South Africa, Zambia, Namibia, Zimbabwe
Africa GreenCo, Investment Fund for Developing Countries (IFU), InfraCo Africa, Southern Africa Power Pool (SAPP)
Countries in Southern Africa, like Zambia, Zimbabwe, Namibia and South Africa, urgently need more energy generation to provide clean and affordable energy to people who still lack access. Currently about 31% of Zambia’s population has electricity, with 67% of the urban and 4% of the rural population having access to power. Financial challenges of ZESCO, the national utility, severely hamper Zambia’s ability to scale up energy access. Africa GreenCo set out to solve this, first in Zambia and then across the wider Southern African Development Community.
Africa GreenCo, a 2018 and 2019 P4G partnership, is a creditworthy renewable energy buyer and seller that facilitates local and regional power trade to expand affordable clean energy access. GreenCo mobilizes private sector investment in renewable energy to strengthen national and Southern African Power Pool (SAPP) electricity markets and facilitate a shift away from the current single buyer model, making renewable energy more competitive, affordable and resilient. GreenCo procures the services of the national utilities to wheel the power and provide energy balancing and banking services, thus providing a cost-reflective revenue stream to the utility and enabling it to commercialize its assets.
The partnership’s first step was a feasibility study to explore approaches to unlocking power investment in sub-Saharan Africa, identify potential countries of implementation, undertake technical analysis and consider legal and financial structuring options. The partnership used this study to develop its approach and structure and apply for additional long-term grant funding to develop a full business plan and to address barriers to commercialization, such as gaining support from critical government and utility stakeholders and attracting investment.
GreenCo provides an efficient link between small-to-medium sized renewable energy projects, commercial and industrial customers and the wider market. By aggregating and diversifying supply and demand side risks and helping to improve market structures, it mitigates risk and can attract more funding to accelerate the development of new renewable energy generation capacity at a lower generation tariff.
As part of P4G’s approach to reducing investment risk through enabling systems, it supported the partnership in addressing regulatory changes needed to expand its model. In 2019, P4G organized an acceleration workshop at the UN General Assembly to engage with key policy and decision makers from Zambia’s government and prospective investors. By connecting with policymakers and sharing recommendations, the partnership collaborated with the government to secure market entry. The acceleration workshop served as a pivotal moment for Africa GreenCo’s implementation; investors noted that the substantial support provided by the policymakers at the session reduced their perception of risk.
GreenCo was able to provide input into ongoing legislation in Zambia to allow for private sector players to participate in the power market. In 2020, a new regulation in Zambia opened up licenses for intermediary offtakers in the country. This clear recognition of the role of entities like Africa GreenCo enabled it to attract sustainable investors in the regional power sector. GreenCo’s model offers key innovations in the electricity market with more electricity generation and improved security of supply – and it does so in partnership, not competition, with existing industry players.
GreenCo leverages the interconnected nature of the regional electricity grid and demonstrates the benefits of regional trade. The economic and development benefits of this model incentivize public and private stakeholders to coordinate in creating an enabling environment for the market participants such as GreenCo.
Africa GreenCo operates on a portfolio basis, purchasing power from multiple independent power projects and then selling that power to multiple purchasers through power supply agreements and trading on the regional electricity markets. By acting as a creditworthy intermediary, the partnership reduces investment risk and shifts investment focus from single project development to the regional energy sector as a whole.
This model allows GreenCo to pool and de-risk renewable power for electricity buyers while promoting cross border power transactions and a more dynamic clean energy market in the SAPP. Private investors benefit from reduced risk and shorter development lead times through offtaker arrangements, and utilities reduce their operational costs while increasing installed capacity.
When it launched in 2017, GreenCo sought grant funding from several sources, using that money strategically for the partnership to grow. With P4G funding in 2018 and 2019, GreenCo leveraged P4G’s connections with the Danish Ministry of Foreign Affairs to demonstrate the value of higher-risk and innovative investments to the Danish government. This helped it close its first investment round — securing $1.5 million in convertible loans from Danish Investment Fund for Developing Countries (IFU) and InfraCo Africa in October 2020.
In April 2022, GreenCo secured an additional $15.5 million in equity funding from InfraCo Africa, IFU and the EU- funded Electrification Financing Initiative (EDFI ElectriFi) to develop an initial portfolio of 100MW renewable energy in Zambia and Namibia.
Since 2022, the energy sector in Southern Africa has evolved rapidly, accelerating GreenCo’s expansion in the region. In 2023, GreenCo submitted applications for energy trading licences in South Africa and Zimbabwe and intends to close a further investment before year end to enable it to support additional projects.
1. Articulate a clear vision and strategy. Africa GreenCo built on lessons learned from its feasibility study to develop a business plan that highlighted the partnership vision and steps to achieve it. This document captures the partnership strategy and enables partners to stay focused and aligned. Throughout its growth, GreenCo held workshops and roundtables to gather feedback from sector actors, using these opportunities to build system-wide support and fine-tune its strategy.
2. Leverage grant funding to secure investment. Flexible, long-term grant financing was critical to GreenCo’s growth, as the partnership used it as catalytic capital for innovative commercial initiatives. It showed how funding awarded to the nonprofit arm of the project could be used to support business components that generate profit. Additionally, GreenCo demonstrated the success of investing in an early-stage model. With its initial investment of $1.5 million from IFU and InfraCo, GreenCo was able to prove out more of its approach and secure $15.5 million just two years later.
3. Pursue enabling systems support. P4G mobilized its network to bring key Zambian policymakers to the acceleration workshop, which propelled the process to enable GreenCo’s market entry.1 Early-stage support from reputable experts in the field who validated the concept and demonstrated buy-in from local government and power utility stakeholders helped the partnership build credibility and unlock funding. This is the kind of support P4G National Platforms can provide as we see how they pave the way for future investments. The partnership also noted the importance of working with both high-level stakeholders and technical teams. High level political support is crucial but senior figures are more vulnerable to changes in government. By building solid support among technical level staff, projects can better withstand changes in leadership.
4. Be patient, flexible and determined. GreenCo emphasized the importance of working with potential partners to find ways to support the partnership, and finding champions within such organizations who are willing to think outside the box. This is especially important when proving an untested model, where partnerships must respond to the evolving environment and context.
In 2021, GreenCo was issued with a provisional trading licence in Zambia and was admitted as the first ‘Market Participant’ of SAPP, a pivotal step in improving liquidity and the supply of renewables on the SAPP. GreenCo signed a power purchase agreement with an operational hydro power plant to sell their uncontracted capacity on SAPP competitive markets, despite them being a SAPP member themselves, in a clear recognition of GreenCo’s value add.
In 2022, GreenCo was issued with a full Zambian electricity trading licence. The partnership is commencing operations in Zambia with a solar photovoltaic pilot project of 25MW which was procured through an open public tender, which it anticipates will avoid 4.3 million MT CO2.
In 2023, GreenCo signed its first greenfield power purchase agreement with an 85MW solar PV project in P4G partner country South Africa, signed an implementation agreement with the Government of Zambia and was issued with a Namibian electricity export licence.