Renewable energy has been a hot topic in Africa recently. The increased need to curb coal reliance for energy production has resulted in governments – such as South Africa, Nigeria and Ghana – developing more sustainable energy solutions for the continent.
A worrying reality is that power outages have an impact on the performances of the continent’s economies and might drive away potential foreign investors.
Off the grid power production has not only been influenced by the need to decrease the reliance on coal, but most importantly carbon dioxide omissions.
Renewable energy is the new gem of Africa. With a favorable climate on the continent, renewable energy has rapidly transformed from being a mere imperative to a lucrative, investment-attracting industry that is growing.
While most energy production on the continent has been state-owned, a brewing phenomenon has been the growth of Independent Power Producers (IPPs).
Female participation within the continent’s renewable energy space is a rarity that is being addressed by governments and policymakers. In South Africa, the department of energy has included the need to incorporate women-owned enterprises in the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP).
With the recent completion of the third bidding rounds of REIPPPP, 17 renewable projects have been awarded to preferred bidders. The estimated deal value for the third round of bidding is said to be around R33.8 billion ($3.1 billion)
One of the successful bidders has been DLO Energy Resources – an energy investment and advisory firm owned by South African entrepreneur Linda Olagunju. Through the Longyuan Mulilo Maanhaarberg consortium and the Longyuan Mulilo De Aar 2 North Wind Facility consortium, the combined capacity of both projects is estimated to be 244MW.
No stranger to sizable deals, this 30-year-old attorney with specialization in energy and project finance was part of the team at Dewey & Leboeuf LPP – now Baker McKenzie – that advised on key transactions in the African energy sector, including Eskom’s $250 million bank loan for its renewable energy projects. Olagunju is also the founder of the Renewable Energy Forum South Africa – a platform that congregates renewable energy players and decision makers within the private and public sectors to engage on key issues affecting the continent’s renewable energy industry.
“Growing up in rural Eastern Cape, prior to the electrification process, therefore having lived and experienced the absence of electricity, I grew up reading about the continent’s vast oil and gas resources and could not understand why countries with an abundance of resources still remained impoverished. Primarily I wanted a further understanding of this, but most importantly to contribute towards making sustainable changes,” says Olagunju.
After being awarded a scholarship to the University of Aberdeen, Olagunju completed her masters in law with a focus on oil and gas law. During this period, she was brought onto a renewable energy organization that was tasked to develop Aberdeen’s first offshore wind farm. It was here that she was introduced to the renewable energy space.
“My introduction to renewable energy occurred at the time when South Africa was facing an electricity deficit and an increase in blackouts. On my return, the national regulator of South Africa was still at the stages of establishing a legal regulatory framework in which renewables could form a part of the energy mix through a feed tariff.”
Olagunju’s perfect timing allowed her to play a contributing role towards the development of South Africa’s renewable energy scene. With Africa set to spend over $72 billion a year on infrastructure development over the next decade, of which energy forms a large part, Olagunju believes that there is still a void within the industry that needs to be filled when it comes to female participation.
“Government is playing an adequate role in ensuring female inclusion, especially in sizable transactions. I do, however, think that the private sector needs to play a bigger role in ensuring that the objectives of female involvement are actually met through ensuring the real involvement of female-owned enterprises and skills transfer,” she says.
With a large part of South Africa’s economy heavily reliant on the mining sector – the biggest electricity consumer – the renewable energy IPP Programme has allowed for the diversification of the country’s energy mix, by integrating renewables into the Integrated Resource Plan. Another benefit of renewable energy projects is the shorter construction turnaround time and connection period, which makes them a favorable solution to address the energy deficit.
International energy companies – mainly from Asia, Europe and the United States – have also been involved in renewable energy projects in Africa. The bidding process in South Africa requires that projects are at least 40% owned by South African companies – a necessary pre-requisite to ensure the sustainability of the projects post-construction and connection. Olagunju believes that there is still a great need for African-owned companies to start investing in such projects to ensure further economic development within the continent.
“Nigeria has done very well in creating local ownership within the oil and gas sector and it would be great to see some of those companies taking up equity in the renewable energy projects that are in progress. I am a firm believer in inter-African trade and investment and certainly this process provides a platform.”
Olagunju believes that strategic partnerships are the perfect recipe for guaranteed development within any industry, especially in energy.
“It is important to have partners with the right mix of skills in order to grow. It is just as important to align oneself with partners that can facilitate an expansion strategy. In the context of REIPPPP, we have seen companies that have aligned themselves with strong international partners with a solid balance sheet, they have been able to achieve better tariffs,” says Olagunju.
With the on-going transformation of Africa’s energy sector – the privatization of Nigeria’s power sector and South Africa creating a platform for large-scale procurement from independent power producers – renewable energy has been a priority within these agendas.
Other recent developments include: Namibia working on the development of three solar PV plants, Zambia’s Request for Proposal (RFP) for the provision of solar power in the country’s mining region, and Ghana announcing the construction of the largest solar park in Sub-Saharan Africa with the development of UK-based blue energy.
“This [solar] park boasts approximately 155MW capacity and is geared to supply much-needed power to the ECOWAS region. Countries such as Kenya, Angola and Mozambique in their embracing of renewable energy is a clear indication that the continent is slowly moving away from being subsistent to being self-reliant and responsible for its own development, which is a great thing.”
2012 saw Olagunju launch the inaugural Renewable Energy Forum South Africa (REFSA) – a Pan-African conference in which players within the renewable energy space can engage in dialogue and find solutions to challenges faced by the industry.
“The reason why I created REFSA was because I felt that developers and other key stakeholders needed a platform to discuss the sector and issues affecting the sector while sharing ideas,” she says.
It is through platforms such as the REFSA conference that the seeds for intercontinental transactions can be planted.
“For the upcoming 2014 conference, which will be held in March, there will be representatives from Nigeria, Ghana, Mozambique, Angola, Zambia, Kenya and South Africa. What is expected from this conference is the exchange of ideas and insight sharing on the South African bidding process from law firms, such as Norton Rose Fulbright and Webber Wentzel, as well as funding advice from advisory firms such as Fieldstone. Coupled with snapshots into key projects that are out in the market and how one can access such opportunities.”
When it comes to the future of renewable energy on the continent, the road ahead will be a long, arduous and expensive one, but with dedicated individuals like Olagunju driving REFSA the rewards will be priceless.