Solar PV project development and construction is well established internationally and particularly so in Europe and America. Africa has caught onto the wave with utility scale projects operational in Algeria, Egypt, Kenya, Mauritius, Morocco, Namibia, Reunion, Rwanda, South Africa, Tunisia and Uganda, with developments ongoing in many other countries. This article discusses the development of a solar PV project in Africa, how to manage such a project, the challenges faced and how to overcome them.
Undoubtedly, the African continent has vast renewable solar energy potential compared to the rest of the world as illustrated in the global horizontal irradiation (GHI) map in Fig. 1. The European Photovoltaic Industry Association (EPIA) created a global solar PV investment attractiveness index of 66 sunbelt countries located within 35 of the equator based on natural solar power potential in a country and solar policies in the country.
The Mediterranean and north African region receives high solar irradiation levels and was identified of having a PV potential of 7 GW by 2020 and 27 GW by 2030 . Renewable energy is paving the way out of energy poverty for many Africans and with more private investment in innovative technologies and bankable projects more African countries will have access to electricity which will stimulate economic growth from one of Africa’s most abundant resource.
Project development approach to building a solar PV farm
Key factors when developing a utility scale solar PV project
Pre-feasibility and feasibility analysis
A pre-feasibility analysis is conducted to select a site and assess its suitability for the potential development of a solar PV farm. Once a pre-feasibility desktop analysis has been finalised, the developer will conduct a site visit to physically assess and confirm the conditions from the desktop analysis.
In competitive tenders, which is common practice, the size of a plant is stipulated. Single axis tracking is often selected as the technology of choice to increase the yield and polycrystalline silicon solar PV modules are preferred.
It is important to identify the form of property ownership and the landowner(s) prior to securing the land i.e. Private/Traditional/State etc.
Permits and licences
Once the land has been secured, the process of obtaining the relevant permits and licences can commence. The developer usually conducts an analysis to identify the relevant and applicable consents, permits and licences which may be required for the development and construction of the facility.
Technical studies commence once the land has been secured with some feeding into the approval of the permits and licences. These will include but are not limited to land surveys, geotechnical studies, hydrological studies, grid studies, yield studies and PV plant designs.
EPC and O&M contracts
It is imperative to select a reputable Engineering Procurement and Construction (EPC) contractor for the construction of the PV plant and an equally reputable Operations and Maintenance (O&M) contractor to operate the facility.
Most often, a reputable contractor performs both EPC and O&M work thereby reducing any interface risk. The ideal selection methodology would be to go through a competitive tender process to select the most reliable contractor with a competitive price.
The Contractor will usually select the specific type of equipment to be used for the plant and will produce its own design but the specifications will be provided by the developer
Before a project can be constructed, it needs to reach financial close. Financial close involves satisfying all the lender and equity sponsor requirements to allow the funding for the project to the released. These requirements include but are not limited to executing all the project documents and the documents becoming effective, i.e., power purchase agreement (PPA), government support agreements, construction and operations contracts, management contracts, financing agreements, connection agreements, etc., securing all permits and licences needed to allow construction to commence and, all conditions precedent as required by the lenders to have been satisfied.
The finalisation of these requirements require negotiations between the developer and multiple parties. The four main parties include lenders, the off-taker, government and, EPC and O&M contractors.
Project development in the rest of Africa
When developing projects in Africa, effective project management is vital during the project development process. This includes conducting the requisite preliminary feasibility studies, technical studies, grid studies, applying for the necessary licences and permits, appointing a reputable EPC and O&M contractor to undertake the plant designs, procure the plant equipment, commission the facility including grid connection and provide operational and maintenance services for the facility.
A developer will typically develop a project for competitive bids or unsolicited bids for both government and private company backed projects. Private companies may also opt for closed bids where they target a limited number of bids.
Regardless of the type of bid, the development process is largely the same. In some cases, the developer will identify its own sites and perform the full development activities prior to bidding, as required under a programme such as the South African REIPPP programme, where large sums of money have to be spent at risk by the developer without any certainty that the project will be successful.
In other programmes, the sites are secured and preliminary development activities are undertaken by the developer prior to bidding with the remainder of the development activities to be undertaken after the project has been selected which reduces the developers capital expenditure prior to knowing that it has secured a project. The programmes that carry the least capital outflow by the developer are those programmes where the state or private company secures the land and performs some development studies before the bid and the developer is only required to complete the development activities after the bid has been awarded.
The selection of a technical partner may also depend on the type of bid. In some cases, a technical partner should be selected at the beginning of the bidding process and may be a pre-qualification requirement. In other cases, the developer can have a generic list of technical partners and only finalise its selection during the financial close period. Choosing a technical partner early in the process provides certainty but may have a disadvantage to the developer in negotiating contract terms.
A bid is more likely to be successful if sufficient development work has already been performed on the project at the time of bidding. This will include having already performed the feasibility study including a preliminary grid study.
Upon announcement of the tender, the bidder can focus on tailoring the project more specifically for the tender and continuing with technical studies. Further steps to ensure that the land is secured and fully registered with the relevant authorities can also be undertaken and a technical partner selected to perform the EPC and O&M work.
The technical partner will typically conduct the site design, provide all necessary materials and equipment for the connection of the solar project into the national grid, identify and select local suitable industry partner(s) and/or subcontractor(s) for the provision of construction and commissioning services, construct, install and commission the facility including grid connection, arrange and obtain all regulatory clearances and approvals required for construction and operations of the facility.
The developer may manage the construction and operations contracts to ensure that the contractor performs as contractually agreed upon or appoint a third party to perform these functions on its behalf. In addition, the developer will typically facilitate the land lease agreement, lead the negotiations with the respective entities, arrange and obtain the required regulatory clearances, permits and approvals required by the project company, provide day to day oversight and asset management and administration services.
Challenges to development in Africa
Renewable energy project development in Africa has to overcome a number of challenges before projects can be constructed.
Changes in government in a country, as a result of general elections may lead to changes in policies and frameworks. This may result in a postponement to the finalisation of projects. Thus, continuous engagement with all relevant government stakeholders is necessary to ensure project agreements are in place to meet the target time-scales.
Securing land in African countries can be a complex task. As with many African countries, there are not always clear demarcations of ownership boundaries nor official registries of these boundaries. Hence, multiple site visits and meetings, close engagement with the local, traditional and national authorities and official surveys need to be conducted to confirm certainty of the lawful landowners and land acquisition processes.
A solar PV project may be the first of its kind in most African countries. Requisite skills may not always be readily available in communities surrounding the project site. Therefore, it is imperative for contractors to educate local communities about the technology and undertake training and upskilling of labour to deliver a quality project within time and budget.
Legislation and policies may not be fully developed or tailored towards renewable energy projects. Engagement with the relevant authorities will be critical to ensure that there are mechanisms in place to govern the renewable energy projects. In some case development agencies will assist governments with developing the requisite policies.
Spending money in a new market is a risk that many developers and investors will not want to take. Grant funding opportunities can assist on providing development funding to de-risk projects.
Most solar projects in Africa are developed in poor rural communities and there are requirements often placed on developers to meet local content and socio-economic obligations. These requirement are not always easy to achieve, but with the developer and the technical partner working together it is possible to ensure that materials that can be obtained locally are sourced locally, labour is sourced locally depending on skill requirements and contributions are made to uplift the communities where the projects are located.
Considering project development in Africa?
Project development in Africa requires perseverance, a long term view and investment horizon and cultural awareness. Examples such as the REIPPP programme in South Africa and the GETFiT in Uganda show that renewable energy projects in Africa work and can be successfully developed.
The time it has taken to kick-off renewable energy projects in Africa shows that commitment to stay on the course is required and ultimately it will pay off. Numerous foreign investors and suppliers entered the African market and they have been successful. African companies have also managed to be successful in the face of international competition.
There is great potential in renewable energy in Africa and renewable energy will bring power to Africa.
Contact Jasandra Nyker, BioTherm Energy, Tel 011 367-4600, email@example.com
Source: EE plublishers