Solar public-private partnerships (PPPs) have been popping up all over Africa. Until recently, most of the solar PPP activity took place in South Africa in the form of utility-scale solar photovoltaic (PV) projects. However, now that more countries have implemented PPP policies, this type of agreement has gained much traction in the continent’s renewable energy landscape. But what exactly is a PPP, and how do its particularities relate to the development of solar energy projects?

What is a PPP?

A PPP is a long-term contract between a private company and a government or non-profit organization for the financing, development, construction, operation and ownership of infrastructure assets. These types of partnerships are guided by a policy framework provided by the public sector in order to issue financial incentives to private sector projects that meet the requirements and serve the public good.

The relationship between PPPs and solar energy

According to the World Bank, PPPs have been a major driver for the exponential growth of grid-connected utility-scale solar PV systems. However, these agreements also have the potential to help the development of smaller-scale solar projects. The biggest benefit of a solar energy PPP is the initial cost savings. Renewable energy initiatives, especially photovoltaic projects, come with a substantial amount of expenses for equipment and infrastructure costs, especially for schools, hospitals and other non-profit groups that cannot afford to finance these projects alone. These public organizations could - through a PPP - partner up with a private company that will take on the full responsibility for the investment and management of the solar project. So not only do they save money on financing and operational expenses with PPPs, but they also benefit from lower energy costs.

Solar PPPs in Africa

In Africa, around 30 countries have adopted laws regarding PPPs. South Africa, being the largest solar energy market on the continent, is the country most familiar with PPPs. However, countries like Ethiopia, Zambia, Namibia and Botswana are poised to challenge this trend. Some of these countries have started to organize competitive auctions involving PPPs, where their governments partner up with independent power producers to develop solar power plants. One such example is the ‘Scaling Solar’ tender program, which is active in both Ethiopia and Zambia. Other programs include the mega-project being developed in Namibia and Botswana, where both countries are aiming to develop 5000 MW of solar energy capacity over the coming years. Besides these initiatives, there is still a massive potential for PPPs in Africa that still remains vastly untapped.

Challenges with PPPs

The success stories of PPPs have demonstrated that, if other African countries want to implement successful solar energy programs involving PPPs, there are a few key lessons to take into consideration. One of them being the need for a well designed, transparent procurement process to encourage the involvement of private investors. Since the costs of solar energy technologies are rapidly falling, the incentive for private sector players is expected to only increase in the future.

It should be noted that the development of such policies can not only focus on increasing solar energy capacity, but also on other socio-economic benefits. Large-scale grid-connected solar power projects are not going to have a significant impact on non-electrified areas. Therefore, these types of policies should also be adapted to rural electrification projects, to make it attractive for private players to make modern energy services available on a sustainable basis to rural households as well. However, in doing so, many challenges arise in terms of market access, political support and business stability that need to be addressed in order to fully extract the benefits of PPPs in Africa.

MARCO DOROTHAL - Research Analyst

Want to tackle these challenges together? Join us at Unlocking Solar Capital Africa on 16-17 of October in Dakar, Senegal where we will have a dedicated session on how PPPs can facilitate private sector participation and how the aforementioned challenges can be overcome.