Clean captive installation for industrial clients in sub-Saharan Africa
09 May 2023
A statement by the UN Resident Coordinator at The Lessons Learnt Workshop on “Clean Captive Installations for Industrial Clients in Sub-Sahara Africa”.
On behalf of UNEP and myself, I am honored and privileged to be here with you today to deliver opening remarks during this important event of The Lessons Learnt Workshop in Ghana on “Clean Captive Installations for Industrial Clients in Sub-Sahara Africa”, organized by the Energy Commission of Ghana and United Nations Environment Programme (UNEP).
This event comes at a time when we have started the implementation of the new UN Sustainable Development Cooperation Framework which has three critical pillars – Inclusive economic transformation, Equitable access to social services, and Durable peace and security - with cross cutting focus on a number of areas including climate and environment.
Key speaking points
UNEP is supporting projects and programmes in line with its Medium-Term Strategy 2022-25 objectives of “Climate stability, Living with Harmony in Nature and Pollution Free planet” which is designed to respond to the global and continental challenges as well as the SDG 2030 agenda, the AU Agenda 2063 and the Paris Agreement on Climate action 2015.
UNEP is committed to promoting environmentally sustainable and climate-resilient economies and countries by prioritizing (i) sustainable natural resource management and biodiversity conservation (ii) sustainable consumption and production patterns (iii) water security (iv) climate resilience and (v) Renewable Energy use.
This project aligns well with UNEP’s mandate as it also contributes to the UN in Ghana Cooperation Framework, addressing several Sustainable Development Goals, including Climate Action (SDG 13), Responsible Consumption and Production (SDG 12), Affordable and Clean Energy (SDG 7) and Industry, Innovation and Infrastructure (SDG 9).
While Ghana has a high total installed electricity capacity compared to its peak demand (5,085 MW and 2,525 MW in 2019, respectively) (EC 2019a), supply reliability is weak. The bulk of the capacity is thermal plants (around 61 per cent) and large hydropower (around 38 per cent).
Ghana currently has around 17.1 megawatts‑peak of distributed solar capacity projects (EC 2019b); however, commercial and industrial buyers represent only around 41 per cent of Ghana’s distributed solar PV generation market (BNEF 2019). The industrial sector holds significant growth potential due to the rapid increase in power demand in this sector.
As of December 2018, 84.3 per cent of the Ghanaian population had access to electricity. The government has set a target for 100 per cent electrification by 2025, indicating its commitment to enhancing the electricity infrastructure. To overcome Ghana’s electricity challenges related to infrastructure and shortage of supply due to high dependency on thermal resources, generation from different types of renewable resources could be considered as a viable solution to achieving the electrification target.
A key barrier to the uptake of clean captive installations in Ghana is the uncertainty surrounding the country’s energy regulatory framework, especially around obtaining licenses. Given the lengthy process for obtaining a license, as expressed by many developers, and the limited installation capacity in comparison with Kenya and other Sub‑Saharan countries, this may prove challenging for the deployment of the captive energy solution.
The Renewable Energy Master Plan, published in 2019, aims at increasing the share of renewable energy penetration in the energy generation mix by 2030. It was developed based on the Renewable Energy Act of 2011 and provides a framework for the development and promotion of renewable energy resources in Ghana.
Financing of clean captive installations in Ghana has proven to be another obstacle in the uptake of clean captive installations. Concessionary lines of credit are increasingly being sought by Ghanaian banks in support of their lending to specific sectors such as renewable energy and energy efficiency. Specific intervention funds such as the Green Climate Fund, AFD and SUNREF aim to reduce interest rate levels and increase tenors. Despite this, only very few commercial banks in Ghana (CalBank, Ecobank, Fidelity Bank and Stanbic Bank) are active in financing commercial and industrial renewable energy captive power installations, as most of these projects are not well understood by the banks and are perceived as high‑risk projects to finance.
Given the good potential for clean captive power in commercial and industrial facilities in Ghana, and the relative lack of accessible bank financing, specialized captive solar PV financing firms such as Cross Boundary, Dutch & Co. and REDAVIA, among others, have recently entered the market. Most of these companies have a base or strong presence in other parts of Africa.
Many captive power developers, ESCOs, EPC companies and equipment suppliers and installers have begun working with private financiers to provide dedicated solutions for captive power users. Some captive projects are implemented solely with capital from facility owners, but other business models such as financing, operating and financing leases are being offered and adopted in the market.
Ladies and Gentlemen
Before I share some more information about thus major transformative project, permit me to highlight the few, among the many works of the UN country team contribution to renewable Energy and climate resilience in Ghana.
UNIDO’s Green Climate Ghana Industrial Energy Efficiency Readiness” Project supported Ghana’s committed to “double energy efficiency improvement within industrial facilities by 20%” by 2030. The project supported implementation of Ghana industry related NDC targets through: (i) Detailed policy formulation for government on industrial energy efficiency; (ii) Developing an initial pipeline of industrial energy efficiency projects; and (iii) Capacity-building of local financial institutions on energy efficiency assessment.
As part of the UN’s broad support for climate resilience, UNCDF’s Local Climate Adaptive Living (LoCAL) Facility provides performance-based climate resilience grants as a financial top-up to cover the additional costs of making investments climate resilient at the local communities.
UNDP’s work on Explore climate finance opportunities, such as the cooperative market approaches offered by Article 6 of the Paris Agreement, efforts to de-risk private investment in clean energy solutions, and empowering young local entrepreneurs and Micro, Small and Medium-Sized Enterprises to drive the transition.
Ladies and Gentlemen
Now let me share with you more information about this major transformative project.
Many parts of Sub-Saharan Africa face issues with an interrupted, highly priced and potentially unreliable electricity supply from the grid, resulting in businesses often having to invest in fossil-fuelled generators to make up for this challenge. This can lead to increased costs for businesses (to power these generators) and result in increased greenhouse gas emissions.
Investing in clean captive energy installations (CCIs), which are independent from the electric grid like generators but are powered by renewable energy, can provide a cost effective and environmentally friendly solution. However, perceived costs have dissuaded businesses from investing in clean captive installations - likely due to the rarity of CCIs in Sub-Saharan Africa.
The project demonstrated that investing in CCIs can be financially and economically viable and can provide both economic and environmental benefits. It focused on four large economies in Sub-Saharan Africa - Nigeria, Kenya, Ghana, and South Africa. The project sought to provide a replicable model for the adoption of clean energy in the commercial and industrial sectors of these countries through clean captive installations.
It financed three types of projects with results-based grants covering transaction costs, capacity building and training, and the creation of a financial vehicle to fund captive solar PV projects.
The Project awarded grants to support Stella Futura under type 1 grant funding (Transaction costs/advisory) to establish a special purpose vehicle (SPV) that will finance the development of captive solar power plants for 3 (three) private hospitals within the Christian Health Association of Ghana (CHAG), with a targeted cumulative capacity of approximately 500kWp. The results of these pilot project and best practices as well as lessons learnt will be presented in this National workshop today on 9 May 2023 in Accra, Ghana.
Overall, Ghana has enormous potential for clean captive power within the service and industry sector, and better transparency in the regulatory environment and the presence of an active financing ecosystem will be conducive for higher uptake of clean captive installations.
It is crucial that we are adequately informed from knowledge gained in project implementation because it will allow for examination and innovative models that add value to our work. We cannot afford to do otherwise, especially in these challenging times of hardship. I encourage you to share your thoughtful experiences and lessons from this pilot project.