Scaling renewables in Africa a challenge, says Saudi investor

For renewable energy developers, Africa presents “a clear business opportunity”, says Marco Arcelli, CEO of Saudi Arabia-based energy and desalination developer ACWA Power.

Outside the largest African markets, however – the firm has invested around $7bn in Egypt, Morocco and South Africa – Arcelli says that ACWA is still largely at the stage where it is limited to “scouting” for opportunities.

“I don’t want to sound arrogant in saying a country is too small for us, but in reality, we only have a limited number of resources, and we need to allocate them based on the priorities that we have on our plate.

“If you look at the need to develop 50 megawatts, 70 megawatts or so at a time in a country where we are not already present, you will understand that, since our scale normally is several hundred megawatts or maybe gigawatts…we need to find a way, basically, to do it effectively. That’s why we need to see if we could combine into a programme that allows us to be the best for the local need.”

Big country focus

ACWA is one of several firms from the Gulf states to have made major renewable energy investments in Africa in recent years.

ACWA’s pipeline includes 10 GW of wind projects in Egypt, while it has developed a series of concentrated solar power projects in Morocco and South Africa (these schemes use mirrors to reflect sunlight onto a receiver, which then heats fluid that spins a turbine to generate electricity). The company is also working to develop green hydrogen projects in all three countries.

Arcelli says that it is “natural” to start in the larger countries, given that the size of their populations and their economies means there is scope to quickly develop large-scale renewable power projects.

Arcelli acknowledges that ACWA’s entry into Africa has benefited from the Saudi Arabian government’s efforts to develop a stronger diplomatic presence in the region, which he says is helpful in creating “trust” and provides “a natural opening to do business together”.

Despite the challenges of scale, he does believe that Africa “has the potential” to compete for a larger share of renewable energy investment. At present, the continent receives only around 2% of global investment in the sector. Arcelli says that much will depend on governments developing the right investment policies.

“If you have the need and if you have the right leadership, then the potential realises itself.”

Desalination

ACWA’s other focus area is desalination – it claims to be the world’s largest private water desalination company.

“Desalination is a different type of opportunity,” Arcelli says.

Compared to renewable energy, Arcelli notes that it is potentially more viable to “start small” with desalination. Relatively small desalination projects in countries outside of Africa’s largest markets could become a “beach head” to enable the company to expand.

ACWA reached a memorandum of understanding with Senegal in 2022 for a desalination facility and reportedly concluded a 32-year agreement on the $800m project in March, shortly before President Macky Sall left office. However, new president Bassirou Diomaye Faye appears less keen.

Arcelli told African Business that this project is “under review by the new government”. Ministers have publicly indicated that the deal will be scrapped.