Investing in Renewable Energy in East Africa
The location of East Africa renders it the fertility and the potential to make use of the renewable sources of nature to produce energy. The sub-Saharan or the East African region comprises the Republics of Burundi, Kenya, Rwanda, South Sudan, Uganda, Tanzania, Djibouti, Eretria, Mozambique, Zimbabwe, and Malawi. This region of Africa is most affected in terms of facing an electricity crisis. Even though some parts have access to electricity, the service is unstable and prone to fluctuation. A significant area of rural East Africa is yet to receive a reliable supply of electricity. This shortage has created a tremendous need to create an industry around renewable energy in East Africa, and it has received the dire seriousness it deserves.
The renewable energy industry saw a milestone in 2015-2016, according to a report compiled by the United Nations Industrial Development Organization (UNIDO) in conjunction with Renewable Energy Policy Network for the 21st Century (REN21) in 2016. The report showcased the region’s massive growth in the renewable energy industry and some pretty substantial investment numbers. For instance, the report showed an investment of approximately USD 150 million from off-grid solar companies. This investment accounted for almost 50 percent of the world’s total investment in renewable energy. The renewables being an efficient source in sustainably providing power, and the East African Community (EAC) having access to solar, geothermal, wind and hydropower, makes it a region that is booming with potential. This factor, coupled with the demand for electricity in the area, predicted to triple by 2030, drives incubator programs, venture capitalists, and angel investors to flock to this market and invest in the industry.
There have been projects undertaken in the East African region in terms of geothermal and wind energy. Hydroelectricity projects dominate over any other form of renewable energy projects. Ethiopia boasts the most significant potential with 260,000 GWh worth of hydropower capacity installed. Ethiopia is followed closely by Kenya with 40,000 GWh. There are other countries in the East African Community that share electricity generated by various power stations. The hydropower project of HPP Ruzizi I and II are shared between Rwanda, Burundi, and DR Congo. The HPP Rusumo Falls Project benefits Rwanda, Burundi as well as Tanzania. The East African Community (EAC) has also witnessed some pretty notable projects in other renewable energy sectors. For instance, Kenya is amongst the leading geothermal energy producers in the world. It was also one of the first African countries to build a geothermal energy source. As of 2019, situated in the Great Rift Valley of Kenya, the geothermal project has 690 MWh of installed geothermal capacity. Kenya aims to have 5,500 MWh of installed geothermal power capacity by 2030, which would make it the world’s largest producer of clean energy. Kenya also hosts the Lake Turkana Wind Project, a 162 square kilometer wind farm aiming to provide cost-effective, clean energy to parts of Kenya.
Even after progressing this far with renewable energy projects, East Africa has successfully tapped a tiny percentage of its clean energy potential. It has not increased equally in all the countries, especially in rural regions. The solar power industry is witnessing growth both in terms of proliferation and the interests of investors. Located close to the equator, some of the East African regions receive the highest solar irradiation levels in the world. In addition to this, government policies are tailor-made to aid solar power plants to thrive in the generation and distribution of electricity, even in the remotest parts of the East African community. East African nations have adopted many tax exemption programs that entail the exemption of import duties on photovoltaic cells and modules. Kenya and Tanzania have gone the extra mile to remove value-added tax on solar products. East African companies like Off-Grid Electric and M-Kopa make the most of these opportunities to provide cost-effective and solar-powered energy.
China is the largest investor in the East African power sector. These large-scale investments in the renewable energy market have also had other economic benefits such as job creation for local laborers, growth of small-scale industries to manufacture adequate technology, and contribution to the local economy. East Africa is brimming with the potential to bring a massive change in energy distribution and consumption and open up opportunities for investors.
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