Energy transition is a key topic of discussion at the African Mining Indaba, currently underway in Cape Town, South Africa. Across the continent, countries in Africa are gearing up for energy transition by implementing policy and legislative frameworks that take into account the energy crisis and the need for a renewable, decarbonized, decentralized energy supply that addresses climate change and the commitments made under the Paris Agreement. Lawyers in Egypt, Ghana, Morocco, Namibia, Nigeria, South Africa, Tanzania and Uganda outline the efforts taken by the governments in their countries to address this urgent need to harness renewable power.
Lamyaa Gadelhak, Baker McKenzie Cairo Partner & Co-Head of Banking and Projects:
“In Egypt, article 20 of the Investment Law No. 72 of 2017 (Investment Law) provides that companies that are established to develop a strategic or national project that contributes to achieving development, or projects in partnership with the private sector and the State, the public sector or the public business sector, in the area of public utilities, infrastructure, new or renewable energy, roads, transportation or ports, may, by a cabinet decree, be granted a “single license” (commonly referred to as the “golden license”) for the establishment, operation and management of the project, which will include a construction permit and an allocation of real estate property required for the project (License).
Such a License will be effective without the need for any further procedures and may include other additional incentives for the project provided in the Investment Law. The aforementioned was further developed through Cabinet Decree No. 56 of 2022, which specified a series of requirements to be met for a project to be considered a strategic and/or national project. In addition to meeting a set of conditions, said projects must be a development in one of the fields specified in the cabinet decree, which include, but are not limited to, green hydrogen projects, green corridor projects, renewable energy projects aimed at supplying desalination projects and green hydrogen production projects with energy, and carbon capture, utilisation and storage (CCUS) projects.
The conditions, set out in the cabinet decree, will be subject to a yearly review in light of any changes to the State’s economic development plan. Said conditions were reiterated and detailed in the “Guidelines for Issuance of the Golden License” issued by the General Authority for Investment and Free Zones (GAFI), which sets out the eligibility requirements, terms and conditions, procedures and required documentation for obtaining the License.
Among the other incentives provided under the Investment Law, and which can be included in the License, Article 11 provides that companies set up before 28 October 2023 to operate in certain industry groups, could obtain a deduction from their taxable income. This incentive is limited to seven years from the date of commencement of the project and is not perpetual. Furthermore, the Investment Law provides that additional incentives around, for example, utilities connection costs, land allocation costs and technical training may be made available to a project by a cabinet decision.
The Government of Egypt has now also expressly recognized the production, storage and export of green hydrogen and green ammonia among the areas falling within the State’s economic development strategy. It has passed a decree that would allow green hydrogen and green ammonia projects to benefit from a wide range of State support under the country’s existing Investment Law, including tax incentives. This is a key development for Egypt’s hydrogen economy and we expect that it will stimulate private investment and the development of new green hydrogen and ammonia projects in the country.”
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Sefakor Kuenyehia, Solicitor & Barrister, Kimathi & Partners in Ghana:
“A recent legal development in Ghana was the amendment of the Renewable Energy Act, 2011 (Act 832) by the Renewable Energy (Amendment) Act, 2020 (Act 1045) (amended Act). The amended Act was passed on 29 December 2020 and establishes a procurement scheme to deliver a competitive market rate for electricity generated from a renewable source.
The Government of Ghana, through the Energy Commission, has also produced the Renewable Energy Master Plan 2019, and the Sustainable Use of Natural Resources and Energy Financing (SUNREF) 2021. Under the Renewable Energy Master Plan, the government proposes incentives in the form of substantial tax reductions. It also proposes exemptions of import duties and VAT on materials, components, equipment, and machinery (that cannot be obtained locally) for manufacturing or assembling renewable energy resources. Also, under the Sustainable Use of Natural Resources and Energy Financing (SUNREF) Programme, the government, in collaboration with other agencies, is offering businesses, organizations and households an opportunity to access financing for sustainable energy projects, and technical assistance in structuring green investment.”
Keltoum Boudribila, Partner, and Saad Khaldi, Associate, Nasrollah & Associés Baker McKenzie in Morocco:
“In May 2022, the House of Representatives of the Moroccan Parliament unanimously adopted Bill 40-19 amending Law 13-09 on renewable energies and Law 48-15 on the regulation of the electricity sector and the creation of the national electricity regulatory authority. The Bill will aim to simplify the authorization procedures, to strengthen the attractiveness of the renewable energy sector for national and international investors, as well as to safeguard the economic and social balance of public actors in the electricity sector. In January 2023, the other chamber of the Moroccan Parliament, the Chamber of Councillors, adopted these texts unanimously.
The new legal framework will allow industries to produce their own renewable energy for their operating needs and supply it to other consumers. Morocco has been liberalizing the renewable energy sector for several years, and is continuing on this path with these legislative amendments.”
Oludare Senbore, Partner at Aluko & Oyebode in Nigeria:
“Following the decisions taken during COP 26, the President of Nigeria announced the intention for Nigeria to achieve a net zero emission target by 2060. In order to achieve this objective, the Federal Government of Nigeria on 24 August 2022, launched its Energy Transition Plan (ETP). The ETP, which was launched by the Vice President on behalf of the Federal Government of Nigeria, has a double-pronged objective of achieving universal access to energy by 2030 and a net-zero emission target by 2060.
The foregoing actions support Nigeria’s energy transition drive, which includes an updated Nationally Determined Contribution (NDC) under the Paris Agreement that was submitted in May 2021, and which highlights the country’s commitment to reduce greenhouse gas emissions by 20% unconditionally, and a conditional reduction target of 47% by 2030. This was followed up with the enactment of the Climate Change Act 2021 in November 2021, which provides a framework for achieving low greenhouse gas emissions (GHG), inclusive green growth and sustainable economic development in Nigeria.
An additional legislative action by the Federal Government of Nigeria is the Petroleum Industry Act of 2021, that empowers the Nigerian National Petroleum Limited (a state-owned oil company) to engage in the business of renewables. This further confirms the country’s drive for energy transition, as do proposed amendments to the Electric Power Sector Reform Act, which provide that distribution companies must ensure that a portion of the electric power that they purchase must be from renewable sources. This is supposed to provide support for the growth of renewable power projects.”
Kieran Whyte, Partner and Head of the Energy, Mining & Infrastructure Industry Group at Baker McKenzie in Johannesburg:
South African President Cyril Ramaphosa launched the new Just Energy Transition Investment Plan (JET IP) for South Africa at COP 27 in November 2022. The JET IP is aligned with the Cabinet-approved National Just Transition Framework. The South African government has noted the plan outlined the investments required to achieve the country’s decarbonization commitments, while promoting sustainable development, and ensuring a just transition for affected workers and communities – in other words, a whole society approach.
The JET IP covers electricity, new energy vehicles (NEVs) and green hydrogen and identifies USD 98 billion in financial requirements over the next five years, to come from both the public and private sectors. The goal of the JET IP is to decarbonize the South African economy to within the NDC target range of 350-420 MtCO2 by 2030, in a just manner. The JET IP is centred on decarbonization, social justice, economic growth and inclusivity, and governance. The investment criteria for the Plan include projects that deliver on greenhouse gas emissions reduction and just transition outcomes, and are catalytic in nature and ready to implement.
Key investments under the JET IP will include:
Electricity – Decommissioning (repowering and repurposing with clean technologies), transmitter grid strengthening and expansion, and renewable energy.
New Energy Vehicles – Decarbonizing the automotive sector and supporting supply chain transition towards green sustainable manufacturing.
Gaseous Hydrogen (GH2) – Essential planning and feasibilities including port investment to enhance exports and boost employment and GDP.
Cross-cutting – Investment in skills development and municipalities.
At COP 27 Masopha Moshoeshoe, a green economy specialist in the Presidency’s Investment and Infrastructure Office, said that the country was seeking to attract investment worth USD 250 billion for the development of its green hydrogen energy economy by 2050. Moshoeshoe said the industry could create around 1.4 million jobs and USD 30 billion in annual revenue by 2050, but that renewable-power generation capacity of between 140,000 MW and 300,000 MW was needed to supply the green hydrogen sector. The country currently has renewable energy capacity of around 40,000 MW.
In late January 2023, Team Europe (the European Union and its member states) launched the Just and Green Recovery Team Europe Initiative for South Africa, as part of its Global Gateway programme. The initiative includes funding of more than EUR 280 million in the form of grants, which will be directed towards supporting policy reforms on green recovery, unlocking green investments and building a knowledge-based transition in South Africa.
In South Africa, there is a requirement to build economic and social resilience to meet the NDC targets, and to manage transition risks and ensure social preparedness as the country diversifies its energy mix and grows new industries. A just transition takes into account the requirement to balance the reduction of carbon emissions with the impact of this transition on employment and the need to develop long-term green energy jobs, especially in respect of impacted communities that have a current heavy reliance on fossil fuels. There is also a need to recognize location and sector-specific vulnerabilities (such as care, preparation and social infrastructure) and intergenerational effects.
Coal remains the primary source of energy for the country, but in order for South Africa to reach its reduction in carbon emission targets, this must change. Reskilling the existing workforce and educating the future workforce is also essential. South Africa updated its NDC under the Paris Agreement in 2021 and now has a proposed revised target range of 398 to 510 Mt CO2-eq for 2025, and 398 to 440 Mt CO2-eq for 2030.
There have been a number of policy developments to assist South Africa with its energy transition. The National Development Plan (NDP), the draft Integrated Energy Plan (IEP), the Renewable Energy White Paper, the Nationally Determined Contribution (NDC), the Just Transition Framework, and enabling policies under development and in implementation, outline the policy foundation for energy transition in South Africa and the move away from carbon-fueled energy. The Integrated Resource Plan (IRP) 2019 covers the government’s plans for power until 2030 and outlines a decreased reliance on coal-powered energy and an increased focus on a diversified energy mix that includes renewable energy, distributed generation and battery storage.
The Renewable Energy Independent Power Producer Procurement Program (REIPPPP), introduced in 2011, outlined the procurement of renewable energy in the country. The sixth round of the REIPPP kicked off in 2022 and this round aims to procure 2.6 GW of solar and wind power. To incentivize the self-generation of renewable energy, the South African government has also indicated that it proposes to scrap the threshold for distributed energy generation of 100 MW, meaning that large-scale power plants in excess of 100 MW could be built without a license, to meet their own demand and to sell to the grid.
Trading in carbon offsets in the carbon market, where companies can pay other entities to offset their emissions for them, is also growing in popularity in emerging markets. In August 2022, the Johannesburg Stock Exchange announced that it was investigating the possibility of introducing a carbon trading market in South Africa.
Further, recent amendments to the Electricity Regulation Act proposed by the Department of Minerals Resources and Energy are likely to address, inter alia, the electricity supply deficit, the vertical structure of the market and the lack of competition, the introduction of a multi-market including independent power producers (IPPs), and the formation of a central purchasing agency.
The amendments will also address the introduction of a day-ahead market to accommodate hourly supply and demand, the direct procurement of power by municipalities, the increase in the threshold pertaining to self-generation, the need to accommodate low carbon-emitting generation technologies, the timing of licensing applications, changes in transmission system operation including power trading, and the creation of additional regulatory capability. The strategy aims to accelerate affordable, decentralized, diversely owned renewable energy systems.
Shemane Amin, Partner at A&K Tanzania:
“Tanzania has refocused its attention on the energy future, with the Ministry of Energy actively pursuing investment opportunities in renewables to improve the country’s energy mix. This is specifically in relation to solar, wind and geothermal opportunities – and to add more renewable energy sources to the national grid to meet the country’s growing demand for power.
The Government of Tanzania is targeting an electrification rate for the entire country of 75% by 2035 and in the next six to seven years is striving to add 2 GW of renewables to the grid. In order to attract these investments, the government is striving to create a more conducive business environment in which such power projects can be sustainable, this includes providing investment incentives. In the 2022 budget speech, the Ministry of Energy highlighted, among other things, the establishment of the Renewable Energy Strategy and Roadmap. In a nutshell, the refocus on the energy future and the momentum behind renewables in Tanzania make this a key area to watch for investors.”
Arnold Lule Sekiwano, Partner at Engoru, Mutebi Advocates in Uganda:
“There are a number of policy initiatives which have been passed purposely to facilitate energy transition in Uganda. Such policies include the Climate Change Policy 2015, which focuses on the use of alternative renewable energy sources such as solar, biomass, mini-hydro, geothermal and wind; and the Renewable Energy Policy (2007), which forms the basis of the underlying framework for renewable energy.
Furthermore, Uganda’s Vision 2040 has also emphasized clean sources of energy to avert climate change. These policy initiatives have culminated into the recent enactment of the Climate Change Act, 2021. The Act governs the national response to climate change. One of the stated purposes of the Act is to give effect to the UN Framework Convention on Climate Change, the Kyoto Protocol, and the Paris Agreement. Generally, there is an increased focus on the utilization of renewable energy resources and technologies in Uganda and a regulatory focus that supports energy transition.”