By Rachel Koning Beals

By 2025, two-thirds of the world population will experience water stress, according to resource consultancies. For investors, where shortages build, opportunities flow.

Think utilities, power generation, desalination of sea water, pumping clean drinking water to the underserved, plus industrial use — all categories that feature water as a commodity, yes, but also the pumps, valves, membranes, and electronics needed to move that liquid.

Says Matt Sheldon, a portfolio manager at Kleinwort Benson Investors International, which runs the Calvert Global Water Fund CFWAX -0.40% : “Two years ago, I would have said utilities presented the best opportunity. Now, it’s pump companies. It’s infrastructure.”

In fact, never mind what’s coming in a decade. For many companies, fund managers, and investors the time to act is now. Their focus is on technological improvements to stretch resources, given the population shifts and infrastructure demands in emerging and frontier markets — from parts of Asia and Latin America to the Middle East and Africa.

But water investment is a theme as old as the Great Depression. At its core, we’re talking about inelastic supply, non-cyclical demand and in some instances, monopolistic market holds.

The S&P Global Water Index has largely kept pace with the Standard & Poor’s 500-stock index SPX +0.23% , up 9.5% over three years compared to the broader index’s 10.9% gain. The S&P Global Water Index gained 21% in 2012, bettering the S&P 500’s 16%.

For retail investors, exchange-traded funds offer several choices. Among the biggest, PowerShares Water Resource PHO -0.09% tracks the Nasdaq OMX US Water Index, with a focus on products that conserve and purify water. There’s also its cousin, the PowerShares Global Water Portfolio PIO -0.32% . Meanwhile, First Trust ISE Water Index Fund FIW -0.32% keeps its focus largely on companies with revenues from the potable and wastewater industry. The iShares Dow Jones U.S. Utilities Index IDU +0.24% provides some exposure to water-related stocks.

Big-drink thinking

Water has topped meeting agendas for global power brokers in recent months. For example, executives in environmental breakout groups at The World Economic Forum in Davos had water risk high on their list. Water issues also are bringing industry, banks, and policy-makers together; General Electric Co., Goldman Sachs, and the World Resources Institute convened a summit “Water: Emerging Risks and Opportunities” in early February. At the highest level, the United Nations has declared 2013 the International Year of Water Cooperation.

In many ways, water is the ultimate commodity. That is, investment in water is really an investment in the bigger “resources” theme. And that’s spawned a new buzz phrase: the food-water-energy nexus. The trio was one of the top four megatrends to watch in the recently released Global Trends 2030 report by the U.S. National Intelligence Council.

Andy Wales, senior vice president of sustainable development at SABMiller, has blogged on the topic. Says Wales: “Agriculture accounts for about 70% of global freshwater use and can pollute freshwater supplies if mismanaged. In the U.S., power generation accounts for about 50% of all freshwater withdrawals, and drought in countries that use hydropower — Ethiopia and Ghana, for example — can lead to black-outs. Energy, in turn, is needed to fertilize and transport crops, which can themselves be used as biofuel to create energy. Large amounts of energy are also required to pump water to drier regions and, as water scarcity increases, so will the energy needed for technologies such as desalination.”

Wales warns against viewing any one of these resource considerations independent of the others: “Given these trade-offs and interactions, successfully addressing the triple challenge of water stress, food security and energy supplies means taking a holistic view and balancing the many competing demands.”

Water log

If global brewing giants are watching water’s resource impact this closely, investors should be too. And technology can help.

The World Resources Institute offers an online mapping tool, the Aqueduct Water Risk Atlas, that uncovers water risks by geography using 12 indicators, including water quantity and quality and reputational and regulatory factors.

Even if you’re not ready for resource investing, you should at least track the wet stuff’s impact on the rest of your portfolio.

Water can have an indirect yet significant influence on most stock choices. That’s because smart water use can be the issue that separates the most efficient and adaptable companies from those likely to suffer from the added costs of resource shortages.

In the 2012 Carbon Disclosure Project Global Water report, for example, more than half of the 500 corporate participants noted “detrimental” water impacts such as drought and flooding extremes, clean water prices, and costs for pollution litigation.

Many investors didn’t need the report. They’d seen the pictures of barges stranded in a dried-up southern Mississippi River.

By Cheryl Conner

The “Green Market” is poised to reach $2.74 trillion by 2020. Got some extra trash? Maybe your next business idea is in there.

They call their headquarters “The Junktion.” Their office looks like a hip 90’s dot com, where news about “junk happenings” covers the wall, there’s a foosball table in the corner, and lots of young executives are running around.

The growing ranks of green entrepreneurs are on to something big—while it’s hard to identify how many of the United States’ 11 million entrepreneurs fit this category, the market they are addressing is undeniably huge. Data from The Green Market says the sector will double from $1.37 trillion a year in 2010 to $2.74 trillion by 2020.

The ideas are as unique as the entrepreneurs. I wrote about one of them, Phil Tepfer, of Kenai Sports last month, who developed with his co-founder, Charles Bogoian, a way to create clothing out of corn husks, computer keyboards, soda bottles and other varieties of trash.

Then there’s New Jersey high school student, Sasha Lipton. Frustrated with the plastic toys she would see on the curb on garbage day, she started to rescue these toys from the landfill, clean them and redistribute them to children in need at local churches and shelters.

Today her award-winning company, Second Chance Toys, has grown into a major charitable organization that has empowered families through the U.S. and in Sydney, Australia to start local programs in their areas. Celebrities have gotten behind the cause as well. The company has distributed more than 110,000 toys to disadvantaged children and has kept thousands of pounds of plastic out of our landfills.

“There is something very special about creating an organization that is based solely on the notion that we can make the world a better place for future generations,” she says.

This new breed of entrepreneurs is doing far more than “greening up” a conventional product or service. In some cases, they are innovating the entire value chain.

For example the young entrepreneurs at Ecoscraps ( www.ecoscraps.com ), in Orem, Utah are making the rounds at grocers, farmers and restaurants to collect food waste that would otherwise be thrown away, and turning it into high quality organic potting soil and compost.

Steve Feldman of Green Demolitions came up with an idea to rescue high-end kitchens and other household treasures from renovations and demolitions and then offer them at discounted prices to luxury bargain hunters. He even has a consignment website and program (Kitchen Trader) where customers can view the kitchen in its current mansion or estate and purchase it online before removal.

With the extraordinary pressure for companies to operate in a manner that preserves and protects our natural resources, every organization is under scrutiny (or even legislative requirement) to fully embrace sustainability and make it a fundamental element of their corporate plan. As a nation, we are raising a generation of socially conscious and cause-focused individuals. These new young and green entrepreneurs are fitting directly into their plans.

The trend towards social entrepreneurship is also fueling the fire. These young people are the workforce of the future, and in many cases are actually inventing their jobs. Green is part of their core DNA.

Entrepreneurs are realizing that doing good and thinking “green” makes great business sense and produces strong profits. While these young ventures are turning trash into treasure, they’re teaching the rest of the world some entrepreneurial lessons as well.

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by Avril David

As protesters across the Middle East continue their fight for democracy and liberation, speculators have drawn attention to the inevitable impact of this instability and change on the oil and gas sector, in oil price spikes.

Looking at these two trends—calls for democratic empowerment and spiking oil prices—it seems that we could be nearing the time for seriously putting the renewable energy discussion (and renewable energy partnerships) back on the table.

On January 17 at the World Future Energy Summit in Abu Dhabi, U.N. Secretary General Ban Ki-Moon called for a “global clean energy revolution,” saying that “investing in the green economy is not simply a luxury of the developed countries. It represents opportunity for job creation and economic growth in developing countries.”

As we hope for a sustainable and robust transition to democratic empowerment in countries across the Middle East, perhaps we can also begin envisioning what new models for international energy partnerships might look like, models that are based on a shared foundation of and commitment to democratic empowerment. If handled right, economic growth, political empowerment, and renewable energy solutions could work together as a mutually reinforcing system in a newly democratic Middle East.

Take the issues of Egypt as an example. According to the U.S. Energy Information Association, Egypt’s oil production peaked in 1996 at 935,000 barrels a day. Since then, production has declined by nearly 30% to about 660, 000 barrels a day. Food prices in Egypt used to be subsidized by oil revenues, and those subsidies were significantly cut back, despite record high global food prices in 2010, adding to the frustrations of an already struggling population.

According to the U.N. Population Fund, Cairo’s population has nearly doubled over the past 30 years as many rural poor have moved to the city seeking work. In addition, an influx of refugees fleeing neighboring Sudan’s civil war has added to the city’s population burden. As a result, a new urban poor population has taken root in Cairo, with the vast majority living in informal settlements without access to electricity and without political clout.

To add to this already difficult picture, the city also suffers from what water experts refer to as “genuine water scarcity” (Pacific Institute, 2002), which is caused by general climate dryness and large fluctuations in the area’s limited rainfall. According to the Pacific Institute’s Water Resources Index, Egypt will be considered a “high stress” water region by 2025, plagued by frequent shortages. Cairo’s growing population adds to the city’s water management problems. As more unplanned settlements are added to the city, the eastern boundary of Cairo gets pushed further out to undesirable lands in the desert without access to planned or natural water sources.

Initiatives such as Desertec offer a possibility for how the international community might start a new energy chapter with the Middle East, one that provides a renewable energy source, creates jobs, and increases potable water. According to information on the Desertec website, Desertec involves “concentrated solar power” stations based in the desert that would supply energy to North Africa and the Middle East, with excess energy being distributed to European Union countries. Desalinated water produced during the solar energy production process could be distributed to Egyptian settlements, increasing the drinking water supply and improving public health; improvements in public health are widely viewed in the development community as a positive contributor to economic development.

But Desertec is just one potential solution. As these movements progress, it will be interesting to see if and how we can work together with these countries to build a more sustainable and empowered future—both environmentally and politically.

Forcefully investing in renewable energy, Vattenfall has now entered into the DanTysk project for the construction of an offshore wind farm in the North Sea.

The wind farm will produce renewable energy equivalent to the electricity consumption of 500,000 households.

The project is among the biggest ones in offshore wind power and implemented as a joint venture by Vattenfall and Stadtwerke München (SWM).

The total investment is estimated to more than one billion Euros. In the joint venture DanTysk Offshore Wind GmbH, Vattenfall has 51 percent and SWM 49 percent of the shares. Vattenfall will be responsible for the construction, which will begin in 2012, and the operation of the wind farm.
The North Sea wind farm will be situated roughly 70 kilometres to the west of the German island of Sylt. With a capacity of 288 megawatts (MW), and an output of around 1,320 GWh electricity, the wind farm will supply enough renewable power to supply electricity more than 500,000 homes, based on an average electricity consumption of 2,500 kWh per home. The DanTysk wind farm will consist of 80 wind turbines erected in an area of approximately 70 square kilometres in water that is up to 30 metres deep. Relevant authorities have approved the project and the preparations are in full swing. The first supplier contracts have been signed, and foundational construction and the laying of cable are currently being negotiated. Siemens will deliver the turbines, which will be commissioned in 2013. The completion of the wind farm is expected around New Year 2013/2014.

Øystein Løseth, Vattenfall’s CEO, says:

“Vattenfall keeps investing in renewable energy for long-term reduction of our CO2 emissions. Less than a month ago we inaugurated ‘Thanet’, the world’s largest offshore wind farm to date, off the coast of England. With DanTysk, we are continuing our engagement in Germany that we successfully began with our partners in the construction of Alpha Ventus, Germany’s first offshore wind farm. We are delighted that we will be implementing the DanTysk project together with Stadtwerke München as a major partner.”

Dr. Kurt Mühlhäuser, head of the SWM executive board, says:

“There are two reasons why DanTysk is important to SWM. One is that this is a very promising project that we are implementing together with Vattenfall. The other is that this wind farm represents a milestone in our renewable energy development initiative. Together with previously initiated or implemented projects, DanTysk will enable us to supply approximately 800,000 households with renewable electricity as well as meet the electrical needs of the Munich subway and tram system.”

By Russell Ray

One of the largest deployments of new hydropower generation in the U.S. is well underway and is expected to move much closer to commercial production in 2011.

Three of six run-of-river hydroelectric plants are under construction at existing dams on the Ohio River. American Municipal Power is building the projects to increase its use of renewable power and decrease its dependency on the volatile wholesale power market.

A run-of-river facility generates power from the natural flow and elevation of a river and does not require a large impoundment of water. Altogether, the six run-of-river projects will generate up to 350 MW of clean energy. Click Here!

“The Ohio River dams represent a valuable, largely untapped resource of renewable power,” said Marc Gerken, president and chief executive officer of AMP. “We’re proud of these projects and glad to be starting construction on the third facility.”

In September, AMP began construction of the 72 MW Smithland project, which is expected to begin commercial production in 2014. The $400 million project will create between 200 and 400 jobs during construction.

The other five run-of-river projects are: 105 MW Meldahl, 48 MW Robert C. Byrd, 35 MW Willow Island, 84 MW Cannelton and 49.5 MW Pike Island. Click Here!

Construction of Cannelton began in July 2009. Officials broke ground on Meldahl, the largest of the six projects, in May 2010. Voith Hydro will supply turbines and generators for the first four run-of-river facilities under a $420 million contract.

Technology

By the end of 2011, hydropower producers should know more about the results of new research into the design of turbines that provide safer passage for fish. Ambitious innovations in fish-friendly turbine designs are being pursued in joint efforts between industry and government.

For example, the U.S. Corps of Engineers recently awarded a $10.9 million contract to Voith Hydro for the design and manufacture of a new runner for an aging turbine at Ice Harbor Lock and Dam on the Snake River.

Engineers from Voith and the Corps will collaborate on the design process, using computer modeling and tests with physical models to evaluate water flow and pressures. The benefits of their work will extend beyond Ice Harbor, as more than two dozen turbines at dams on the Columbia and Snake rivers will need to be replaced soon, according to the Corps.

“We want to take advantage of technology that wasn’t around when the dams were constructed and design the most advanced runner available to help improve fish passage in the region,” said Witt Anderson, director of programs for the Corps’ Northwestern Division.

The contract is supported by a memorandum of understanding between the Departments of Energy and Interior to invest in clean, renewable hydropower projects with few environmental impacts.

“Our designs minimize the gaps between rotating and stationary parts where fish could get pinched,” said Mark Garner, president and chief executive officer of Voith.

Also, Alden Research Laboratory is developing a new fish-friendly turbine that could lead to significant improvements in fish survival without a loss of generation.

The Electric Power Research Institute is funding the continued development with an award from DOE. A final engineering design and report should be completed in the first quarter of 2011.

Policy

A national Renewable Electricity Standard (RES) that recognizes hydropower, incentives for the development of pumped-storage plants and tax credit parity for hydropower will continue to be chief objectives of the National Hydropower Association (NHA) in 2011.

Right now, incremental hydropower receives a production tax credit of 1 cent per kWh while producers of solar, wind, and biomass receive 2 cents per kWh.

“There are some bills in Congress that work to address the issue that hydro only receives half of the credit of other technologies,” said Jeff Leahey, senior manager of government affairs for NHA. “These bills would take the existing tax structure and bump up the credit from 1 cent to 2 cents.”

There are no incentives for the development of pumped-storage plants in the U.S., a form of energy deemed important to the future development of wind and solar power. Congress may adopt an investment tax credit to support such development.

“There are a couple of bills that would provide a 20 percent credit on the cost of development,” Leahey said.

Also, the hydropower industry will be working hard in 2011 to get lawmakers on Capitol Hill to recognize hydro in a national RES. Some lawmakers contend hydro should not be used by utilities to meet the requirements of a national standard for renewable electricity because an RES is designed to support new development and hydropower plants do not require support to continue operating. What’s more, if hydro were allowed to count toward a national standard, it may discourage the development of other technologies.

“The other renewable energy industries are concerned that if all hydro was included, then you would be wiping out market share in certain areas of the country,” Leahey said. “We certainly would in the Northwest, where there is 70 percent to 80 percent hydro.”

One option calls for excluding existing hydropower capacity from an RES and including new capacity added to existing facilities, hydrokinetic power and small projects that don’t require a dam.

Hydro: 411

The U.S. has seen a decline in hydro electricity production over the last couple of decades. The industry hopes to change that not by focusing on large-scale power plants, but on smaller projects and incremental improvements to existing facilities. Hydro advocates say that an additional 30 to 70 GW could be added to the electricity mix in the next decade with such a strategy. However, the big hold-up in hydro is the long, expensive permitting process. If the federal government doesn’t streamline permitting for developers, it’s unlikely that the U.S. will come close to adding that much capacity. Canada, the second-largest producer of hydropower in the world, is also looking to expand the sector and continue exporting electricity to the U.S. Canada gets 60 percent of its electricity from hydro. But experts estimate that there is still over 160 GW of untapped potential in the country. Provinces like Ontario and British Columbia have expressed their intent in harnessing those resources in the coming years. Much of the innovation in hydropower will come from companies developing wave, tidal and in-stream hydrokinetic devices. These technologies could provide tens of thousands of MW to coastal areas. But progress in this sector will be fairly slow; companies are running into serious technical and financial challenges. Most of the installations in 2011 will be small commercial or demonstration-scale, not utility-sized projects.

By Mark Hankins

Now that real progress has been made in growing global demand and production and lowering costs in developed countries, it is time to think seriously about kick-starting real solar markets in Africa.

There is a need for a shift in focus on solar markets in Africa away from donor and rural electrification projects to commercial and productive investments. There is also a need for the international PV industry to aggressively invest in the development of solar markets and not to leave it up to aid and relief organisations. This must be based on the need to move – today – towards grid-connected and urban markets. As part of this process there is a need to engage and educate African governments about the current global status of the solar sector and help them build frameworks for industry growth.

Markets for small off-grid systems, those below 100 Wp, are important to kickstart solar industries, but they will be less important in the long term as demand for them begins to fall.

It is also useful to have an idea of where marketing and development efforts will lead in the long term. ‘Off-grid rural solar development’ in Africa has dominated discussion for so long that we seem to have lost the bigger picture. Where does the solar industry want to be in Africa in 10 years? Leaving aside the ‘rural electrification’ impact, which is more attractive for a solar company: 20,000 solar home systems at 50 Wp or 500 systems of 2 kW each? Both will result in 1 MW of sales.

Kenya’s so-called ‘solar PV success story’ is a good example of this. Its focus on small systems – to the exclusion of larger commercial or grid-connected systems – and has resulted in an annual PV market of 1.5 MW that is low-tech, over-the-counter and dominated by small products. But the market is stagnating.

Continued efforts by aid groups to build sales in ‘poverty markets’ will likely increase the depth and accessibility of small scale lighting systems. However, this will not build a market with a 20 MW/year solar demand of a scale that is interesting to larger PV supply companies. No matter their importance to the rural poor, LED lanterns with 1 W modules fall into the realm of the fast moving goods providers from Asia, not solar PV companies.

If healthy markets that are multi-dimensional and sustainable are to develop, solar advocates must prepare the ground for the variety of viable niches that will be part of a healthy long-term solar market. In addition to village electrification, this includes off-grid markets such as telecoms, tourism, business and pumping as well as grid-tied and utility-scale markets.

Africa is not solely a poverty market and, in the long term, middle class and commercial groups will do far more to develop solar markets than procurement-driven public sector projects or the efforts of humanitarian groups.

Every car salesperson knows that, when a customer enters a showroom looking for a luxury car there is probably no need to show the second-hand hatchbacks. But, in Africa, the solar sales approach shows high-end customers bicycles, not limousines. Africa’s most important buyers go for generator sets because they see generators as being ‘classy’ and practical solutions – and generator dealers latch on to this. Solar agents do not recognise this market.

The Flawed ‘Aid’ Approach to African Development

The aid-dominated approach to PV in Africa has led many decision-makers in Africa to believe that solar is about helping poor people. Without detracting from the hard work of solar NGOs, village solar electrification is relief work and should not be confused as being the foundations of a developing market. If building real markets for solar in Africa, and in doing so reducing carbon emissions, is the objective, NGO contracts to supply a thousand lanterns or government procurements for 100 schools are, at best, stepping stones, but they are not the long-term answer to stimulating wider demand and building solar futures.

Too many people think of Africa in terms of desperate unempowered off-grid rural poor people with no cash. Aside from a lot of sunshine, the continent’s agricultural sector is growing as are its mineral exports. In some areas, Africa is also seeing massive building projects, along with more frequent traffic jams as automobile sales increase rapidly, and more and more power shortages as electricity companies struggle to meet spiralling demand. Where there is money – and power shortages – there is a market for solar power.

The multi-megawatt PV project market is coming to Africa, but not yet. To deliver large-scale projects, a focus on intermediate-sized 50 kW to 200 kW installation market segments is required.

Developers, financiers, solar companies and governments want to push the envelope and open up new markets in Africa. But most are thinking big, and perhaps a bit too big, for the present undeveloped state of the market. For example, a finance house developing PV project portfolios for African countries, while eager to hear ideas for innovations in Africa, was unwilling to discuss projects below 1 MW.

On a continent where the largest installed system is 250 kW (Kigali, Rwanda) a 1 MW minimum requirement is unreasonable as a starting target. Even though grid parity is close in a number of countries, outside of South Africa the type of feed-in tariffs and incentives necessary for megawatt-scale projects are simply not feasible. Resistance from utility sectors can make agreements problematic and risky for investors whereas smaller-sized projects may be able to fly under the radar and build up experience as solar is assimilated into power sector planning. When experience is gained on one or two 50 kW projects in a country, these can be bundled by developers into financially attractive packages. But the first step is to gain experience.

There is a need for developers, perhaps with donor agency help, to think bigger than village scale, but a bit smaller than utility scale. Just 10 years ago 50 kW PV projects made industry headlines in Europe.

Grid-Connected Markets

Grid connection is coming in Africa, perhaps faster than expected and definitely in different ways than expected. In the near future, urban PV markets will be as important as rural markets.

In the mid-1990s, when the annual world production of PV was well below 100 MW, many ridiculed the idea of grid-connected solar anywhere in the world. Off-grid rural solar electricity made much more sense. How could grid-connected solar prosper when off-grid markets were screaming to be satisfied in developing countries all over the globe?

In every country in Africa the electricity sectors plan to eventually connect all economically active areas to a national grid system. Arguments and concerns can be raised about how fast this will occur – or even whether it makes sense – but the fact is that politicians, planners and consumers are united in their desire for grid electricity. Because virtually all solar in Africa today is off-grid, ministry planners often view solar as a second class option for remote locations where it is likely to be too expensive to establish a grid connection and where there is little economic activity. It is time for those planning national strategies to look to solar – and those developing solar marketing plans – to embrace on-grid solar and stop pretending that solar is exclusively for off-grid communities in Africa.

Some say that fragile African grids, with fluctuating voltages and frequent shutdowns, cannot accept PV power but the same thing was said about wind a few years ago. Now there are multi-megawatt wind projects all over the continent. Surely, the opposite is true – grid connect solar systems can help stabilise grids and, with small battery banks, can also help consumers weather power outages.

While there are definitely technical, financial and regulatory hurdles to be overcome there are also huge opportunities. From Lagos to Nairobi and from Addis to Dakar, businesses, hotels, offices and households today buy and install hundreds of thousands of generator sets and battery-inverter systems to hedge against brownouts. Because electricity can be unreliable in African cities people who require continuous power are willing to pay extra to ensure their supply and therefore surely it makes sense to use this willingness to pay as a wedge to open new grid-connected PV markets.

Given the choice, a substantial proportion of the middle classes, NGOs and business consumers in Africa would purchase grid-connected systems. Educated Africans will install solar for the same reasons that people in the North do – because it is clean and silent, reduces carbon footprints, is modern and aesthetically pleasing.

Net-metering, not feed-in tariffs, will initially be key to developing grid-connected markets, just as they were in Germany and the US.

For medium- to large-scale renewables such as wind, hydro and biomass, specialised feed-in tariffs are important policy tools to stimulate investment. Even in Africa (RSA, Kenya) feed-in tariffs are helping to get renewable power projects off the ground.

However, feed-in tariffs are less suited to PV than other renewable technologies for several reasons. First, there is much less economy of scale in PV; it does not matter whether a PV installation is 10 kW or 1 MW – the costs are broadly the same. Secondly, because of this scale issue, thousands of dispersed PV installations make as much sense as a single large plant. But right now PV is still more expensive than wind, hydro or biomass, so it is hard for governments to justify PV as part of their ‘least cost power plan’. However, there is no need to block private consumers who want to invest in Africa’s nascent solar market.

Net metering is a low-cost policy tool that allows electric utilities to incentivise on-grid PV investment by private consumers. With it, consumers invest in a PV system. Instead of storing their PV power in a battery during the day, they store it on the grid by running their meter backwards and selling their output at a retail rate. In the evenings they draw back the electricity that was generated during daylight hours, with the result that at the end of a month consumers could potentially have a zero-value bill.

Unlike feed-in tariffs, net metering does not require massive grant support or additional levies on electricity consumers by cash-strapped African governments. Net metering cannot be unscrupulously ‘rigged’ because there is no incentive – electricity bills are offset, and no cash changes hands. Net metering also allows demand to develop naturally. Those who want solar PV and are willing to pay a premium for it will be rewarded. In short, those that want to buy and sell PV power should be encouraged, not discouraged.

The Benefits of Solar

In Africa the versatility and practicality of solar energy solutions is as important as the cost/kWh.

Too often, electricity is judged on extremely narrow price grounds. Policy-makers, from both government and donor sides, look at the cost/kWh of solar and automatically disqualify it from discussions in national planning. African energy departments, and the donor agencies that support them, apparently dismiss solar out of hand because of its high costs. The mentality, it seems, is that Europe should busy itself with developing the PV as Africa cannot afford to do so.

But at the same time, in countries as divergent as Kenya, Rwanda, Senegal and Burkina Faso, petroleum-based generation is sacrosanct when it comes to investments in power supply. Thermal generation units are purchased to meet ‘emergency’ peak demands because petroleum flexibly supplies power when it is needed.

Even though solar PV is an expensive investment it can be an extremely reliable and predictable component source of an overall electricity profile during periods when electricity is needed.

It is especially valuable during cloudless periods when dams dry up and grid managers must scramble to get thermal units on line, and nothing seems surer than the fact that as petrol prices will invariably rise the costs of developing and installing relevant and efficient PV solutions will fall.

PV can be deployed in a decentralised manner where it is needed and where space is available. Financing can also be decentralised. The same customers who buy their own generator and battery back-up sets may consider investing in solar as an alternative to brownouts.

But perhaps most importantly it is necessary to pay the high up-front prices of solar today to build the experiences and capacities that will be needed tomorrow.

Solar did not happen in Germany and California overnight; it took decades of work to get the skills, supply lines, finance and consumer awareness in place.

Governments cannot wave magic wands and make these things happen, at which point solar suddenly becomes ‘cost-effective’.

Before achieving 200 MW of installed capacity, a first target of 1 MW has to be reached.

The Role of Industry

Over the past two decades, as solar markets have grown at double digit rates in the North, the job of building up solar markets in Africa has been left to NGOs and aid agencies such as the UN, the World Bank and the Global Environment Facility.

Few African governments have championed PV, and most of the companies that did have offices in Africa have left. This needs to change. As stand alone generator and petroleum-based power suppliers already know, Africa is a steadily growing market – and a profitable one at that.

Donor agencies have relegated PV to off-grid markets and, moreover, they have left the administration of PV projects to slow-moving government agencies.

Few major solar players want to bid on World Bank-supported government tenders that can take years to develop and which can be expensive.

Thomas Edison and Henry Ford had it right. When they developed their electrical lighting and automobile products, they aggressively took them to the moneyed classes in large American cities and their companies were successful. With more solar resources than anywhere else in the world, with steadily growing economies, and with massive shortages of power, the markets in Africa are ripe. But Africa needs solar entrepreneurs that can convince the buyers and it needs the type of aggressive green investment that took place in the 1990s in Europe.

Solar industries need to work together to build viable markets in Africa and should instead leave the World Bank and the UN to focus on the off-grid poor.

Aid efforts should focus on helping to steer solar policy in the right direction, and tying grant and subsidy support to the achievement of targets. This will require the active long-term engagement of governments, the private sector, civil society, and the international solar industry.

The global boom in solar – and the accompanying fall in PV prices – has occurred because a handful of countries realised that it would take strong policy initiatives to get PV markets to a size that would bring solar prices to back down to earth. Bold politicians bet on solar and we are now beginning to see the fruits of those measures.

Because of a lack of disposable income and difficulties, perceived or real, in doing business, Africa has been largely side-stepped in solar energy development discussions.

Slapping donated modules onto the roofs of rural clinics is an easy way to leave the impression that something is being done in Africa. Of course it is easier to target support for schools, clinics and village electrification, but until policy frameworks are in place to build sustainable solar energy industries, much international solar aid support is being wasted on projects in remote locations with no infrastructure and little cash. Sustainable local solar businesses are simply not being created.

As is the case with coal and nuclear industries in the North, there are entrenched interests in many African countries that do not necessarily embrace solar.

Numerous ruling elites manage profitable petroleum and large power project cartels and they could be expected to block decentralised solar and grid-connected projects. International solar industries and development aid networks that are seeking to build solar markets need to be aware of these interests and find ways to help civil society empower itself with solar.

As power prices in Africa rise, grid expansion stalls and as grid power availability is constrained, consumers and communities increasingly have to take electricity production into their own hands. In the long term, this is a good thing, and having a portion of electricity coming from decentralised solar sources is healthy for any grid.

Just as political systems in Africa have evolved to reflect the needs of educated voters, power sectors must change too to allow new segments of the population to profit from and participate in electricity production. This is the promising future of solar in Africa.