Climate finance is, sometimes, the only opportunity for a community.
Only around one in four people in Mozambique have access to electricity, a situation that places considerable limitations on the country’s scope for improving in areas as diverse as health, industrial production and education. Mozambique has significant potential to develop renewable energy projects, but the electricity sector lacks the financial resources to set major renewables investments in motion.
Time for Climate Finance
Some very welcome news is that, in June 2017, it was announced that significant amounts of Climate Finance are being mobilised to support the development of Mozambique’s first utility-scale Solar PV plant, a 40.5 MW project that will generate sufficient electricity to supply 175,000 households. The project has a 25-year Power Purchase Agreement, with the electricity to be sold to Mozambique’s State-owned electricity utility (Electricidade de Mocambique, EdM).
The project is a public-private partnership (PPP) being developed by a Norway-based independent power producer (Scatec Solar), Norway’s development finance agency (Norfund), and EdM.
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Climate Finance will be provided by the International Finance Corporation (IFC), the private sector arm of the World Bank Group. Of the US$ 76 million required for the construction of the project, the IFC will provide US$ 55 million, equivalent to around 72% of the total project cost. The IFC financing package is comprised of US$ 19 million from its own account, US$ 19 million from the Climate Investment Funds (a Climate Fund), and a syndicated loan of up to US$ 17 million. The remaining funding will be provided by EdM.
The project will improve access to electricity (especially in rural areas), improve grid stability, demonstrate the potential of utility-scale of Solar PV in Africa, and will hopefully promote further foreign direct investments in the region.
The deal indicates the strong and growing commitment of certain Climate Finance providers to develop renewable energy projects in some of the most underdeveloped and isolated parts of Africa.