Financing gap stalls Africa’s renewable revolution.
A striking paradox defines the African renewable energy sector. The continent holds the world’s greatest untapped renewable potential, from vast solar fields to untapped geothermal power, positioning it as a global energy powerhouse.
In Nigeria, for instance, fuel subsidy removal has catalysed the West African nation into a solar boom. In a report released early this year, the Africa Solar Industry Association (AFSIA) ranked it among the top African countries leveraging solar as an alternative energy source. The Lake Turkana wind power project in Kenya, Africa’s largest and powered through blended finance and Public-private partnerships, cut 574,547 tonnes of Carbon emissions in 2024. To strengthen renewable integration, South Africa has procured more than 1,744 megawatts through private tenders.
In theory, Africa has the potential to generate more power than the entire world consumes. For instance, it has a vast solar energy capacity of about 482,000 Gigawatts ( GW), and wind energy’s potential at about 72,000 GW.
However, the reality on the ground is different. In 2024, the world added a record 585 gigawatts (GW) of renewable power capacity, a 15.1 per cent increase over the previous year. In contrast, Africa, which had the biggest ambition with a set target of reaching 300GW renewable energy generation by 2030, only added a modest four gigawatts.
The financing gap
“The problem is not ambition in Africa. The problem is the financing gap,” said Mr Ali Mohamed, Special Climate Envoy of Kenya’s President, William Ruto. He was speaking at the sidelines of the Africa Climate Summit 2 in Addis, during the launch of a report that outlines the roadmap for Africa to achieve its renewable energy goals and drive sustainable development.
The new report ‘The Renewable Energy Investment Case for Africa’ shows that the continent should more than triple its annual growth (23 per cent annual growth) if it is to accomplish the Nairobi Declaration aspiration of 300GW renewable energy generation capacity by 2030 as a means of ending energy poverty and boosting the global supply of affordable clean energy.
Co-produced by Africa Climate Insights (ACI) and Enzi Ijayo Africa Initiative, it notes that Africa accounts for a meagre two per cent of global clean energy investment, with the support granted disproportionately favouring fossil fuel projects over renewable energies. The International Energy Agency (IEA) states that 64 per cent of the investment in energy in Africa in 2024 went to fossil fuel projects, with the remainder going to clean energy initiatives. This is the total opposite of the global situation, where clean energy receives a 2:1 favourability over fossil fuels.
Wangari Muchiri, director for Africa at the Global Wind Energy Council said at the launch that policies must be “simple, consistent, and predictable.” Such a policy environment, she remarked, give confidence to large-scale capital flow into Africa.
She also urged Africa to “build up capacity with Africa” to bring costs down and boost local demand.
Key barriers to financing
Risks- real and perceived – associated with lending to Africa, remains a serious hindrance to scaling up private finance. Lack of data and transparency among other factors implies Africa faces disproportionately high borrowing costs with the UN projecting public debt servicing would hit a record US dollars 89.4 billion in 2024.
The Enzi Ijayo and ACI report shows that the cost investors charge to finance a solar power plant in Kenya and Senegal, for example, is 8.5 – 9 per cent, while in Europe or North America, it is only about 5- 6 percent, meaning that African countries pay almost twice as much to get the same projects funded.
Deep dive into Africa’s finance landscape
Dr. Kevin Kanina Kariuki, Vice-President, Power, Energy, Climate and Green Growth, AfDB, during the launch of the report, highlighted that one of Africa’s blockages is the lack of reforms. “Investment capital follows the path of least resistance. That is why reforms are at the heart of unlocking Africa’s energy future. Policy reforms plus capital equal investments, and once those reforms are in place, countries become viable investment destinations,” he remarked.
According to Dr. Kariuki, instruments such as the Sustainable Energy Fund for Africa are important. “The fund uses concessionary and blended financing to reduce costs and crowd in private sector participation. Alongside this, we established the Alliance for Green Infrastructure in Africa to build a strong pipeline of bankable projects.”
A full transition to renewable energy in Africa by 2050 would provide savings of about US dollars 150 billion per year that could be invested in more climate action interventions and other development goals such as millions of jobs and access to clean and affordable electricity.
