– Effective use of Norwegian aid funds – E24

The Norwegian solar company has received more than NOK 200 million in payments from NORAD. Now the company is getting promised another 85 million.

Scatec, which develops renewable energy in developing countries, has secured billions in guarantees from government Exfin and millions of dollars for research from Innovation Norway.

In a new grant from NORAD, Scatec has now been promised NOK 85 million.

Scatec is one of the world's largest solar energy developers in Africa. It is one of the few companies that has made it its core business, says Norad Bård CEO Vegar Solhjell.

-I would very much like to have more people like Skatyk.

He gets responsibility for half of Norwegian aid

Recently, the president of NORAD wrote an article in Morgenbladet Calling it “helping because we make money from it,” he argues that modern aid should be based on self-interest.

As of August this year, NORAD, which functions as the Directorate for Development Work, will be responsible for more than half of the government's aid budget.

The aid framework for 2023 was NOK 58.4 billion. The framework for this year is somewhat lower, at around NOK 52.7 billion.

Solhjell believes that the amount that goes to companies that produce renewable energy in developing countries is especially important now. For 2023, the total amounts to NOK 217 million.

One of the biggest challenges facing solving the climate crisis is stimulating private investment from rich countries to poor countries. Businesses today take low risks. We have to get out of that. Some countries in Africa and Asia are now seeing a sharp increase in climate emissions. Without significant investment, he says, they cannot change course.

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Bets in Eastern Europe, the Middle East and Africa

For more than fifteen years, NORAD has been a valued supporter of Scatec. Since 2009, NORAD has concluded 40 agreements with the energy company – paying a total of NOK 208 million, according to Scatec.

Many agreements are called early stage evaluations where the company receives support to assess whether the project is commercially profitable.

In total, support from NORAD has helped unlock $922 million in investments, according to Scatek.

At today's exchange rate, this equates to NOK 9.7 billion.

– This is a very effective use of Norwegian aid funds, says government contact Enja Sæthren at Scatec.

The Norwegian company has projects in the field of solar energy, battery solutions and hydrogen in several places in the world. Projects have been launched in South Africa, Egypt, Ukraine, Pakistan and Mozambique through NORAD support, according to Southern.

She believes that it is important for Norwegian companies to invest in renewable energy in order, among other things, to rebuild Ukraine, ensure energy security in Europe, and contribute to the energy revolution in African and Asian countries.

Southern says mitigating risks at the state level can help.

The first NORAD grant was used to launch the first investment in South Africa. Scatec, a relatively small Norwegian company, is now one of the largest solar cell companies in Africa, she says.

It will help reduce risks

Development Minister Anne Beth Tevenrim says that Scatec has succeeded in open competition with others, in addition to a number of other Norwegian and foreign companies.

When asked why it was difficult to convince Norwegian companies to invest in renewable energy in developing countries, she cited high investment costs, high risks and high return requirements.

Last year, the government launched a new five-billion Norwegian kroner state guarantee scheme for private companies that want to build solar, wind and hydropower in developing countries.

Tevenerim refers to the scheme as “the most powerful tool Norway has ever used” and believes it will save a huge amount of capital.

– Aid funds alone are too little, and we need more private investments. At the same time, we know that many companies shy away from investing in developing countries because they are considered too risky. Then we must use aid catalytically, so that we mitigate risks and stimulate private investment, which in turn provides lower emissions and clean energy to more people.