion.

The African Development Bank, which is leading the initiative together with other agencies plans to triple its financing, up to 40 percent of the bank’s total resources, to fund climate change initiatives by 2020. Other leading organizations in the initiative are the African Union’s comission, The New Partnership for Africa’s Development (NEPAD), the United Nations Environment Programme (UNEP) and the International Renewable Energy Agency (IRENA).

300 GW by 2030

The goal of the initiative is to deliver 10 GW by 2020, and then kick into high gear to deliver the 300 GW by 2030.

Another $15 billion in investment is needed by 2020, according to the initiative. Just before the launch of the initiative, the World Bank called for an additional $16 billion investment in Africa’s energy sector and committed World Bank support to reach that goal.

The initiative (AREI) is not the only most green energy initiative for Africa. Another famous project to develop African Green energy sector is the African Development Bank’s Sustainable Energy Fund for Africa (SEFA): a multi-donor trust, established as a result of $60 million commitment by Denmark and the United States to support small- and medium-scale renewable energy and energy efficiency projects.

But now as before, the question remains whether solid financial support will translate into the real action on the ground.

Challenges for renewable energy development

Africa could become an El Dorado for renewable energy because is has abundant solar and wind resources. It could be also a solution to the contintent’s power supply shortages, as only to of three Africans have access to power and the 48 combined generate a base of only 68 GW.

Renewable energy technologies are mature. However, the costs of some key components such as batteries and end-use technologies are still a large constraint. Off-grid energy companies face many challenges in attracting private investment because of high risks, both real and perceived, so the public sector needs to step in to help reduce the risk of these investments. A sound regulatory and policy environment, and especially a political will to support the development, are also needed.

Private-public partnership in South Africa

An interesting case-study in promoting renewables is South Africa. Today, South Africa renewable energy policy is praised as a flagship private and public partnership model for the whole continent. The government of South Africa pledged to develop renewable sources of energy in 2003 by setting a ten-year target of 10,000 GW of energy from renewable energy sources, such as biomass, wind, solar and small-scale hydro.

However, fast-track implementation of the renewable energy plan is not seen as a positive process by everyone, as it also touches the interests of powerful traditional energy businesses – in case of South Africa, the coal industry.

For example, the Northern Cape solar park, was supposed to generate 5,000 MW in 2010. Recently, the Energy Minister announced that the solar park will be for 1,500 MW – slashed by more than two-thirds after five years during which the price of solar electricity dropped more than any other alternative source.

Renewables are not the only challenge faced by the coal industry. Fierce competition from China and falling coal prices also pushes these companies to transform themselves as soon as possible and to move toward production of green energy.

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