Africa is endowed with vast renewable energy resources. It holds 60% of the best solar resources globally, but has only 1% of installed solar PV capacity.
Wind resources could power the continent 250 times over. However, higher capital costs hinder investment in renewable projects. Interest rates for renewable projects in Africa average 8.2%, compared to 4.4% in Europe.
Despite the challenges, the business case for renewables in Africa is strong. Projects in countries like Kenya show higher energy production compared to similar installations in Europe.
Local manufacturing of renewable energy equipment presents an additional opportunity. Establishing factories for solar panels and wind turbines can boost industrial development and create jobs.
Investing in renewables supports economic growth while also addressing energy poverty. Over 600 million people in Africa still live without electricity—the energy poverty gap that hampers development across the region.
Solar power is a particularly promising option for Africa, home to 60% of the world’s best solar resources. “Solar energy could revolutionize energy access across Africa,” says Fatih Birol, Executive Director of the International Energy Agency (IEA). “The technology is now affordable, and Africa can harness it to meet its energy needs.”
The cost of solar photovoltaics has halved in the past decade, making solar power one of the cheapest sources of energy.
In Kenya, solar plants are producing up to 60% more energy than comparable facilities in Europe. For investors, Africa offers a high return on renewable energy investments, and for local economies, it provides job creation and improved energy access.
Moving Away From Fossil Fuels
It’s not just about installing solar panels. Africa needs to shift away from its dependence on fossil fuels. Nigeria, for example, has vast oil and gas reserves but struggles with chronic energy shortages.
Despite its fossil fuel wealth, much of Nigeria’s population remains without reliable electricity. As Dr. David Anyaele, an energy analyst in Lagos, notes, “Nigeria is sitting on a gas bonanza, yet millions of Nigerians don’t have electricity. It’s a paradox we must resolve.”
Natural gas has been proposed as a “bridge fuel” to help Africa transition to renewable energy. However, environmentalists warn that investing in gas infrastructure may lock African nations into a carbon-heavy future. “We cannot afford to build new gas plants now, only to abandon them later,” said Kumi Naidoo, former Executive Director of Greenpeace. The fluctuating price of fossil fuels also makes gas a risky long-term investment, as recent volatility in global energy markets has shown.
For the move away from fossil fuels to take place and for Africa to truly benefit from its renewable energy potential, several things need to happen. Firstly, multilateral development banks must scale up financing for renewable energy projects.
High interest rates for renewable projects in Africa—averaging 8.2%, close to twice the 4.4% average in Europe—make large-scale installations difficult. Secondly, investment needs to happen in local manufacturing, enabling growth centered around renewable energy technologies that leads to new jobs and industrial development.
The African Union’s Alliance for Green Infrastructure in Africa (AGIA) is one initiative aimed at tackling this issue. Launched with the goal of raising US$500 million of blended finance capital, it hopes to catalyze US$10 billion in private investments in green infrastructure across the continent. With the right financial backing and policy support, Africa could leapfrog outdated energy systems and become a leader in the global renewable energy transition.
Ensuring a Fair Energy Shift for Africa
As African countries move toward a cleaner energy future, the principle of a just transition becomes key. A just transition ensures that the shift from fossil fuels doesn’t disproportionately harm workers and vulnerable communities. It promises that the benefits of renewable energy—jobs, industrial growth, and energy access—are shared equitably.
“The transition to green energy must not leave anyone behind,” said Ayodele Odusola, United Nations Development Programme (UNDP) Chief Economist for Africa. “We need policies in place that protect workers who are dependent on fossil fuel industries while creating opportunities for new employment in the renewable sector.”
South Africa, a coal-dependent economy, has become a test case for this approach. The country has been promised US$8.5 billion in funding from developed nations as part of a Just Energy Transition Partnership (JETP) to help phase out coal and transition to cleaner energy sources. This funding will be directed toward retraining coal workers, developing renewable energy infrastructure, and ensuring that vulnerable communities are supported during the transition.
But the challenge of a just transition goes beyond South Africa. For instance, Nigeria’s energy transition plan is estimated to need US$410 billion in funding by 2060 to meet its clean energy targets. “The cost of inaction is far higher than the cost of transition,” explains Damilola Ogunbiyi, CEO of Sustainable Energy for All, who further emphasizes the need for investment in renewable energy, which could create 840,000 jobs in Nigeria by 2060. Ghana’s energy transition blueprint also outlines how the country could create 400,000 new jobs by investing in low-carbon technologies.
African countries must not only secure funding but also create the right conditions for investments. “There’s a real opportunity here for Africa to lead the way in showing how an equitable energy transition can be done,” says Mamphela Ramphele, co-president of the Club of Rome. This requires preparing clear, data-backed transition plans that will attract investors and ensure that no communities are left behind.
