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What does Covid-19 pandemic mean for climate change? (H1)

March 31, 2021

Gabriela Herculano


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Jens Thomassen and I worked together at GE Energy Financial Services, making investments in renewable energy. Holding a Master of Science in Finance from the Norwegian School of Economics, he has over 20 years of experience in principal investments in the energy sector. Between 2012 and 2017, Jens was a Director in the Power Deal Team at Denham Capital, a global private equity firm focused on energy and resources. Jens was also a Director at HG Capital, where he originated, executed and managed investments in wind, solar, hydro and conventional energy sectors across Europe. Since 2017, he has been a Partner, running the investment function at A.P Møller Capital, a fund management company which targets infrastructure projects within energy and transport in Africa.

Gabriela: A.P Møller Capital launched its first fund in August 2017 called “The Africa Infrastructure Fund”. With an advisory network and industry partners in more than forty African countries, you look for investments in African infrastructure. The fund also supports sustainable economic growth and prosperity in the continent while delivering attractive returns to its investors. Why did you choose Africa to focus your first fund on and what else is in your pipeline?

Jens: We raised our first fund (a $1billion fund) for Africa which in an African context is quite ambitious. The ethos is to focus on transportation and energy. We are backed by the A.P. Møller family’s foundation which holds ca $60 billion of assets. Their ethos is to promote good business, so in addition to be a commercial enterprise, we focus on doing well by doing good. Why did we pick Africa? It’s a combination of the opportunity we saw to invest in an underserved market that has substantial barriers to entry. The Maersk group has been operating in Africa for more than a century and today has more than 10,000 people in 52 out of the 54 countries on the continent. The other three partners came over from Maersk. They have built a global port business where they’ve made some good investments. That’s part of the reasoning behind choosing Africa as our first region. It also coincided with the migration crisis which brought the African challenges to the forefront here in Europe. The combination of poverty, governance issues and climate change forced people to migrate out of desperation. While we wanted to create good returns for investors we also want to build socially and economically sustainable infrastructures in some of the poorest places to create jobs and facilitate economic growth.

Gabriela: Will you continue to focus on Africa or have you other emerging market areas aspirations?

Jens: Africa will always be a very big part of what we do. We are also currently thinking about going broader, but we will continue to invest in Africa, that’s for sure.

Gabriela: For the energy, you’re not looking only at utility-scale renewable energy. You’re also looking at decentralised types of investments.

Jens: You asked earlier about “what do we look for? What does success look like and what doesn’t work?” One of the challenges, particularly in Africa and other emerging markets, is that you don’t have a lot of creditworthy off-takers. In infrastructure, the default then is to ask for a sovereign guarantee, which would add to the government debt burdens. An alternative is to focus on good, stable customers who can support infrastructure investments. Most of the countries we invest in are not investment grade. The concept of the sovereign ceiling doesn’t always apply in emerging markets. Commercial off-takers can reduce the credit risk for off-take agreements and enable smaller projects than utility-scale power plants tend to do. We are about to launch a platform looking at distributed resources primarily from renewable energy. As you know, grids in Africa and other emerging markets are not as developed or reliable as in OECD countries. We are looking at micro-grids as part of a broader portfolio.

Gabriela: In an interview for Energy Council in 2017, you said: “Most of our activity is still in West Africa. That is not by preference, that is just where the opportunities have been so far. Having said that, we are looking at opportunities in East Africa, they just have not progressed as those in West Africa.” What type of investment opportunities have you found in West Africa that you have not found in the East part of the continent? Has it evolved since 2017? Is there a big divide between East and West Africa?

Jens: It has evolved since that conference. Since then, we have invested in the Kenyan power sector and we’ll continue to invest more there.

Gabriela: There is this idea that cost-effective renewable-based type of energy could be a solution for Africa. Do you see the continent becoming a leading example with renewable energy? Does common sense tell you that the irradiation is abundant? Are we talking about a geopolitical shift? For example, can green hydrogen give Africa and Sub-Saharan Africa an edge? Do you see that long term geopolitical change?

Jens: I think there are several good case studies. Renewable energy has provided cheap electricity to Africa. If you look back a couple of years ago, the average wholesale cost of power for grid-connected power plants across Sub-Saharan Africa was hovering around 20 U.S. cents per kilowatt-hour, very expensive. You are now seeing wind farms being built in Egypt at 3 U.S. cents a kilowatt-hour. Similarly, in Zambia we are seeing solar projects producing power at 6 U.S. cents per kilowatt power.

The next challenges to deal with will be “how to deal with intermittent power and poor grids?” I am not an expert on the hydrogen economy, but we’re a few years away before we understand what that will do in developed markets. Right now, we have a broader set of resources and infrastructure to deal with. In Nigeria, you have 15 gigawatts of installed power capacity. Only five of these 15 gigawatts are grid-connected, of which only 3-4 gigawatts are operational. The remaining ten are distributed generation, primarily diesel. By blending in renewables, even for smaller-scale power plants, you can reduce cost and the carbon footprint. There’s a lot you can do in adding renewables to capital power projects that are already existing and therefore reduce carbon footprint. That’s certainly something we think is an interesting energy transition exercise.

Gabriela: Concerning poor grids and intermittence, is there legislation in place to allow private, direct investments to attempt to solve the grid and to deal with battery storage for utility-scale? In some countries, even in Europe -Italy being a case in point- that framework is not quite there.

Solar powered village in Morocco
Visitors tour the U.S. Department of Energy Solar Decathlon 2011 in Washington, D.C., Friday, Sept. 30, 2011, with Arlington, VA, left, and the Lincoln Memorial, right, in the background. (Credit: Stefano Paltera/U.S. Department of Energy Solar Decathlon)

Jens: It varies, and it’s probably not been a priority for regulators or legislators over the last few years. There are only a few examples. Morocco has introduced a concept of wheeling that can offer a framework for corporate PPAs, which has been a great enabler for building out renewable projects in Europe. There’s currently a big debate in South Africa about increasing the threshold for self-generation above one megawatt. It is a politically sensitive and complex situation. Eskom, the state-owned utility, is in dire financial stress. Rolling blackouts, self-generation and wheeling makes a lot of sense to finance new power projects to keep the lights on, but the risk is that the best customers will switch from Eskom first, deepening the financial challenges for the company.

Gabriela: In 2018, still 789 million people lived without electricity. We cannot emphasise enough the importance of getting access to energy for health, education or basic needs. It looks like we are not on track to meet the universal electricity access target by 2030, the annual rate of electrification would have to rise significantly. At the current rate of progress, a projected 620 million people would still lack access to electricity in 2030. Can you explain how renewable energies can solve this huge inequality? How fast is it going to happen and what is needed? Is it within reach?

Jens: It’s a good question. I think on the positive side, you have a lot of companies that are looking at distributed solar panels anywhere from single lamps to small systems that electrify your house with a computer, a TV or a fridge. The modularity of solar and batteries allows you to scale the system to the local demand. Exactly in terms of what it costs and how permeable is that in the 670 million people who don’t have access to reliable electricity, that is a good question. We’re looking at something which will take a first step at the mini grid in some of the trickier parts of Africa. It is complex and does require concessionary capital. If you look at how the cost of solar panels have dropped over the past decade and assume a similar trend for batteries, you don’t need a lot of imagination to see this becoming a game-changer for off-grid applications.

You have to bear in mind that you’re looking to provide electricity to 700 million people who are the poorest in the region and the ones who are furthest away from centres and coastal transports. Logistic is prohibitively expensive in Africa as well. It is the hardest 700 million people to provide these services. That does require an extra effort.

If you look at utility-scale projects, South Africa has since 2012 built five gigawatts of renewable capacity. Egypt has built a few gigawatts too. That is transformational for those countries. In a few years, both countries have added a substantial amount of cheap, clean power to the grid.

Gabriela: Non-existent and unreliable electricity access isn’t just an issue limited to rural areas of Africa. Nigeria, Africa’s largest economy, had an electrification rate of just 61.6% in 2019. It has taken an average of 25 years for countries to move from 20% to 80% access. History suggests that it may be several years before Sub-Saharan Africa fully catches up with other parts of the world. Would you say the implementation of distributed generation renewable energy solutions could help accelerate the rate of electrification in Africa? Could that innovation help Africa leapfrog and go off-grid (instead of waiting for the grid interconnection that never comes) in a similar way that mobile phones leapfrogged landlines?

Jens: Absolutely. CDC, the UK development finance institution, sets up a company called GridWorks to focus on building transmission, distribution and mini grids. Being a late adopter, a large part of the African population went straight to mobile phones.

Given the cost and timeline for developing transmission networks combined with the lack of bankable off-take agreements, you can see a very interesting opportunity for captive power solutions ranging from solar home systems measured in kilowatts to large scale captive power plants in the 50MW+ scale. We see this segment as a really interesting growth area.

Gabriela: You’re touching on a relevant point, it’s not necessarily the residential users but it’s also those SMEs, the small hotels like you said that also need to go off-grid. They also need to self-generate. It goes beyond the residential users. Perhaps, that is a good thing because it means an even bigger market. There is a Boston-based start-up called OffGridBox that installs a 6-foot cube of solar panels mounted on top. Its mission is to provide affordable clean water and renewable energy in remote areas. We’ve focused on the residential users, there is a commercial angle on that additional part of the market for the small industries and the commercial demand. So hopefully that would make this even more enticing for the private investors. Do you see private/public as much needed or do you think private capital like yours don’t need anymore that PPP type of structure to invest in Africa?

Jens: I think there is a need for concessionary capital from the Development Finance Institutions (DFIs) and foundations to kick start and work towards those consumers that are not the most commercially attractive. You can argue that a lot of the DFIs follow the path of least resistance in emerging markets and often find themselves competing against private capital for grid-connected type renewable energy projects. We very much find ourselves working hand in hand with DFIs. As I said, there is a part of that business that can be a good investment opportunity for us. It is a way to get power to villages in parts of Africa that otherwise wouldn’t attract private capital.

Gabriela: Climate change is one of the biggest threats to national security in several countries. Africa is the continent that is the most susceptible to be impacted by climate change despite having the lowest emissions of carbon dioxide. Are you starting to see the challenge of underwriting investments in the continent because of that climate change risk?

Jens: One of the issues we face in Africa is that the CO2 emissions in the continent are a fraction of the developed nations. A thermal power plant in Kenya has fewer emissions than an Airbus A380 and is a core backbone of the energy infrastructure in a country that generates 70% of its electricity from renewable sources. On the investment side, Africa runs the risk of being the “baby getting thrown out with the bathwater” as investors are, for very good reasons, becoming more and more selective on where their capital should go. Most investors are excluding investments in coal and Heavy Fuel Oil (HFOs) is being added to this list.

As a consequence, we run the risk of leaving behind the poorest countries that have not developed the core infrastructure we take for granted in Europe and the US.  For instance, the European Investment Bank (EIB) came out last year and banned any gas investments. That is now being filtered through a number of lenders. It means that places like Senegal which has made a large domestic gas discovery and can displace existing coal and HFO plants, cannot mobilise capital from EIB to decarbonise that power sector. Gas is not the perfect solution, but it is a better alternative than HFO and coal. For Senegal, it’s better to use domestic gas from a local source rather than import fuel easing pressure on the country’s foreign exchange reserves. So, there is a risk there and there are other examples as well. I don’t think anyone needs to build new coal plants anymore but the gas industry or the gas-related infrastructure can still be a bridge fuel in emerging markets until renewables can provide baseload power on a cost-effective basis at scale.

For additional reading, please check:

Powering the last billion – pv Europe

Powering Last-Mile Connectivity | BloombergNEF (

Cabling Africa: the great data race to serve the ‘last billion’ | Financial Times (

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