Africa: Renewable Energy Growth Modest When Compared with Massive Potential

Africa has over 120 carbon market projects up and running or in the pipeline, in areas ranging from wind power to forestry schemes, a new assessment, published today shows. However, in comparison to the rest of the world, the Continent is still lagging behind, with the potential for clean and green energy largely under-exploited.

Meanwhile, the growth in Clean Development Mechanism (CDM) projects under the Kyoto Protocol remains uneven. The larger economies such as Egypt and South Africa are still claiming the lion’s share, with 32 and 13 projects respectively.

The exceptions are Kenya and Uganda. The number of projects up and running, or in the pipeline has jumped from two in 2007, to 15 and 12 respectively today. In comparison, many countries on the Continent such as Zambia; Madagascar; Cameroon and Mali only have one or two. Equatorial Guinea is among several countries which has none.

These are among the findings compiled by the UN Environment Programme’s (UNEP) Risoe Centre for the opening today of the 2nd Africa Carbon Forum.

Achim Steiner, UN Under-Secretary General and UNEP Executive Director, said: "The growth of the carbon markets in Africa are both cause for optimism, and cause for concern. On the one hand, the work of UNEP and a myriad of other partners on capacity building, catalyzing finance and other barrier-breaking initiatives have been bearing fruit among an ever wider range of countries".

"But in order to realize only a few percentage points more of the massive potential for wind energy, solar energy, biomass and waste into energy schemes, action across a range of challenges needs to be stepped up," he added. Mr Steiner said this was in part the responsibility of the UN, regional development banks and international funding and donor bodies.

"However, there is also a great deal private national and trans-national banks and individual governments can do to make clean energy investments more attractive through innovative loans and forward-looking policies and smart market mechanisms," he added.

Mr Steiner cited the case of Kenya where the introduction of a feed-in tariff (a policy mechanism designed to encourage the adoption of renewable energy sources) rapidly triggered interest by a consortium in establishing Africa’s largest wind farm—a 300 MW wind power scheme in the Turkana region in the north of the country.

"The groundwork has been laid for Africa to boost its participation in the carbon market, which is growing as an important commodity market worldwide," said John Kilani of the Bonn-based United Nations Framework Convention on Climate Change secretariat on behalf of the organizers of the Africa Carbon Forum.

Under the Kyoto Protocol’s CDM, developed economies can offset some of their emissions at home, by investing in developing country projects in areas such as renewable energy and forestry schemes. The projects can earn valuable, saleable credits called Certified Emission Reductions (CERs) whose value is linked to the traded price of carbon.

"You are bound to do business when you bring all of the key market players together: the investors, buyers and sellers. This forum is therefore bound to boost the number of carbon offset projects in Africa," said Mr. Kilani. In a country such as Kenya, this is encouraging expansion of the market, such as geothermal electricity expansion in Naivasha.

Valuable additional income may also be soon generated via tree planting in National Parks and reserves including the Mau forest complex. This would be part of the Green Economy’s many benefits for enhancing the country’s ‘water towers’ that in turn support flows to many key river systems.

The new Africa-wide assessment estimates that world-wide, close to 4,900 CDM projects are up and running or in the pipeline – with the lion’s share in the big developing economies such as Brazil, China and India.

Africa Highlights

* Projects that harvest methane gas from landfills to fuel electricity generation are, at close to 20 per cent of all projects on the Continent, the most popular.

* These are followed by projects in biomass energy, 15 per cent; hydro-electric including run of river schemes, 10 per cent; reforestation, 14 per cent; fossil fuel switching, eight per cent and wind power, seven per cent.

* It is estimated that based on the current pipeline, the number of CDM projects in Africa could total around 245 by the end of 2012.

* It is also estimated that by 2012, and with the price of carbon at just over $13 a tonne, these could be worth over $475 million.

Projects Selected for New Facility to Boost African Carbon Market

Standard Bank and UNEP collaborate on the Africa Carbon Asset Development (ACAD) Facility

Project developers, bankers and others setting up carbon projects as part of the fight against climate change have a new place to go for help. ACAD, the first facility dedicated to boosting the African carbon market, has launched by awarding several new grants.

The Facility is a partnership between the United Nations Environment Programme (UNEP), Standard Bank and the German Government’s International Climate Initiative, administered by its Federal Environment Ministry. ACAD supports African carbon projects through a combination of technical assistance, grants and preferential access to corporate finance and transactional guidance.

One of the key challenges Africa faces is in removing investment barriers to low-carbon sustainable development. Combined with traditional debt or equity finance, carbon finance is a promising means of attracting funding for energy and infrastructure projects; and it is here that ACAD can help.

ACAD takes a new approach toward capacity and market development, sharing costs and risks with African banks such as Standard Bank to realize and replicate projects.

"Huge investments, especially in Africa, will be needed if we are to minimize the effects of climate change," said Sylvie Lemmet, Director of UNEP’s Paris-based Division of Technology, Industry and Economics. "Government investment alone will not be enough. ACAD is a good example of how we can attract much-needed private capital for investments that address climate change."

The ACAD partnership couples UNEP’s longstanding capacity building expertise in environmental policy and finance with the financial know-how and regional reach of Standard Bank. "We are keen to bring our global experience on carbon finance back to our roots in Africa and to combine it with the leading technical expertise of UNEP and its Risoe Center," said Geoff Sinclair, Head of Carbon Sales and Trading at Standard Bank. "Our objective is to collaborate with local companies and investors to bring Africa to the forefront of the carbon markets and we look forward to working with everyone to achieve this."

ACAD has recently awarded its first grants to innovative "green" development projects in Kenya, Nigeria and South Africa. These include:

-The Lake Turkana Wind Power Project in Kenya, one of the largest renewable energy generation projects on the African continent to have achieved financial closure. ACAD will provide partial payment for validation costs under the Clean Development Mechanism the U.N. carbon credit scheme; and

-The Lagos Waste Management Authority in Nigeria which is developing several waste-to-energy sites. ACAD is supporting the costs of engineering and carbon auditing studies required to earn carbon credits.

Another ACAD beneficiary is the Athi River Mining (ARM) Company Ltd., which operates a cement plant in Kenya and is attempting to reduce coal consumption in a cement plant by using locally available biomass resources. "As we are continuously working to improve our environmental footprint, Athi River Mining appreciates the technical and financial support provided by the new ACAD Facility to get this project off the ground. We will look to the lessons of this project for further energy and cost savings across the company," says Mr. Pradeep Paunrana, Managing Director of ARM.

Cape Verde to be entirely wind powered

Britain is to spend £26 million building a wind farm to power the entire Cape Verde, the isolated archipelago off the west coast of Africa. With a population of 500,000 stretched over a 1,500 square mile chain of islands, Cape Verde needs a dramatic expansion of its electricity network to support a rapidly expanding tourism industry.

Cape Verde, which is hurricane blighted, has secured British funding for the construction of 40 wind turbines capable of generating 40 megawatts of electricity.

Africa, comprising 48 countries, uses less power than Spain. A submarine cable system will be constructed using the funds to connect 13 counties from Zanzibar to Kenya.