Namibia's solar success

How Africa's outlier raced ahead with low-cost solar

While most of sub-Saharan Africa struggles to attract private investment in electricity generation at reasonable rates, Namibia seems to have done so overnight.

Rapid solar build out

Consider the following facts:

1. In 2015, there was no private power generation in Namibia

2. By 2022, two-fifths of all electricity came from privately generated utility-scale solar¹

3. Incredibly low solar tariffs have been achieved: US$c 2.9/kWh (2020)²

Private finance without crippling conditions

Namibia's solar electricity was procured in local currency without government gaurantees.³

This is incredibly uncommon.

Only 20% of global investment in power goes to developing countries (barring China),⁴ and when private investment does flow, investors make costly demands such as payments in USD to avoid local currency risk and government guarantees.⁵ This exposes the local population to crippling exchange rate volatility, oftentimes dramatically increasing the real price of electricity.⁶

How did Namibia buck the trend?

Namibia has the third largest number of independent power producers in sub-Saharan Africa.⁷ It seems like there are three factors which contributed to success:

1. A reliable buyer: NamPower, the country's utility, was in relatively good financial health, making it a credible counterparty and removing the need for government guarantees. Investors could trust NamPower to pay up on time due to its ability to fully recover costs and collect bills.⁸

2. Competitive procurement: Renewable energy auctions allowed for transparent and competitive procurement. This helped drive down prices and ensure power contracts did not become an avenue for under the table deals and corruption (something I talk about in this podcast).

3. Good incentives and governance: Namibia wanted to reduce its net imports of electricity which created a strong incentive to get procurement right, which in turn was bolstered by good governance. As a testament, it was agreed that any dispute between the independent power producer and NamPower would be handled in Namibian courts rather than through international arbitration.⁹

The road ahead

While Namibia has had glowing success, there is much that remains to be done. To bring electricity to the remaining two-fifths of the population who still lack access, Namibia needs to invest in its grid. As I mentioned in my last post, building out transmission was transformative for Chile. With support from the World Bank, Namibia will get $138 million to construct a new power line and battery storage.¹⁰

Keep procurement transparent and competitive

Finally, in its race to install new solar, Namibia should not forsake competitive procurement. While it can be tempting to follow expedited procedures for future solar build-out,¹¹ as

Todd Moss

says, it is critical to maintain transparent and competitive procurement to keep costs down.

1. IEA Namibia Electricity Data

2. Kruger, W., 2022. A quiet transition: The role of Namibia's state-owned power utility in the renewable energy auction program. Utilities Policy, 78, p.101392.

3. Ibid.

4. IEA’s 2024 World Energy Investment Report

5. Isaad, H. (2023). IEEFA. https://ieefa.org/resources/would-pakistans-long-term-power-purchase-agreements-become-roadblocks-its-solar-energy

6. Fink et al. (2023). Mitigating foreign exchange risk in local currency lending in fragile states. IGC Synthesis Paper. https://www.theigc.org/publications/mitigating-foreign-exchange-risk-local-currency-lending-fragile-states

7. Kruger, W., Alao, O. and Eberhard, A. (2019). Namibia Country Report. Power Futures Lab. https://www.gsb.uct.ac.za/files/Namibia_Country_Report.pdf

8. Ibid.

9. Ibid.

10. World Bank (2024). https://www.worldbank.org/en/news/press-release/2024/05/06/world-bank-loan-to-afe-namibia-supports-renewable-energy-integration

11. Solar Quarter (2024) https://solarquarter.com/2024/12/20/namibia-allocates-330-mw-solar-capacity-in-2024-plan-for-energy-independence-and-sustainability/