Focus on renewable energy
Infinite and eco-friendly
Within the socalled "Sustainable Energy for All" initiative of the United Nations, the international community set itself the target of doubling the share of renewable energy in total energy consumption to 36 % by 2030. Renewables are crucially important for KfW Development Bank because they make a substantial contribution to environmental and climate protection. Hydropower plants, solar and wind farms are all promoted, but also projects related to bioenergy and geothermal energy. This includes small systems too, such as solar home systems, as well as large grid-connected power plants, where planning the grid integration in advance is vital. KfW promotes primarily wind energy, hydropower and solar energy but also geothermal heat and biomasse.
After biomass, hydropower is the second most used renewable energy in global energy consumption: according to the International Energy Agency (IEA), hydropower accounts for roughly 16 % of global electricity production. Nonetheless, there is still great potential for expanding this environmentally friendly technology, not only in Africa, where only about 10 % has been tapped so far, but also in Latin America and Asia.
Hydropower represents a vital and cost-effective resource in many countries, and can overall be considered a tried and tested form of energy that has been used for many years. Furthermore, it has a range of benefits that include being extremely eco-friendly. That said, hydropower does depend on weather conditions, which means there is a risk of power cuts during droughts. Moreover, environmental and social aspects have to be considered when constructing hydropower plants to make the changes acceptable to those affected. Taking this into account in accordance with the German Federal Government's policies constitutes a key part of KfW's project work.
One example is the Ruacana hydropower plant on the river Kunene in Namibia. It has been in operation since 1977, but a fourth turbine was added in 2012, increasing the installed capacity of the power plant by 92 MW. KfW has already promoted the expansion with EUR 35 million on behalf of the German Federal Government. In the next phase, the three original turbines were modernised, adding another 15 MW capacity. The hydropower plant is a key component of Namibia's electricity supply, covering roughly half of the country's electricity demand.
Unlike the "traditional" renewable energy of biomass and hydropower, wind energy as well as solar energy and modern bioenergy are considered "new" renewables. Although they only account for approximately 5 % of global electricity production, the current growth rate is dynamic. Based on figures from the World Wind Energy Association, installed power capacity rose by 21 GW during the first half of 2016 - roughly the same as during the first six months in 2015 which over all reached a new record.
Although technological innovation is making progress and costs have fallen steadily in recent years, the number of actual wind farms has fallen short of the potential number for some time now: particularly in developing countries there are still countless obstacles in the way, such as a lack of capital or specialists. KfW Development Bank helps to overcome these barriers to entering the market by supporting partners not just with financing the wind farms. The bank also promotes master plans to identify the right locations, and wind measurements to determine the exact potential. It should be considered early on how integrating a rising level of wind energy will impact on the power grids, and experiences in Germany offer a valuable source of information here.
The sun's solar radiation energy can be used to produce electricity in two ways: while photovoltaic systems (PV) convert sunlight directly into electricity, solar thermal power plants concentrate the sunlight (CSP - Concentrated Solar Power) to create steam. This then passes through a steam turbine and a generator and is converted into electricity.
According to data from REN 21 (Renewable Energy Policy Network for the 21st Century), photovoltaic systems registered another record growth in 2016 of 50 GW to 227 GW; more than half of this increase took place in China, Japan and the United States. Since costs have fallen sharply in recent years, large grid-connected photovoltaic facilities in many regions are already on the threshold of commercial viability. Yet this technology is equally suited for small decentralised solutions in areas off the grid. Take Bangladesh for example, where KfW Development Bank in consultation with the World Bank facilitated the installation of several hundred thousand solar home systems.
KfW Development Bank equally plays a leading role in spreading the lesser known and tested CSP technology. In the vicinity of the Moroccan city Quarzazate right now four power plants are being built, one of which went into operation in 2016. The complex eventually is to comprise three CSP power plants and one PV power plant, producing electricity for roughly 1.3 million people and thereby avoiding at least 800,000 tonnes of carbon dioxide emissions every year. KfW Development Bank is set to support the project with a sum of roughly EUR 830 million on behalf of the German Federal Government; the total investment cost is about EUR 2.3 billion.
Geothermal energy uses the energy of the earth. Steam or hot water are brought to the earth's surface and then converted into electricity, thermal or process heat. The worldwide potential is enormous, particularly along the Pacific Ring of Fire and the East African Rift. Uganda, Kenya, the Philippines and some countries in Central and South America have large and as yet untapped potential. The technology behind hydrothermal power generation has been used reliably for more than 100 years, and in contrast to wind and solar energy, geothermal energy is completely independent of the weather, which means it is very predictable and eco-friendly.
One of the main reasons why geothermal energy is not used as often for generating electricity is the development risk: before the actual power plant is established, boreholes must be drilled into the ground, sometimes to depths of several thousand metres. This is the only way to determine and develop the geothermal heat potential.
KfW Development Bank has been active in the field of geothermal energy on behalf of the German Federal Government for a long time. In Kenya the bank promoted the Olkaria power plant in several stages; now it supplies roughly half of Kenya's electricity. With a view to helping other countries in the region introduce this technology, KfW Development Bank set up a facility in consultation with the African Union designed to mitigate the risks associated with geothermal energy. Countries can apply to this facility for assistance with test drilling for example. In 2014 KfW - on behalf of the Federal Ministry of Economic Cooperation and Development - also launched the "Geothermal Development Facility for Latin America", which provides more than EUR 760 million for geothermal projects in Latin America.
Biomass is the most important source of energy in many countries of Africa and South America: more than 500 million households in developing countries use traditional biomass fuels for cooking and heating purposes. Not only does this frequently result in resource depletion in nature, but according to the World Health Organization millions of people also die each year as a result of polluted air in households. Women and children are particularly affected here. What is more, they spend a lot of time obtaining firewood, time they could spend in a more meaningful way.
In comparison to fossil fuels like oil or gas, bioenergy has a lower energy density, which means long transportation and collection routes can make it uneconomical to use. Bioenergy, in the form of wood, charcoal, energy crops, crop residues or organic byproducts for example can be used in a modern and sustainable way, be it for heating and cooking, generating electricity or for transportation.
One example of this are the biogas plants in rural areas of Bangladesh. Smallholders who keep cattle or poultry receive grants and low-interest credits from micro financing institutions to build these plants. Thousands of these plants are already operating by now. KfW Development Bank is supporting the project together with the Netherlands and the World Bank.