Africa requires significant levels of investment across the renewable energy value chain in order to unlock the full potential of the sector and address the continent’s ongoing energy crisis.
While investment in clean energy across Africa has, in 2021, reached the lowest recorded levels since 2011 with only $2.6 billion invested in new wind, solar, geothermal and other renewable technologies during the year, a new study conducted by BloombergNEF has found, new interest and financial commitments being made across the continent promise a new era of growth across the market.
While investments in clean energy reached an all-time high in 2021, increasing by 9% globally, Africa-directed investment declined by 35% year-on-year despite the continent’s significant natural energy resource potential, most of which remains largely untapped.
According to BloombergNEF, inadequate policies and enforcement is restraining an increase in investments in renewables in Africa. Only a handful of African countries including South Africa, Egypt, Morocco and Kenya have managed to secure clean energy investments with the four countries accounting for approximately 75% of the clean energy capital in the continent since 2010.
As a result, energy access in Africa remains low, and the continent lags far behind other regions in meeting the United Nations Sustainable Development Goal 7 – universal access to affordable, reliable, sustainable and modern energy for all by 2030.
However, interest in the market is beginning to grow following COP27 which took place in Egypt this year. During and following the event, several financial commitments were made to kickstart the development of Africa’s renewables including $544 million committed by the Dutch government and the European Investment Bank for Namibia; the launch of a multi-billion dollar green infrastructure alliance, set to generate up to $10 billion in private investment; the endorsement of a climate finance roadmap to mobilize one trillion dollars in annual external financing; and R10.7 billion in loan agreements for South Africa committed by France and Germany.
To boost investments in renewables even further, the report recommends that Africa enhances its energy procurement practices; planning of electrification and grid modernization initiatives; while improving renewables awareness among domestic energy stakeholders and investors.
Michael R. Bloomberg, UN Secretary-General’s Special Envoy on Climate Ambition, stated that increasing clean energy investments in Africa “requires new levels of collaboration to identify viable clean energy projects and bring more private financing and public support to them – so we can turn Africa’s potential as a global clean energy leader into reality.”