Date: 17-Sep-10
Country: KENYA
Author: Duncan Miriri

A global clamour for cuts in emissions, growing investor appetite for energy sector projects and sound government policies could help Africa make strides in green energy generation in the next few years.

Some governments, like Kenya, plan to raise the amount of energy generated from renewable sources like wind and solar, to cut overreliance on expensive sources and stabilize power supplies.

Others, like South Africa, need to reduce their carbon footprint, one of the world's highest.

"Africa has immense opportunities to take the lead," said Achim Steiner, head of the United Nations Environmental Programme, citing wind farms in Kenya and methane to electricity projects in Rwanda.

"It is not inconceivable that Kenya will triple, quadruple its power generation and reduce in absolute terms its C02 emissions and perhaps become a CO2 neutral electricity generating economy."

Under the east African nation's feed-in tariffs, private investors are guaranteed $0.12 per kilowatt hour up to 100 megawatts generated.

Kenya and South Africa combined could have an extra 1,625 megawatts from wind by 2013 if all planned projects -- both private and government-sponsored -- are completed on schedule.

Kenya has a capacity of 1,350 megawatts from all sources and South Africa can generate 40,000 megawatts from all sources.

Analysts say there is money available for green energy projects in Africa, boosted by rising concerns about climate change and the availability of cheap products from China.

"There is a lot of funding available for these projects, because it is certainly top of mind in the West at the moment, there is a lot of product that can be sourced relatively cheaply from China," said Cornelis van der Waal, energy analyst at consultancy Frost & Sullivan.

North Africa has been leading in the push for investments in wind energy because of an active renewable energy policy and a programme based on public-private partnerships.

Countries elsewhere on the continent are only now putting proper regulations and incentives in the form of renewable feed-in tariffs in place.

Analysts said the establishment of a unit in South Africa -- independent from state utility Eskom -- to purchase power from private investors is critical.

"Investors are starting to be a little bit itchy because they have been planning for a very long time and it's been too long since the announcement of the renewable feed-in tariff," van der Waal said.

As the continent's largest economy, South Africa depends on coal for 90 percent of its electricity. Eskom has been struggling to plug a national power deficit owing to fast-rising demand and its own financial problems.

SOUND POLICIES

Countries that have aligned their energy policies with the national interest will be at an advantage because investors are attracted to markets whose policies are driven by high level officials with an appreciation of the strategic importance of energy to an economy.

Rwanda, with its methane gas -- found under Lake Kivu -- to electricity projects, is an example of a country that is getting its energy policies right, the U.N. says.

Under a pilot scheme at the lake, the central African nation is producing 3.6 megawatts, with a view of stepping that up to more than 50 megawatts in the months ahead at a cost of $130-$280 million.

Gachao Kiuna, the chief executive of Transcentury, a Nairobi-based investment group that focuses on power and infrastructure, says apart from the environmental benefits of green generation, it is quite practical to the continent.

Given its power deficit, Africa may be keener to tap emerging green technologies like wind and geothermal than the west where there is no shortage of large-scale, cheap technologies like nuclear facilities, he said.

A wind farm project can be completed faster than a hydropower plant, while geothermal projects attract minimum running costs, once drilling of wells is completed.

Transcentury plans to develop 100-300 megawatts in the next five years at an estimated cost of $2 million per megawatt from environment-friendly sources like geothermal.

Other investors have already started putting in money. The Lake Turkana Wind Power project, which will be the biggest on the continent when completed in the next two to three years, has secured funding.

Barclays Bank works with the International Finance Corporation to develop new financial products to mitigate against climate change.

The programme aims to support renewable energy projects in Nigeria, South Africa and Kenya where officials are in the process of setting up an open-ended green energy fund financed locally and from international development partners.

UNEP's Steiner says African nations can contribute a huge chunk of the funds required to fund energy generation from green sources.

"Finance is absolutely critical. We shouldn't underestimate the potential of African economies to also generate finance domestically," he said.

(Editing by James Macharia and Sue Thomas)

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