Africa50 Helps Egypt’s Solar Sector Take Off
A 37-square-kilometer solar park so large that it can be seen from space, with over seven million photovoltaic panels, and funding of US$4 billion. In Africa? Impossible? Not anymore. 30 international infrastructure developers did not think so, investing in Egypt’s massive 1.5 GW Solar Park, which will be the largest in the world upon completion. Africa50 was among them, joining Norfund and Scatec Solar to reach financial close in October 2017 for six of the 32 utility scale solar power plants in the complex, totaling 390 MW.
The solar energy potential in Egypt, a country known for year-round sunny days, has long tempted investors, but the high cost of solar plants led the government to favor fossil fuels for 90% of its power generation. Now that the prices of its components have fallen, solar energy has become competitive, allowing Benban to become a reality. The government hopes that Egypt can generate 20% of its power from renewable sources by 2022.
This was truly a landmark investment, not just for Africa500 but for Egypt and Africa:
- It was the first Africa50 investment to become operational – after having reached financial close in a mere six months after signature of a Joint Development Agreement. It was also the first early stage investment by the Africa50 Project Development arm to be converted into a long-term equity investment by the Project Financing arm.
- It is one of the largest contributions to the Benban park (26%), helping put Egypt on the map as a major solar player in Africa, and setting a precedent for using North Africa’s ample solar resources to provide power while meeting climate change commitments.
- It demonstrates Africa50’s ability to act as a bridge between the private sector and governments to deliver more projects more quickly and help narrow Africa’s infrastructure gap.
With a 25% stake, Africa50 contributed equity to fund construction, alongside Scatec Solar and Norfund, which helped leverage total funding of around US$450 million from EBRD, FMO, the Green Climate Fund, the Islamic Development Bank, and the Islamic Corporation for the Development of the Private Sector. The plants are supported by 25-year power purchase agreements with the Egyptian Electricity Transmission Company (EETC) under Egypt’s Feed-in Tariff program, backstopped by a sovereign guarantee. Access roads and interconnection facilities were funded collectively by the Benban project developers under a cost sharing agreement with EETC and the New and Renewable Energy Agency.
The development impact of Benban is tremendous. Africa50’s six plants alone created about 1,000 construction jobs (out of 4,500 total jobs) and a quarter of the 250 permanent operations positions. And in 2019, when they had become operational, they started producing about of 870 GWh of power, providing clean energy for over 400,000 households, and avoiding 350,000 tons of CO₂ emissions. Moreover, the consortium is pioneering the use of bi-facial solar modules, capturing the sun from both sides of the panel to increase generation.
The Benban project could provide valuable insights for the Desert-to-Power programme led by the African Development Bank, with which Africa50 is associated, and which aims to develop 10,000 MW of solar power across the Sahel. Moreover, Benban’s links to the infrastructure of the Aswan Dam will help combine hydro, wind, and solar power, a model for other African regions.
In fact, Benban is a good example of a fundamental change in the way an African country can provide power to its people. For decades, the Egyptian government had built and operated most power plants and was spending more on electricity subsidies than it was on education, health care, and social welfare combined. Benban proves that, with the right regulatory regime and cost structure, the private sector, supported by partners such as Africa50, can make solar power attractive, allowing a government to focus on other pressing priorities. Indeed, in the time of COVID-19 we need partners such as Africa50 that can leverage private finance to free up government budgets to fight the pandemic.
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