With the right support, renewable energy financing in Africa can overcome the challenges

SEI researchers Daniel Duma AND Miquel Muñoz Cabré presented the preliminary results of its many years of activity design on risk mitigation for renewable energy investments in sub-Saharan Africa at a side event of the UN Development Finance Forum in New York in late April. They stressed that most countries in these regions, even those affected by a serious economic or political crisis, have at least one industrial-scale renewable energy project operating or in an advanced stage of development. These successes confirm the effectiveness of the various risk-mitigation instruments that enable lenders and sponsors to invest in projects.

However, when it comes to attracting private finance for large-scale renewable energy in Africa, a major barrier remains: commercial viability. This illustrates the current state of national public utility companies, i.e. the main recipients of energy from renewable energy projects, which are struggling with serious financial difficulties. They struggle to collect revenue from consumers, cut losses and cover costs. At the same time, projects were developed even in these difficult circumstances, thanks to various programs involving cooperation between governments, utilities, investors and development partners. Recognizing that there is no quick solution to the structural problems of African markets, researchers called for the continuation of various renewable energy support programs, both at the project level and at the institutional and regulatory levels, as they are showing encouraging results.

The scientists presented their comments at a side event organized by SEI in cooperation with the Permanent Mission of Sweden to the United Nations. The session, focusing on renewable energy financing in Africa in the current global context, was moderated by Måns Fellesson, deputy director and coordinator of the 2030 Agenda and development finance at the Swedish Ministry of Foreign Affairs. The team included Ulrika Modéer, Deputy Secretary-General of UNDP, and three distinguished UN diplomats: Agnes Chimbiri-Molande from Malawi, Godfrey Kwoba from Uganda and Njambi Kinyungu from Kenya.

The event included representatives from UNDP, international financial institutions such as the World Bank and the Climate Investment Funds, academic researchers from Columbia University, and other nonprofit sector entities such as the Rockefeller Foundation and the Rocky Mountain Institute. A presentation by SEI researchers served as the basis for a roundtable discussion moderated by Rob Watt, SEI’s Director of Engagement, with participation from renewable energy finance specialists from a variety of institutions in addition to those listed above, such as the United States Agency for International Development (USAID) and American company dealing in Blackrock financial investments, as well as representatives of Senegal, Zambia, Germany and Great Britain. Shared insights on the challenges and solutions to renewable energy financing on the continent included the key issue of sovereign debt, the role of blended finance in risk management, especially currency risk, and better use of local capital. Greater emphasis on the productive use of energy and the importance of energy were also discussed clean cooking.

The event ended with a call for continued dialogue to better leverage accumulated investor experience and research evidence. The overarching goal should be to refine interventions that promise to achieve specific results in the short term, while recognizing that long-term progress in improving institutions remains a key goal.