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On 26th July we had the pleasure of hosting a virtual discussion on the price of solar with MPs from Kenya, as part of our Parliamentary Action on Renewable Energy (PARE) series. We were joined by Paddy Padmanathan, the CEO of ACWA Power, a major renewable energy developer, who provided useful insights for the Kenyan legislators in attendance.
Mr Padmanathan gave an overview of the renewable energy sector, emphasising the affordability of renewable energy as the cheapest source of energy. Paddy Padmanathan gave details on how costs can be brought down, as this is a major concern for parliamentarians in Kenya and much of Africa. He spoke of construction costs, operational costs and financing capital as key areas that contribute to the cost of energy. The price of renewables will continue to go down because of advances in technology. He mentioned, as an example of technological advance, the fact that ACWA Power now uses automated cleaning of PV panels, which makes it easier to maintain the panels and enables them to capture more energy.
ACWA Power provides renewable energy to Ethiopia for 2.54 cents per KWh, an unprecedentedly low cost in Africa. It is developing two projects with a fixed price delivery of energy for 20 years with a 15-18 month construction time, requiring a 250 million investment. The contract with the government of Ethiopia contemplates a penalty if ACWA Power is unable to deliver the amount of energy promised. Risk allocation between the public sector and the private sector is key. The government agrees to purchase the energy and to assume the foreign currency risk, while the company assumes the risk of delivery, construction, availability and for the lifetime of the asset. The government only pays for what is produced and used. Mr. Padmanathan emphasised that ACWA Power has a vested interest in keeping the costs low, as unaffordable energy results in losses for both sides. Nicholas Dunlop, Secretary General of the Climate Parliament, seeked clarification on whether subsidies are required from the government to get cheaper prices. Paddy Padmanathan stated that there are no subsidies whatsoever. Costs do vary because of two factors: the cost of land and the solar resource itself.
During the discussion with the parliamentarians, questions and points were raised in relation to capacity building, how to make renewable energy more accessible and how policies and regulations can facilitate the deployment of large-scale renewable energy projects. Mr. Padmanathan raised the point that success in countries such as Morocco and Saudi Arabia was due to the establishment of a separate government agency, set up specifically for working on a transition to renewable energy.
To close the discussion Nicholas Dunlop displayed a graphic of the globe to show that the 1% of the world that is currently uninhabitable due to climatic conditions is anticipated to increase to 19% by 2070, with Kenya expected to be severely impacted. Hence it is all the more important for legislators to use their position and work collaboratively to advance the renewable energy agenda.