*Article written by IFC which originally appeared on the IFC website
Solar power has enormous potential to quickly and affordably meet the energy needs of emerging markets—including in sub-Saharan Africa, where two out of three people lack access to electricity and existing grids are under strain.
But while large countries such as India, Mexico, and South Africa have benefited from surging investment in the renewable energy sector, many of their smaller neighbors remain off the radar of solar power developers and are struggling to obtain the electricity they need.
To bridge this gap, the World Bank Group has launched Scaling Solar, a “one-stop shop” for governments that want to attract private investors to build large-scale solar plants but lack the purchasing power of bigger emerging markets where strong competition has driven down solar prices to virtual parity with oil, gas, and coal-fired electricity.
Scaling Solar includes a package of technical assistance, templates for documents, pre-approved financing, insurance products, and guarantees that take the guesswork out of whether a solar project is viable and bankable for both governments and investors.
Under the program, a country can assess a project, manage a competitive tender, build a plant, and start generating cheap, sustainable solar power within two years—a fraction of the time it would take to do so independently, and faster than other generation sources such as hydro and thermal.
Zambia, for instance, is on track to have two 50-megawatt solar facilities up and running about two years after having engaged in the program. The country’s needs are urgent as several years of drought have significantly reduced the output from hydropower plants Zambia has traditionally relied on.
Zambia’s first tender attracted 48 interested groups including top developers EDF, Enel, and First Solar, and 11 prequalified to bid. This has provided an important boost for the country, which desperately needs new sources of energy but has otherwise struggled to attract investors given the impact of falling copper prices on its economy.
“For quite a long time, we’ve had interest from the private sector to invest in renewable energy including solar. But we haven’t had the coherent structure to implement this,” said Andrew Chipwende, chief executive officer of Zambia’s Industrial Development Corporation. “With Scaling Solar, what we’ve been able to do is develop a transparent process that the private sector and public institutions can work towards.”
Following Zambia’s successful launch, Scaling Solar has expanded elsewhere in Africa, with competitive tenders coming soon in Senegal and Madagascar. As the program grows, it is providing more opportunities for clean energy investment and creating a new market standard for developing large-scale solar power.
“What Scaling Solar offers is a robust process, contracts that have been pre-negotiated and which are ultimately going to be bankable, and transparency and speed. For us, as investors, that’s exactly what we are looking for,” said Ashwin West, Investment Principal with African Infrastructure Investment Managers. “It is a robust framework that creates confidence in the market.”
The process begins with feasibility studies led by IFC advisers. They work with governments to establish how much solar capacity should be added to the grid, and select suitable sites. IFC also helps structure and plan a competitive bidding process for developers, who enter the tender with a clear and complete picture of the project. The winning developer can then access financing from IFC should they choose it, as well as partial risk guarantees from the World Bank, and political risk and other insurance products from the Multilateral Investment Guarantee Agency (MIGA).
Scaling Solar has the financing support of USAID’s Power Africa, the Ministry of Foreign Affairs of the Netherlands, the Ministry of Foreign Affairs of Denmark, and the Infrastructure Development Collaboration Partnership Fund (DevCo), a multi-donor facility managed by IFC.