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21 Sep 2020

Removing the barriers to renewable energy technologies in Africa

Tags
Africa; energy; renewable energy, finance, investment
Author
James Manda
Renewable energy in Africa

There are many challenges that developing countries grapple with in the deployment of renewable energy technologies (RETs) in their national energy mix. To realise their potential, renewable energy technologies require the right environment to thrive.

Renewable energy increases the diversity of energy supplies and can replace diminishing fossil fuel resources over the long run. Most renewable energies use indigenous resources, thus enhancing a country’s independence from external supplies of primary fuels. In developing countries, RETs could be a key element in providing energy and economic empowerment to the rural poor. It is even important as the onset of COVID19 has heightened the need for power for households.

Their use in place of fossil fuels can substantially reduce greenhouse gases and other undesirable pollutants.

Growth in demand for RETs in industrialized countries is leading to economies of scale. In developing countries, such growth could enable increased access to modern energy resources by the rural poor. While it is believed that many new markets could sustain even higher rates of RETs penetration, numerous barriers remain that could be broadly classified under distinct categories. These include limited economic resources, a limited or lack of commitment by policy makers to switch to RETs, limited awareness that RETs can contribute to different dimensions of sustainable development. Further, the cost of RETs remains high, although in many instances it continues to fall. Some forms of RETs are now competitive in some market conditions. However, further price reductions are needed for RETs to compete broadly with the least costly fossil-fuel alternatives. Whilst most of these barriers have been dealt with in many industrialized countries, developing countries still face several impediments to the use of RETs Energy.

Policies

Energy stakeholders should adopt a broader view of promoting the use of renewable energy resources. Renewable energy should be viewed in terms of its edge to development, substituting the use of fossil fuels, thereby reducing the emissions of greenhouse gases (GHG) and achieving sustainability. The contribution of renewable energy resources should not be considered marginal, but as significant to attract the necessary attention.   

Social Awareness

The development of policies and programs to use RETs should involve the concerned stakeholders at all levels. Consumer education and political acceptance in the implementation of renewable energy policies cannot be overestimated. In industrialised countries, this has been achieved through inter-sectoral coordination and participation. However, in many developing countries it has been shown before that programs and policies solely designed at the National level without the active involvement of all stakeholders have not resulted in measurable success and sustainability. Consumers and users of renewable energy can be involved through a deliberate action plan designed to offer consumer education and consumer participation. Such programs can achieve a great deal of acceptance at different levels.

Economic and Financial Constraints

In many renewable energy technologies, the initial cost is high and therefore prevents consumers from adopting them. This is rather unfortunate, since it is desirable to keep initial costs as low as possible rather than minimising operational costs, which runs for a longer period in the life cycle of the technology. As a result, capital markets and lending institutions may demand a premium in lending rates for financing renewable energy projects, because more capital is been risked up front than in conventional energy projects. At worst, lending institutions will not be willing at all to offer credit facilities to non conventional energy sources whose technology and applicability has not been widely tested. Most developing countries also impose large tariffs and Value Added Tax (VAT) on imported goods such as PV and their related systems, which are considered as luxury items.

Technical Barriers

While industrialized countries possess skills and technical capacity to conduct research and development (R&D) in the area of RETs, this is not so in developing countries. Even though developing countries may possess skilled manpower, lack of investment in research and development is the major hindrance that militates against the full-scale implementation of renewable energy technologies. Where these technologies have been implemented, developing countries have to deal with technological problems ranging from waste disposal to continuity of a particular RET, long after the foreign experts have left.

The challenge is for developing countries to devise programs that must be devoted to assessing the applicability of renewable energy technologies suitable to prevailing local conditions. Through such applied research, developing countries can prioritise the applicable technologies in terms of their costs and benefits and devise incentives to influence consumer choices and market behaviour.

Legal Framework

Legal framework is key. Most industrialized countries with a heavy investment in RETs have appropriate legal frameworks pertaining to the use of all forms of energy. These include the establishment of independent regulatory bodies whose basic objective is to protect the public interest – that is, to ensure that private interests do not compromise public values. Such values include the maintenance of a strong and competitive base, assurance of safe, reliable and reasonably priced energy, the protection of health and safety of individual rights in the pursuit of common good, and preservation of the environment.

In most developing countries, especially those in Africa, there is a limited and lack of enthusiasm to develop appropriate legal frameworks that would smoothen the operations of the energy sector. Where regulatory bodies do exist, they favour the use of non-renewable energy resources and technologies that reinforce this conservatism. The absence of clearly defined energy policy and the lack of legal and institutional capacities in many developing countries hinder the growth of renewable energies. In particular policies must be formulated as regards regulation, the unbundling of activities, pricing and the promotion of private participation.

The promulgation of appropriate legal framework encourages the participation of the private sector in the development of renewable energy technologies, which would then encourage diversification. This is particularly important for the developing countries, which are often dependent on a limited number of traditional energy sources.

Institutional arrangements

In order to draw upon private sector efficiency and achieve the required transparency in the use of renewable energy policies, governments and state utilities and regulators in developing countries should involve private energy service providers, development banks, local commercial banks, and local and international NGOs who have the necessary experience in the implementation of such programs. This institutional arrangement has the potential to achieve high levels of success in the implementation of renewable energy programs since most of them are sealed away from the day-to-day government institutional complexities and are also closer to the consumers. Therefore, they are generally considered to have greater capacity and credibility to achieve success. Private banks and energy companies have a vested interest in the success of the projects. Therefore, they make excellent stakeholders to promote successful renewable energy programs.

On the other hand, governments in developing countries should consider revising their roles from being the owners of renewable energy programmes to brokers. Their role should be limited to bringing the energy companies, local and international banks, equipment and technology providers, and donors into the project in order to facilitate development and implement market driven solutions. Their role should be limited to putting in place an enabling environment that would encourage private sector investment. In the absence of an enabling environment specifically designed for the development of renewable energy, it is unlikely that the private sector will ever focus on non-commercial renewable energies, given the perceived and real risks and the institutional difficulties obtaining in most developing countries.

Conclusion

Renewable energy technologies hold enormous potential in developing countries in the Sub Sahara Africa and that potential can be realized at a reasonable cost if the right environment is created. Indications are that many customers will purchase renewable power even if it costs more than conventional power. But this cannot be achieved unless special policy measures are enacted to encourage that development.

By: James Manda, Technical Manager, African Forum for Utility Regulators.

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