Africa’s wind industry and the migrant crisis


January 30, 2017

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Could investing in clean energy in Africa help Europe to address its migrant crisis? One senior African politician speaking at the annual meeting of the World Economic Forum in Davos thinks so.

Guinea’s president Alpha Conde, who also heads the African Renewable Energy Initiative, said in an interview last week that European countries should invest in African clean-power resources to fight problems caused by immigration.

He says investing in renewables would make it more attractive for African people to stay in their own countries, because renewables would create jobs, improve living standards by increasing access to power, and spur economic growth. Fewer would then head to Europe, which would help curb the rise of right-wing populism.

We see some of the benefits of renewables in South Africa. The country’s deputy president Cyril Ramaphosa used Davos to praise the successes of South Africa’s renewable energy industry. And he said the country’s stable macroeconomic environment and developed financial markets would keep providing a solid platform for a stronger growth in the sector. Others could do likewise.

In theory, investing in African renewables to help solve the migrant crisis could be a win-win. European countries could use this to help fix their issues with immigration, Africa could end up with a stronger economy based on renewables, and African people would be able to work in their own countries.

There is a ‘but’, though. Despite progress on major wind schemes in Africa – the 310MW Lake Turkana in Kenya and 225MW Ayitepa Wind in Ghana – investors will need to have confidence in an African energy market has still some issues to address.

Again, we can use South Africa as example, where state-owned utility Eskom is undermining investor confidence.

Eskom has refused to sign power purchase agreements (PPAs) with 37 projects chosen as preferred bidders in the country’s REIPPPP initiative – the Renewable Energy Independent Power Producer Procurement Program. This means that those projects cannot go ahead because they do not have a guaranteed buyer for the power they produce.

The South African Renewable Energy Council, an umbrella body for the various renewable energy technologies, has sought counsel from law firm Webber Wentzel and has signalled that it might take the issue to court to force Eskom to sign all the outstanding PPAs.

This is not the first time Eskom has refused to sign a PPA and it says the reason it is refusing to do so is the high costs of renewable energy, wind in particular, compared to coal. The battle is ongoing – but the fact there is a battle in one of Africa’s most pro-renewables countries will sound warning bells for investors.

If a state-owned utility like Eskom is not willing to enter into any PPA because it thinks that costs of renewables are too high, why would international investors look at that country to invest in?

And if they cannot be confident about their money being safe in South Africa, where would it be safe? Africa may be a continent of hugely varied countries, but the Eskom argument only reinforces a perception – fair or unfair – about instability in the region.

In South Africa, the collaboration of Eskom is essential to make the REIPPPP work properly. South Africa’s renewables industry has the potential to be an example to all other African countries and, one day, it could lead them to make Conde’s proposal reality.

But will not be in time to help Europe fix its immediate challenges.

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