…but says special funding mechanism required
While electricity tariffs from conventional generation sources will continue to rise, the cost of renewable energy, particularly solar, is declining and becoming an increasingly competitive alternative for businesses, an expert has observed.
According Kwabena Otu-Danquah, Technical Expert at GFA Consulting Group, tariffs from conventional sources of power like hydro and thermal – which constitute 100 percent of existing power generation – will continue to rise. Meanwhile, that of solar is declining; owing to the coming of age of technology and manufacturing processes. This, he said, makes renewable energy a much better option for any economy in need of cleaner and cheaper power.
GFA Consulting Group is currently implementing a German Development Cooperation (GIZ) funded project, Market Entry into Renewable Energies and Energy-Efficiency for the Productive Sector, in the country.
Globally, solar costs have fallen 82 percent since 2010. The levelised cost of energy generated by large-scale solar plants is around US$0.068/kWh, compared to US$0.378 ten years ago; and the price fell 13.1 percent between 2018 and last year alone, according to figures released by the International Renewable Energy Agency.
“Since 2010, the cost of energy has dropped by 82% for photovoltaic solar; by 47% for concentrated solar energy (CSP); by 39% for onshore wind and by 29% for wind offshore,” the Agency said in its Renewable Power Generation Costs in 2019 report released earlier this year.
The cost is expected to drop further in the coming years, as technology continues to advance – a reason Mr. Otu-Danquah believes the country must start thinking of innovative ways of increasing renewable energy uptake so as to ensure competitive prices of power for consumers, particularly industry.
Despite the drop in global cost of solar energy, factors like high initial cost remain a challenge for most developing countries like Ghana. The high initial cost, coupled with high lending rates and lack of dedicated funding mechanisms, Mr. Otu-Danquah said, are the main barriers preventing more people from investing into solar in the country.
“The price of the technology keeps coming down, especially with solar energy. Now, it has come so low that solar energy is competitive; but the issue is that the initial cost is quite high,” he told the B&FT in Accra on the side-lines of a roundtable meeting with renewable energy and energy-efficiency service providers.
He said: “Finance is a very big issue in this country. The private sector is not able to access favourable funding; our interest rates are high. And because the initial investment is usually high, a lot of people are not able to afford solar”.
Government, through the Energy Commission, wants to achieve a 10 percent renewable energy component in the national energy mix by 2030; but many watchers have questioned government’s commitment to achieving this target. Renewable energy currently constitutes 43MW of Ghana’s installed power capacity of about 4,399MW.
The need for a special funding mechanism
Mr. Otu-Danquah wants government to establish a green or clean energy credit line to provide funding at rates lower than the prevailing commercial bank lending rates for individuals and companies that want to invest in renewable energy. “Government could introduce innovative funding models like a green fund or concessionary loans, so that people or companies can tap into it,” he advocated.
Another way he believes government could promote and encourage more people to invest in renewable energy is to create what he calls an enabling environment, so that banks should be able to give concessionary loans or loans with reasonable terms to individuals and businesses that want to invest in clean energy.
“When done properly,” he said, “first and foremost, it means that we are going to get power from renewable energy, especially solar, that will be competitive with our conventional generation.
“A lot solar units have been installed, but it’s all by individuals; and due to the fact prices are becoming attractive, that is pushing a lot of people to go for it. At the same times, tariffs on conventional sources of electricity are going higher by the day. If this trend continues, then a lot more people will invest in solar.”