Google green

Africa is already benefitting from Google Green’s massive investment in solar power. The company has closed its first investment on the continent, a $12 million investment in the Jasper Power Project, a 96 megawatt solar photovoltaic plant in the Northern Cape province of South Africa. Upon completion, Jasper will be one of the largest solar installations on the continent, capable of generating enough electricity to power 30,000 South African homes.

As Rick Needham, Google’s Director, Energy & Sustainability, explained on the Google Green blog:

When we consider investing in a renewable energy project, we focus on two key factors. First, we only pursue investments that we believe make financial sense. South Africa’s strong resources and supportive policies for renewable energy make it an attractive place to invest—which is why it had the highest growth in clean energy investment in the world last year. Second, we look for projects that have transformative potential—that is, projects that will bolster the growth of the renewable energy industry and move the world closer to a clean energy future. The Jasper Power Project is one of those transformative opportunities. To explain why, perhaps some background would be helpful.

Back in 2008, South Africa experienced a severe energy shortage, which resulted in blackouts throughout the country and slowed down economic growth. Since then the South African government has been actively supporting the growth of new sources of electricity to power the nation. While today South Africa is primarily dependent on fossil fuels, there’s lots of potential for renewable energy—it’s a country blessed with abundant wind and solar resources—and the government has set an ambitious goal of generating 18 gigawatts (GW) of renewable energy by 2030 (as a comparison, the entire South African grid is currently 44 GW).

To meet this goal, the South African government has established the Renewable Energy Independent Power Producer Procurement Program (REIPPPP). Through the program, renewable energy projects compete on the basis of cost and contribution to the local economy to be awarded a contract with Eskom, South Africa’s state-owned energy utility. Jasper and the other projects being developed through the REIPPPP have the potential to transform the South African energy grid. And given South Africa’s position as an economic powerhouse in Africa, a greener grid in South Africa can set an example for the whole continent.

Jasper will create approximately 300 construction and 50 permanent jobs in a region experiencing high rates of unemployment, as well as providing rural development and education programs. It will set aside a portion of total project revenues—amounting to approximately $26 million over the life of the project—for enterprise and socioeconomic development, spreading the green further than it’s ever gone before.

Ouarzazate

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The scene: a rocky plateau above the southern city of Ouarzazate, on the edge of the Sahara and often called “the door of the desert.” It’s a Hollywood favorite: Star Wars, Lawrence of Arabia, and Gladiator were all filmed there. A scorching sun hangs overhead, boosting summer temperatures to 40° C (104° F) or more. IFC and its partners are now tasked with harnessing that heat by making it the basis of a feasible power project, advising the Moroccan government on the initial phase of an ambitious 2,000 megawatt plan for solar energy.

National solar agency MASEN named IFC its financial adviser in developing the first power plant to be built in Ouarzazate. The goal is to have 500 megawatts installed by 2015 at a cost of approximately $3.5 billion. Private investors were asked to submit proposals for the initial phase of at least 150 megawatts by early 2011, with a public bid award expected in the second half of that year.

However defined, it will be one of the largest solar plants ever built, selling power in the domestic market first, and later perhaps to Europe as well. Such projects are now growing in number: in June 2010, Abu Dhabi authorities named Spain’s Abengoa Solar and French oil company Total their partners in a new, approximately $700 million, 100 megawatt solar plant called Shams-1, in 2012. The consortium will build, own, and operate the power plant using concentrated solar power (CSP) technology, collecting sunlight in 768 parabolic troughs.

The Morocco project will also use CSP systems. But large-scale commercial financing is far less available in emerging economies than in oil-rich Gulf locales. So IFC and the World Bank will help mobilize concessional financing from development institutions so the Ouarzazate project can sell affordable power to its final consumers without major government subsidies, while also providing private developers a viable business proposition.

Source: Telling Our Story: Renewable Energy, IFC, 2010.

Senegal

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Morocco’s national utility, the Office National de l’Electricité (ONE), has raised the rural electrification rate from 18 percent to 95 percent since 1995. Small-scale solar kits were an important part of its approach to bring power to more than 3,600 villages. This led to a partnership between ONE and IFC in Senegal, whose government is working with the World Bank Group on new public-private partnerships to achieve 50 percent rural electrification.

In one rugged northern area near the Mauritanian border, IFC and ONE are co-investors in a new private utility called Comasel St. Louis, which has a long-term concession from the government. Among its goals: using solar technology to bring more than 5,000 local villagers their first electrical power over the next two years.

The area is poor and dry, using unpaved roads for transport and simple wells for water. But its residents want a reliable source of power and lighting, and are willing to pay for it. Comasel St. Louis’ solar systems will meet those needs for as little as $8.39 a month, costs that are far below those of the kerosene lamps and dry cell batteries currently being used. They will also serve 213 schools and 118 health centers.

Initial subsidies from the International Development Association and the Global Environment Facility, provided under an innovative Output-Based Aid approach where funding is released only as targets are met, and Islamic Development Bank loans will help defray installation costs in the early phases. Villagers will then begin to pay, ramping up commercial viability via a four-tier pricing structure based on consumer demand. The three lowest-level users will pay flat monthly rates, while small businesses and other large users will pay on a variable basis.

Demand for a low-cost, “base of the pyramid” solution to Africa’s rural electrification needs is high. But given the expectations of modest returns, private risk capital is in short supply, and this project sets a “powerful” example for others to follow.