Prospects for Solar Energy Investment in Sudan and the Potential to Benefit from the Malaysian Investment Model (4/4)

Dr Ahmed Abdelbagi

Advantages of Solar Photovoltaic Power Purchase Agreements under the Malaysian Model
Some of the principal advantages of solar photovoltaic Power Purchase Agreements (PPAs) under the Malaysian model include the following:
(a) The “zero upfront cost” principle: The basic Malaysian investment model is founded on the principle of zero upfront cost. This means that the investor bears the cost of purchasing and installing the solar panels and maintaining the system throughout the contractual period, while the customer—the consumer or purchaser—pays no initial capital costs.
(b) Sale of electricity: The purchaser undertakes to buy the electricity generated by the investor—the seller—at a predetermined tariff agreed upon in advance, which is generally lower than the tariff charged by the Malaysian electricity utility.
(c) Diversified sources of finance: Financing is provided from multiple sources, none of which is the government, as will be explained below.
Technical and Legal Features of Solar Power Purchase Agreements in Malaysia
(a) Contract duration: Contracts generally extend for periods ranging from 15 to 25 years.
(b) Ownership of the system: At the end of the contractual period, full ownership of the solar system is transferred to the customer—the purchaser—free of charge. The customer can then continue generating electricity without paying for the power produced during the remaining operational life of the solar panels, which may reach 25 years depending on the type and quality of the solar system.
(c) Maintenance and operation: Throughout the contractual period, the investor—the seller—is responsible for ensuring the efficient operation of the system and repairing any faults at its own expense.
Investment Incentives for Power Purchase Agreements
Malaysia provides special incentives to encourage investment in renewable energy, particularly solar power.
These include full tax exemptions for five years, income tax exemptions of 70 per cent extending for more than ten years, and other incentives, such as allowing purchasers to sell surplus electricity to the Malaysian electricity utility.
Financing Solar Photovoltaic Investment in Malaysia
Solar photovoltaic investments in Malaysia are financed through several mechanisms.
(a) Commercial bank financing: Malaysian banks, which possess substantial capital resources, finance investments undertaken by individuals and companies through concessional, long-term loans that may extend over decades. Such financing is generally provided at annual interest rates under conventional interest-based lending arrangements.
(b) Financing by multinational corporations: Multinational companies frequently finance solar photovoltaic projects designed to supply electricity to their own facilities. This is particularly evident among operators of large-scale data centres in Malaysia, where investments can reach billions of dollars, as in the case of Google.
There are also foreign and domestic investors, including partnerships involving the Emirati company Masdar, which has invested in floating solar power plants on bodies of water in Malaysia.
(c) Financing from international institutions: International institutions, including the World Bank, provide financing for solar photovoltaic projects in South-East Asia, including projects involving electricity interconnections between Singapore and Malaysia.
Green Sukuk Financing
Malaysia has pioneered Islamic financing instruments that enable investment in accordance with the principles of Islamic Sharia.
One of the most important innovations has been the Green Sukuk programme for renewable energy investment, which began in 2017. Since then, Malaysia has become a global leader in the issuance of Green Sukuk.
By 2024, the number of Green Sukuk projects worldwide had reached 291, of which 262 were located in Malaysia. Financing for solar photovoltaic projects in Malaysia amounted to US$350 million, while Malaysia accounted for approximately 25 per cent of Green Sukuk issuances across Asia.
Why Invest in Solar Energy in Sudan?
Abundant Renewable Energy Resources
Sudan’s renewable energy resources, particularly solar energy, could become a major investment attraction through Power Purchase Agreement models similar to those adopted in Malaysia.
Sudan is among the countries in a region characterised by high levels of solar irradiation, making it suitable for photovoltaic electricity generation. Annual solar irradiation in Sudan ranges from approximately 1,900 to 2,500 kilowatt-hours per square metre, while average daily sunshine duration ranges from 8.5 to 11 hours.
However, a study by the United Nations Development Programme Regional Bureau for Arab States, titled Solar Energy Value Chains in Sudan, highlighted several obstacles to solar energy investment in Sudan.
The study noted that Sudan possesses enormous opportunities for solar energy investment, but that the sector will not achieve its full potential without targeted support for businesses and productive sectors.
Despite the substantial decline in global solar panel prices over the past decade, solar energy remains beyond the reach of many Sudanese due to high upfront costs, depreciation of the national currency, and limited access to finance.
The study also highlighted delays affecting imports, logistical bottlenecks, taxes and charges imposed at state level, security risks affecting internal transportation, and increases in shipping costs.
Furthermore, the widespread availability of low-quality solar equipment and products has weakened consumer confidence in solar systems in Sudan, while the departure of qualified Sudanese engineers and technicians has undermined maintenance and after-sales services following installation.
These challenges underscore the urgent need to establish an enabling investment environment that can transform Sudan’s substantial solar potential into affordable, reliable electricity.
The Potential for the Malaysian Model to Succeed in Sudan
For Sudan to successfully adopt a Power Purchase Agreement model similar to Malaysia’s, comprehensive legal and institutional reforms will be required to regulate investment in solar energy.
Such reforms should include legislation that encourages renewable energy investment and establishes appropriate government guarantees.
Sudan could then adopt models similar to Malaysia’s Large-Scale Solar photovoltaic programmes and Power Purchase Agreements for supplying solar electricity to companies, commercial establishments, and industrial facilities, as discussed in Part Three of this series.
To ensure the success of meaningful renewable energy investments in Sudan, there is an urgent need to establish a specialised government agency focused on solar energy.
Such an agency could conduct feasibility studies for solar investment projects and serve as a one-stop investment window to streamline administrative and regulatory procedures.
The state could also establish a dedicated financing facility, with substantial capital contributions from Sudanese banks, to finance solar energy investments.
Such financing should initially focus on providing photovoltaic electricity to companies and industrial establishments in Sudan. Providing reliable electricity to productive enterprises would stimulate economic activity, reduce pressure on the national electricity grid, and allow more of the available grid capacity to be directed towards residential areas and government service institutions.
Financing this type of investment would also reduce investment risks.
The government could further consider adopting Public-Private Partnership models in which the private sector contributes capital, management expertise and operational capacity, while the public sector contributes existing assets, including transmission lines, transformers and qualified technical personnel.
Above all, the Sudanese Standards and Metrology Organisation should adopt internationally recognised standards alongside appropriate national standards for the testing and certification of solar systems imported into Sudan.
Given that some solar energy systems have operational lifespans extending over several decades, these standards must be enforced rigorously, without favouritism or exemptions.
Harnessing Artificial Intelligence for Solar Energy Investment in Sudan
Artificial intelligence has become an important instrument for improving the efficiency of renewable energy systems through large-scale data analysis, operational optimisation, performance forecasting and the management of smart electricity grids.
Sudan could therefore utilise artificial intelligence in the solar energy sector in several important areas.
Improving Solar Panel Efficiency
Artificial intelligence can be used to forecast solar irradiation and optimise the positioning and tilt angles of solar panels.
The efficiency of solar panels depends on several factors, including tilt angle, the intensity of solar irradiation and prevailing weather conditions.
Using Machine-Learning Algorithms
Machine-learning algorithms can analyse historical weather data and predict expected levels of solar irradiation.
These forecasts can help automatically adjust the positioning and angles of solar panels to maximise energy absorption and electricity generation.
Fault Detection and Predictive Maintenance
Solar panels may experience a range of problems, including cracking, contamination, physical deterioration and declining efficiency.
Artificial intelligence, computer vision, smart cameras and sensor technologies can be used to continuously monitor solar installations and identify faults at an early stage.
Predictive maintenance systems can therefore reduce maintenance costs, prevent unexpected system failures, improve operational efficiency and extend the lifespan of solar energy installations.

Shortlink: https://sudanhorizon.com/?p=15616