Mitigating GHGs with Solar Power in Africa Ming Yang, Robert K. Dixon, Yun Wu Global Environment Facility/World Bank Group, 1818 H Street, NW Washington, D.C., 20433 Mamadou Diarra Department of Studies and Engineering, NIGELEC, BP:11202, Niamey, NIGER

Introduction Solar power: powerful weapon to reduce greenhouse gas (GHGs). IEA (2008) projected that 11% (4754TWh) of the global electricity demand until 2050 could be provided from solar energy in order to reduce 50% of GHG emissions. Besides photovoltaic panels, CSP plants are estimated to produce about 46% (2200 TWh) of the projected amount of solar power annually. From 1999 to 2001, the Global Environment Facility (GEF), the World Bank and Eskom Enterprises, jointly financed a study entitled “CSP-Africa". IEA (2008) recognize that the African continent has the greatest potential for using solar PV and CSP. The GEF has supported the development and deployment of technologies with low GHG emissions that were not yet commercial, but showed promise of becoming so in the future (Diarra et al, 2001).

Objectives To identify key issues in financing CSP plants in Africa. To demonstrate the GEF’s investment in CSP plants in Africa and its impacts on climate change mitigation. To present GEF/World Bank’s projects in South Africa, Egypt and Morocco as case studies.

1. GEF Project in South Africa South Africa is a substantial emitter of greenhouse gases 89% of carbon emissions from energy related activities in Southern Africa (Energy research centre, 2007). The country’s power generation is heavily dependent on coal. 95% of national power demand is supplied by the predominantly coal-based utility Eskom.

2. Financing Structure of the CSP project in South Africa (1/2) Figure 1: Financing structure of the GEF project in South Africa

2. Financing Structure of the CSP project in South Africa (2/2) Financial mechanism How the GEF resolved the issues South Africa, Egypt, and Morocco Insufficient financing secured; Lack of private investment Leverage in public and private investment High financial risk Mitigated through investigation of replacement solutions and cost; demonstration of critical components Table 3: Financial mechanism issues and the GEF projects’ contributions to addressing them.

3. GEF project in Morocco Electricity demand increased at a fast speed of 8.2% annually from 2000 to 2006. Morocco is heavily relying on energy imports with 95% of its energy need, dominantly from fossil fuels source. The GHG emissions provided of fossil fuel have grown at an average rate of 6.3% annually from 2000. In November 2009, the government initiated a Moroccan Solar Plan aiming at a 42% renewable energy target by 2020 and a 2000 MW capacity for solar power including CSP by 2020.

4. Financing Structure of the CSP project in Morocco Total cost: US$ 114.36 million Co-financed by equity from the plant owner, and the preferential loan from the AfDB. Figure 2: Financing structure of the CSP project in Morocco

5. GEF project in Egypt Egypt ranks the 11th fastest growing GHG emission in the world. Its CO2 emission increases of 7% annually since 2000. The CSP project was designed as Integrated Solar Combined-Cycle with a capacity of 150 MW including 20 MW from solar.

6. Financing structure of the CSP project in Egypt Project cost: US$147 million The local cost is estimated to be 20% of the total investment. GEF grant shares USD 49.8 million of the total cost. Figure 3 Financing structure of the GEF project in Egypt

7. Interrelation of the three CSP projects Entering the GEF work program: Morocco (1999), Egypt (2004). Morocco and Egypt projects contribute to Operational Program 7’s goal of reducing long-term costs of low GHG emitting energy technologies. The South Africa project evaluates economic, environmental, and social aspects of the STE technology. It benefits the Egypt and Morocco projects in terms of identifying impediments to sustainable deployment. Different from the South Africa project, the Egypt and Morocco projects looked at the market and cost reduction potentials of STE technologies.

8. GEF contributions on CSP projects in Africa The GEF plays a catalytic role in developing the solar industry. The projects: generate domestic side benefits (improved air quality and/or reduced fuel cost due to capacity expansion). are instrumental for future CSP projects worldwide. They provide momentum for the development of global solar market, and reveal the barriers in earlier stages of CSP projects.

9. Barriers removed from the GEF projects: The major barriers of the three projects include: reduced private sector interest, higher than expected capital cost, weak institutional capacity, inadequate market access, uncertain regulatory reform, and underdeveloped transmission infrastructure.

9. Barriers removed from the GEF projects: Therefore, the GEF program helps mitigate the risks by removing their barriers in the areas of: Capacity building, Technology transfer, Policy framework, and Financing mechanism.

a.) Capacity building Capacity restriction and a lack of industrial infrastructure are big hurdles for new technology. Building broad-scale capacity of key stakeholders is critical to project design and implementation of new technology penetration in developing countries. Stakeholders can then be provided with knowledge of the new technology for risk analysis, project implementation and monitoring. Supports and participation from stakeholders and communities can greatly catalyze market entry of CSP technologies.

SOUTH AFRICA EGYPT MOROCCO Capacity building issues How the GEF built capacity SOUTH AFRICA Lack of tech know-how and expertise Developing local expertise, know-how, and intellectual capital Low industry response Facilitating establishment of local manufacturing enterprises to take advantage of CSP projects EGYPT Lack of infrastructure Trade of power, adding transmission projects to buy down the market access risk for potential private investors Low industry response/interest Moving towards increased private sector participation (varying electricity market characteristics and different types of implementation models); Corporatizing of private sector and public enterprises; andGaining momentum on private sector development of renewable energy. MOROCCO Low capacity of power trade Between countries Adding transmission projects Institutional frame in host country for the electricity market Enhancing interconnection with Spain, Algeria; Developing and extending grid towards the center and the east; and; Modernizing national dispatching Table 1: Capacity building issues and the GEF projects’ contributions to addressing them

b.) Technology transfer The lack of CSP technology application from developed countries has impaired credibility of the technology in developing countries, and the lack of knowledge and expertise in host countries makes it even harder to implement. Without participation and advocates of new technology, the CSP technology transfer can be difficult. Technology transfer issues How the GEF resolved the issues South Africa Lack of knowledge and awareness of the technology Research, development, demonstration, testing of diff technologies; establishment of testing and certification facilities, development of local standards and codes; education, training, and information dissemination programs Egypt & Morocco Economic and institutional barriers Mitigated through capacity building and financing mechanism Lack of knowledge and awareness of the technology; Transfer of know-how and learning: Training of staff in CSP operations; monitoring/evaluation and dissemination of performance results to support future replication; Limited public acceptance of ISCC Table 4: Technology transfer issues and the GEF projects’ contributions to addressing them

c.) Policy The GEF has implemented energy policies and/or energy efficiency policies in the three countries and encourages solar power to meet the targets set by each government. Policy issues How the GEF resolved the issues SOUTH AFRICA Lack of supportive framework for CSP Implements SA’s energy policy, and the energy efficiency policy; Encourages renewable energy to meet the targets set by the government; EGYPT Existing energy subsidy Project implementation under reform program of reducing energy subsidies Lack of regulatory framework for CSP Implemented Egypt’s energy policy: renewable energy share target of 20% by 2020; Gained more experience on enabling environment MOROCCO Existing Energy subsidy Energy subsidies are low by regional standards Lack of regulatory framework Implemented energy policy: Moroccan solar plan of achieving 42% renewable energy target by 2020 and 2000 MW solar power target by 2020 More experience on enabling environment; Table 2: Policy issues and the GEF projects’ contributions to addressing them

d.) Financing Mechanism There is strong need for national or regional loan guaranteed programs and long-term financing mechanisms to ensure sustainable deployment of CSP. Cooperation with bilateral and/or multilateral financial mechanisms, such as Clean Development Mechanism, diversifies the financial risk from single institutes and reduces the inherent financial risk of new technologies. The GEF is able to mitigate high financial risks through mobilizing private sector participation, investigating alternative solutions and costs, and leveraging public and private investment. Financial mechanism How the GEF resolved the issues South Africa, Egypt, and Morocco Insufficient financing secured; Lack of private investment Leverage in public and private investment High financial risk Mitigated through investigation of replacement solutions and cost; demonstration of critical components Table 3: Financial mechanism issues and the GEF projects’ contributions to addressing them

9. Conclusions The GEF has experienced difficulties and learned valuable lessons. Developing new, large-scale technologies in developing countries has various challenges: lack of appropriate policy, legislation, institutional structures, human resources, capital resources, and industrial partners. The GEF will continue to facilitate the establishment of financing mechanisms to sustain future funds, encourage communications among CSP host countries, continue to develop local know-how and intellectual capital, and integrate solar projects into a broader international power generation pool.

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