Invest in non-renewables or help the energy transition? It is not always either/or.
Ivory Coast has an electricity production deficit and only 65% of its population currently has access to electricity, hampering economic growth. Meanwhile, the country is committed to a 42% renewable energy target by 2030. For the moment however, energy supply to the grid by renewable sources can only be 20% of the total grid capacity in order to avoid frequency instabilities or outages.
Building a baseload
The existing lenders to Azito, a local gas-fired power plant that is already an FMO client, were approached to finance a further expansion of the plant, Azito 4, which would deliver over 30% of the country’s electricity and reduce quality problems such as cut-offs.
Though a non-renewable energy project, FMO decided to support Azito 4. Because it is key to providing the baseload capacity required to ensure the national grid’s stability and increase access to reliable, more affordable power for citizens and businesses.
The expansion is closed cycle, so it also has a steam turbine that converts heat from the gas turbine into electricity, using highly efficient turbine technology that halves the gas consumption of the country’s existing gas-fired plants. It also allows Ivory Coast to close down expensive, polluting diesel generators, and therefore reduces CO2 emissions.
The bigger picture
By taking a step back to view the overall picture, we saw that this project would deliver more reliable and efficient energy. The enhanced baseload capacity also lets Ivory Coast integrate more renewables onto its grid, thus facilitating the longer-term energy transition, while the increased access to cheap energy drives economic growth. We therefore see our €27.7 million loan to support the plant’s extension as a good investment in the Ivory Coast’s economy and its energy transition.
What we will (and will not) do
In the context of SDG 10, Reducing Inequalities, we may decide on a case-by-case basis whether to support a gas-fired power plant. We will not, however, invest in other non-renewable sources of energy, such as coal or Heavy Fuel Oil (HFO).