ANALYSIS-Africa makes strides in green energy

ANALYSIS-Africa makes strides in green energy

Friday September 17, 2010 04:19:13 PM GMT
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AFRICA-GREENENERGY/(ANALYSIS)

* Wind and geothermal set to take off

* Investors happy with energy policies

* U.N. says funding available locally

By Duncan Miriri

NAIROBI, Sept 16 (Reuters) - A global clamour for cuts in emissions,
growing investor appetite for energy sector projects and sound
government policies could help Africa make strides in green energy
generation in the next few years.

Some governments, like Kenya, plan to raise the amount of energy
generated from renewable sources like wind and solar, to cut
overreliance on expensive sources and stabilise power supplies.

Others, like South Africa, need to reduce their carbon footprint, one
of the world's highest.

"Africa has immense opportunities to take the lead," said Achim
Steiner, head of the United Nations Environmental Programme, citing
wind farms in Kenya and methane to electricity projects in Rwanda.

"It is not inconceivable that Kenya will triple, quadruple its power
generation and reduce in absolute terms its C02 emissions and perhaps
become a CO2 neutral electricity generating economy."

Under the east African nation's feed-in tariffs, private investors are
guaranteed $0.12 per kilowatt hour up to 100 megawatts generated.

Kenya and South Africa combined could have an extra 1,625 megawatts
from wind by 2013 if all planned projects -- both private and
government-sponsored -- are completed on schedule.

Kenya has a capacity of 1,350 megawatts from all sources and South
Africa can generate 40,000 megawatts from all sources.

Analysts say there is money available for green energy projects in
Africa, boosted by rising concerns about climate change and the
availability of cheap products from China.

"There is a lot of funding available for these projects, because it is
certainly top of mind in the West at the moment, there is a lot of
product that can be sourced relatively cheaply from China," said
Cornelis van der Waal, energy analyst at consultancy Frost & Sullivan.

North Africa has been leading in the push for investments in wind
energy because of an active renewable energy policy and a programme
based on public-private partnerships.

Countries elsewhere on the continent are only now putting proper
regulations and incentives in the form of renewable feed-in tariffs in
place.

Analysts said the establishment of a unit in South Africa --
independent from state utility Eskom -- to purchase power from private
investors is critical.

"Investors are starting to be a little bit itchy because they have
been planning for a very long time and it's been too long since the
announcement of the renewable feed-in tariff," van der Waal said.

As the continent's largest economy, South Africa depends on coal for
90 percent of its electricity. Eskom has been struggling to plug a
national power deficit owing to fast-rising demand and its own
financial problems.

SOUND POLICIES

Countries that have aligned their energy policies with the national
interest will be at an advantage because investors are attracted to
markets whose policies are driven by high level officials with an
appreciation of the strategic importance of energy to an economy.

Rwanda, with its methane gas -- found under Lake Kivu -- to
electricity projects, is an example of a country that is getting its
energy policies right, the U.N. says.

Under a pilot scheme at the lake, the central African nation is
producing 3.6 megawatts, with a view of stepping that up to more than
50 megawatts in the months ahead at a cost of $130-$280 million.

Gachao Kiuna, the chief executive of Transcentury, a Nairobi-based
investment group that focuses on power and infrastructure, says apart
from the environmental benefits of green generation, it is quite
practical to the continent.

Given its power deficit, Africa may be keener to tap emerging green
technologies like wind and geothermal than the west where there is no
shortage of large-scale, cheap technologies like nuclear facilities,
he said.

A wind farm project can be completed faster than a hydropower plant,
while geothermal projects attract minimum running costs, once drilling
of wells is completed.

Transcentury plans to develop 100-300 megawatts in the next five years
at an estimated cost of $2 million per megawatt from environment-
friendly sources like geothermal.

Other investors have already started putting in money. The Lake
Turkana Wind Power project, which will be the biggest on the continent
when completed in the next two to three years, has secured funding.

Barclays Bank works with the International Finance Corporation to
develop new financial products to mitigate against climate change.

The programme aims to support renewable energy projects in Nigeria,
South Africa and Kenya where officials are in the process of setting
up an open-ended green energy fund financed locally and from
international development partners.

UNEP's Steiner says African nations can contribute a huge chunk of the
funds required to fund energy generation from green sources.

"Finance is absolutely critical. We shouldn't underestimate the
potential of African economies to also generate finance domestically,"
he said.

For a factbox on new green energy projects in Africa: (Additional
reporting by Flak in Johannesburg; Editing by James Macharia and Sue
Thomas)
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