Banks awakening to renewable energy

By Wisdom Mumera

The drive for renewable energy has generally been embraced in Africa wholesomely.

However, progress on the ground has largely been at a snail’s pace due to financial hurdles.

Locally, financial institutions are still hesitant to be involved in the renewable energy sector by financing  long-term investments.

This has resulted  in the stagnation of initiatives with such projects as the Gwanda Solar Project  in Zimbabwe’s Matabeleland South province.

Most financial institutions have not been receptive to financing this ‘new’ field thereby threatening the sustainability of the green initiatives. However, this could soon change as some continental and international financial institutions are coming up with sector-tailored schemes to propel the green revolution.

The Beijing-based Asian Infrastructure Investment Bank (AIIB), is already bankrolling 80 member countries which include Egypt. The bank is financing renewable energy projects in the North African country as part of its over $3.04 billion loans for 28 projects.

According to D.J. Pandian, the Vice President and Chief Investment Officer in AIIB, in a statement released to the media: “The Asian Infrastructure Investment Bank (AIIB) will provide about $ 210m to finance renewable energy projects in Egypt, including the construction of 11 green field solar power plants with a total capacity of 490 MW.

“The project will increase Egypt’s capacity to generate energy and reduce reliance on gas and fuel to generate electricity, which would help in meeting the commitments of the Paris Climate Agreement.”

The bank is already financing renewable energy projects in other developing and developed nations such as Pakistan, Azerbaijan and India.

Having started business as recently as 2016, AIIB is not alone in financially embracing the renewable energy agenda after seeing the potential growth therein.

The African Development Bank (AfDB) has created its own initiatives geared towards providing financial schemes for countries developing renewable energy initiatives.

According to Johan Burger, the Director of the NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, the rural electrification rate in sub-Saharan Africa is the lowest in the world, at less than 20%.

“The electrification of rural areas faces challenges such as the high costs of capital, low revenue collection rates, and insufficient generation capacity (infrastructure), among others.

“For example, Tanzania’s national electricity coverage is estimated at just over 20%, with the transmission grid covering a minor part of the country and leaving out most of the territory.

“Access is even lower for the rural population at 7%; thus nearly 30 million Tanzanians lack a connection to the electricity grid. The vastness of the country, coupled with low population densities, makes grid extension too expensive. This is typical of most African countries,” said Burger.

In response to these challenges, the AfDB began a New Deal on Energy for Africa with the launch of the aptly named Transformative Partnership on Energy for Africa whose aim is to add 160 GW of renewable energy electricity.

The ultimate objective is to provide electricity to more than 900 million people who are still segmented from accessing electricity.

According to the bank the initiative will enhance inclusive green growth in Africa, and unlock the potential for industrialisation and wealth creation.

“It will drive agricultural transformation and regional power pooling to integrate Africa, create jobs and ultimately improve the quality of life for Africans,” said Burger.

In South Africa, Standard Bank says it has been supporting renewable energy initiatives. The bank has  assisted in financing more than 40% of the approximately 1 760 MW currently provided by the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) initiated in 2011.

“The REIPPPP has resulted in the allocation of power purchase agreements for 92 projects after four rounds of bidding, with the projects that have already been connected to the grid currently contributing about 1 760 MW to South Africa’s total generating capacity”, said the bank in a statement on the contributions to renewable energy development.

The coming in of banks in financing renewable energy options provide a glimmer of hope for the alternative energy agenda.

This  a should provide insight and encouragement to local banks still hesitant in financing the sector.

Post Author: Nyasha Nyakunu

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