2023/11/07

Time: November 07, 2023

Location: Epic Sana
Attandees: Renewable Energy in Angola.
-Framework and Challenges.

Aperture.

Angola's energy context at the time of project preparation was characterised

by low access to clean, modern and reliable energy: 33% nationally, 69% in
urban areas, only 6% in rural areas (2017). As part of its long-term
development strategy, the Government of Angola aims to increase access to
electricity for 60% of the population by 2025. Renewable energy (RE) will
make up 70% of the country's installed capacity.

The hydroelectric potential is enormous. It is estimated at 18.2 GW (of which

only 20% is currently exploited). The Angolan government plans to install 100
MW of solar capacity by 2025, of which 30 MW will be off-grid.

In addition, there are also significant opportunities to develop wind energy:

100 MW could be generated in southwestern Angola. Unlocking the country's
renewable energy potential requires significant private investment.

Government's vision, goals and strategies for Renewable Energy and

Rural Electrification.

Energy is a factor in development not only in urban areas, but also in rural
areas. Rural areas are characterised by low population density, high
population dispersion and low energy consumption, and rural areas far from
the electricity grid can be subdivided into two areas: rural areas of influence –
commune and other seats – and dispersed rural areas.

In the rural areas of influence, it is possible to ensure the supply of electricity

through small local grids or renewable energy systems, particularly solar and
peak or micro hydro, associated with public or communal infrastructures. It is
possible to foresee solutions to encourage the installation of the so-called
"Individual Solar Systems", whether photovoltaic or thermal, or the creation of
energy stores involving the private sector. Incentives for private initiative and
financing solutions are essential since the investments to be made are large
and often unattractive compared to the alternative of generator using diesel or
gasoline at a subsidized price that represents a cost for the country.
In dispersed rural areas, individual solar-based systems or solutions are the
most suitable solution to provide basic energy services. The use of firewood
or charcoal will continue to be the most used solution for cooking, and the
dissemination of efficient or improved ovens will be a priority. Greater
dispersion and lower economic capacity may justify a higher level of subsidy
associated with simpler and lower investment energy services. The productive
use of renewable energies in agricultural communities in terms of pumping,
drying or milling is a priority area of intervention in these places.

An integrated management of the various interventions at the level of rural

electrification is important to optimize the allocation of resources and ensure
the quality, coherence and regional balance of ongoing initiatives. Quality is
one of the relevant issues because low purchasing power often forces
consumers to opt for low-quality solutions with a short duration, which will
result in increased costs and a setback to traditional solutions.

The Government has created a 2023/2027 investment plan where it intends to

invest about 11.7 Billion Dollars in New Projects and in Projects already
existing in the PIIM.

The Photovoltaic Projects are expected to be completed in: Saurimo, Luena,

Bié.

The State is creating strategies for the distribution of off-grid energy in Rural
Areas by 2025, intending to create the following:

Create the National Institute for Rural Electrification;

• Extend the "solar village" programme to all commune seats and villages with
more than 2,000 inhabitants that are not connected to the electricity grid by
2025, with the goal of connecting at least 500 sites, installing more than 10
MW of solar PV and installing 50 peak- and micro-hydro-based systems;

• Promote a private domestic market of at least 1 MW of individual solar

systems manufactured in Angola per year;

• Distribute at least 100,000 improved stoves and 500,000 solar lanterns to

the most remote populations with less purchasing power, and create
distribution and training teams within the scope of the National Institute of
Rural Electrification to be created;

• Implement in more than 200 farming communities, systems for productive

uses (irrigation, drying or grinding) based on renewable energies;
• Promote the creation of at least 200 new companies or businesses
dedicated to the manufacture, maintenance, distribution or marketing of
renewable energy solutions for rural areas.

In order to achieve the objectives, the following measures have been

identified. The implementation of these measures should be aligned with the
economic development programmes defined by the Government.

1. LARGE PROJECTS AND PROXIMITY PROJECTS:

COMPLEMENTARY OR ALTERNATIVE?

The perspective of Electrification is not in the cities, but in the country in

general. A lot has been invested in energy production, but it has been slow to
respond to the consumer market.

The Electrification projects throughout the country in terms of financing is a

very high value, and the Angolan State has no way to finance them, so it has
been looking for a way to finance these Projects.

It is important to develop the grid connection of each of the priority new

renewable energies rationally: solar energy, small hydroelectric power plants
of up to 10 MW, biomass energy and wind energy.

In terms of solar energy, numerous opportunities have been identified for

connection to the grid, particularly in the Southern System and in the Eastern
System, which must be achieved in conjunction with the creation of at least
one modern manufacturing unit that fosters a real market for solar solutions
also for rural areas. Solar thermal, although it does not produce electricity,
can reduce its consumption, with particular interest in places where the
production of electricity is based on diesel.

In terms of hydropower, it is important to implement the projects allocated,

prepare the launch of tenders for the remaining identified potential and carry
out an exhaustive mapping to identify additional opportunities, both in terms of
the electrification of isolated urban areas and in terms of small hydroelectric
projects for connection to the grid.

In terms of biomass energy, it is important to implement the opportunities

identified with the potential to boost agricultural and forestry initiatives,
particularly in the North, Center and East. The co-generation or energy use of
waste from agricultural and/or livestock farms can help to boost new business
realities in the agricultural and livestock sector, which should be supported
through the purchase of surplus energy, where their prices are adequate.
Finally, it is important to create incentives, in concert with the Ministry of the
Environment, for the construction of 1 to 2 incineration units based on Fuels
derived from Waste (up to 50 MW) and so that the landfills to be built are
prepared for the future energy use of the gas they will generate.

In terms of wind energy, the resource values confirmed in Tombwa, plus the
large investments required in terms of the grid, advise a phased
implementation of the project – with the target of 100 MW being met by 2025
with a first phase in Tombwa of 20 MW and other projects throughout the
territory. It is important to take advantage of the first 100 MW to acquire
knowledge, train people with the capacity to maintain the equipment and
create skills in the area of renewable energies, promoting the connection with
universities and the launch of training offers in this area.

In terms of other energy sources and research and development, it is

important to follow technological developments in order to understand their
implications and applications to the Angolan context.

These renewable energy projects are complementary projects because they

are extremely important for the state.

Since they are very expensive Projects, the State cannot work on its own, it
must create more opportunities for the Private Sector to leverage the
Electrification Project although it is the responsibility of the State.

Note: There have been some past situations in which individuals have been
supplying energy in some areas and but RENT and END being two
monopolies have blocked it. This has affected the Private Sector when they
want to create projects like these.

2. PROJECT FINANCING CHALLENGES.

The Private Sector has had a lot of difficulties when it comes to the issue of
project financing, taking into account the current situation that the country has
been facing.

You have to apply for financing from International Banks because local banks
cannot finance large projects, and many companies cannot get financing
because many are not known internationally and only at the territorial level.
A foreign investor who wants to invest in the Angolan market has two factors
to take into account, which are the tariffs and the depreciation of the currency,
thus creating a certain difficulty for the foreign investor who wants to invest
with a foreign currency and because of the depreciation of the currency they
do not get satisfactory answers.

Subsidised tariffs should be established and enacted for the supply of

electricity to the grid based on new renewable energies of up to 10 MW.
Provide, where possible, decreasing tariff regimes in order to ensure the
sustainability and competitiveness of renewables in the future. For powers
above 10 MW, the negotiated tariff regime is provided for based on power
sales agreements ("PPAs").

Establish specific rules or calculation standards for specific situations in the

case of concessions for the supply of electricity in isolated systems based on
renewable energies. In the case of local networks, the subsidy for investment
and initial installation should be prioritised, through pre-fixed values per
connected customer and installed kW.

Establish the granting of sovereign guarantees during the initial 15 years of

operation for all new renewable energy projects with a capacity of more than 1
MW and, through the Ministry of Finance, guarantee concessional financing
for investments in approved renewable energy projects, whose management
and retrocession of the respective responsibilities will be guaranteed by the
National Energy Fund.

Review the taxation applicable to new renewable energies, namely at the

level of consumption tax applicable to investments in renewable energies, the
purchase of individual solutions and systems and the purchase of energy from
local networks, as well as at the level of exemptions to be applied at the level
of customs and industrial tax in the initial years.

Establish the appropriations, rules and management of the National Energy

Fund (FUNEL) by the National Institute of Rural Electrification. The Fund shall
provide, inter alia:

• Obtaining and channelling concessional financing, guaranteed by the

Angolan State, in favour of new renewable energy projects connected to the
grid, assuming the retrocession of its responsibilities and channelling the
capital gains to the financing of rural electrification;

• An adequate articulation with the Sovereign Fund of Angola, which will seek
to take a minority stake in the largest projects (power of more than 10 MW) in
order to support their financing and
• Subsidy for the installation of "Solar or Renewable Villages";

• Support, through pre-established subsidies per customer and installed kW,

for the initial investment in local grids, awarded through a tender;

• Support for the distribution of solar lanterns and improved ovens,

manufactured in Angola, or "Renewable Cheques" for rural and dispersed
areas in Angola;

• The promotion, together with local banks, of credit lines for the purchase of
individual solar systems; as well as to support entrepreneurship and the
creation of businesses for the distribution of solutions and the creation of
energy stores;

• International cooperation with a view to maximizing the obtaining of non-

repayable financing for rural electrification projects in Angola

;• The implementation of CDM procedures, reverting their benefits to the

financing of rural electrification.