Energy industry stakeholders attending the 5th Energy Access Investment Forum have called for a restructuring of the financing mechanisms enabling the development of off-grid and mini-grid connectivity in Africa.
“Meeting the universal electricity access objective within the next decade will require the roll-out of off-grid and mini-grid solutions at scale,” said Daniel Schroth, acting director of renewable energy & energy efficiency at the African Development Bank, in his opening remarks.
The phone call to the World Bank Treasury came out of the blue: in late 2007, a group of Swedish pension funds wanted to invest in projects that help the climate, but they did not know how to find these projects. But they knew where to turn and called on the World Bank to help. Less than a year later, the World Bank issued the first green bond—and with it, created a new way to connect financing from investors to climate projects.
Bonds are essentially an agreement where issuers borrow funds from investors and must repay investors at an agreed rate after a specified amount of time. Governments, companies and many others issue bonds to borrow money for projects. Issuing a bond was nothing new for the World Bank—it has been issuing bonds since 1947 to raise financing from the capital markets for its development projects. But the concept of a bond that is dedicated to a specific kind of project had not been tested before. The green bond turned out to be a history-making event that fundamentally changed the way investors, development experts, policymakers, and scientists work together.
US electric utilities are seeing their industry transformed. Renewable portfolio standards, nonutility generators of renewable electricity, net metering, behind-the-meter storage, and other distributed energy solutions have drawn revenues and customers away from traditional utilities and created a mismatch between electricity rates and utilities’ costs.5 In the long term, policy and technology trends, largely spurred by decarbonization, could continue to motivate customers to decrease their dependence on—or even abandon—traditional utilities in favor of third-party suppliers. There is no cure-all, but electricity rate designs must be reformed to ensure a stable transition to less carbon-intensive sources and secure utilities’ role in the future system.
Four out of nine projects approved for funding at a recent meeting of the Green Climate Fund (GCF) will support the expansion of solar in Africa, including utility-scale PV in Nigeria and embedded generation in South Africa. The Nigeria Solar Intervention Program is one of a raft of schemes backed through the US$400 million latest GCF funding round, green-lighted by its board representatives last week as they met in Songdo (Korea).
The GCF, the African Development Bank (ADB) and the Africa Finance Corporation (AFC) will each loan US$100 million to the US$467 million scheme, set to build 400MW of utility-scale solar in the Gulf of Guinea state. The initiative will support 14 IPP projects that have previously signed PPAs with Nigeria’s federal government.