Clean Energy Investments for Growth in Africa

The document Clean Energy Investment for Development in Africa provides an in-depth analysis of the challenges and opportunities surrounding clean energy investment across the African continent. Commissioned by the Italian Presidency of the G7, the report outlines the critical role clean energy investment must play in the continent’s development and the global efforts required to help Africa meet its growing energy demands. Africa, despite its vast natural resources, remains energy-poor, with over 600 million people lacking access to electricity and over 1 billion relying on traditional, unsafe cooking methods. This energy poverty stifles the continent’s economic potential, contributing to inequality and hampering development. The report delves into the need for targeted clean energy investments to address these deficits while ensuring sustainable development.

A major focus of the report is Africa’s vast but underutilized renewable energy resources. Africa holds 60% of the world’s best solar resources but represents only 1% of global installed solar capacity. The report suggests that harnessing this potential—alongside other renewable energy sources such as hydropower, wind, and geothermal—could serve as a cornerstone of Africa’s clean energy transition. To do so, however, would require a drastic increase in clean energy investments. The report estimates that energy investment in Africa must more than double by 2030, with three-quarters of the investment dedicated to clean energy. Specifically, $22 billion annually is needed to provide universal access to electricity, while $4 billion per year is required for clean cooking solutions.

The report also identifies numerous barriers that have slowed the pace of clean energy investment in Africa. One significant challenge is the high cost of capital for renewable energy projects. The continent’s risk profile, often seen as too high by investors, leads to elevated borrowing costs, making clean energy projects less attractive or viable. Additionally, the lack of bankable projects poses a serious hurdle. Many renewable energy projects in Africa struggle to secure financing due to weak project preparation, limited technical expertise, and regulatory uncertainties. Furthermore, private sector involvement remains constrained by perceptions of financial risk and the absence of well-structured investment frameworks that could attract long-term investors.

Africa’s declining energy investments are also highlighted in the report. Despite the continent’s growing energy needs, energy investments have decreased by 34% since 2014, reflecting a concerning trend. The report points to a reduction in the financing of fossil fuel projects, a consequence of global commitments to the Paris Agreement, but it also stresses that clean energy investments have not sufficiently filled the gap left by declining fossil fuel investments. Given that Africa contributes less than 3% of global energy investments despite comprising 20% of the global population, this disconnect underscores the need for more robust international efforts, particularly from G7 nations, to help bridge the gap.

Another significant area of the report centres on the potential for clean energy to drive economic growth in Africa. The continent’s abundance of critical minerals, such as cobalt, copper, and nickel, positions it as a key player in the global clean energy transition. These minerals are essential for the production of renewable energy technologies, including batteries and electric vehicles. The report projects that by 2030, Africa could see a 65% increase in the market value of its production of key battery metals. This presents a unique opportunity for African countries to diversify their industrial base, support local manufacturing, and foster economic development through the clean energy sector. In this context, Africa’s growing role in the production of low-emissions hydrogen is also explored. This emerging industry, according to the report, could be transformative, offering Africa new export markets while supporting the continent’s own clean energy goals.

The report emphasizes the importance of blended finance as a mechanism to unlock more private capital for clean energy projects. Blended finance, which combines public and private funds, has been successful in mobilizing investment in other sectors but is still underutilized in the clean energy space in Africa. By leveraging public capital to de-risk investments, blended finance could help attract institutional investors who are otherwise hesitant to enter African markets. The report also advocates for stronger coordination between international financial institutions, African governments, and private investors to create a pipeline of bankable clean energy projects.

To ensure that Africa’s clean energy transition is both inclusive and sustainable, the report stresses the need for significant policy reforms at the national and regional levels. Governments across Africa are urged to create enabling environments that promote private sector participation, reduce regulatory barriers, and encourage investment in renewable energy. Additionally, the report calls for enhanced capacity-building initiatives to equip African institutions with the technical skills needed to design, finance, and implement large-scale clean energy projects.

A recurring theme throughout the report is the mismatch between Africa’s potential for clean energy and the actual levels of investment flowing into the continent. Despite the clear benefits of clean energy investments—including job creation, poverty reduction, and climate resilience—Africa continues to lag behind other regions in attracting the necessary funds. The report asserts that without significant increases in clean energy investments, Africa will be unable to meet its sustainable development goals, nor will it achieve universal access to electricity by 2030.

The document also outlines the role of international collaboration in scaling up clean energy investment in Africa. The G7, in particular, is called upon to play a leading role by providing concessional financing, technical assistance, and political support for Africa’s clean energy agenda. By fostering partnerships between African nations and G7 countries, the report suggests that Africa can accelerate its transition to a cleaner, more sustainable energy system. The G7’s commitment to supporting Africa’s energy transition is seen as pivotal in mobilizing the large-scale financing needed to close the investment gap.

In conclusion, Clean Energy Investment for Development in Africa clearly shows the continent’s opportunities and challenges in its journey towards sustainable energy. The report underscores the urgency of increasing clean energy investments, especially in renewable energy technologies that can address Africa’s energy poverty while contributing to global climate goals. It calls for greater international cooperation, innovative financing solutions, and strong policy reforms to ensure that Africa’s energy future is clean, resilient, and inclusive. Without these interventions, Africa risks being left behind in the global energy transition, with dire consequences for its economic development and the well-being of its people.

This article by Brickstone reviews the International Energy Agency’s publication on Just Energy Transition .
 
Read the complete publication here