Page 7 - Energize Issue 1 2023

INDUSTRY NEWS

Financing energy project

development in Africa

Experts agree that sustainable economic growth throughout Africa depends on the infrastructural

development and distribution of clean energy

aising capital for energy projects and building sustainable pipelines is complex entities will become more valuable
in a market that is challenged by demand for fossil fuels, while simultaneously as co-investors, by helping to lower
Rtrying to satisfy carbon-neutral policies and commitments. Data shows that the perceived risks of financing novel
despite Africa’s sizeable population, it attracts less than five percent of global energy projects. This, in turn, will serve to
investment. attract more significant private sector
support.
Africa’s clean energy success
hinges on the implementation of a
well-integrated financial framework
aimed at accelerating green energy
projects. Each country has its own
unique requirements contextualised by
its existing energy supply environment.
This makes a one-size-fits-all approach
unproductive when it comes to
financing solutions. Naturally, investors
will also require cooperation from
policymakers, as well as the governance
structures necessary to support the
Figure 1: Annual average investment by sector in Africa in the sustainable Africa scenario (IEA) implementation and roll-out of purpose-
built financial solutions.
Undoubtedly, Africa is abundant in opportunities and resources, but many of the
continent’s countries have yet to unlock barriers to trade and prove themselves to Where to look for energy
be reliable global partners. The countries that stand to benefit from energy project project investment?
development and attract meaningful investments are those with governments that seek Depending on the project, its size and
to lower risks through pricing reforms, transparent tendering systems, strong anti- purpose, there is an abundance of
corruption law enforcement, and the development of skilled labour. funding options available. Below, we list
a few of the notable organisations that
Green energy development attracts the biggest backing are helping to power Africa’s renewable
Experts agree that sustainable economic growth throughout Africa depends on the energy development projects.
infrastructural development and distribution of clean energy. This means:
• A move from fossil fuel sources to renewables African Renewable Energy Fund
• Decentralisation of energy generation, transmission and distribution (AREF): Investing in small hydro, wind,
• The integration of digital technology to support and speed up transition geothermal, solar, stranded gas and
biomass projects throughout sub-
To make this shift possible and enable meaningful socio-economic reform, the continent Saharan Africa, the AREF aims to invest
will need more than double the current energy investment by 2030. In real terms, this in up to 12 renewable energy projects.
requires a minimum investment of roughly $1 billion per year. It is a closed-end private equity fund
Between 2016 and 2020, the private sector contributed to 60% of all energy keen to support medium-sized projects
investment in Africa. Public sector enterprises also play an important role, although, which aim to produce an energy
in recent years, many public utility companies have been plagued by a high level of output between 5 and 50 MW, at all
debt, requiring capital injections from public finance institutions. It is likely that public development stages.

energize | Issue 1 2023 | 7