By Benjamin DENIS
The dynamics of deployment of renewable energies in
Sub-Saharan Africa is threatened by the risk of corporate default
national electricity supply, too often strained. How to protect it and
to reinforce ?
Climate finance aims to support low transitions
carbon, it concerns all sectors of the economy. But does not she
tend to be too good for one of them, that of the production
electricity from renewable sources? In sub-Saharan Africa
In particular, is it not likely to generate, within
electric power, imbalances that can break the momentum of the transition
national electricity companies
In many countries of sub-Saharan Africa,
dedicated to strengthening operators and mitigating the risks of
defect are insufficient.
The national electricity companies are there, most of
time, the unique customer of the original power generation plants
renewable. In Kenya, KPLC buys all electricity generated by the
Lake Turkana wind power plant. In Zambia, ZESCO is the unique customer of the park
Bangweulu, as ENEO will soon be for the power station
Nachtigal hydropower plant in Cameroon.
The power purchase agreements signed by these companies are
long-term commitments guaranteeing the purchase price of energy
produced. In this type of scheme, an abusive break in relations
can break the momentum of the entire sector. Subsequently,
investors remain for a long time restive to return to the markets with
In Europe, Spain is a case study. In 2012,
local authorities, overtaken by the level of investment and the
quantities of electricity to purchase, have put in place a moratorium on
renewable energies. They retrospectively revised the conditions of the
too many renewable electricity purchase agreements entered into force,
leading to significant losses for investors and lenders. Result,
it is only very recently that the country has regained the confidence of
investors in the renewable energy sector.
In sub-Saharan Africa, electricity companies are,
the vast majority, chronically loss-making, the revenues they collect
not covering their operating costs. Thus the company Electricity of
Does Guinea support a full cost of an estimated kilowatt hour of more than 30
cents, while for every kilowatt hour sold it does not collect
only 8 cents. Due to recurring cash flow difficulties, it is not
rare to see these electricity companies pay their suppliers with a year
However, climate finance is itself a risk
these companies when it focuses on a limited number of production projects
electricity, large, which are financed in hard currency. These
disproportionate projects unbalance networks and expose companies
national electricity bills to currency risk. Some already advertise
that beyond a certain level of devaluation of their national currency, they
will cease to honor their currency obligations.
A series of defects on purchase and loan agreements
signed by green power plants could halt the dynamics of
energy transition initiated in sub-Saharan Africa. To avoid such
threat, it is essential to rely on management solutions
risks and intensify efforts for electricians and their
Better distribute the
risks to favor renewable energies
Climate finance must therefore rapidly increase its offer
of derisking products: the aim is to allocate the risks to the best of
according to the specific capacities of each actor, through products of
guarantee, insurance and public-private collaborations. If these tools do not
can not be a solution for poorly designed projects, they allow in
however, to guard against a chain fault scenario.
The technical risks are generally seen as being
the competence of industrial plant developers. Conversely,
sector professionals are calling for coverage by
public actors, political risks and the risk of non-payment of
electricity. For example, a regional development bank could
commit to pay for the electricity generated by a power plant in place of a
national electrician if the latter was lacking, so as to reassure the
investors in the renewable energy sector.
The derisking instruments can advantageously be
combine to diversify the risks associated with the electricity buyer,
multiplying the customers of renewable energy plants, and for
mutualize the exchange risks of several geographies.
If, ultimately, the objective is to have sectors of
reliable, solid and perceived as such without external support,
risk pooling tools are necessary in the short term, for
reduce the vulnerability of this industry to possible
In parallel with these risk management efforts, the
climate finance must allow public capital to be concentrated on
substantive work, objects of long-term partnerships between donors
development and national utilities in sub-Saharan Africa.
efforts for electricians and their renewable energy networks
The actors of the climate finance recognize that today
it is less about increasing public funding for energy
renewable than to attract more private capital (in local currency) on this
sector. Public financial flows, for their part, must be reoriented.
To best contribute to the energy transition, they must concentrate
on controlling energy demand and adapting to change
climate change, but also on investment by companies
electricity supply to strengthen their transport and
It is necessary to modernize the networks for
intermittent renewable energies, which produce over the
sun or wind and which reduce the exposure of electricians to the
volatility of fossil fuel prices. It is also about reducing their
technical and commercial losses. Subsidy support, allowing
strengthen the financial governance of national electricity companies, are
then important levers for the viabilisation of electricians, their
payment capacity and therefore energy transition.
It is necessary to articulate risk management in the short term
term and substantive work on the resilience of the electricity sector. Ways
devoted to these two objectives must be increased, and for that to be recognized
and encouraged by climate finance accounting methodologies.
This is a necessary step to enable Africa to finance faster
universal access to more reliable and low-carbon energy.
Benjamin DENIS, Project Team Manager, in charge of
energy topics within the public companies and finance team
structured at AFD