Embracing African wind power, Chinese enterprises seize opportunities

As many African countries have gradually accelerated the process of industrialization in recent years, the problem of expanding power gaps has become increasingly prominent. At present, the electricity consumption per capita in Africa is not only far lower than the world average, but even slightly decreased in the past 20 years. There are 30 countries in sub-Saharan Africa with frequent power outages, and the economic losses caused by blackouts account for 5% of GDP in Malawi, Uganda and South Africa. According to estimates by the World Bank, there are currently about 600 million people living in Africa in unpowered areas.

In the field of China-Africa energy cooperation, power cooperation has always been the “key event.” In Africa, known as the “plateau continent”, compared with traditional hydropower and thermal power cooperation, China-Africa wind power projects have shown increasing prospects in recent years with the development of China’s wind power technology.

Africa accounts for 32% of global wind energy

Africa, which has long been plagued by power shortages, actually has huge wind energy resources, accounting for 32% of the total wind energy of the earth, and has great potential. Wind power costs are lower than other forms of power generation. In many parts of Africa, it has become common practice for companies or home users to install generators at their own expense. After installing a fuel-generator, the average price per kWh is about three times the grid price. Especially in landlocked countries without crude oil reserves, such as Zambia, the price of electricity generated by generators in the event of a power outage is about 53 cents per kWh, which is nearly 10 times the general price of electricity. In Nigeria, the annual national cost of fuel generators is as high as $1.6 billion due to frequent power outages. Wind power can achieve a cheaper electricity solution. As of 2017, global wind power generation costs have been as low as 4.5 cents per kWh, which is absolutely competitive with most power generation methods and is expected to reach 2 cents per kWh by 2050. As a result, African countries have enacted clean energy development plans, such as Tanzania, which are planning to develop a 200 MW wind power project.

According to the latest report released by energy consulting firm MAKE, wind power generation in Africa is expected to increase by 30 GW between 2018 and 2027. Wind power in South Africa, Egypt and Morocco will dominate the African wind power market, accounting for two-thirds of the total new generation. Ethiopia, Kenya and Tunisia are the main additions to wind power in Africa, and MAKE expects to add 5 GW of wind power to the three countries by 2027. In addition, smaller markets such as Ghana, Senegal and Tanzania will be major players in regional wind power development.

Actively participate in intergovernmental cooperation

Although the African wind power market has broad prospects, Chinese companies should give priority to countries with better business environment and rich wind resources when entering the market. In particular, South Africa, Nigeria, Kenya, Tanzania and other countries have fully utilized their respective radiation effects in the south, west and central and eastern regions of Africa, and gradually expanded their business to neighboring countries after operating the local area. In the financing model, Chinese companies can give priority to government financial cooperation. At present, clean energy development is an important area of ​​China-Africa cooperation and is highly supported by both governments. Guinean President Alpha Conte once said: “Building an African energy Internet will greatly promote the large-scale development and utilization of clean energy in Africa and the interconnection of power grids, drive the development of mineral resources and the development of deep processing industries, and accelerate the clean, industrialization, electrification and regional integration of Africa. Development. The China-Africa Cooperation Forum at the Johannesburg Summit announced at the China-Africa “Top Ten Cooperation Program” and the “Eight Actions” announced at the Beijing Summit of the Forum on China-Africa Cooperation will focus on clean energy as a key support area with a corresponding government. financial support. Chinese companies can actively communicate and coordinate loans and corresponding funds with the Export-Import Bank of China and the China Development Bank. The Adama Phase I and Phase II wind power projects in Ethiopia are the largest wind power projects completed in East Africa. The Export-Import Bank of China provides 85% financing support for these two projects, and Chinese companies provide wind turbines for the project. The installed capacity of the project is 51 MW and 153 MW, respectively.

In terms of investment methods, Chinese companies can adopt an integrated investment approach. With the development of the African engineering market, PPP and other funded contracting methods are becoming more and more common, and the depth and breadth of project owners’ demand for contractors is increasing. Therefore, when investing in power projects, Chinese companies need to conduct more joint ventures with the government where the project is located in order to obtain preferential policies in the fields of business license, taxation, import, and employment visas. In addition, when implementing joint ventures with African governments or companies, Chinese companies can seek to control, master the management and operation rights of the company, and ensure the operation and revenue of the project.

Have the courage to face international competition

In Africa, the main competitors of Chinese wind power companies are energy giants from developed countries in Europe, America and Japan. Although Chinese companies often have obvious advantages in terms of execution and product cost performance, European and American energy companies have considerable strength in soft power and high-level design. European and American companies are more familiar with international rules, and can even use their own international voice to formulate “rules of the game” to keep competitors out. In the field of wind power, Japan Marubeni Corporation, French power company EDF, Total, etc. all have considerable competitive strength.

In terms of operational risk management and control, Chinese enterprises should take the lead in general contracting with design consulting companies. In order to ensure that wind power projects integrated with investment and construction can stably recover the initial investment, Chinese-funded enterprises should pay attention to the requirements of relevant contract conditions when signing the power facility investment return agreement. At the same time, in view of the fact that the front-end planning is crucial for the accounting of the later operating income, it is recommended to strengthen the role of the front-end design enterprise, which is conducive to the overall control of the operation cost accounting and investment profit model.