This article is based on Renewable Watch’s report, Solar Power in Africa 2020
Several countries across Africa which are rich in solar resource have taken policy initiatives and developed regulatory frameworks to promote solar project and make sure that they are implemented effectively. A majority of the African countries have introduced national policies, renewable energy and solar targets. Countries have also introduced national policies or renewable energy and solar targets, some of these targets. These targets are usually either in terms of installed solar or renewable capacities, or in terms of the share of these sources in the power sector.
Source: Renewable Watch Research
Project allocation
Countries like Egypt and South Africa that were early movers in solar space, had initially introduced feed-in-tariffs for project allocation. In terms of policy and regulatory trends, many countries are moving away from the feed-in-tariff regime to auctions for allocation of renewable energy projects, indicating a trend towards a competitive market and consequent increase in the influx of financing and deployments. The prevalent project allocation mechanisms can thus broadly be categorised under competitive bidding and feed-in-tariffs.
Competitive bidding/auctions: Competitive bidding mechanisms are increasingly being adopted as a project allocation mechanism for solar projects across Africa. Many countries have seen a trend of shifting from feed-in-tariffs to auctions. A large and solar resource rich country of Egypt is among the countries who recently floated tenders for solar projects, while smaller countries like Burkina Faso and Côte d’Ivoire have also started with large-scale solar development through tendering.
Feed-in-tariffs: Feed-in-tariffs and their associated frameworks have been introduced in many countries across Africa, especially in the countries that started large-scale development of solar a few years ago. Feed-in-tariffs were found to be higher as compared to competitive tariffs for solar projects on an average. RE FiT schemes and initiatives like GET FiT have tried to promote renewable energy through setting up projects using the feed-in-tariff mechanism.
Net metering: Other emerging policy measures include net metering schemes. Countries including Ghana, Kenya, Tunisia and Zimbabwe have net metering schemes, although usually only for small scale generation, with a cap on eligible project capacity. Most countries have a net metering scheme or frameworks which allow for net metering, although usually only for small scale generation. The provisions of these schemes tend to have a cap on the project capacity eligible for net metering. However, Morocco’s legislation at present only permits net metered projects connected to the high voltage grid which meet at least 80 per cent of the user’s annual electricity needs, ensuring net metering is available solely to large industrial users. The maximum capacity limit for net metering also varies from country to country, for instance, Mauritius has a cap of 5 kW, Zimbabwe of 100 kW, South Africa of 100 kW, while Namibia has a cap of 500 kW.
Some countries have introduced a framework for net metering, however are facing issues in implementing the system. These countries include Ghana, Kenya and Senegal. In Senegal, the law was expected to become operational in 2014 but was delayed due to lack of implementation capacity at the national power company, Senelec. Many countries are also planning to develop a net metering framework. For instance, Uganda is in the process of developing a pilot scheme for solar net metering.
Source: Renewable Watch Research
Financial incentives and tax exemptions
In order to promote the solar segment, countries have introduced various financial incentives such as tax exemptions related to setting up of solar plants and on sale of solar equipment. Some of these incentives and exemptions include exemption on import duties, exemption on VAT, tax holiday, reduced interest rates, and reduced sales tax.
For example, in Burkina Faso, there is exemption on import duties and VAT for solar energy equipment for a five-year period. Meanwhile, in Cameroon, a full value added tax exemption exists for equipment and materials used in electricity generation solar PV and solar thermal sources. In December 2011, the government of Côte d’Ivoire reduced the rate of VAT applied to solar energy production equipment from 18 per cent to 9 per cent.
In Egypt, tax incentives for renewable projects include reduction in customs on supplies, reduced interest rates, reduced sales tax on imported tools, equipment and machinery along with a 30 per cent reduction in net taxable profits for the first seven years through tax and customs exemptions, which are mainly targeted at manufacturers and agricultural businesses.
In Kenya, solar cells and modules that are not equipped with elements such as diodes, batteries or similar equipment are exempt from import duty and VAT. Further, specialised solar equipment and accessories are also exempt. IPPs including renewable ones are eligible for Pioneer Status Incentive (PSI) in Nigeria, which brings with it an income tax holiday for three years, extendable by an additional one or two years. Further, in Zambia the policy allows for developers who develop PV plants can claim tax exemption status for the first five years of the projects lifetime.
International multi-country initiatives in Africa
There are several multi-country initiatives in the African continent as well. These initiatives help set up solar projects across different countries with the help of local as well as international organisations which work in tandem with each other. Some of the major initiatives include clean energy corridors, pan-Arab clean energy (PACE), global energy transfer feed-in-tariffs program (GET FiT) and scaling solar program.
Clean energy corridors: clean energy corridors in Eastern, Southern and West Africa are helping African countries scale up renewable power generation and cross-border electricity trade. These corridors were established within the respective power pools of East, South and West Africa. They aim to support efforts to meet the continent’s fast-growing electricity needs through the region’s abundant renewable energy resources, including solar. The corridors largely focus on utility-scale development of renewable power with a cross-border trade dimension to benefit from resource efficiency and economies of scale.
Pan-Arab clean energy (PACE): the pan-Arab strategy for the development of renewable energy, 2010–2030 was adopted at the third Arab economic and social development summit by the league of Arab states in 2013. The countries committed to increasing the region’s installed renewable power generation capacity from 12 GW in 2013 to 80 GW in 2030. The Pan-Arab clean energy initiative (PACE), included in the pan-Arab renewable energy roadmap for 2030, is a regional initiative that aims to promote the integration of greater shares of renewables into power systems in the Arab region.
Global energy transfer feed-in tariffs program (GET FiT): The main objective of GET FiT is to enable East African nations to take a climate resilience low-carbon development path resulting in growth, poverty reduction and climate change mitigation. Currently, GET FiT has rolled out in Uganda (starting from May 2013). Roll-out plans in other countries are still in plan phase. The programme is designed to address investment barriers for renewable energy projects by providing project owners additional cash flow during early debt repayment periods.
Scaling Solar: This is a ‘one stop shop’ scheme, which supports project development with legal, regulatory and technical analysis. It prepares and holds the tender for the projects, while supporting developers with pre-approved financing. It brings together several World Bank Group services under a single engagement to help governments mobilise privately funded grid-connected solar projects at competitive tariffs that can be operational within two years.
Source: Renewable Watch Research
Currently there are six countries under Scaling Solar, five of which are African countries of Ethiopia, Madagascar, Senegal, Togo and Zambia Scaling Solar initiative which supports the deployment of solar power is active under various stages across five African countries. The government of Senegal is working with the World Bank Group to develop 60 MW of solar power through Scaling Solar. The planned Scaling Solar projects underscore Senegal’s commitment to integrate renewable energy into the mix. Togo is looking to identify a private investor for the development, construction and operation of up to 90 MW of grid connected solar installations on an IPP basis through the program. Madagascar is the third African country to join Scaling Solar. A new 30-40 MW solar facility developed under the initiative will help ease daily interruptions of power service. The planned Scaling Solar project will provide a reliable alternative to expensive diesel generators. Ethiopia is the fourth country to join Scaling Solar. Ethiopia Electric Power signed an agreement with IFC to advise on developing up to 500 MW of solar power under the initiative. Scaling Solar will provide a quick reliable complement to hydropower In Zambia, the first procurement round will develop around 180 MW of utility-scale solar power. The auctions held in May 2016 yielded some of the lowest tariffs in the world. In February 2017, Zambia’s Industrial Development Corporation signed an agreement with IFC to develop up to 500MW through two to four projects.
Key takeways
Overall, in terms of project allocation, there is a shift away from feed-in-tariff towards competitive bidding with larger project sizes. Net metering is also being taken up in increasingly more countries, albeit with a considerable set of challenges in implementation.
There are many countries that provide some sort of tax incentives or exemptions for solar and other renewable projects, although positive, the level of their impact on the uptake of solar is unclear. Also, several multi-country initiatives are also underway, playing a key role in linking international experience with local implementing bodies in order to promote clean energy in the form of solar power.
