POWER November 2020 - 23

PROJECT FINANCE
2. Investments in technology include everlarger
wind turbines, including Siemens
Gamesa's 14-MW SG 14-222 DD. Courtesy:
Siemens Gamesa
we know now, it's time that we factor
in the outcomes of our investments and
get things headed in the right direction. "
The U.S. Commodity Futures Trading
Commission (CFTC) in a September report
said, " Climate change poses a major
risk to the stability of the U.S. financial
system and to its ability to sustain the
American economy, " noting adverse climate
already is impacting " infrastructure,
agriculture, residential and commercial
property, as well as human health and
labor productivity. " The CFTC report said
that even the process of combating climate
change- " which demands a largescale
transition to a net-zero emissions
economy " -poses risks to the financial
system, if market participants " prove unable
to adapt to rapid changes in policy,
technology, and consumer preferences. "
The CEO Climate Dialogue group has
called on U.S. leadership to establish a
" federal policy as soon as possible to
protect against the worst impacts of climate
change. " The group of 21 companies
includes utilities such as DTE Energy,
Exelon, Dominion Energy, Pacific Gas &
Electric, Calpine, and PSEG, along with
other energy companies such as Equinor,
Total, and BP. They've joined with four environmental
groups-Center for Climate and
Energy Solutions, Environmental Defense
Fund, The Nature Conservancy, and the
World Resources Institute-to urge the
president and Congress to enact a marketbased
approach to climate change.
Environmental advocates say the financial
community should proactively
provide solutions to climate change, in
part by being a catalyst for investments
that promote economic resilience and
the transition to a net-zero emissions
economy. That could be new financial
products and services, along with support
for technologies that support cleanNovember
2020 | POWER
Programmatic Initiatives Spur Investment in
Africa
Africa's power market has not been as
accommodating to private financing
as would be most beneficial to achieving
widescale electrification across the
continent. However, in 2012, a wave of
new private-sector investments helped
to build momentum and create systematic
change. Private-sector financing
increased nearly fivefold to $8.3 billion,
with the number of projects nearly tripling
from 15 to 43 between 2011 and 2012.
This period witnessed the emergence
of " programmatic development "
with initiatives such as the
International Finance Corp.'s Scaling
Solar and the Global Energy Transfer
Feed in Tariff (GETFiT) program; the
development of renewable energy as
an increasingly attractive alternative to
fossil fuels; and a broadening, moreliquid
investor base. Since that point,
the private sector's involvement in the
energy market has grown to the tune
of $28.2 billion.
Such positive progress is indicative
of a market that is more receptive to
private involvement and the need for
such external participation. This has
been a welcome change from widespread
contract cancellations and sclerotic
policy reform.
South Africa's Renewable Energy
Independent Power Producer Procurement
(REIPPP) program encapsulates
this change. Thirteen years of policy
development has produced a transparent
framework, enabling significant
private-sector investment in the renewables
space. A continuous (save
for some hiccups a few years ago)
pipeline of projects and robust regulatory
framework have helped capture
the best of a competitive landscape,
significantly driving down costs.
Over four bidding-round windows,
prices for the end-user.
African
102 independent power producer (IPP)
projects were signed off (compared
to only a handful prior to REIPPP's
launch), creating 6,329 MW of renewable
energy capacity. The competitive
process as well as technological advances
have witnessed a significant
reduction in procurement costs. Between
the first round of bids and the
fourth, the average wind technology
bid price fell by 37%, and solar has
fallen by 69%, translating into lower
er energy (Figure 2).
Combating climate change does not
come cheap. The International Renewable
Energy Agency in 2019 said a technically
and economically feasible path for
limiting global warming to " well below "
www.powermag.com
Infrastructure Investment
Managers (AIIM) is the largest equity
investor in REIPPP-one of the flagbearers
of African IPP programs-with
the projects it has invested in contributing
to 24.5% of the total clean energy
on the South African grid. The last
round was particularly successful, with
AIIM investing in nine projects, out of
a total of 26.
When fully operational, the projects
AIIM has invested in will produce
an additional 800 MW of energy.
The power facilities will deliver about
2,425 GWh annually, preventing about
2.4 million tonnes of carbon emissions
from traditional fossil fuel power
plants per annum. When operating at
full capacity, they are expected to supply
enough green electricity to power
about 522,730 medium-sized South
African homes.
In total,
AIIM's IDEAS Managed
Fund holds interests across 27 projects
involved in windows 1-4 of
REIPPP, one of which is the 75-MW
Renewable Energy Investments South
Africa (REISA) solar photovoltaic (PV)
farm. Spanning 210 hectares, 343,200
solar modules produce about 180,000
MWh of energy annually, preventing
an estimated 125,000 tonnes of carbon
emissions from traditional fossil
fuel power plants. When operating at
full capacity, REISA is expected to supply
enough green electricity to power
about 75,000 medium-sized South African
homes. Its impact includes more
than just power provision, however;
it has also incorporated wider needs
of the host communities through a
business development and mentoring
scheme, as well as an education initiative
benefiting 5,000 locals.
Impact driven by sustainable energy
generation stretches far beyond
the measurable and is a core component
toward realizing Africa's vast
potential. Heightened strain on public
finances opens the door for greater
private-sector involvement. The data
dictates this will only increase momentum
in delivering a more connected,
sustainable future.
-Vuyo Ntoi is joint managing director
of African Infrastructure Investment
Managers (AIIM).
2 degrees Celsius, in line with the Paris
Agreement, would require an estimated
$110 trillion of cumulative worldwide investment
in the energy sector by 2050. ■
-Darrell Proctor is associate editor
for POWER.
23
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POWER November 2020

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