The solar power market in Africa: How will the Paris Agreement on climate change affect the development of solar power across Africa?
"Opinion around the impact of the Paris Agreement on Africa has been mixed. On the positive side, the commitment from the more developed countries to allocate finance to developing countries to assist them with their climate adaption and mitigation needs is formalised in a pot of $100bn. The Paris Agreement further provided for this pot to be revised upwards from 2025. But the requirement for the developing countries to provide their own contributions has not been met so favourably. The African Adaption Gap Report of the UN Environment Report says that African countries must, between them, raise $3bn a year between 2016 and 2020.
A further aspect of the Paris Agreement that has received commentary in an African context concerns the substance and ongoing scrutiny of individual countries’ Intended Nationally Determined Contributions (INDCs). These set out a country’s planned contributions for long-term climate action.
Once a country has ratified the Paris Agreement it must submit a more final Nationally Determined Contribution (NDC). The Paris Agreement says that these plans will be updated every five years. Prior to the Agreement coming into effect last November, all African countries (except Libya) had submitted INDCs, with 14 countries having ratified the agreement and submitted their NDCs.
Concerns raised around these plans focus on the ability of the countries to implement them and meet their goals and aspirations without a significant resourcing commitment from the developed countries in the form of financing, technology transfer and capacity building.
Demand for power
Arguably, it is just too soon to say whether the Paris Agreement will have a positive or negative impact on the future of solar deployment in Africa. The INDCs and NDCs will be tested over time. But in any discussion on Africa it is hard to look beyond the desperate need for immediate accessibility to electricity, regardless of its generation source. It thus becomes a hugely controversial and sensitive issue. The problems of financing new large-scale power generation and the associated transmission and distribution implications remain.
The priority of the Paris Agreement is to focus on alternative generation sources to address the carbon issue. African leadership is faced with this commitment at a time when in some cases access to hydrocarbons and coal is more immediate. Some leadership has focused on the very small, almost negligible, contribution African countries have made to carbon emissions in the past and will do on an ongoing basis. In this context, the Paris Agreement with its legal and financial commitments imposed on these countries, represents an unfair position. Why should those countries invest in new technologies when their own current resources are cheaper and more available?
The future of solar deployment in Africa will be driven more by immediate electricity demand than by global regulation around carbon reduction. The smaller-scale, off-grid PV solutions should continue to receive the support necessary as the best means of providing quick and basic electricity to households and small businesses. At the same time, governments, utilities, international donors and multilateral agencies and investors should try to address the funding and political issues inherent in large, grid-based solutions."
Excerpt of: The solar power market in Africa, published in Energy World 2017. Download the full article here.
Tom Eldridge is a London Banking & Finance partner at Mayer Brown International.