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SOLAR SURVEY REPORT

Solar Photovoltaic Market in Southern / Eastern Africa 2017 Overview of the solar market trends

Report no.: 186076-ZACT-R-01, Rev. 00 Date: 2017-06-06


Project name: Report title:

Solar Survey Report

DNV GL - Energy

Solar Photovoltaic Market in Southern /

7 Walter Sisulu Avenue

Eastern Africa 2017

15th Floor, Metlife Centre

Subtitle

Overview of the solar market trends

Cape Town 8001

Date of issue:

2017-06-06

Tel: +27 21 418 1891

Organisation unit:

DNV GL South Africa (Pty) Ltd

Report No.:

186076-ZACT-R-01, Rev. 00

Customer reference No.:

Prepared by:

Verified by:

Approved by:

Elisa Brutto Consultant

Robert O’Keeffe BD Manager, Africa

Mohammed Atif Area Manager Middle East and Africa

Hanane Hilmi Intern

☒ Unrestricted distribution (internal and external)

Keywords:

☐ Unrestricted distribution within DNV GL

Solar, Market, Africa, Survey

☐ Limited distribution within DNV GL after 3 years ☐ No distribution (confidential) ☐ Secret Rev. No. Date

Reason for Issue

Prepared by

Verified by

Approved by

01

Solar Survey Report

Elisa Brutto Hanane Hilmi

Robert O’Keeffe

Mohammed Atif

2017-06-06

Reference to part of this report which may lead to misinterpretation is not permissible.

Copyright © 2017 DNV GL South Africa Pty Ltd All rights reserved. It is prohibited to change any and all versions of this document in any manner whatsoever, including but not limited to dividing it into parts. DNV GL South Africa Pty Ltd and/or its associated companies disclaim liability for any direct, indirect, consequential or incidental damages that may result from the use of the information or data, or from the inability to use the information or data contained in this document. Det Norske Veritas Pty Ltd, trading as DNV GL Registered in South Africa: 2008/019456/07; VAT registration no: 4070252608


Table of contents 1

Executive Summary ................................................................................................ 5

2

Solar Survey .......................................................................................................... 6 2.1

Introduction .......................................................................................................... 6

2.2

Participants ........................................................................................................... 7

3

Solar Survey Responses .......................................................................................... 8 3.1

Solar PV Technology Trends ..................................................................................... 8

3.2

Solar PV Pricing .................................................................................................... 13

3.3

Solar PV Market Potential ....................................................................................... 15

3.4

Barriers to Development of the Solar PV Market ......................................................... 18

3.5

Regulation / Incentives to Support the Development of the Solar PV Market ................... 19

3.6

Solar PV Off-grid / Mini-grid Market ......................................................................... 22

3.7

Responses to the open-ended question about improving the Solar PV market ................. 24

4

Country Information ............................................................................................. 25 4.1

Ethiopia .............................................................................................................. 26

4.2

Kenya................................................................................................................. 28

4.3

Mozambique ........................................................................................................ 30

4.4

South Africa ........................................................................................................ 31

4.5

Tanzania ............................................................................................................. 34

4.6

Uganda ............................................................................................................... 36

4.7

Zambia ............................................................................................................... 38

5

DNV GL in the Solar Market .................................................................................... 41 5.1

DNV GL Group ..................................................................................................... 41

5.2

DNV GL - Energy Advisory...................................................................................... 42

5.3

DNV GL - Solar Expertise ....................................................................................... 43

6

Questionnaire ...................................................................................................... 44

7

Reference............................................................................................................ 48

DNV GL - Energy – Report No. 186076-ZACT-R-01, Rev. 00 – www.dnvgl.com/energy

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List of Figures Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure

1: Participant Mix ........................................................................................................... 7 2: Impact of the Cost-Efficient Energy Storage for Solar PV in the Future ................................ 9 3: Expected Timing of Energy Storage Impact ..................................................................... 9 4: Relative Importance of Technical Problems with PV Solar Projects..................................... 11 5: Most Suitable Technology Applications for Solar PV ........................................................ 12 6 : Expectation of the Drop of Solar PV Electricity Prices by end 2020 from 2016 .................... 13 7: Impact of Crude Oil Price Increase on Solar Market Development ..................................... 14 8: Short-term Country Potential for Solar PV .................................................................... 15 9: Long-term Country Potential for Solar PV ..................................................................... 15 10: Barriers to Growth for the Solar PV Market in Southern / Eastern Africa ........................... 18 11: Suitable Regulatory Frameworks in Southern / Eastern Africa......................................... 19 12: Suitable Fiscal Incentive in Southern / Eastern Africa .................................................... 21 13: Attraction of Solar PV Off-Grid / Mini-Grid market for private investors ............................ 22 14: Solar PV Off-Grid / Mini-Grid Requirement for Government Subsidy / Charitable Support .... 23

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List of Abbreviations and Acronyms Abbreviation

Meaning

AEDPD

Ethiopian Alternative Energy Development and Promotion Directorate

CCU

Climate Change Unit

CSP

Concentrated Solar Power

DNA

Designated National Authority

DoE

Department of Energy

EEP

Ethiopian Electric Power

EEU

Ethiopian Electric Utility

ERA

Electricity Regulatory Authority

ERA

Electricity Regulatory Authority

ERB

Energy Regulation Board

ERC

Energy Regulatory Commission

EREDPC

Ethiopian Rural Energy Development and Promotion Centre

EWURA

Energy and Water Utilities Regulatory Authority

FiT

Feed-in Tariff

GDC

Geothermal Development Company

GET

Global Energy Transfer

GoE

Government of Ethiopia

GTP

Growth and Transformation Plan

IEA

International Energy Agency

IPP

Independent Power Producer

IRP

Integrated Resource Plan

KENGEN

Kenya Electricity Generating Company Limited

KETRACO

Kenya Electricity Transmission Company Limited

KfW

Kreditanstalt fuer Transfer

KNEB

Kenya Nuclear Electricity Board

KPI

Key Performance Indicators

KPLC

Kenya Power and Lighting Company

KPLC

Kenya Power and Lighting Company

MEA

Middle East and Africa

MEM

Ministry of Energy and Minerals

MEMD

Ministry of Energy and Mineral Development

MEWD

Ministry of Energy and Water Development

MoEP

MINISTRY OF ENERGY and Petroleum

MOWIE

Ministry of Water, Irrigation and Energy

NERSA

National Energy Regulator of South Africa

OPPPI

Office for Promoting Private Power Investment

PPA

Power Purchase Agreement

PSMP

Power System Master Plan

PV

Photovoltaic

REA

Rural Electrification Agency

DNV GL - Energy – Report No. 186076-ZACT-R-01, Rev. 00 – www.dnvgl.com/energy

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REES

Rural Electrification Executive Secretariat

ROI

Return On Investment

SANEDI

South African National Energy Development Institute

SETRM

Solar Energy Technology Roadmap

STA

Standardised Implementation Agreement

TANESCO

Tanzania Electric Supply Company

UEDCL

Uganda Electricity Distribution Company Limited

UETCL

Uganda Electricity Transmission Company Limited

ZDA

Zambia Development Agency

ZESCO

Zambia Electricity Supply Corporation

DNV GL - Energy – Report No. 186076-ZACT-R-01, Rev. 00 – www.dnvgl.com/energy

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1

EXECUTIVE SUMMARY

This report is part of a series of market surveys conducted by DNV GL on the status, development and potential of solar PV. DNV GL has conducted several annual solar market surveys for the Middle East region, and has this year conducted its first survey in the Southern / Eastern Africa region to understand the solar market trends specific to its countries, as perceived by some of its stakeholders. DNV GL is the leading technical advisor in the renewable energy industry and has acted as technical advisor for PV projects to over 30GW of the world’s project financed solar farms over the past decade. DNV GL has assisted with the realisation of almost 50 large scale solar projects in Africa and aims to share its understanding of the PV industry in this report. Major stakeholders including government officials, developers, advisors, EPC contractors and manufacturers shared their experience and expectations of the role of solar PV in the rapidly emerging African region. The survey aims to provide insight into the perceived status of the development of the solar market, based on the industry experts’ knowledge and their experience of the Southern / Eastern Africa region. In Section 2 and 3 of the report, DNV GL presents the results of the 2017 solar survey. In Section 4 of the report, DNV GL provides an overview of the solar energy market for each of 7 selected countries in the region. The key indicators include the overview of main stakeholders, implemented regulatory frameworks and fiscal incentives, and operational as well as anticipated solar projects in the country. In Section 5 of the report, an overview is given with regards to DNV GL Group and the services it provides in the Solar Market. As a summary of the key findings in each of the sections in the report: •

Energy storage is expected to be a gamechanger, within 2 years for off-grid, and within 5 years for utility scale applications

The issue of system integration and the challenge of intermittency of the PV generation is considered to be the top technical problem.

Solar PV can readily be applied to rooftop (domestic and buildings), Off-grid as well as Utility scale applications. All four are viable development scenarios, whereas desalination and industrial applications appear less attractive for this technology.

Solar PV prices are expected by the majority to fall by another 20-40% in the next 5 years.

The majority agree with the hypothesis that higher oil prices will make Solar PV more attractive.

There is an optimistic outlook for all of the 7 featured countries in the short term, and their attractiveness will improve in the next 10-15 years.

Key barriers to growth for the Solar PV market are: “Low Governmental support (regulation, policy)”, closely followed by “Access to finance”.

Feed-in tariffs are the preferred fiscal regulatory regime, and tax incentives are the preferred means of financial incentives.

In a series of qualitative comments by participants, key themes include: the need for more government support and stability; better regulation and policy; improved financial incentives; improved access to finance and dollar-based payments; technical grid codes to be adapted for Solar PV and its access to the grid.

DNV GL - Energy – Report No. 186076-ZACT-R-01, Rev. 00 – www.dnvgl.com/energy

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2 SOLAR SURVEY 2.1 Introduction DNV GL has conducted its first survey in the Southern / Eastern Africa region to understand the Solar PV market trends specific to its countries, as perceived by some of its stakeholders. Although the survey is only a snapshot of opinion, the survey aims to provide insight into the perceived status of the development of the Solar PV market, based on participants’ knowledge and experience of the Southern / Eastern Africa region. The questionnaire, consisting of fourteen questions across six key topics, was e-mailed to a list of industry experts and was also distributed to the attendees of the Solar Show in Johannesburg in March 2017. The six topics are: •

Solar PV technology trends

Solar PV Pricing

Solar PV Market Potential

Barriers / Opportunities for the development of the Solar PV market

Regulation / Incentives to support the development of the Solar PV market

Solar PV Off-grid / Mini-grid market

The results of the survey are presented and analysed in the six sub-sections in Section 3 (plus responses to an open question), with the full questionnaire available in the Section 6. Although many of the questions are generic to all countries in the region, two questions in Section 3.3 aim to identify perceived differences in the markets across 7 specific countries: -

Ethiopia

-

Kenya

-

Mozambique

-

South Africa

-

Tanzania

-

Uganda

-

Zambia

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2.2 Participants Having a diversified mix of participants in the solar survey is key to understanding the different perspectives of the stakeholders operating in the energy market. The respondents were from different sectors of the solar and energy industry, including officials from government organisations, utility and grid operators, investors, manufacturers, developers, EPC contractors, advisors and professionals of the energy industry. In total DNV GL received 48 responses. Figure 2-1 shows the participant mix (from Q1 & Q2).

Figure 1: Participant Mix

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3

SOLAR SURVEY RESPONSES

The responses of the industry experts provided valuable insight in what to expect from the solar market in the coming years. The visions are analysed and shared in this section.

3.1 Solar PV Technology Trends Respondents were asked the following questions: Q3: Will cost-efficient energy storage be a gamechanger for Solar PV in the future? Q4: When will energy storage make an impact? Q5: What are the main technical problems with Solar PV projects Q6: Which are the most suitable technology applications for Solar PV?

3.1.1 Energy storage as a gamechanger for Solar PV A major perceived disadvantage of Solar PV technology is its intermittent (day-night) and somewhat unpredictable nature (e.g. due to cloud cover). This influences the power quality and consistency of the power grid, particularly at large-scale solar energy systems. The variable nature of solar power causes significant challenges for the electric grid operators, but the maturing and availability of electrical energy storage technologies are helping to smooth out the intermittency of solar electricity generation. The question is whether it will be a gamechanger. Despite one negative response, a clear majority agree that energy storage will have a significant impact on the implementation and roll-out of renewable energy. Generation of renewable energy by wind and solar is becoming increasingly significant as a part of the energy mix in many countries, but arguably it is now largely a question of ramping up (and improving) the application of existing generation technology. The intermittency of renewable energy sources once again highlighted the age old need for energy storage, which in turn sparked a new interest in an industry which has seen very little progress over the past few decades. Along with other companies, DNV GL is researching the opportunities for energy storage and the industry is identifying how to use energy storage to balance the intermittency of renewable generation as well as grid system support for e.g. frequency control, time shifting, peak balancing.

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Figure 2: Impact of the Cost-Efficient Energy Storage for Solar PV in the Future Energy storage technologies offer great promise for Africa to solve electrical infrastructure challenges, defer expensive maintenance costs and can be the driver of more resilient and efficient grids. The role of energy storage in achieving clean energy initiatives should also be equally emphasised, with experts touting energy storage as the "new solar", potentially creating an unstoppable hybrid force as energy storage technologies continue to combine better with PV technologies to offer a clean, resilient, economical and dependable source of energy.

3.1.2 When will energy storage make an impact In the expectation that respondents would agree that energy storage will have a strong impact on solar PV, the survey also asked when this impact is expected to occur, separately addressing the timing for the large scale utility market and the smaller scale off-grid market.

Figure 3: Expected Timing of Energy Storage Impact DNV GL - Energy – Report No. 186076-ZACT-R-01, Rev. 00 – www.dnvgl.com/energy

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The survey indicates that nearly 90% of respondents believe energy storage will have an impact for the offgrid market within the next 2 years. For the utility market, 70% of respondents (15% + 55%) believe that the impact will appear within a timeframe of 5 years from now. The impact on the off-grid market is therefore expected to occur before the utility market, which makes sense given the smaller individual investments needed for off-grid, as well as the perception that the technology already exists compared to the technological increment needed to provide the larger scale storage capability for the utility market. Furthermore, the lack of rural electrification combined with an increase in demand in Southern and Eastern African countries is driving off-grid and mini-grid projects rather than utility scale projects. The geographically isolated nature of these projects (far from grid-access) results in the need for storage, because these mini-grids do not have the luxury to fall back on the baseload power stations that larger grids can provide when renewable energy sources are not available. Lastly, there is a perception that the technology already exists for off-grid or mini-grid solutions, compared to the technological increment needed to provide the larger scale storage capability for the utility market. Having said that, many examples already exist for utility-scale energy storage, so it is just a matter of time before they make a significant impact on grids.

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3.1.3 Technical problems with Solar PV projects Despite the fact that Solar power is one of the most promising renewable energy technologies, allowing the generation of electricity from free and inexhaustible sunlight, this does not mean that there are not technical challenges with Solar PV projects. The survey asked “What are the main technical problems with Solar PV projects”, from a pre-defined list reported below. Two other issues raised by respondents were “Feeding back into grid not possible everywhere” and “(Lack of) Support from ESKOM [or other utilities and off-takers]”. The issue of system integration and the challenge of intermittency of the PV generation was the most common top technical problem, and is closely followed by the related issue of grid harmonics and system stability. These issues require sophisticated grid studies, often with the support of the Transmission Operator and agreements to be developed with the energy supplier. Even though PV plants construction might be expected to become increasingly standardised and a known technology, construction challenges are still considered a significant problem by many respondents. Maintenance and reliability are seen as less of a technical priority problem, but still with issues.

Figure 4: Relative Importance of Technical Problems with PV Solar Projects

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3.1.4 Which are the most suitable technology applications for Solar PV? DNV GL asked participants to select the most suitable technology application for Solar PV in Southern / Eastern Africa, pre-suggesting the following main applications: -

PV rooftop for houses

-

PV rooftop for large buildings

-

Utility scale Solar PV projects

-

Replacement of conventional plants

-

Solar thermal for heating / cooling industrial processes

-

Desalination

No additional options were suggested by respondents The four most common applications have similar responses, with ‘Building rooftop’ in the lead as the most suitable application, but ‘Utility scale plants’ still with a high response. By contrast there seemed little expectation of larger scale use of Solar PV for niche applications such as desalination and industrial heating / cooling, with the assumption that these are better suited for grid electricity and or thermal power plants.

Figure 5: Most Suitable Technology Applications for Solar PV

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3.2 Solar PV Pricing Respondents were asked the following questions: Q7: By how much do you expect Solar PV electricity prices (i.e. USD/kWh) to drop by end 2020 as a % reduction from the 2016 average price? Q8: How would a significant increase in the crude oil price (e.g. to over USD 70/bbl) affect the Solar PV market development?

3.2.1 Expected drop in Solar PV electricity prices The question asked: “By how much do you expect Solar PV electricity prices (i.e. USD/kWh) to drop by end 2020 as a % reduction from the 2016 average price?” In other words: Price per KwH in 2016: 10 units Expected Price per KwH in 2020: 8 units (e.g.) Reduction of 20%

Figure 6 : Expectation of the Drop of Solar PV Electricity Prices by end 2020 from 2016

Given that just over 50% of respondents (with an opinion - i.e. 41/81) believe that Solar PV will fall in price by at least another 20% (despite significant falls already in the past 5 years), this suggests that there is hope for it to become truly competitive against other sources of energy, without subsidy. These even lower prices are already becoming apparent in recent bidding rounds elsewhere in the world, therefore the hope must be for Africa that similar prices will be achieved. The reverse side of that hope of course is that the Developers must look for further cost reductions and efficiencies, and Financiers need to assume possibly reduced returns as perceived risks are minimised and the technology becomes more mainstream.

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3.2.2 Effects of crude oil price increase This question explored whether there is a perceived correlation between oil price and attractiveness of Solar PV. The hypothesis is that higher oil prices will make Solar PV more cost competitive against traditional hydrocarbon energy sources. The majority agree with the hypothesis, though a significant minority believe it will make no difference, perhaps as they believe that Solar PV is already competitive and is no longer influenced by such external factors, already being a viable alternative to traditional energy sources. Perhaps next year a future question could ask e.g. what if oil prices fall (again) to $30/bbl, meaning Solar PV has to be even more competitive – can it compete at that price?

Figure 7: Impact of Crude Oil Price Increase on Solar Market Development

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3.3 Solar PV Market Potential Respondents were asked the following questions: Q9: What is the potential for development of the Solar PV market in the short / medium term (by 2020)? Q10: What is the potential for the development of the Solar PV market in the long term (by 2030)?

DNV GL questioned participants on the potential (from “Low” to “Excellent”) for the development of the Solar PV market in each of the focus countries and considering two time periods: -

The short / medium term, defined by a 2020 timeline

-

The long-term, defined by a 2030 timeline

The results are presented below:

Figure 8: Short-term Country Potential for Solar PV

Figure 9: Long-term Country Potential for Solar PV

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3.3.1 Comparison of Short Term and Long Term Outlooks The first observation of the above charts is that the opinion is generally positive for all countries in the short term (perhaps excluding Mozambique and Ethiopia) and is certainly very positive for all countries by 2030, reflecting an optimistic outlook for the Region in the next 10-15 years for Solar PV projects. Also of note is that the relative order of positivity for each country is the same, except that the outlook for Ethiopia improves relative to Uganda and Mozambique, perhaps recognising current efforts by that country to develop projects in renewable energy. A further observation is that even Mozambique (the lowest ranked) has a better outlook in 2030 than South Africa (the highest ranked) in 2020.

3.3.2 Short / Medium-term country potential (by 2020) South Africa - Most areas average more than 2,500 hours of sunshine per year, and average solar-radiation levels range between 4.5 and 6.5kWh/m2 in one day. Currently contracted capacity, anticipated to be installed by 2021, amounts to 2,321 MW for solar PV and 600 MW for CSP. The IRP 2016 envisions 17,600 MW of CSP and solar PV generation by 2050, in addition to the already contracted capacity. Zambia has a potential energy output per unit area (Solar radiation) average 5.5kWh/m²/day (MEWD, 2008) and up to 3,000 sunshine hours per year. This is significant potential for solar thermal & photovoltaic exploitation. Kenya presents the third highest potential. Solar power is largely seen as an option for rural electrification and decentralised applications in Kenya. And the government has continued to finance initiatives that aim to boost the energy sector. In Tanzania, energy is a key driver of development, particularly in relation to promoting the growth of small and large scale economic activity in the private sector. Renewable energy is growing fast in Tanzania and Tanzanian markets could be supported to benefit from recent improvements in technology associated with falling costs and new business models. Uganda is endowed with favourable solar irradiation of 1,825 kWh/m² to 2,500 kWh/m² per year. Small solar applications are often used in rural electrification projects such as Solar Home Systems or solar water heating. Over 30,000 solar PV systems have already been installed to in rural areas. Currently, two larger PV plants are at the planning stage. The Ugandan government intends to build a 500 MW utility-scale solar plant and awarded the implementation to Ergon Solar, a Taiwanese-US partnership. The capacity will be split up into four parks of 125 MW. The construction of the first park was planned to start in 2014 with an expected completion by October 2016. Additionally, the ERA has greenlighted the construction of a 10 MW PV plant by Dubai’s Access Power MEA, the first PV project to benefit from the Get FIT scheme. Mozambique has significant and virtually unexploited solar potential. Global horizontal irradiation varies between 1,785 and 2,206 kWh/m2/year. In total, Mozambique has a potential of more than 2.7 GW that could be easily developed. This potential offers many possibilities for grid-connected and rural electrification projects. Ethiopia is a country on the brink of an energy revolution, but requires significant assistance to realise its potential.

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3.3.3 Long-term country potential (by 2030) In South Africa, the Solar Energy Technology Roadmap (SETRM) estimated that 40 GW of Solar PV and 30 GW of CSP can be developed by 2050. In Kenya, the government is aiming to install an additional 500 MW and 300,000 domestic solar systems by 2030. In Tanzania, the PSMP 2007-2031 envisages the construction of 120 MWp of PV capacity by 2018, and several private companies have expressed an interest in developing 50-100 MWp solar plants. A few PPAs have been signed thus far. Zambia is currently battling an electricity supply deficit and has low electrification rates, 45% in urban and 3% in rural areas, while aiming to reach 90% and 51% access by 2030 in urban and rural areas, respectively. Considering its flexibility and ease of deployment, renewable energy is well poised to contribute to meeting this challenge. In Ethiopia the government considers private investment in its renewable energy sector as critical for the success of its ambitious Growth and Transformation Plan (GTP), which aims to reshape the country into a middle-income state by 2025. Considering the high amount of solar irradiation that Ethiopia receives, averaging at 5.2 kWh/m2/day, the development of solar PV projects in Ethiopia is an extremely lucrative opportunity for investors. In Mozambique, the Government’s renewable strategy also includes targets for the installation of 100,000 solar water heaters and 5,000 solar refrigerators up to 2025. In Uganda, the featured ‘renewable energy scenario’ presents a path that enables the Ugandan energy sector to transition to a modern, environmentally sustainable system. (60% renewable by 2030, and (near) 100% renewable by 2050).

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3.4 Barriers to Development of the Solar PV Market Respondents were asked the following question: Q11: What are the barriers to growth for the Solar PV market in Southern-Eastern Africa?

3.4.1 Barriers to growth for the Solar PV market The survey suggested 7 topics that may be seen as barriers to growth of the Solar PV market, covering a range of topics but excluding technical issues which are addressed elsewhere. Although the energy market in the Region is clearly open to growth, with a shortage of supply versus predicted demand, clearly the speed of growth is not as high as required to connect the estimated 600 million people who are not currently connected to reliable electricity in Africa. This question aimed to identify the priority barriers to be resolved. The chart below orders the topics from left to right, based on P1 selections. Clearly “Low Governmental support (regulation, policy)”, closely followed by “Access to finance” are the key topics. It could be argued that finance would be more readily available if the project risks are removed, so perhaps this is a downstream effect of other barriers. Clearly Government has a key role to play in opening up the energy markets, partly through regulation & policy and perhaps also through financial incentives. “Grid issues (capacity)” is the top P2 issue, suggesting that the Utility companies have a part to play in opening up access for new suppliers of electricity, with enhanced grid networks that can handle the renewable energy sources. The only additional qualitative comment / option from the responses was “damage or losses (safety)”.

Figure 10: Barriers to Growth for the Solar PV Market in Southern / Eastern Africa

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3.5 Regulation / Incentives to Support the Development of the Solar PV Market Respondents were asked the following questions: Q12: Which type of regulatory scheme do you prefer for Solar PV projects? Q13: Which type of financial incentive do you prefer for Solar PV projects

3.5.1 Preferred Regulatory Framework The Regulatory framework plays an important role in the confidence level which an investor can hold, to invest in and execute energy sector projects in any defined country. The survey asked participants which of four types of framework were preferred: •

Feed-in Tariff: o

Cost-based compensation to solar energy producers (e.g. USD/kWh produced)

IPP Bidding: o

Independent Power Producer bidding process, to allocate solar projects to generate electric power for sale to utilities and end users.

Net metering: o

Credit system for solar energy system owners for the electricity they generate and inject into the grid.

Electricity wheeling: o

Generate electricity in one part of the country and use it in another location by paying fees to the grid operator.

Feed-in Tariff (FITs) was the most attractive regulatory frameworks in Southern / Eastern Africa, and this was true across all the main respondent types.

NB Does not add up to 100% as some respondents selected more than one option

Figure 11: Suitable Regulatory Frameworks in Southern / Eastern Africa

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Country-specific FIT information Ethiopia is in the process of drafting its FITs bill, which should offer independent power producers (IPPs) the option to sell renewable energy power to the national grid at specified rates. As of May 2015, the GoE is in negotiations for its first Independent Power Production Agreement with Reykjavik Geothermal to develop two 500 MW geo-thermal sites in Ethiopia. In Kenya, FITs were introduced in 2008 and revised in 2010 and 2012. The regulation enables IPPs to sell electricity to KPLC at a fixed price for a fixed term of 20 years. In Mozambique, Decree 58/2014 was approved in October 2014 creating Mozambique’s FITs for renewable energy. Further regulation is still pending to implement the price premium. Decree 58/2014 creates Mozambique’s FITs, which applies to biomass, wind, small hydro and solar projects from 10 kW to 10 MW. South Africa is successfully implementing its REIPP program Tanzania introduced a FIT scheme for small power producers (100 kW to 10 MW) in 2008. The framework was reviewed in 2015. The tariff is negotiable for capacity of over 10 MW. In Uganda, to promote the development and use of renewable energy sources, Uganda’s Government has developed a FIT structure for power plants of up to 20 MW and first published it in 2007. IPPs enter a Purchase Power Agreement (PPA) with the UETCL. In 2014, both a Standardised Implementation Agreement and a Standardised Power Purchase Agreement were published. In Zambia, the Global Energy Transfer Feed in Tariff (“GET FiT”) Program is an initiative launched by KfW, whose purpose is to fast-track a portfolio of a number of RE generation projects (1 MW - 20 MW) promoted by private developers.

3.5.2 Preferred Fiscal Incentives Fiscal incentives boost the overall attractiveness and provide financial support to developers executing renewable energy projects. The survey offered four options for participants to select the most attractive fiscal incentive: •

Tax incentive: o

Deduction, exclusion or exemption from the payment of tax for the project

Funding program: o

Financing the solar activity, a program, a project, etc. (international program and/or, national programs)

Renewable Energy Certificates (REC) / Carbon Credits(CC): o

REC and CC are tradable certificates attesting the purchase of renewable energy directly from the electrical grid

Research and Development (“R&D”) support: o

Programs to support the development of products, programs, etc.

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NB Does not add up to 100% as some respondents selected more than one option

Figure 12: Suitable Fiscal Incentive in Southern / Eastern Africa

Clearly tax incentives are the most popular financial incentive, presumably as this is the most transparent means of achieving the Government support to the project. Funding programs are still a key means of ensuring some projects proceed, with many international development agencies supporting the expansion of renewable energy supplies. The fiscal incentives provided in each country in Southern / Eastern Africa is summarised in section 4.

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3.6 Solar PV Off-grid / Mini-grid Market Respondents were asked the following questions: Q14: Is the Solar PV Off-Grid / Mini-Grid market attractive for private investors? Q15: Does Solar PV Off-Grid / Mini-Grid require governmental subsidy / charitable support?

The hypothesis underlying these two questions is that the off-grid market requires subsidy due to the difficulty for its pure economic justification and private equity bankability based on the higher cost of providing this electricity. Because of this, many development agencies are focusing funding on this sector to extend access to electricity for communities who have little prospect of connection to the grid in the near or even medium term future. Nevertheless, there are also projects from private investors seeking to establish a viable market for off-grid and mini-grid electricity supply. The survey explored opinion on both the attractiveness of this specialised part of the Solar PV market for private investors and also whether government subsidy is needed. The survey responses are in fact somewhat contrary – “Yes”, the market is attractive for private investors, but also “Yes”, the market requires subsidy. Perhaps it is the seed money provided by the subsidies that makes it attractive. A future survey question could explore this further.

3.6.1 Attractiveness for Private Investors A clear majority believe the off-grid market can be attractive for private investors. This response is also true for the sub-set of participants who are developers and EPC companies.

Figure 13: Attraction of Solar PV Off-Grid / Mini-Grid market for private investors

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3.6.2 Need for Subsidy A clear majority believe the off-grid market requires subsidy or charitable support. This response is also true for the sub-set of participants who are developers and EPC companies.

Figure 14: Solar PV Off-Grid / Mini-Grid Requirement for Government Subsidy / Charitable Support

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3.7 Responses to the open-ended question about improving the Solar PV market Respondents were also invited to share their opinion on how to create an attractive market for investors: Q16: “In your perspective, what should be improved/implemented in the Southern / Eastern Africa Solar PV market to attract international and local investors?” The following comments were provided by respondents. Other than being grouped into a few themes, they are not edited. The overall ‘flavour’ of the responses is clearly suggesting that respondents believe that Governments have a large part to play in improving the regulatory landscape to make investment in the Solar PV market more attractive. Government

Regulatory

Incentives

Financial

Technical

Other

Governmental Buy In Country Stability Government stability Support from the Government should increase Improved Government Regulations Policy and regulations Clear support in government policy and regulations Policy certainty, government support Regulation Stability Governance stability and bankable PPA The separation between generation and distribution sectors and legal certainty for investors is essential. Get rid of the 60% local content requirement and don't let foreign utilities bid in the IPP programme to drive the price down as it makes investors look somewhere else as they can't compete with the reduced costs of the utility The incentives must improve Feed in Tariff secured by a fund / insurance Credit for and possibly of feeding into grid. Tax incentives Access to financial resources Bank efforts in stabilizing the currency fluctuations in the different countries Dollar based payment to mitigate the risk of not being able to repatriate revenues Updates of grid codes to take account of the difference requirements for grid connection. Creation of grid codes where they don't exist. Streamlining of grid connection process The grid stability, compatibility Advertising of the product Knowledge, Credibility, Seriousness

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4

COUNTRY INFORMATION

In the following pages DNV GL has summarised some key information related to the energy industry and solar power for each of 7 countries in Southern and Eastern Africa: •

Ethiopia

Kenya

Mozambique (to be added in Rev 1)

South Africa

Tanzania

Uganda

Zambia

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4.1 Ethiopia Country Energy information Data TBC in Rev 1

Regulatory policies implemented: IPP, Long term PPA, Net Metering Fiscal incentives available: Funding Program, R&D Support, Credits from Net Metering Ethiopia offers a comprehensive set of fiscal and non-fiscal incentives to encourage investment into priority areas and industries, of which investments are regulated by the Ethiopian Investment Agency (EIA). Country Information Ethiopia presents a considerable renewable energy potential, with an abundant hydropower capacity, solar and geothermal, as well fossil fuels. Hydropower constitutes the main source for the energy profile. The electricity demand is growing fast and the government needs to face important challenges at the level of the demand and the transmission system. Disruptions of power supply are frequent and only a small percentage of the population has access to the electricity (estimated to 12% form World Bank). Strategy plans have been launched in the country since 2011 with the aim to increase the power generation capacity, attracting investors, expanding and modernizing the grid network, bring electricity connection to the rural areas and export power to neighboring countries. Main stakeholders in the energy sector Authority

Ministry of Water, Irrigation and Energy (MOWIE)

Regional Energy Agencies

Ethiopian Rural Energy Development and Promotion Centre (EREDPC) Rural Electrification Executive Secretariat (REES)

Ethiopian Alternative Energy Development and Promotion Directorate ("AEDPD")

MOWIE is the regulatory body in charge of the management and planning of the water and energy resources development including strategies, polices, programs, and sectoral laws and regulations, and guidelines. The Ministry engages in the negotiations of international agreements for water resources. Regional energy agencies are government offices responsible for promoting and facilitating programs for the development of energy technologies regionally. This department is focused on the issue of rural electrification, primarily through the expansion of the national grid. To date, the EREDPC has played a limited role in the promotion of small scale off grid renewable energy technologies and access to modern energy services. Under the supervision of the AEDPD, REES is entrusted with the responsibility of supporting and promoting off-grid rural electrification projects through cooperatives and private sector operators acting outside the national grid. REES manages the Rural Electrification Fund (REF). AEDPD is in charge of the coordination of the renewable energy technology interventions in the country and lead the sector, by promoting and assessing energy technologies, providing technical assistance and training, stimulating participations of stakeholders.

Regulator

Ethiopian Energy Authority("EEA")

EEA is a governmental body in change of the management of rules, regulations, directives and standards to regulate energy efficiency sector. It is in charge of the management of tariffs, licences and negotiations with the off-grid IPPs contracts.

Producers

Ethiopian Electric Power ("EEP")

EEP is in charge of the production, transmission, distribution, and sale of electrical energy. Its projects include construction, operation and maintenance of hydropower, wind farm, geothermal, waste to energy projects; expansion, operation and maintenance of high voltage lines (including border crossing power lines); provision of bulk electricity to users; export of electricity to neighbouring countries.

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Independent Power Producers ("IPPs")

IPPs have entered the power market in Ethiopia providing electricity to the local market and few of them have projects under development.

Transmission

Ethiopian Electric Power ("EEP")

See above

Distributors

Ethiopian Electric Utility ("EEU")

EEU is a public body in charge of distributing and selling electrical energy.

Others N/A Regulatory policy and fiscal incentives National Energy Policy 2013

Regulatory framework in force since 2013 to support the development of hydropower resources and encouraging the energy mix diversification with renewable sources (solar, wind, and geothermal).

Scaling-Up Renewable Energy Program for Ethiopia ("SREP") Climate Resilience and Green Economy Strategy ("CRGE") Growth and Transformation Plan ("GTP II")

The SREP program was launched in the country in 2012 in coordination with the Africa Development Bank, the World Bank and other development entities and Ethiopian stakeholders, with the goal of supporting the development of renewable projects in Ethiopia. An Investment Plan, based on different criteria, has been set to finance the construction of renewable power plants.

Rural Electrification Fund

The fund, managed by the REES, provides loan and technical services for Rural Electrification Projects carried out by private operators, cooperatives and local communities and more specifically for those projects operating on renewable energy sources.

IPPs

IPPs are encouraged to enter the market and negotiate long-term power purchase agreements. However, the discussions are bilateral and no fixed regulatory framework exists for the IPP.

Feed-in Tariff

A first REFiT framework was established in 2008, including many changes during the years. Solar PV has also been added; however, the bill has gone through several revisions and it is not clear what is the status of the law.

Long term PPA

To be negotiated with the grid operator.

Carbon Credits

The International Development Association (IDA) is the part of the World Bank that provides loans (called “credits”) and grants for programs that boost economic growth, reduce inequalities, and improve people’s living conditions. Carbon Credit Trade exists in Ethiopia.

The CRGE's goal consists in creating clean electricity markets in Ethiopia and in the neighbouring countries. With regard to the energy sector, it defines the strategy for the expansion of the electric power generation from renewable sources and the energy efficiency technology in transport, industry and buildings. An extension of the GTP strategy from 2011 to 2015, the GTP II will run from 2015 to 2019 to support the improvement of the physical infrastructures for irrigation activities, hydropower electric generation projects and market penetration of off-grid solar technology.

Completed solar projects TBC in Rev 1 Current solar projects TBC in Rev 1 Future solar projects TBC in Rev 1

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4.2 Kenya Country Energy information Area Population Installed Capacity Peak Demand Demand Growth Installed RE Capacity Installed PV Capacity Installed CSP Capacity RE Target by 2020 RE Target by 2030 RE Target by 2050

msq km million MW MW % MW MW MW % % %

581,309 48.000 2,250 1,512 18.9 1,434 100 0

Year 2015 Year 2015 (2004 - 2013) Year 2015

100

Regulatory policies implemented: IPP, FiT, PPA Fiscal incentives available: Funds, tax incentives and carbon credits Country Information Electricity in Kenya is provided by different generation sources, mainly hydropower and geothermal, including also a contribution from wind power. However, to respond to its internal demand, Kenya is also importing electricity from Uganda ad Ethiopia. The grid connected installed electricity capacity is about 2.2 GW as at March 2015, however the network is characterised by high frequency of power outages. Kenya imports also 100% of its petroleum needs, however some oil deposits were discovered in the country and some plans exist for the production of small-scale crude oil in-house. Some coal mine were also discovered in the country, so the energy mix is expected to change in the next years. In 2008, the Kenya Vision 2030 initiative was launched, describing the transformation plan by 2030 the country aims to achieve. The plan also includes energy and electricity sustainable changes to support the economic growth of the country and diversification of the national power generation and supply from new sources.

Authority

Ministry of Energy and Petroleum ("MoEP")

The Ministry oversees policy and strategy development for the entire energy sector, defining the strategic plans and supporting the development of the Vision 2030 and Second Medium Plan 2013-2017 long term plans for all sector players.

Regulator

Energy Regulatory Commission ("ERC")

The ERC was established under the Energy Act 2006 and it is in charge of regulating the energy sector. With regards to the renewable sector, ERC coordinates the energy planning process, sets electricity tariffs, collects and maintains data and carries out the licensing process for IPP looking to connect power plants to the national grid. REA is in charge of the rural electrification development plan, including the management of the rural programme fund, the promotion of renewable energy sources and management of licences and permits for rural electrification. KNEB is the statutory body in charge of the development of the nuclear electricity generation in Kenya as part of the Vision 2030 program for the diversificaiton of the electricity sector.

Rural Electrification Authority ("REA")

Kenya Nuclear Electricity Board ("KNEB")

Producers

Geothermal Development Company ("GDC")

As a state-owned special purpose vehicle, the GDC is responsible for the exploration and production sites development for geothermal fields and management of contracts with geothermal operators.

Kenya Electricity Generating Company Limited ("KENGEN")

KENGEN is Kenya’s leader power generation company, operating hydro, geothermal, and gas- and diesel-fired power plants. The company is 70% state-owned, with the remaining 30% held by private investors.

Independent Power Producers ("IPPs")

TBC in Rev 1

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Transmission

Kenya Electricity Transmission Company Limited ("KETRACO")

KETRACO is a government-owned entity that was incorporated in 2008 to plans, designs, builds, own, operates and maintains all the future new transmission lines above 132 kV.

Distributors

Kenya Power and Lighting Company ("KPLC")

KPLC owns and operates transmission and distribution system in the country and sells the electricity to consumers.

Others N/A Regulatory policy and fiscal incentives Rural Electrification Program Fund

As part of the Vision 2030, REA is working to extend the national grid in rural areas, install off-grid stations and develop mini-grids, and promote the use of renewable energy sources.

IPP procurement programme and long term PPAs Feed-in Tariff ("FiT") Phase 2

The IPP procurement programme has been running since the mid-1990s, when KPLC started to procure power from IPPs. Long-terms power purchase agreements ("PPA") are in place for systems with capacities above and below 10MW.

Least Cost Power Development Plan 20112031 Solar water heating regulations Carbon Credits Tax incentives for renewable energy

Feed-in Tariff program exists to promote the development of renewable resources on a long-term agreement basis (20-year PPA). With regard to solar energy, a FiT applies for on-grid and off-grid applications: - On-grid 0.5-10MW: USD 0.12/kWh - Off-grid 0.5-10MW: USD 0.20/kWh - On-grid 10-40MW: USD 0.12/kWh A transmission development plan to develop approximately 10.345 Km of new lines by 2031.

To support the installation of water heater in private premises.

TBC in Rev 1 Kenya offers an exemption from value added tax (VAT) and import duties for supplies imported or bought for the construction of a power-generating plant or for geothermal exploration, as well as certain plant and machinery. This incentive applies for solar, under some specific conditions.

Completed solar projects TBC in Rev 1 Current solar projects TBC in Rev 1 Future solar projects TBC in Rev 1

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4.3 Mozambique Country information shall be added in Rev 1.

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4.4 South Africa Country Energy information Area sq km 1,221,037 Population million 55.380 Installed Capacity MW 52,811 Peak Demand MW 34,481 Demand Growth % 5.0 Installed RE Capacity MW 6,377 (contracted, 2750 in place @end2016) Installed PV Capacity MW 2,321.80 Installed CSP Capacity MW 600 RE Target by 2020 % 10% 7000 MW RE Target by 2030 % 20% 17800 MW RE Target by 2050 % No target yet Regulatory policies implemented: Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), a programme developed to encourage private investment to help further develop the renewable energy sector within South Africa. Long term (20 yr) PPA, backed up by the government. Fiscal incentives available: "South Africa Energy Efficiency Tax Deduction; Accelerated Depreciation Allowance; Green Energy Efficiency Fund; Green Fund; Country Information "Electricity generation in South Africa is currently dominated by coal power, however this dominance is expected to decline in anticipation of increased investments in gas, renewables, and nuclear power. South Africa is both importing and exporting power from and to its neighboring countries. The electrification rate in South Africa is comparatively very high for the region, standing between 85 and 90%. Main stakeholders in the energy sector Authority

Department of Energy (DoE)

DoE is responsible for energy planning, policy formulation and implementation.

Regulator

National Energy Regulator of South Africa (NERSA)

NERSA issues, among others, generation licenses and enforces their compliance, regulates all tariff increases proposed by Eskom, provides national grid codes, develops regulatory rules for relevant industries and determines the applicable standards.

Producers

Eskom

The national utility Eskom is responsible for generation, transmission and distribution of electricity to industrial, mining, commercial, agricultural and residential customers and redistributors. Eskom is a single buyer of electricity produced by numerous IPPs and it oversees all grid operations, including the connection of new customers and provision of continuous service.

Independent Power Producers

Most renewable energy projects are established under the REIPPP programme and are owned by IPPs.

Transmission

Eskom

Eskom is responsible for transmission and distribution of electricity throughout the country.

Distributors

See above

Others N/A Regulatory Policy and Fiscal Incentives Rural Electrification Fund

South African Electrification Programme aims to achieve universal access to electricity by 2019. It encloses all household, schools and clinics in South Africa. There are many output of this programme as New policies such as the Energy White Paper in 1998 establishing the Integrated National Electrification Programme (INEP) in 2000 a unit within the Department of Energy, Restructured electricity sector and Free Basic Electricity of 50 kWh per month for poor households, etc.

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Renewable Energy Independent Power Producer Programme ("REIPPP")

South Africa is the African country with the biggest IPP market, which is expected to contribute 30% of South Africa’s future generation capacity. Launched in 2011, the REIPPP programme consists in 5 rounds defining 20-year PPAs for large-scale renewable projects for onshore wind, solar PV, solar thermal, biomass, biogas, landfill gas and small hydropower plants.

Integrated Resource Electricity Plan 2010 – 2030 ("IRP 2016") Feed-in Tariff

The IRP 2010 was promulgated in 2011 and was indicated to be a 'living plan'. A new draft has been prepared in 2016. Currently, this plan is being discussed with multiple stakeholders and consultation workshops have been held in Q1 2017. The plan defines the demand profile for electricity over the next 20 years and details how this demand can be most effectively met from different sources.

Long term PPA

Carbon Credits

The REIPPPP is designed to contribute to meeting the national renewable energy target while encouraging foreign investment and developing socio-economic and environmentally sustainable growth. Ultimately the programme aims to stimulate the renewable industry in South Africa.

Round 1: •ZAR 1.14/kWh for wind; •ZAR 2.76/kWh for solar PV •ZAR 2.69/kWh for concentrating solar power (CSP). Round 2: •ZAR 0.90/kWh for wind; •ZAR 1.65/kWh for solar PV •ZAR 2.51/kWh for concentrating solar power (CSP) Round 3: •ZAR 0.74/kWh for wind; •ZAR 0.99/kWh for solar PV •ZAR 1.64/kWh for concentrating solar power (CSP) Round 4: •ZAR 0.68/kWh for wind; •ZAR 0.82/kWh for solar PV •ZAR 1.62/kWh for concentrating solar power (CSP) 20 year PPA with Eskom's Single buyer's Office. The PPA is financially backed up by the government. The main features of PPAs implemented in South Africa are: Legal basis, Long-term in nature, Take or pay, Design and perfomance requirements, Matters relating to delays,, under perfomance, Grid unavailability Force majeure, Termination, Testing standards – prior to operations, Project operations and Change in Law. TBC

Completed solar projects REIPPPP Round 1 projects SlimSun Swartland Solar Park The RustMo1 Solar Farm Mulilo Renewable Energy Solar PV project Konkoonsies Solar project of 9.7 MW at Pofadder Aries Solar project of 9.7 MW at Kenhardt, Northern Cape. The Greefspan PV Power Plant of 10 MW at Douglas The Herbert PV Power Plant of 19.9 MW at Douglas Mulilo Renewable Energy Solar PV project of 19.9 MW at Prieska The Soutpan Solar Park of 28 MW in the Waterberg Witkop Solar Park Core Energy project of 30 MW in the Waterberg, The Touwsrivier project of 36 MW at Touwsrivier, The De Aar Solar PV project of 48.3 MW at Pixley Ka seme, Mainstream Drogfontein project of 48.3 MW at Kimberley Letsatsi power project of 64 MW at Bloemfontein The Lesedi power project of 64 MW at Postmasburg The Kalkbult project of 72.5 MW at Kalbult The Kathu solar energy facility of 75 MW at Kathu The Solar Capital De Aar project of 75 MW at De Aar REIPPPP Round 2 projects The Solar Capital De Aar 3 project of 75 MW at De Aar, Northern Cape. DNV GL - Energy – Report No. 186076-ZACT-R-01, Rev. 00 – www.dnvgl.com/energy

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The Sishen solar facility of 74 MW at Dibeng/Deben, Northern Cape. The Aurora solar park of 9.0 MW at Aurora, Western Cape. The Vredendal solar park of 8.8 MW at Vredendal, Western Cape. The Linde project of 36.8 MW at De Aar, Northern Cape. The Dreunberg project of 69.6 MW at Dreunberg, Eastern Cape. The Jasper PV project of 75 MW at Postmasburg, Northern Cape. The Boshoff solar park of 60 MW at Boshof, Free State. The Upington solar PV project of 8.9 MW at Upington, Northern Cape. Current solar projects

REIPPP Round 3 projects

Adams Solar PV 2 Tom Burke Solar Park Mulilo Sonnedix Prieska PV Electra Capital (paleisheuwel) Pulida Solar Park Mulilo Prieska PV Xina CSP Karoshoek CSP Future solar projects

Round 4 projects Sirius Solar PV Project One Droogfontein 2 Solar Dyason's Klip 1 Dyason's Klip 2 Konkoonsies II Solar Facility Aggeneys Solar Project Sirius Solar PV Project One Droogfontein 2 Solar Dyason's Klip 1 Dyason's Klip 2 Konkoonsies II Solar Facility Aggeneys Solar Project

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4.5 Tanzania Country Energy information Data TBC in Rev 1

Regulatory policies implemented: IPP, FiT, PPA Fiscal incentives available: Funds and tax incentives

Country Information Hydro, natural gas, coal, uranium, wind, geothermal, biomass, solar, tidal and waves are abundant energy resources in Tanzania. Total power capacity mix in Tanzania is mainly composed of: - 45% natural gas; - 42% hydroelectric; and - 13% liquid fuel. Tanzania is also importing power from its neighbours such as Uganda (10 MW), Zambia (5 MW) and Kenya (1MW). The demand for electricity is expected to be growing at 10-15% per year. In order to absorb the demand, the government has decided to increase its generation capacity up to 10,000 MW by 2025. Including investments in renewable energy projects, rural electrification, generation, transmission and distribution expansion and by attracting private capital in the electricity industry. Main stakeholders in the energy sector Authority

Ministry of Energy and Minerals ("MEM")

MEM is responsible for the definition of the national energy policies and strategies and for the coordination of the sector and its stakeholders.

Regulator

Energy and Water Utilities Regulatory Authority ("EWURA")

EWURA is the regulatory authority responsible for technical and economic regulation of the electricity, petroleum, natural gas and water sectors. It is in charge of the definition of the licencing process, receiving tariffs, and setting standards in the different sectors. The Rural Energy Agency is an autonomous and governmental body in charge of the promotion and facilitation of the electrification in rural areas. Its role consists in managing the Renewable Energy Fund, to finance eligible rural energy projects, defining the grants allocation process and supporting in the development of the power capacity in rural community. Tanzania Electric Supply Company Limited is a public organisation under the authority of MEM. The company generates, transmits, distributes and sells electricity to mainland Tanzania, and sells bulk power to the Zanzibar Electricity Corporation ("ZECO"). TANESCO is the owner of 60% of the generation facilities and transmission and distribution facilities.

Rural Energy Agency ("REA")

Producers

Tanzania Electric Supply Company ("TANESCO")

Zanzibar Electricity Corporation ("ZECO")

Transmission

As above

Distributors

As above

Others

Independent Power Producers ("IPPs")

ZECO is the governmental body in charge of the electricity sector supervision in Zanzibar. It is in charge of the generation, transmission, transformation, distribution and supply of electricity in the island, operation and maintenance of the existing lines, investigation of new supply facilities of electricity, including purchase of electricity from independent power producers.

Tanzania counts nine large power plants fired by gas, heavy fuel oil and diesel, run by private companies, with capacities of over 10 MW

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Small Power Producers ("SPPs") Emergency Power Producers ("EPP")

under a power purchase agreement. SPPs includes projects < 10 MW, usually bio-energy or solar PV power plants, developed under a specific framework agreement and sell the electricity they produce to TANESCO or directly to consumers. Two emergency power producers, Aggreko and Symbion LLC, were hired by TANESCO to temporarily generate power in order to decrease the need for load shedding.

Regulatory policy and fiscal incentives Power System Master Plan 2007-2035 ("PSMP")

The PSMP 2007-2035 launched in 2007 by MEM and updated in 2012. It describes the short and long-terms strategy consisting in concluding PPAs for the interconnection with neighbouring countries, IPPS for the creation of new generation facilities, expansion plans for the high-voltage transmission network and studies of wind energy projects. In total, the PSMP foresees the development of 3,564 MW of renewable energy capacity from hydro, wind, solar and biomass codigestion plants.

Renewable Energy Investment Facility ("REIF") International donors and financing institutions IPP bidding and long term PPA

In 2016 a 870,000 USD grant was approved by the Sustainable Energy Fund for Africa ("SEFA") to REA for the management of the Renewable Energy Investment Facility. REIF provides funds to private sector for the development of renewable energy projects in rural areas. Projects include offgrid/mini-grid electrification schemes.

Feed-in Tariff (First generation of SSPs and Second generation of SPPS)

Tanzania introduced a feed-in tariff scheme for small power producers (100 kW to 10 MW) in 2008. For capacity of over 10 MW, the tariff is negotiable.

Various financing opportunities exist supported by commercial banks and development partners providing financial support to the construction of renewable energy projects in the country.

In August 2015, the Ministry of Energy and Mines (MEM) published model PPAs for seven energy technologies to be used for projects larger than 10 MW. These technologies are hydro, natural gas, oil, coal, geothermal, solar and wind. The model PPAs were issued for use in negotiations between project developers and energy customers.

Standardised power purchase agreements ("SPPAs") are used for the FiT scheme. The SPPAs signed before April 2015 fall under the first generation SPP framework, characterised by yearly adjustment of tariffs. While for SPPAs after April 2015, the second generation SPPs framework applies, including a fixed tariff for the duration of the SPPA. For solar projects, tariffs are defined as bid prices under a tender process. This competitive scheme applies for both grid-connected and mini-grid solar projects.

Tax incentives

Value added tax and import tax for main solar components have been removed.

Carbon Credits

TBC in Rev 1

Completed solar projects TBC in Rev 1 Current solar projects TBC in Rev 1 Future solar projects TBC in Rev 1

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4.6 Uganda Country Energy information Area Population Installed Capacity Peak Demand Demand Growth Installed RE Capacity Installed PV Capacity Installed CSP Capacity

sq km million MW MW % MW MW MW

241,038 41,653 910 550 10.0 786 Not Known Not Known

Regulatory policies implemented: IPPs, PPA, FiT Fiscal incentives available: Funds, tax incentives and carbon credits

Country Information Uganda has one of the lowest per capita electricity consumption rates in the world, showing a critical lack of electrification in the rural areas. The annual electricity demand is growing at an annual rate of 10-12 percent through 2020. The generation capacity of the country is mainly dominated by hydropower, supported by some heavy fuel oil and biomass cogeneration power plants. The export of oil and gas resources might generate investment funds for power projects in the medium term. The country intends also to achieve a rural electrification rate of 22% by 2022 and has a Renewable Energy Policy in place. Main stakeholders in the energy sector Authority

Ministry of Energy and Mineral Development (MEMD)

The MEMD’s mandate is the governmental authority in charge of establishing, managing and safeguarding the exploitation and utilisation of energy and mineral resources for social and economic development. MEMD provides policy guidance to attract investment and to inspect, regulate, monitor and evaluate the activities of private companies in the sector.

Regulator

Electricity Regulatory Authority (ERA)

The ERA is the statutory body in charge of regulating the generation, transmission, distribution, sale, export and import of electricity in Uganda. It also guides the liberalisation of the electricity industry, and manages licensing, rates, safety and other matters concerning the industry.

Rural Electrification Agency (REA)

The REA was established by the MEMD and is in charge of the implementation of the rural electrification agenda under a publicprivate partnership, to support the achievement of the rural electrification goals for 2022.

Producers

Uganda Electricity Generation Company Limited (UEGCL)

UEGCL is a governmental authority in charge of the generation of electric power, and its sale within and outside the country. UEGCL ensures the building, operating, maintaining and monitoring of electricity generation plants.

Transmission

Uganda Electricity Transmission Company (UETCL)

UETCL is the national system operator of the transmission network. It is the offtaker of the power purchase agreements, sells on power to the distribution network companies and maintain the operation of high voltage transmission system.

Distributors

Umeme

Since 2004, Umeme is in charge of the operation, maintenance and expansion of the distribution network. It is managed by a consortium of Globeleq and Eskom under a 20-year concession agreement.

Uganda Electricity Distribution Company Limited (UEDCL)

UEDCL is the owner of the electricity distribution network (previously having the responsibilities of the Umeme). Today its responsibilities related to the distribution network are limited to managing the lease and assignment agreements and supervising the completion of rural electrification projects starter before 2004.

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Others

Independent Power Producers (IPPs)

Few IPPs have entered the power market in Uganda providing electricity to the local market. In addition to Umeme, these IPPs are the West Nile Rural Electrification Company, Ferdsult Engineering Services, Kilembe Investments, Bundibugyo Electricity Cooperative Society, Pader Abim Community Multipurpose Electricity Cooperative Society and Kyegegwa Rural Electricity Cooperative Society.

Uganda Energy Credit Capitalisation Company ("UECCC")

UECCC is a governmental entity acting as credit support institution, providing financial, technical and other support to renewable energy and/or rural electrification projects in Uganda and managing the Uganda Energy Capitalisation Trust.

Regulatory Policy and Fiscal Incentives Global Energy Transfer Feedin Tariff ("GET FiT") Programme Renewable Energy Feed-in Tariff Scheme Phase 2 ("REFiT 2")

The GET Fit Uganda Program was launched in 2013 to develop small-scale renewable energy projects with a power between 1 to 20 MW installed capacity. A portfolio of renewable projects has been supported under the GET Fit including hydropower, cogeneration and solar power plants.

Uganda Energy Capitalisation Trust

Uganda Energy Capitalisation Trust is managed by UECCC providing allows credit enhancement of renewable energy projects with a particular focus on enabling private sector participation.

Renewable Energy Policy ("REP") 20072017

The 2007-2017 Renewable Energy Policy (REP) aims to increase the share of renewable energy from 4% to 61% of national energy consumption by 2017.

Energy for Rural Transformation Phase III ("ERT III") programme

ERT III is the Phase III of the Energy for Rural Transformation program started in 2005 in Uganda. Phase III covers the projects on the 2015-2020 period. The main goal is to increase rural electrification in the country, including three projects: grid-connected projects, off-grid project and monitoring and improvement of the programme for the next phases. As part of the ERT Programme, solar power subsidy is also provided as loans to solar power companies and public-private sector grants.

Rural Electrification Fund

Under the Rural Electrification Strategy and Plan covering 2013-22, the fund aims to increase electricity access in rural areas of Uganda, with the ultimate goal of reaching universal access by 2035.

IPPs and long term PPAs Carbon Credits

Standardised process is in place for PPAs.

Tax incentives for renewable energy

In order to attract investor and facilitate the expansion of the power sector, the following fiscal incentives are available: - Initial Capital Allowances - Partial VAT exemption for solar - Import duty tax

The REFiT Phase 2 applies to small-scale renewable energy systems form 0.5 MW up to 20 MW installed capacity and connected to the grid. Solar PV is not included in the list of tariffs. However, it could be included in the next phases of the scheme. With effect from 1st January 2015, procurement of new capacity from solar technology will be subject to a competitive tendering process initiated by the ERA in accordance with the Electricity Act, 1999 Chapter 145, Laws of Uganda

Carbon Credit is defined as “a certificate showing that a Government or Company has paid to have a certain amount of carbon dioxide removed from the environment” . The Climate Change Unit ("CCU") has been created by the government in the Ministry of Water and Environment to manage all crediting projects in Uganda.

Completed solar projects Small solar applications have been installed in rural areas. Some solar PV projects have already been built. It is the case for the 10 MW Soroti Solar Power, the 20 MW Klabulasoke Solar Power and the 10 MW Tororo Solar Power plants currently operational and connected to the national grid. Other PV plants are under development and construction and present capacities varying from 10 to 125MW. Current solar projects TBC in Rev 1 Future solar projects TBC in Rev 1 DNV GL - Energy – Report No. 186076-ZACT-R-01, Rev. 00 – www.dnvgl.com/energy

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4.7 Zambia Country Energy information Area Population Installed Capacity Peak Demand Demand Growth Installed RE Capacity Installed PV Capacity Installed CSP Capacity RE Target by 2020 RE Target by 2030 RE Target by 2050

million sq km million MW 2,494 MW 1,960 % 3.0 MW 2 362 MW 2 MW 0 % NA % NA % NA

752,618 17.170

//2015 //2015 //2015

Regulatory policies implemented: "The Revised Sixth National Development Plan for Zambia kick off specific objectives relevant to the renewable energy sector, including: Increasing electricity generation capacity by at least 1,132MW and building appropriate transmission and distribution lines; Increasing rural electrification levels to 8%, and; Expanding the use of renewable and alternative energy in the country’s energy mix." Fiscal incentives available: Renewable energy investment incentives are around: Priority Sector Incentives and Micro and Small Enterprises (all tax related incentives) Rural Electrification Fund (REF) Scaling Solar GET-FiT In Zambia, fiscal and non-fiscal incentives are available for investors in specific 'priority sectors' (currently manufacturing, infrastructure development and energy and water development) where the investments are made in an industrial area, rural area or multi-facility economic zone. These incentives are available for certain sizes of investments which receive approval from the Zambia Development Agency (“ZDA”). Country Information Zambia has an abundance of renewable and non-renewable energy resources, including industrial minerals such as coal, biofuels, biomass, wind, hydro and solar. 96% of the electricity generation of the country is provided by hydropower. The demand for electricity is expected to increase by roughly 3% per year. Power outages have been increasing in the last years due to low water levels in Zambia's main reservoirs. This highlighted the need for the country to diversify its energy mix with by adding other renewable energy sources, however at the moment the development of solar energy projects has been mainly driven by governmental and donor funded projects. Zambia is part of the Southern Africa Power Pool ("SAPP"). Main stakeholders in the energy sector Ministry of Energy and Water Development ("MEWD")

MEWD is the Ministry responsible for the development and management of energy and water resources in the country. It is in charge of the definition and implementation of the national energy policy and strategy, including the development of new national programs. It is also in charge of the coordination of the energy and water sectors' stakeholders.

Rural Electrification Authority ("REA")

REA is a governmental body in charge of the coordination of the activities for the rural electrification, including the management of the rural electrification fund and of the tenders for the rural projects.

Regulator

Energy Regulation Board ("ERB")

The ERB the regulatory body in charge of the regulation of the licencing process, the tariffs and prices definitions, the setting of technical standards, the promotion of new grid connections. Since 2017, ERB is also responsible for the regulation of the solar sector, in particular in the regulation of solar equipment and components imports.

Producers

Zambia Electricity Supply Corporation ("ZESCO")

ZESCO is a fully state-owned company responsible of the electricity sector management, including electricity generation and transmission.

Authority

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Transmission

Zambia Electricity Supply Corporation ("ZESCO")

See above.

Distributors

See Transmission

Others

Office for Promoting Private Power Investment ("OPPPI")

OPPPI is a governmental body created to promote private investment in the generation and transmission of electricity. It is in charge of the planning, procurement and awarding of electricity projects, facilitating the coordination with the governmental entities.

Zambia Development Agency ("ZDA")

ZDA facilitates investors market entry, opened to local and international investors, by offering supporting services in the administrative management. It support in the land acquisition, licencing and procurement of water and electricity.

Zambia Industrial Development Corporation ("IDC")

Incorporated in 2014, the Industrial Development Corporation of Zambia is an investment company majority owned by the Zambian government. IDC’s mandate is to play a catalytic role in Zambia’s industrialization through the promotion of job creation and domestic wealth formation in key sectors. The IDC facilitates provision and raising of long term finance for industrial projects. In 2015, IDC signed an agreement with the IFC to explore the development of up to 100 MW solar capacity through the Scaling Solar initiative. The first phase of the program resulted in two utility-scale projects (50 and 35 MW, both projects awaiting financial close) scheduled for construction in 2017.

Zambia Revenue Authority ("ZRA")

The Zambia Revenue Authority is they key agency governing domestic and customs taxes, including considerations of VAT, import tariffs, and business taxes. Zambia Environmental Management Agency (ZEMA) The Zambia Environmental Management Agency advises on environmental policy formulation, makes recommendations for the sustainable management of the environment, ensures the integration of environmental concerns in overall national planning, reviews environmental impact assessment (EIA) and strategic environmental assessment (SEA) reports, and facilitates public access to environmental information in the Country.

Zambia Bureau of Standards ("ZABS")

The Zambia Bureau of Standards (ZABS) is the national standards body for Zambia, responsible for standards formulation, quality control, quality assurance, import and export quality inspections, certification, and removal of technical barriers to trade. As of 2017, importers of solar equipment must present ZABS with a certification of product quality.

Regulatory Policy and Fiscal Incentives Rural Electrification Fund

Access to electricity in Zambia is estimated at 28% of the total population, comprising approximately 62% of the urban population and 5% of the rural population. Approximately 500,000 urban households and 1.8 million rural households currently do not have access to electricity. The Government of Zambia maintains an official target of achieving 51% rural electricity access by 2030.

IPP bidding and Long term PPA

Zambia’s energy regulations have allowed Independent Power Producers to feed electricity into the grid since 1995. There are currently four IPPs contributing 186 MW equivalent to 7% of installed capacity to the sector.

Feed-in Tariff

For Solar PV Plant Size Range: 500 kW to 1 MW: 17.82 (U.S. ¢/kWh) 1+ MW to 5 MW: 16.76 (U.S. ¢/kWh) 5+ MW to 10 MW: 15.74 (U.S. ¢/kWh) 10+ MW to 20 MW:14.25 (U.S. ¢/kWh)

Carbon Credits

BioCarbon Group, BCP, and First Climate are committed to reduce carbon emissions from a transformational community forestry project in Zambia. Indeed Zambian community forestry project sells carbon credits to BP Target Neutral, supporting African communities.

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Completed solar projects

Current solar projects 34 MW Ngonye (ENEL)

34 MW PV project has started in the Lusaka South Multi-Facility Economic Zone in southern Zambia under Enel Green Power and Zambia’s state-owned utility ZESCO after signing 25-year PPA

54 MW Bangweulu (NEOEN)

French solar developer Neoen signed PPA with ZESCO for 54MW solar project in Zambia with the deal expected to last for 25 years.

Future solar projects IDC Zambia issued EOI for Scaling Solar Rnd 2

Following the first successful tender for up to 100 Megawatts (MW) in Round1, The Industrial Development Corporation Limited (IDC) released an Expression of Interest (EOI) for Round 2, which will be for 150MW - 250MW.

IDC Zambia Round 3

The IDC is expected to announce a third round for their Scaling Solar project, adding another 250MW - 350MW, bringing the total for the Scaling Solar projects up to around 600MW.

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5

DNV GL IN THE SOLAR MARKET

5.1 DNV GL Group DNV GL South Africa Pty Ltd is a wholly owned subsidiary of DNV GL Group. The DNV GL company structure is illustrated below.

Figure 1: DNV GL company structure Driven by our purpose of safeguarding life, property and the environment, DNV GL enables organizations to advance the safety and sustainability of their business. We provide classification and technical assurance along with software and independent expert advisory services to the maritime, oil and gas, and energy industries. We also provide certification services to customers across a wide range of industries. Combining leading technical and operational expertise, risk methodology and in-depth industry knowledge, we empower our customers’ decisions and actions with trust and confidence. We continuously invest in research and collaborative innovation to provide customers and society with operational and technological foresight. With our origins stretching back to 1864, our reach today is global. Operating in more than 100 countries, our 13,500 professionals are dedicated to helping customers make the world safer, smarter and greener. We work from a position of global knowledge, experience and advanced techniques. As an independent, objective business and technical advisor we help customers achieve higher levels of reliability, availability, sustainability and profitability. As a solutions partner we help customers enhance value to their customers, stakeholders and shareholders. DNV GL is one of the few companies in the world able to provide economic and technical expertise that combines policy and strategy topics, with operational and technical advice with an explicit focus on the energy industry. We understand the technical consequences of a business decision, and the business consequences of a technical decision. In the Energy Industry DNV GL delivers world-renowned testing and advisory services to the energy value chain including renewables and energy efficiency. Our expertise spans onshore and offshore wind power, solar power, conventional DNV GL - Energy – Report No. 186076-ZACT-R-01, Rev. 00 – www.dnvgl.com/energy

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generation, transmission and distribution, smart grids, and sustainable energy use, as well as energy markets and regulations. DNV GL - Energy is headquartered in Arnhem, the Netherlands, with major offices throughout Europe, North America and China as well as Asia-Pacific, Latin-America the Middle East and Africa. As an objective and impartial knowledge-based company, we advise and support organizations along the energy value chain: generators, TSOs, DNOs, suppliers and end-users of energy, equipment manufacturers, as well as government bodies, corporations and non-governmental organizations. Our 2,300 energy experts support customers around the globe in delivering a safe, reliable, efficient, and sustainable energy supply. As an energy powerhouse, we deliver trusted opinions throughout the energy value chain.

5.2 DNV GL - Energy Advisory Under our brand DNV GL - Energy, we have united the rich heritage of five well-known entities: DNV, GL, KEMA, Garrad Hassan and GL Renewables Certification. DNV GL - Energy Advisory is part of the DNV GL Energy Business Division and serves the diverse needs of the energy and sustainability marketplace with the strong heritage and experience of KEMA, Garrad Hassan and DNV. This heritage gives us a solid foundation for providing world-class, innovative solutions in the fields of business and technical consultancy. In a world of increased energy demand, climate change, environmental concerns, finite fossil fuel reserves, and aging energy assets, we are playing a vital role in serving the needs of our customers globally. We support DNV GL's initiatives across the energy value chain (see Figure 2) through consulting on energy and greenhouse gas management, (distributed) generation, sustainability strategy and certification, and smart grid opportunities such as demand response, energy storage and energy information.

Figure 2: DNV GL - Energy Advisory services

Our activities include: •

Support industry to reduce their energy costs and remain competitive

Design, implement and evaluate policy

Assist project developers, owners or lenders with developing projects successfully

Develop, operate and measure the effectiveness of utility obligation schemes

Capacity building and market assessments for the new energy economy (smart cities, demand side management, measurement & verification, renewable energy sources etc.)

Research & innovation

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5.3 DNV GL - Solar Expertise DNV GL is the world’s largest renewables advisory firm with over 2,300 energy experts worldwide. We have advised on over 30,000 MW of solar projects. Through our extensive experience we have provided the following services in the PV industry: Owner’s engineering for project developers

Regulatory standards compliance consulting Independent engineering & asset management

Design services for project developers

Technology assessments for component manufacturers

DNV GL solar services

Solar resource assessments and grid integration

Figure 3: DNV GL services to the solar PV industry DNV GL, with its large resource of independent energy experts, is a world-leader of expert advisory services. Building on humble origins providing power in the remote corners of the world, solar PV has evolved to become a significant source of renewable distributed generation, being found on rooftops and open fields throughout Africa, Middle East, Europe, North America, and Asia. DNV GL has successfully advised on more than 2,500 solar projects globally, by offering a comprehensive range of technical and project services, throughout the entire solar project lifecycle. DNV GL has performed technology reviews for leading global module, inverter, and tracking system manufacturers to support their products becoming “bankable”. The models of solar grid interconnection equipment and the utility grid itself are keys for successful integration of high levels of solar penetration. We work with investors, project developers, owners, and equipment manufacturers to help manage risk throughout the entire project life cycle and to ensure the performance and safety of systems from residential rooftops to multi-megawatt power plants. Our team includes experts in PV system design, solar power plant operation, PV module manufacturing, PV module and inverter testing, equipment performance, and structural elements such as rooftop mounting systems and trackers. Additionally, we have economists and data analysts who have conducted numerous economic impacts and costs and benefit analyses. DNV GL’s global experience includes successfully contributing to more than 2,500 solar projects (over 30,000 Megawatts) over the past 25 years. Investors engage us to perform Independent Engineering (IE) on individual solar projects, portfolios of distributed generation projects (residential, commercial, industrial), and key system components. Project developers and owners seek our advice and guidance. As owner’s engineers we help you set the highest standards of engineering excellence in today’s PV and CSP systems, providing services from site feasibility studies through turn-key design packages. Component manufacturers turn to us to perform technology reviews of new products for successful market entry. This includes PV modules, inverters, mounting systems, and CSP component. DNV GL - Energy – Report No. 186076-ZACT-R-01, Rev. 00 – www.dnvgl.com/energy

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6

QUESTIONNAIRE

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7 REFERENCE # 1 2 3 4 5 6 7 8 9

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DNV GL - Energy – Report No. 186076-ZACT-R-01, Rev. 00 – www.dnvgl.com/energy

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About DNV GL Driven by our purpose of safeguarding life, property and the environment, DNV GL enables organizations to advance the safety and sustainability of their business. We provide classification and technical assurance along with software and independent expert advisory services to the maritime, oil and gas, and energy industries. We also provide certification services to customers across a wide range of industries. Operating in more than 100 countries, our 16,000 professionals are dedicated to helping our customers make the world safer, smarter and greener.

DNV GL - Energy â&#x20AC;&#x201C; Report No. 186076-ZACT-R-01, Rev. 00 â&#x20AC;&#x201C; www.dnvgl.com/energy

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Africa Solar Survey Report 2017  

Solar photovoltaic market in Southern / Eastern Africa 2017. Overview of the solar market trends