Africa, home to one-fifth of the world’s population, is facing a critical energy investment gap, with the region currently receiving a mere 3 percent of global energy investment, according to a recent report titled “Financing Clean Energy in Africa.”
This report, which is part of the World Energy Outlook Special Report series, emphasizes the urgent need for doubling energy investments to over USD 200 billion per year by 2030. Achieving this target is vital for African nations to meet their energy-related development objectives, including universal access to modern energy and meeting their nationally determined contributions.
The report builds upon the findings of the Africa Energy Outlook 2022 and introduces the Sustainable Africa Scenario (SAS), which outlines innovative investment solutions crucial for scaling up energy investments across the continent. One of the primary challenges highlighted in the report is the substantial disparity in the cost of capital for energy projects between African countries and advanced economies like China. Currently, African countries face capital costs that are at least 2-3 times higher, hampering investment opportunities and raising project costs.
Despite some progress in electricity access over the past decade, Africa remains energy-poor, accounting for only 6 percent of global energy use and 3 percent of global electricity demand. Shockingly, approximately 600 million people in Africa still lack access to electricity, and nearly one billion Africans do not have access to clean cooking energy.
To meet the Sustainable Development Goal 7 (SDG 7) targets, Africa must connect 90 million people to electricity annually over the next eight years and transition 130 million individuals away from polluting cooking fuels every year. In the Sustainable Africa Scenario (SAS), which envisions universal energy access by 2030, an annual investment of approximately USD 20 billion is needed to build the necessary infrastructure for electricity access, and nearly USD 2.5 billion is required to provide clean cooking solutions.
The African Development Bank Group is at the forefront of efforts to unlock Africa’s vast renewable energy potential. Notably, since 2016, the bank has ceased funding coal energy projects and directed 87 percent of its investments in power generation toward renewables. Transformative projects such as the 510-megawatt Noor Ouarzazate solar project in Morocco and the 310-megawatt Lake Turkana wind project in Kenya showcase the bank’s commitment to clean energy.
The bank’s ambitious USD 20 billion Desert to Power program aims to develop 10,000 megawatts of solar power across 11 countries in the Sahel and East Africa, providing renewable energy to 250 million people. Upon completion, it will become the largest solar zone in the world.
However, the report emphasizes the pressing need to reduce the cost of capital for clean energy projects in Africa. Achieving a low-carbon development pathway requires targeted concessional support and technical assistance from international finance institutions and multilateral organizations. The African Development Bank Group’s Sustainable Energy Fund for Africa (SEFA) is playing a crucial role in unlocking private-sector-led renewable energy and energy efficiency projects across the continent. The current SEFA portfolio is expected to leverage a total of USD 9.2 billion in investment, delivering approximately 3,700 megawatts of new capacity and around 2 million new energy connections.
In conclusion, addressing Africa’s energy investment gap is pivotal for achieving sustainable development goals and providing access to clean and affordable energy for millions of Africans. It requires concerted efforts from international organizations, financial institutions, and governments to make clean energy projects more accessible and affordable in the region. As highlighted by Dr. Akinwumi A. Adesina, President of the African Development Bank Group, collaboration and targeted support are essential to unlocking Africa’s renewable energy potential and advancing the continent’s sustainable energy future.