Utility-scale PV can be quickly and economically deployed to address supply-demand imbalances in national grids, lower power costs and improve the financial sustainability of power utilities.
Africa has some of the world’s most abundant solar resources, but more than 50% of its people live without electricity. Solar PV can now deliver power at less than 15US¢/kWh with long-term price certainty, yet most African countries have not been able to benefit from recent dramatic cost reductions in this technology. Many still rely on diesel-fired power that costs more than 25US¢/kWh and is subject to global oil price volatility.
Scaling Solar’s comprehensive package will deliver speed and certainty at the lowest possible prices. As it is implemented across multiple countries, Scaling Solar will allow smaller African countries to enjoy the purchasing power of bigger and more developed economies.
Despite the benefits that solar can bring to African power grids, its deployment to date has been slow: the largest installation in Sub-Saharan Africa (excluding South Africa) is just 8.5 MW. Progress is hampered by the following barriers:
- Lack of scale: navigating the unique features and structures of each African power market deters investors and adds time and costs to projects, creating barriers to scale and efficiency.
- Lack of competition: many power projects in Africa are not competitively tendered and rarely attract investors with experience
and low cost of capital.
- High transaction costs: individually negotiated contracts and financing weigh down smaller solar projects with excessive
transaction costs that increase tariffs.
- High perceived risk and cost of capital: long development cycles, the poor credit situation of Africa’s power utilities and the historic political risks of the region result in high equity and debt costs, which drive up tariffs.
- Limited institutional capacity: African governments are stretched, with limited capacity to manage, structure and negotiate private
As a result of these barriers many countries have struggled with slow and ineffective solar development whether via direct negotiation, feed in tariff or tender
A “one stop shop” to help governments mobilize privately funded grid-connected solar projects at competitive tariffs that can be operational within two years of engaging our team. Scaling Solar brings together several World Bank Group services under a single engagement:
- Advice to assess the right size and location for solar PV power plants in a country’s grid.
- Simple and rapid tendering to ensure strong participation and competition from committed industry players.
- Standardized, balanced project documents to eliminate negotiation and ensure speed and bankability.
- Competitive financing and insurance attached to the tender and available to all bidders, delivering competitive bidding and ensuring rapid financial close post-tender.
- Risk management and credit enhancement products to lower financing costs and deliver power at lower tariffs.
Delivered as a simple package these elements ensure speed, certainty and low tariffs.
Benefits to Governments and Utilities
- Speed: standardized processes and documents enable rapid tendering and financial close without the delays typically associated with project development and contract negotiations.
- Certainty: balanced, bankable documents that can be offered on a non-negotiable basis with the comfort of pre-approved, financing attached to the tender and available to all bidders.
- Competitive fixed-rate tariffs: tenders designed to attract competition amongst top tier industry investors, reduced transaction costs, and competitive financing terms to drive down tariff bidding.
Benefits to Project Developers and Investors
- Market creation: solar opportunities are either nascent or non-existent in much of Africa but consistent tendering
and bankable documentation will open up the regional opportunity for qualified developers looking for new markets.
- Reduced development time and costs: tendering of identified sites with technical diligence and approval requirements in place, bankable non-negotiable documents, and preapproved
- A level playing field: clear and transparent award process allowing developers and investors to compete on the basis of lowest tariffs and long-term commitment to Africa.
Benefits to international donors and development partners
- Reach: support to multiple low-income, fragile and conflict affected states to achieve energy security and sustainable low-carbon growth.
- Leverage: donor support will leverage significant amounts of private capital via transparent, competitive tenders.
- Impact: rapid delivery of low cost, sustainable electricity with
target time from engagement to power at just two years,
helping African countries meet urgent energy demand.