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Corporate commitments to reduce their carbon footprint have
driven growth of renewable power installations many parts of the
world, but so far, such projects have achieved only modest inroads
in Africa and the Middle East.
Out of an estimated 22 gigawatts (GW) of solar and wind capacity
in the regions, a report by IHS Markit estimates that only 600
megawatts (MW) is consumed by private offtakers, rather than owned
and operated by power companies for their general customer
base.
However, according to IHS Markit, the problem isn't a lack of
corporate interest. Instead, a lack of government regulation and
transparent guidelines for direct power sales, limited access to
local financing for projects, and resistance by state-owned
utilities to losing potentially high paying customers are key
barriers holding back the nascent sector.
Five countries—Morocco, Oman, South Africa, Jordan, and the
UAE—account for almost 80% of corporate renewable power
sourcing activity to date in the Africa and the Middle East, wrote
Silvia Macri, principal researcher, and Anna Shpitsberg, director,
in the report, "Corporate renewable power sourcing activity in
Africa and the Middle East," published on 1 February.
Utility-scale PV projects account for about 200 MW, or
one-third, of the corporate capacity operating today, and half of
that is the 105-MW Amin project in Oman. In Morocco, the largest
operator of corporate renewable power, onshore wind is the market
leader, with 157 MW of installed capacity.
Growth is accelerating
On the positive side, the report said the pipeline of announced
projects has grown considerably since 2017, driven particularly by
utility-scale solar photovoltaic (PV). As of December 2020, the
combined capacity of announced corporate renewables projects is six
times the capacity contracted to date.
Companies involved in two major sectors—materials (primarily
cement manufacturing) and upstream oil and gas—are responsible
for about 72% of installed capacity to date. However, the new
project pipeline shows that the minerals extraction industry has
the most ambitious plans, as it accounts for 45% (approximately 1
GW) of new commitments.
Leasing of renewable generation rather than outright ownership
has been the preferred option for many buyers to date, Macri and
Shpitsberg wrote, because it enables the corporation to "avoid the
up-front capital cost and balance sheet impact."
But leasing became more difficult after 1 January 2019, when
International Financial Reporting Standards 16 guidelines became
effective, requiring leases in which the lessee controls and
"substantially" benefits from an identified asset to sit on the
lessee's balance sheet. "The accounting change may require more
creative contracting solutions," they note.
Posted 03 February 2021 by Kevin Adler, Chief Editor
