Utility-Scale Solar Infrastructure for Improved Grid Capacity
Utility-Scale Solar Infrastructure for Improved Grid Capacity
Business Model Description
Establish and operate large-scale solar power plants for local power generation, or offer power supply to industrial consumers through modified single buyer model (SBM).
Expected Impact
Provide stable, affordable and clean energy to large businesses and industries as well as communities not covered sufficiently by the grid networks.
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
- Namibia: Hardap Region
Sector Classification
Infrastructure
Development need
The Africa SDG Index and Dashboards Report 2019, on SDG 9 regarding Industry, Innovation and Infrastructure, indicates that Namibia has “major challenges” in achieving this SDG (VIII). The country's infrastructure performance is ranked 94 out of 114 countries in the WEF Global Competitiveness Report 2019 (XII).
Policy priority
The Government prioritises infrastructure development towards SDG achievement (I). Namibia's 5th National Development Plan (NDP5) highlights how the lack of infrastructure development results in bottlenecks for economic development (II). It committed to spending 42% (NAD 74 billion, USD 5.3 billion) of the country's GDP on infrastructure projects over five years (VII).
Gender inequalities and marginalization issues
Given that infrastructure projects are typically linked to large-scale construction, gender representation in the construction industry was used as a proxy to gauge gender equality within the infrastructure sector. Namibia’s construction industry is male-dominated; 92% of its workforce is male (XII).
Investment opportunities introduction
Namibia put in place the Public Private Partnership Act in 2018, which aims to address the country's critical infrastructure needs through participation from the private sector through leveraging public private partnerships (PPPs) (IX). It also established a dedicated infrastructure fund to support the sector's growth (X).
Utilities
Development need
Namibia's utility infrastructure, which includes access to electricity, quality of electricity supply, exposure to unsafe drinking water and reliability of water supply, is a challenge in the country, as it scores a low 68.7 out of 100 in the WEF Global Competitiveness Report 2019 (XII).
Policy priority
The Government's infrastructure focus includes energy and water infrastructure developments. Priorities for energy in Namibia feature generating capacity and renewable energy, such as solar, wind and biomass, as stipulated in the 5th National Development Plan (NDP5) (II).
Gender inequalities and marginalization issues
Namibia’s electricity, gas, steam and air condition industries are male-dominated; 76% of its workforce are male (XIII).
Investment opportunities introduction
The Namibian Infrastructure Fund (NIF) addresses infrastructure backlogs in Namibia's key subsectors, including energy and water utilities (besides sanitation, ICT, transport and logistics, health and municipal services) (XI). The World Bank estimates that investments in infrastructure can generate economic returns of up to 11% for electricity projects (V).
Electric Utilities and Power Generators
Pipeline Opportunity
Utility-Scale Solar Infrastructure for Improved Grid Capacity
Establish and operate large-scale solar power plants for local power generation, or offer power supply to industrial consumers through modified single buyer model (SBM).
Business Case
Market Size and Environment
1,330 MW of power generation capacities required by 2035, partly through renewable energies.
The National Integrated Resource Plan, which sets the procurement allocation to supply options to meet the demand and demand growth in Namibia, calls for power plant capacities to be expanded to 1,330 MW by 2035. The stipulated power generation capacities must consist of roughly equal proportions of renewable energies and fossil thermal power plants (14).
The Modified Single Buyer registered contestable customer list has an allowable contestable quantity of 406 MW available for the private sector to engage these contestable customers directly (12).
NamPower, the national power utility, aims to procure 70 MW new capacity from Independent Power Producers (IPPs) through competitive procurement, comprising 20 MW of solar PV besides 50 MW of wind (11).
Indicative Return
10% - 15%
Tariffs are cost reflective and regulated by the Electricity Control Board (ECB) of Namibia; the IRR for solar PV investments is 12.6% (22).
Investment Timeframe
Long Term (10+ years)
Based on insights from Namibia based institutional investors, who have actively invested in utility scale solar infrastructure, the typical investment timeframe is 15-20 years for debt providers, and a minimum of 20 years for equity investors (23).
Market Risks & Scale Obstacles
Business - Supply Chain Constraints
Capital - Requires Subsidy
Market - Volatile
Impact Case
Sustainable Development Need
As of 2016, only 51.8% of Namibia's population has access to electricity (1). The country's electricity prices are the highest in the Southern African Development Community (SADC) region (2).
Renewable energy consumption only represents 26.5% of Namibia's total final energy consumption levels (1).
To meet Namibia's energy needs sustainably, the country must increase the grid-connected renewable energy capacity to a total of 669 MW by 2035. The generation target for PV and concentrated solar power is 149 MW and 250 MW, respectively (2).
Gender & Marginalisation
Electricity coverage is lowest in Namibia's rural areas, where it stands at only 18% (2).
Expected Development Outcome
Provision of clean energy at household- and small business-level, which improves the environmental balance of Namibia's energy consumption through the reduction of greenhouse gas emissions by replacing fossil fuels with renewable energy.
Reduced dependency on imported energy from the Southern African Development Community (SADC) region.
Gender & Marginalisation
Lower electricity tariffs for consumers, which allow especially marginalised groups to save household costs and access income generation opportunities.
Primary SDGs addressed
7.1.1 Proportion of population with access to electricity
7.1.2 Proportion of population with primary reliance on clean fuels and technology
7.2.1 Renewable energy share in the total final energy consumption
Secondary SDGs addressed
Directly impacted stakeholders
People
Planet
Corporates
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Public sector
Outcome Risks
Utility-scale solar infrastructure facilities are area consuming and can cause environmental damage in the disposal of PV installations, if not recycled carefully (5).
Impact Risks
If the facilities are used solely for consumptive purposes, the impact is limited as the energy does not directly generate economic value.
If the infrastructure is not managed professionally, the power supply may be unstable and not serve the needs of the large businesses and industries.
Impact Classification
What
The outcome is likely to be positive, important and intended because utility-scale solar infrastructure provides clean energy to businesses and households.
Risk
While distributed solar generation technology is becoming increasingly efficient, external factors like a potential slowdown in solar component imports may disrupt the ability of to deliver impact.
Impact Thesis
Provide stable, affordable and clean energy to large businesses and industries as well as communities not covered sufficiently by the grid networks.
Enabling Environment
Policy Environment
National Renewable Energy Policy, 2017: Supports the adoption of a market structure in Namibia that enables Independent Power Producers (IPP) to generate and sell electricity to off-takers other than the Single Buyer and enables Small Scale Distributed Generation (SSDG) from various resources (13).
National Integrated Resource Plan, 2016: Sets the procurement allocation to supply options to meet the demand and demand growth in Namibia (13).
Draft National Independent Power Producer (IPP) Policy, 2015: Addresses specific issues relevant to privately-owned power generation plants (13).
Financial Environment
Financial incentives: The Solar Revolving Fund, delivered by the Ministry of Mines and Energy, is a credit facility that stimulates demand for renewable energy technologies; it offers subsidized loans to Namibian citizens at a fixed interest rate of 5% per annum for five years (21).
Financial incentives: Local authorities provide "compensation" for locally generated electricity being fed into the national grid in the form of receiving electricity tariff credits or discounts for excess power fed back into the grid (17).
Regulatory Environment
Electricity Act, 2007: Establishes the Electricity Control Board (ECB) with its functions, provides for the requirements and conditions for obtaining licences for the provision of electricity, and provides for the powers and obligations of licensees (16).
Electricity Control Board (ECB) Rules for Net-Metering, 2016: Makes provision for customers who generate their own electricity from solar power to 'store' their excess electricity produced in the distribution grid and then balancing out their grid consumption with the stored electricity (4).
Other relevant regulations include the Quality of Supply and Service Standards (2004), the Namibian Transmission Grid Code (2005) and the Administrative Electricity Regulations (2011) (20).
Marketplace Participants
Private Sector
Funds such as the Namibia Infrastructure Development and Investment Fund (NIDIF), Mergence Unlisted Investment Managers, and Old Mutual Alternative Investments Expanded Infrastructure Fund. Independent power producers, such as Omburu Solar PV (4.5 MW) and HopSol Solar PV (5 MW) (24).
Government
Ministry of Mines and Energy (MME), Electricity Control Board (ECB).
Multilaterals
The Environmental Investment Fund (EIF) is the local partner for the Green Climate Fund (GCF), which provides funding for the development and implementation of environmentally sustainable development projects, including solar infrastructure (25).
Non-Profit
The Agency Française de Développement (AFD) SUNREF Namibia programme provides a green credit line, with technical assistance, for businesses through partner banks like FNB, Bank Windhoek and Nedbank (18).
Public-Private Partnership
The Pathway to Renewable Off-Grid Community Energy for Development (PROCEED) project implements "island networks" (10).
Target Locations
Namibia: Hardap Region
References
- (I) Republic of Namibia, National Planning Commission, 2018, Implementation of Sustainable Development Goals, Voluntary National Review, https://sustainabledevelopment.un.org/content/documents/19880New_Version_Full_Voluntary_National_Review_2018_single_1_Report.pdf. II) Republic of Namibia, National Planning Commission, 2017, Namibia's 5th National Development Plan (NDP5), https://www.npc.gov.na/?wpfb_dl=294. III) Republic of Namibia, Office of the President, 2016, Harambee Prosperity Plan 2016/17 - 2019/20 Progress Report, Goals and Outcomes, https://op.gov.na/documents/84084/572904/HPP+Report+2019/66c2eef8-3b23-45be-bc2c-5e728699057e. IV) African Development Bank Group, 2020, Namibia: African Development Bank approves $121.7 million loan, Euro 3 million grant to support water and sanitation sector, https://www.afdb.org/en/news-and-events/press-releases/namibia-african-development-bank-approves-1217-million-loan-euro-3-million-grant-support-water-and-sanitation-sector-34727. V) Canning, David & Bennathan, Esra. 2000, The Social Rate of Return on Infrastructure Investment, The World Bank, Policy Research Working Paper Series, https://elibrary.worldbank.org/doi/abs/10.1596/1813-9450-2390. VI) Republic of Namibia, Public Private Partnership Act 4, 2017, Section 40(1), https://laws.parliament.na/cms_documents/public-private-partnership-act-4-of-2017---regulations-2018-353-c96b676b6f.pdf. VII) African Development Bank Group, 2018, 2018 African Economic Outlook, https://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/country_notes/Namibia_country_note.pdf. VIII) SDG Center for Africa and Sustainable Development Solutions Network, 2019, Africa SDG Index and Dashboards Report 2019, Kigali and New York: SDG Center for Africa and Sustainable Development Solutions Network, https://sdgcafrica.org/wp-content/uploads/2019/06/SDGS_INDEX_REPORT_2019WEB.pdf. IX) Republic of Namibia, Public Private Partnership Act 4, 2017, Section 40(1), https://laws.parliament.na/cms_documents/public-private-partnership-act-4-of-2017---regulations-2018-353-c96b676b6f.pdf. X) World Bank, 2020, Leveraging Pension Fund Investment for Domestic Development: Namibia’s Regulation 29 Approach, http://documents1.worldbank.org/curated/en/125241594367606090/pdf/Leveraging-Pension-Fund-Investment-for-Domestic-Development-Namibia-s-Regulation-29-Approach.pdf. XI) Ino Harith Capital, Our Partners, https://www.harith.co.za/our-partners-2. XII) Schwab, K, World Economic Forum, 2019, The Global Competitiveness Report 2019, http://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf. XIII) Republic of Namibia. Namibian Statistics Agency, 2018, Labour Force Survey 2018 Report, https://d3rp5jatom3eyn.cloudfront.net/cms/assets/documents/NLFS_2018_Report_Final_.pdf. XIV) United Nations, 2018, Accelerating SDG 7 Achievement Policy Brief 12 Global Progress of SDG 7 - Energy and Gender, https://sustainabledevelopment.un.org/content/documents/17489PB12.pdf. XV) Republic of Namibia. Namibian Statistics Agency, 2016, Namibia Household Income and Expenditure Survey (NHIES) 2015/2016 Report, https://d3rp5jatom3eyn.cloudfront.net/cms/assets/documents/NHIES_2015-16.pdf. XVI) DNA Economics, 2021, SAM Multiplier Analysis for the SDG study in Namibia, Six Capitals.
- (1) Republic of Namibia, National Planning Commission, 2017, Namibia's 5th National Development Plan (NDP5), https://www.npc.gov.na/?wpfb_dl=294.
- (2) Global Business Network Program, 2020, Partnership Ready Namibia: Renewable energy, https://www.giz.de/en/downloads/GBN_Sector%20Brief_Namibia_RenewableEnergy_E_WEB.pdf.
- (3) Republic of Namibia, Namibia Industrial Development Agency, 2020, Long list of candidate PPP Projects. Available on request.
- (4) Republic of Namibia. Electricity Control Board, Net Metering Rules: Electricity Act, 2007, https://www.ecb.org.na/images/docs/Noticeboard/Gazetted%20Net%20metering%20Rules.pdf.
- (5) Andrzej Bielecki, Sebastian Ernst, Wioletta Skrodzka, Igor Wojnicki, 2020, The externalities of energy production in the context of development of clean energy generation, Environmental Science and Pollution Research. 27:11506–11530.
- (6) Danish Energy Management & Esbensen, 2017, Renewable Energy Market Landscape Study covering 15 countries in Southern and East Africa. Volume 2: Country Profile Stakeholder Maps, https://www.entwicklung.at/fileadmin/user_upload/Dokumente/Regionen/Volume_II_Market_Landscape_-Study_-EEP-SEA_CountryProfiles_StakeholderMaps-1.pdf.
- (7) International Finance Corporation, 2020, Regulatory and Tariff Review for Distributed Generation in the Commercial and Industrial Sectors in Southern Africa, https://www.ifc.org/wps/wcm/connect/090c58a2-2b98-482e-8c6d-b5931ed793e2/202006-Regulatory-Tariff-Review-Southern-Africa.pdf?MOD=AJPERES&CVID=nbDqlVa.
- (8) Republic of Namibia, Office of the President, 2016, Harambee Prosperity Plan 2016/17 - 2019/20 Progress Report, Goals and Outcomes, https://op.gov.na/documents/84084/572904/HPP+Report+2019/66c2eef8-3b23-45be-bc2c-5e728699057e.
- (9) EOS Capital Website, About NIDIF, https://www.eoscapital.com.na/nidif.
- (10) Old Mutual, 2021, Alternative Investments, https://www.oldmutual.com.na/old-mutual-investment-group/alternative-investments/expanded-infrastructure.
- (11) NamPower, 2019, NamPower Corporate Strategy and Business Plan 2019 - 2023, https://www.nampower.com.na/Page.aspx?p=233.
- (12) Ministry of Mines and Energy, 2019, Electricity Supply Industry Detailed Market Design, https://www.ecb.org.na/images/docs/Rules_and_Regulations/MSB/MSB_Detailed_Design_Report.pdf.
- (13) International Finance Corporation, 2020, Regulatory and Tariff Review for Distributed Generation in the Commercial and Industrial Sectors in Southern Africa, https://www.ifc.org/wps/wcm/connect/090c58a2-2b98-482e-8c6d-b5931ed793e2/202006-Regulatory-Tariff-Review-Southern-Africa.pdf?MOD=AJPERES&CVID=nbDqlVa.
- (14) Ministry of Mines and Energy, 2016, The National Integrated Resource Plan 2016, https://www.ecb.org.na/images/docs/Noticeboard/ELECTRICITY%20SECTOR%20NATIONAL%20INTEGRATED%20RESOURCE%20PLAN%20(NIRP)%202016%20Version%201.pdf.
- (15) Government Institution Pension Fund of Namibia (GIPF), 2020.
- (16) Electricity Act 4 of 2017, Republic of Namibia, https://laws.parliament.na/cms_documents/2016---technical-rules-40c94f5c41.pdf.
- (17) Global Business Network Program, 2020, Partnership Ready Namibia: Renewable energy, https://www.giz.de/en/downloads/GBN_Sector%20Brief_Namibia_RenewableEnergy_E_WEB.pdf.
- (18) SUNREF, 2020, SUNREF Namibia: Towards a greener future, https://www.sunref.org/wp-content/uploads/2018/05/Brochure-Sunref-Namibie_AFD.pdf.
- (19) PROCEED, Pathway to Renewable Off-Grid Energy for Development, 2019, https://www.bmbf-client.de/en/projects/proceed.
- (20) See Annotated Laws & Regulations, Republic of Namibia, https://laws.parliament.na.
- (21) Ministry of Mines and Energy, Solar Revolving Fund, http://www.mme.gov.na/directorates/efund/srf.
- (22) Electricity Control Board (ECB), 2021, WACC Calculation 2020 / 2021, available upon request from ECB.
- (23) Monasa / UNDP interviews with Government Institution Pension Fund of Namibia, RMB Namibia, and Old Mutual Investment Group Namibia, 2020.
- (24) NamPower, 2019, Corporate Strategy and Business Plan: 2019 – 2023, https://www.nampower.com.na/public/docs/NamPower%20Corporate%20Strategy%20and%20Busness%20Plan%202019%20-%202023%20%20Abridged%20Booklet.pdf.