Climate Action 2016-2017

RENEWABLES SURGE
IN EMERGING MARKETS
ENERGY
by Paddy Padmanathan, President and CEO,
ACWA Power
Paddy Padmanathan, President and
CEO, ACWA Power, describes the
massive potential of the renewable
energy sector, with a focus on projects
in emerging regions.
The climate change deal signed in 2015 at
COP21 in Paris confirmed that the leaders
of 200 nations are now committed to
decarbonising power generation by 2050.
They have recognised renewable energy as an
important tool in limiting the rise of the ambient
temperature on earth, without compromising the
need to fuel social development and economic
growth with reliable supplies of energy. At
the time, it was our view that the deal had the
potential to fundamentally change the way
the world not only generates but also utilises
electricity. Developments since then, particularly
in emerging markets, have only served to
reinforce this view.
Countries in the Middle East and Africa all
need significant new electricity generation
capacity to keep pace with the rapidly growing
need for industrialisation. This goes hand in hand
with the creation of employment and serving
the grossly underserved, even as the focus
on efficiency starts reducing energy intensity
in all areas of consumption. Countries in this
region are also richly endowed with renewable
resources, benefiting from strong sunshine and
long daylight hours, some of the highest stable
onshore wind speeds in the world, and more
than adequate land space to develop large
renewable generation plants.
Given how innovation, technology
development and competitive tension have
made solar and wind energy cost-competitive
compared with fossil fuel energy, the potential
for these sectors’ growth is high, both to serve
peak loads and for supply to remote isolated
communities. Because battery storage is
still expensive, photovoltaic (PV) and wind
technologies have been criticised as intermittent,
since they can be used only when the resource
is available. Introducing into the system
concentrated solar power (CSP) technology
together with molten salt storage offers the
prospect of competitively delivering renewable
energy for more than 50 per cent of the electricity
needs of every country in this region. While
these technologies are more expensive now, they
are reducing in cost with increasing levels of
deployment, and will be able to serve consumers
more flexibly. As volumes of deployment increase
over the next decade, as more innovation comes
into play and as costs are further reduced, there
is the real prospect that all the electricity in
this region can eventually be generated from
renewable carbon neutral resources.
THE PPP INVESTMENT ROUTE
ACWA Power has been leading the way in
propagating the deployment of renewable
energy. Several years ahead of COP21, ACWA
Power was one of the first power generators in
the region to declare a voluntary target of at least
5 per cent power generation from renewable
sources within five years, and pushed ahead to
"Both the models are
achieving much more
than simply renewable
megawatts, without
impacting the cost of the
delivered energy."
embark on pace-setting projects challenging
the cost paradigm in both CSP and PV solar
technologies. As we not only achieve but
exceed our targets on developments that will be
completed within the next two years, renewable
energy plants in our portfolio will avoid more
than 2.4 million tonnes of carbon dioxide a year.
Already, 2016 has shown the way forward with
a steady stream of projects being inaugurated
or announced throughout the Middle East and
Africa. The common thread running through
these is the model they share, particularly
popular in these emerging and frontier markets –
public–private partnerships (PPPs).
PPP project agreements typically transfer
the responsibility to the private sector to design,
build, finance, construct and operate the power
generation plants, where the payment for the
generated electricity is only made as the energy
is dispatched. The private sector thus takes all
risks such as technology, timely completion of
new build, cost overrun in capital and operating
cost and even the resource risk; with the
public sector only taking demand risk as the
energy is provided on long-term take or pay
contracts. This model of contract procured on
a transparent competitive procurement basis,
where the tenderer is given the opportunity
to offer the most competitive price instead of
offering capacity within a preset feed-in tariff,
has demonstrated the ability to deliver significant
cost reductions. This privately financed and
competitively procured model of infrastructure
service provision not only removes from the
state a significant capital investment burden,
but also ensures the delivery of the most fit for
purpose and efficient solutions that also comply
with global environmental impact mitigation
regulations and legislation.
EXAMPLES OF NEW AFRICAN PROJECTS
In the context of renewable energy, two
shining examples of what can be achieved
on this continent are the South African REFIT
programme, procured by the IPP unit at the
Treasury of the Ministry of Finance, and the
Moroccan renewable energy programme
procured by MASEN, the dedicated renewable
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