With the increasing population and the urge by both private and public sectors to bridge the loss in the economy triggered by the devastating pandemic, Africa’s biggest economy has become the destination in early 2021 for investors who aimed at developing renewable energy capacity.
In less than 15 days into 2021, Nigeria-based Daystar Power, which supplies solar energy to businesses in West Africa, announced it has raised $38 million in funding to expand its operations in Nigeria and four other African countries while Starsight received a second $10 million financing injection from Scandinavian investment funds, Finnfund and Norfund to supply solar energy to businesses in Nigeria and Ghana.
In addition to increasing installed power capacity to 100MW from its current 23MW, Daystar aims to aid in Nigeria’s energy transition by replacing high-emission diesel with clean and reliable solar power while Helios-backed solar power solutions firm, Starsight plans to scale up its generation capacity and services in the Nigerian and Ghanaian markets.
Other stakeholders say the infant stage of the Nigerian renewable energy market makes it a haven for investors and new energy companies.
Power inadequacy is a major impediment to growth in Nigeria, where four in every five people in the over 200 million population lack access to grid electricity and those that have are often at the mercy of perennial blackouts.
That has opened up a gap in supply and created an opportunity for a number of solar power firms, which are launching various renewable energy initiatives to bridge the shortfall and earn huge cash.
With the overall cost of wind and solar installations have fallen sharply on lower raw material prices, investors are betting big on renewables to increase electricity access.
“We have seen a more than fifty-fold increase in power-as-a-service revenue over the last two years,” Daystar’s CEO Jasper Graf von Hardenberg said in a statement.
Nigeria, seen as the largest potential market for mini-grid in West Africa, has received millions of dollars in the past ten years from international donors for mini-grid development.
“Private sector players command solar hybrid development in the majority of the region, garnering financial support from development finance institutions and receiving at least $374 million in the past decade from international donors for mini-grid development,” BloombergNEF said in a July 2020 report.
Africa’s largest economy has a small-grid capacity of 2.8 megawatts as of 2019, with 52 of the 59 projects solar-powered, according to BloombergNEF.
Only 55percent of the nation’s population is connected to the national electricity grid and those experience frequent power cuts of up to 15 hours per day.
Renewable energy being a critical driver of Africa’s post-COVID-19 growth recovery and economic prosperity, topped highlights at a 2021 UK Africa Investment Summit event last week, where panellists called for a stronger partnership between the United Kingdom and Africa.
The panel, themed UK & Africa: Partnering in Sustainable and Resilient Infrastructure Development, covered discussion of British innovation and experience in the context of partnering with Africa to advance its economic development. Panel members said investment in large-scale electrification projects would be key.
African countries are building back better from the coronavirus, said Louis Taylor, CEO, UK Export Finance, adding that this presents an “unalloyed opportunity for UK investors to be part of the African success story and for African countries to access the UK’s support for projects.”
“The UK is still the ultimate one-stop-shop. The UK government is still the largest G7 investor in Africa. For instance, UK Export Finance is providing a £ 1.7 billion guarantee to support the development of Cairo monorail in Egypt – the UK’s biggest ever overseas infrastructure guarantee,” Taylor said.
According to International Energy Agency data, scaling up Africa’s capacity to achieve universal access to energy by 2030 would require over $100 billion per year, of which 40% would be dedicated to solar, wind, and other low-carbon power generation projects.
The African Development Bank has taken the lead in accelerating the electrification of the continent through its New Deal on Energy for Africa, a transformative partnership-based strategy that aims to increase access to energy for all Africans.
“Building on the City of London’s deep expertise in innovative financial solutions, the African Development Bank sees promising opportunities to further expand its program to securitize receipts from solar home systems providers,” said Wale Shonibare, the Bank’s Director for Energy Financial Solutions, Policy and Regulation.
Shonibare called for a structured approach to sustainable infrastructure development and the implementation of large-scale electrification programs, citing the Bank’s Desert to Power initiative as an example of a project likely to attract interest from UK businesses.
Nicholas Oliver, Business Development Director of UK-based NMS Infrastructure Ltd, urged investors to engGE more actively with local companies: “We need to create partnerships with governments and local businesses. It is a great time to invest in Africa. The African Development Bank estimates that climate change presents a $3 trillion investment by 2030. What an opportunity,” he said.
Olusola Lawson, Co-Managing Director of African Infrastructure Investment Managers, an infrastructure investment management firm, noted the urgent need for access to energy in centers of high demand.
“In Africa, you can’t have a transition without electrification. In this context, what we see is the trend from centralized large-scale power plants to a more distributive system.”
The UK Africa Investment Conference, hosted by the UK Department for International Trade, brings together the UK and African businesses to explore the opportunities for partnership and investment.
The UK has been a strong partner to the African Development Bank in the institution’s drive to attract greater private sector participation in African infrastructure investment. The Bank is currently working with a number of UK institutions to improve the enabling environment for infrastructure development in Africa.
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