Hope for renewable energy as AfDB approves $25m equity investment - OrientEnergyReview

Hope for renewable energy as AfDB approves $25m equity investment

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The huge potential for renewable energy in the country is mostly untapped.  All around the country, there are enormous potentials in solar, hydro; wind, and biomass. But the presence of large oil and gas production in the South together with government fuel subsidies, the lack of clarity and market information on private sector opportunities, and a general knowledge gap concerning financial support mechanisms available within the country place their development at a very slow pace.

In solar energy alone, Nigeria has enormous potential which are yet untapped. With fairly distributed solar radiation averaging 19.8 MJm2/day and average sunshine hours of 6h/day. The assumed potential for concentrated solar power and photovoltaic generation is around 427,000 MW. According to estimates, the designation of only 5 percent of suitable land in central and northern Nigeria for solar thermal would provide a theoretical generation capacity of 42,700 MW. In July 2016, 14 Greenfield Independent photovoltaic (PV) power projects with a capacity of 1,125MW had their PPAs signed by the Federal Government owned NBET.

Hydropower has been a cornerstone of grid-powered generation in Nigeria for decades. About 15 percent of current power generation sources in the country are hydro based. The country is reasonably endowed with large rivers and some few natural falls. In all parts of Nigeria, potential sites for unexploited small hydropower exist, with an estimated total capacity of 3,500 MW. A multitude of river systems, providing a total of 70 micro dams, 126 mini dam and 86 small sites, supply a technically exploitable large hydropower potential estimated to be about 11,2500 MW. Under recent circumstances, only 17 percent is being tapped. Potential large investments in some significant hydropower sources and even some plans, such as the dam for the Mambilla plateau in northern Nigeria, have been struggling due to large investments cost required and lead times needed. The potential for small hydro power is about 3,500 MW, with just about 64.2 MW being exploited. By 2020, the Nigerian government aims to have increased the hydroelectricity generation capacity to 5,690 MW. This projection shall be met through an upgrade of old hydroelectricity plants and the installation of new hydro power plants.

The Wind energy potential in Nigeria is very modest, with annual average speeds of about 2.0 m/s at the coastal region and 4.0 m/s at heights of 30m in the far northern region of the country. Based on wind energy resource mapping carried out by the Ministry of Science and Technology, Wind speed of up to 5m/s were recorded in the most suitable locations, which reveals only a moderate and local potential for wind energy. The highest wind speeds can be expected in the Sokoto region, the Jos Plateau, Gembu and Kano / Funtua. From a study, Maiduguri, Lagos and Enugu also indicated fair wind speeds, sufficient for energy generation by wind farms. Apart from these sites, other promising regions with usable wind potential are located on the Nigeria western shoreline (Lagos Region) and partly on the Mambila Plateau. A 10MW wind farm projects is currently being built in Katsina, and expected to be completed in 2017.

 

The biomass resources of Nigeria are mainly crops, forage grasses, shrubs, animal wastes and waste arising from forestry, agriculture and municipal and industrial activities. Crops such as sweet sorghum, maize, and sugarcane are the most promising feedstock for biofuel production. According to estimates, the daily production of animal waste in Nigeria is about 227,500 tons, which could lead to about 6.8 million m3 of biogas. Though the technology itself is not yet established in the country, a variety of research covering different aspects of biogas production in Nigeria, such as technical feasibility or policy recommendations, are ongoing.

It is with the hope of tapping these abundance of potentials in the country that the Board of Directors of the African Development Bank Group approved an equity investment of up to US$ 25 million in ARCH Africa Renewable Power Fund (ARPF), a US$ 250 million private equity fund for renewable energy projects across Sub-Saharan Africa.

ARPF in the next few years will provide equity for the development and construction of 10 to 15 Greenfield renewable energy projects in Sub-Saharan Africa, adding approximately 533MW of installed energy generation capacity from renewable sources in the region. This will provide both base load and peak load power in underserved markets.

ARPF projects will focus on mature technologies including wind, solar PV, small to medium hydro, geothermal and biomass. These would include grid-connected independent power producers (“IPPs”), and decentralized energy projects (commercial & industrial solar, mini-grids and solar home systems companies). The Fund’s strategy is to prioritize projects with a clear timeline to financial close, with emphasis on de-risking early stage Greenfield projects.

The Bank’s presence is expected to act as a catalyst for other investors to commit a further US$ 60-75 million equity from non-DFI sources. The Bank would also ensure that the highest environmental and social standards, together with climate change and gender considerations, are applied to the ARPF’s projects. “Energy investments in Africa are constrained by limited well-structured, bankable projects, as well as by unavailability of risk capital. Renewable technologies require additional support to be fully competitive over fossil fuel-based energy generation,” said Amadou Hott, the Bank’s Vice-President for Power, Energy, Climate Change & Green Growth. “ARPF will expand the pipeline of bankable energy projects in Africa, and complement and deepen the work of the Bank in this critical area. This is vital for economic growth, and to foster transition to low carbon across the continent,” Hott added.

The Project is in line with the Bank’s Ten-Year Strategy and High-Five priorities, specifically the New Deal on Energy for Africa, which aims to achieve universal access by 2025. ARPF will also assist governments in meeting their renewable energy objectives through on-and off-grid renewable energy technologies.

In addition to contribution to renewable energy, the project construction and operation will result in direct creation of at least 272 full time jobs and 5,320 part time jobs.

The Fund is expected to reach first close in early 2019. The ARPF anchor investing entity is ARCH Emerging Markets Partners Ltd, a London-based emerging market investment joint venture.

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