Large-Scale Solar Power Generation
Large-Scale Solar Power Generation
Business Model Description
Invest in or provide project financing for large-scale solar power generation to provide local power to end consumers or sell the generated capacity into the national energy grid.
Expected Impact
Increase access to energy, enhance economic productivity, and reduce carbon emissions.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Djibouti: Arta
- Djibouti: Tadjourah
- Djibouti: Ali Sabieh
- Djibouti: Djibouti (City)
Sector Classification
Renewable Resources and Alternative Energy
Development need
Only 55% of Djibouti's population has access to electricity. This is an obstacle to the development of the country because it affects the wellbeing of households and the productivity of corporates (1). The country experiences high energy demand driven by economic growth and the geographic expansion resulting from the rapid urbanization of the capital and regions (2).
Policy priority
The Horn of Africa Initiative prioritizes the development of regional energy markets, and the African Development Bank support the Ethiopia-Djibouti Second Power Interconnection project (28). Djibouti's Government, in partnership with Power Africa, has the goal of achieving 100% access to electricity within the Vision 2035, using exclusively renewable energy sources (3).
Gender inequalities and marginalization issues
Renewable energy globally employs about 32% women, compared to 22% in the energy sector overall (7), and expanding the sector can generate new jobs for women. Energy access for women also contributes to poverty reduction, saving time by substituting manual labor and reduces drudgery of fetching fuel wood and water, tasks typically women are responsible for. Access to energy also improves education, as it enables studying after sunset and greater flexibility in the organization of everyday chores (8).
Investment opportunities introduction
The Government is encouraging private-public partnerships to expand Djibouti’s renewable energy potential. This offers an opportunity for the private sector to fill the energy investment gap in the country within the renewable energy sector (5).
Key bottlenecks introduction
Slow implementation of the Independent Power Producers (IPPs) law, reliance on electricity imports, technical losses, weak supply infrastructure and over-reliance on the public sector are challenges Djibouti's energy sector faces (6).
Alternative Energy
Development need
Djibouti has significant unexploited potential in solar energy. Sunshine levels essential for solar energy are the highest in the world and remain relatively constant throughout the year (6).The country also has significant wind resources that can be used for the production of wind energy (6).
Policy priority
The Government is committed to investing in alternative energy, especially solar, wind and geothermal energy (4). Djibouti set out with a goal to obtain 100% thermal energy by 2010 and 100% renewable by 2020 (6).
Gender inequalities and marginalization issues
Clean energy reduces indoor air pollution levels and hence improves health conditions compared to polluting energy forms such as wood fuel and kerosene-intense cooking stoves, which particularly supports the position of women and other family members (8).
Solar Technology and Project Developers
Pipeline Opportunity
Large-Scale Solar Power Generation
Invest in or provide project financing for large-scale solar power generation to provide local power to end consumers or sell the generated capacity into the national energy grid.
Business Case
Market Size and Environment
Djibouti offers a solar potential of 70 MWh and has 110,000 households without power
With an estimated solar potential of more than 70 MWh per year, Djibouti offers substantial development opportunities, both for on-grid and off-grid applications (11).
Only 55% of Djibouti's population has access to electricity (1), which leaves 110,000 households without power (13).
Djibouti envisages a full transition from 100% fossil thermal energy in 2010 to 100% renewable sources, which requires significant investment (6).
Indicative Return
15% - 20%
Actis, an energy investor in growth markets including in Sub-Saharan Africa, have recorded returns at 12-14% IRR in South Africa (12).
Investment Timeframe
Medium Term (5–10 years)
The International Finance Corporation's scaling solar tender in Zambia entailed a long-term power-purchasing agreement (PPA) spanning across 10 years (12).
Ticket Size
> USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Capital - Limited Investor Interest
Business - Business Model Unproven
Market - Highly Regulated
Impact Case
Sustainable Development Need
Only 55% of Djibouti's population has access to the electricity (1), leaving nearly half of the country with limited social and economic development opportunities.
Djibouti relies on imported energy with about 70% supplied from hydropower by Ethiopia and the rest is produced locally from heavy fuel oil and diesel thermal power plants. At USD 0.29, Djibouti has one of the highest electricity rates in the world (29).
Djibouti does not utilize its abundant solar potential. The country has the highest sunshine levels in the world and they remain relatively constant throughout the year, which factors exploitation (6).
Gender & Marginalisation
In Djibouti, only 19% of women are employed, compared to 81% of men (15). Employment levels are generally lower in rural areas of the country since most of the economic activity is concentrated in Djibouti City.
Communities lacking access to electricity have lower opportunities to pursue productive opportunities, and women and children particularly suffer from unstable electricity supply.
Expected Development Outcome
Improved access to energy sources results in greater economic productivity for Djibouti's population and improvements in the country's economic and social development levels (14).
Utilizing solar energy increases the share of renewable energy and reduces the environmental footprint of energy generation and reduces the use of fossil fuel in thermal power plants, which advances environmental conservation.
Gender & Marginalisation
Large-scale solar power generation improves job opportunities for women and rural communities, where installations are expected to be located.
Primary SDGs addressed
7.1.1 Proportion of population with access to electricity
7.2.1 Renewable energy share in the total final energy consumption
As of 2018, 60% of Djibouti's population has access to the electricity (23).
Djibouti's renewable energy share in the total final energy consumption is 27.83% (22).
Country aims at meeting 100% of energy demand from renewable resources in line with Vision 2035 -initial goal was to reach the target by 2020 (21).
N/A
13.2.1 Number of countries with nationally determined contributions, long-term strategies, national adaptation plans, strategies as reported in adaptation communications and national communications
N/A
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
Planet
Corporates
Public sector
Outcome Risks
Land use change and thermal pollution may result in possible habitat loss and cause harm on the land’s productive areas.
Solar power energy may be more expensive and increase electricity tariffs, which would obstruct access to power for poorer communities.
Impact Risks
The improper disposal of solar cells at the end of their life cycle may have negative environmental effects.
Possible future changes of the currently beneficial tariff for solar energy may discourage investors in long term, and hence limit expected impact.
High capital costs for solar installation or challenges in accessing financing may limit the realization of large installations and minimize its impact at scale.
Impact Classification
What
Large-scale solar power generation increases access to energy, enhances economic productivity, and reduces carbon emissions.
Risk
While the solar power model is proven, Djibouti's underdeveloped solar power market and potential tariff changes require consideration.
Impact Thesis
Increase access to energy, enhance economic productivity, and reduce carbon emissions.
Enabling Environment
Policy Environment
Djibouti Vision 2035, 2014: Envisages a transition from fossil thermal energy to renewables; and seeks to increase electrification rates to 60%, increase share of renewable energy to 87-100% of energy mix, reform the electricity utility, extend the power grid and establish new interconnections (6).
Strategy for Accelerated Growth and Employment Promotion (SCAPE) 2015-2019, 2014: Highlights the development and use of renewable energies, such as solar, as an important part of the energy priorities in Djibouti (24).
National Strategy and Five-Year Action Plan for the Development of the Electricity Sector, n.d / forhcoming: Provides the direction for the approach, responsibilities and sources of finance for conventional and decentralized electrification and for promoting renewable energy sources (21).
Financial Environment
Financial incentives: As part of the effort to increase electricity access by low income households, a new law is under preparation to lower connection fees from their present levels of USD 280-350 (21), which would favor investors with expected higher numbers of potential customers.
Other incentives: Public-private partnerships are encouraged to expand renewable energy potential, including the one signed with Engie in 2020 (9). Efforts are underway to set up the regulatory framework and laws to encourage the private sector to enter the renewable energy market (21).
Regulatory Environment
Law No. 88, 2019: Seeks to reduce the costs of electricity; favor the production of electricity from renewable energy sources; ensure a production that is adequate as regards to volume, frequency, and quality; and ensure the energy independence of Djibouti (20).
Decree No. 2019-013/PR/MERN, 2019: Provides the regulatory framework that aims to facilitate private investment in the sector of electricity production (20).
Law No. 186, 2017: Establishes Djibouti's Public-Private Partnership Act, which may be of relevance for large-scale solar projects, following the Executive Decision No. 045 of 2016 to establish a committee on the creation of a national legal and regulatory framework of 2016 (27).
Marketplace Participants
Private Sector
Engie, Foundation Rural Energy Services (FRES), M-Kopa, Sunkofa Energy, Infraco, Camco Clean Energy, Eldosol and Radiant.
Government
Ministry of Energy and Natural Resources, Ministry of Economy and Finance, Electricity of Djibouti, Red Sea Drilling Company (RSDC).
Multilaterals
Multilaterals: Islamic Development Bank (IsDB), Investment and Development Bank of the Economic Community of West African States, African Development Bank (AfDB), World Bank, United Nations Development Programme (UNDP), European Union (EU), Global Environment Facility (GEF).
Non-Profit
French Development Agency (AFD), Japanese Government, Centre for Studies and Scientific Research of Djibouti, University of Djibouti, Djibouti Chamber of Commerce.
Public-Private Partnership
The Grand Bara solar power plant project will be developed and operated by the French energy group Engie through its subsidiary Grand Bara Solar Energy and financed through a public-private partnership between Engie and the Government of Djibouti signed in 2020.
Target Locations
Djibouti: Arta
Djibouti: Tadjourah
Djibouti: Ali Sabieh
Djibouti: Djibouti (City)
References
- (1) PNUD Djibouti. Plan Cadre des Nations Unies pour l'Aide de Developpement. 2018-2022. 2018. https://www.undp.org/sites/g/files/zskgke326/files/undp/library/corporate/Executive%20Board/2018/First-regular-session/DPDCPDJI3_UNDAF%20Final.pdf.
- (2) Ministère des Affaires Etrangères et de la Coopération Internationale. Evaluation a mis parcours du programme d'action d'Istanbul. 2015. http://unohrlls.org/custom-content/uploads/2015/12/Djibouti-National-Report-to-the-Midterm-Review.pdf.
- (3) The Business Year. Djibouti Embraces Renewables. 2020. https://www.thebusinessyear.com/djibouti-renewable-energy-investment-promises-50-percent-contribution-2-years/focus.
- (4) Ministère de l'Habitat, de l'Urbanisme, de l'Aménagement duTerritoire et de l'Environnement. Rapport National sur le development durable RIO+20. 2012. https://sustainabledevelopment.un.org/content/documents/1011DjiboutireportRio+20.pdf.
- (5) Republic of Djibouti. Strategie de croissance accelere et de croissance d'emploie. 2015. https://planipolis.iiep.unesco.org/sites/default/files/ressources/djibouti_scape-francais.pdf.
- (6) Republic of Djibouti. Vision Djibouti 2035. 2014. http://ccd.dj/w2017/wp-content/uploads/2016/01/Vision-Nationale.pdf.
- (7) International Renewable Energy Agency (IRENA). Renewable Energy: A Gender Perspective. 2019. https://www.irena.org/publications/2019/Jan/Renewable-Energy-A-Gender-Perspective.
- (8) ENERGIA. International Network On Gender And Sustainable Energy. When women have access to energy. 2021. https://www.energia.org/case-gender-perspective-energy-access.
- (9) Afrik 21. Djibouti: Engie to build 30 MW solar power plant in Grand Bara. 2019. https://www.afrik21.africa/en/djibouti-engie-to-build-30-mw-solar-power-plant-in-grand-bara.
- (10) Energy Live. Two utility-scale solar plants to be built in Kenya in $253m deal. 2019. https://www.energylivenews.com/2019/09/26/two-utility-scale-solar-plants-to-be-built-in-kenya-in-253m-deal.
- (11) Oxford Business Group. Djibouti looks to renewable energy to boost self-sufficiency and competitiveness. 2016. https://oxfordbusinessgroup.com/analysis/untapped-potential-authorities-seek-exploit-renewable-energy-potential-boost-self-sufficiency-and.
- (12) Solar Finance & Investment. March 2017. The risks and returns of African PV. https://financeeurope.solarenergyevents.com/2017/02/06/the-risks-and-returns-of-african-pv/
- (13) USAID. Djibouti - Power Africa Sheet. 2020. https://www.usaid.gov/powerafrica/djibouti.
- (14) Chisika and Yeom. Enhancing Sustainable Development and Regional Integration through Electrification by Solar Power: The Case of Six East African State. 2021. https://doi.org/10.3390/su13063275.
- (15) Borgern Project. Women's right in Djibouti and what US is doing to help. 2020. https://borgenproject.org/womens-rights-in-djibouti.
- (16) Republic of Djibouti. Plan de development rural de Arta. 2017. https://www.academia.edu/37693833/PLAN_DE_DEVELPPEMENT_RURAL_ARTA_final_08_03_2017_pdf.
- (17) Republic of Djibouti. Plan de development rural de Tadjourah. 2017. https://www.academia.edu/37693836/PLAN_DE_DEVELPPEMENT_RURAL_TADJOURAH_final_08_03_2017_pdf?auto=download.
- (18) Republic of Djibouti. Plan de development rural de Ali Sabieh. 2017. https://www.academia.edu/37693832/PLAN_DE_DEVELOPPEMENT_RURAL_ALI_SABIEH_final_08_03_2017_pdf.
- (19) Republic of Djibouti. Schéma Directeur d’Aménagement et d’Urbanisme (SDAU) Djibouti. 2014. https://www.adds.dj/wp-content/uploads/2016/03/DOSSIER-DU-SDAU-2014-12-23.pdf.
- (20) AfricaDroit, Association Internationale des Juristes. Production of Electricity in Djibouti – A new Regulatory Framework favouring Renewable Energy. 2019. https://africadroit.com/2019/09/13/production-of-electricity-in-djibouti-a-new-regulatory-framework-favouring-renewable-energy.
- (21) International Renewable Energy Agency (IRENA). Djibouti Renewable Readiness Assessment. 2015. https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2015/IRENA_RRA_Djibout_2015_EN.pdf.
- (22) UN Global SDG Database. SDG Indicators. 2021. https://unstats.un.org/sdgs/indicators/database.
- (23) Sustainable Development Report. Country Profiles: Djibouti. 2021. https://dashboards.sdgindex.org/profiles/djibouti.
- (24) Republic of Djibouti. Strategie de Croissance Accélérée et de Promotion de l'Emploi. 2015. https://economie.gouv.dj/wp-content/uploads/de95d383afef8bcbe0a3bc609a7f5c76.pdf.
- (25) Construction Review Online. Djibouti approves construction of Grand Bara solar power plant. 2020. https://constructionreviewonline.com/news/djibouti-approves-construction-of-grand-bara-solar-power-plant.
- (26) UNEP. Energy Profile Djibouti. 2021. https://wedocs.unep.org/bitstream/handle/20.500.11822/20491/Energy_profile_Djibouti.pdf?sequence=1&isAllowed=y.
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- (28) Horn of Africa Initiative (HoAI). African Development Fund approves grants for $83.6 million to boost Ethiopia-Djibouti electricity trade. 2021. https://hoainitiative.org/african-development-fund-approves-grants-for-83-6-million-to-boost-ethiopia-djibouti-electricity-trade.
- (29) Oxford Business Group. 2016. Diversification key to expansion of Djibouti's energy sector. https://oxfordbusinessgroup.com/overview/fuel-growth-diversifying-energy-mix-and-securing-adequate-supply-eye-expansion-central-development.