Financing To Fast-Track Africa’s Renewables Sector

As Africa confronts its energy challenges head-on, the potential for renewable energy to provide a sustainable solution becomes increasingly evident. However, greater understanding of financing options needs to be unlocked to accelerate the growth of the continent’s renewables sector.

With the world pledging a shift towards greener and cleaner energy alternatives, companies have seized the opportunity to deliver renewable energy solutions and contribute to bridging the power gap. But to successfully scale up their operations, and deliver sufficient power to the grid, these businesses require adequate financing.That funding must also take note of the constantly evolving requirements of the renewables sector. Energy innovation must be matched with financial innovation.

Funding the just transition

When it comes to the renewable energy market in Africa, barriers to entry are many. Insufficient infrastructure, regulatory complexities, and limited access to innovative finance models all pose significant challenges.

Recognising the importance of overcoming these hurdles, various sustainability-led African financing options, from the likes of Nedbank, the Development Bank of South Africa (DBSA), ABSA, and others, have emerged to support renewable energy projects across the continent.
These specialised financial offerings are instrumental in unlocking Africa’s renewable energy potential, and creating a more favourable investment climate. While there are still challenges to overcome, these are some of the catalysts driving the just transition…

Government

Governments in Africa are increasingly realising the potential of renewable energy and are introducing regulations to support its development. Through favourable policies, they encourage investment in the renewable sector, thereby providing essential support for project development, feasibility studies, and capacity building, and helping renewable-energy companies to establish a sustainable foundation.

An example of this is the recent move by Ghana’s government to establish a procurement scheme that encourages a competitive market rate for electricity generated from a renewable source.

Such regulations are the prerogative of policymakers in every region. It’s important for African countries to retain sovereignty over their energy decisions and implement regulations that support their local energy transition.

Public-private partnerships (PPPs)

PPPs are another sometimes complex financial solution, often used by governments to finance new projects as part of their energy transition. By combining resources, expertise, and risk-sharing, PPPs can promote sustainable energy development. With the right partnerships in place, investors, innovators and government can join forces to finance, build, and operate renewable-energy projects.

For instance, in South Africa, new regulations have been designed to facilitate private-sector investment into grid-connected renewable-energy generation. Transmission and distribution networks are still supported by government.

Banks

Banks play a vital role in financing renewables initiatives. They offer a range of financial products such as loans, project finance, and guarantees to support renewable-energy companies. The banking sector’s involvement helps bridge the gap between capital requirements and available funds, allowing these projects to progress and contribute to Africa’s energy transformation.

In support of the just transition, South Africa’s Standard Bank has revealed it’s poised and ready to support renewable energy and infrastructure projects.

International funding

International organisations and development agencies provide critical support for renewable energy projects in Africa. These institutions offer grants, loans, and technical assistance to support the just transition. Such funding sources not only provide capital, but also foster knowledge exchange and capacity development.

A case in point is the $311 million regional project, supported by the World Bank, to increase grid-connected renewable-energy capacity and strengthen regional integration in West Africa.

Energy Investment Village

Green Energy Africa (GEA) is committed to accelerating the renewable-energy revolution in Africa. Through its Energy Investment Village (EIV), it has created a platform that supports new and upcoming renewable-energy companies in accessing the necessary financing. 

The EIV creates opportunities for growth for clean-tech start-ups and energy projects. The initiative is open to start-ups in the early stages of rolling out clean-tech projects, as well as large-scale energy projects of between 20 and 100MW, requiring finance to get off the ground.  

In its second year, the EIV is a partnership between Saldanha Bay Innovation Campus and RIIS, supported by Anza Capital and Afida. Last year’s event saw finalists representing local clean-tech projects pitching to energy leaders holding potential investments worth more than $100 billion.

The event was won by Brayfoil Technologies, a South African wind-energy company, whose adaptive turbine designs enable more efficient applications in the wind energy, aerospace, sailing and automotive sectors. After their win, the Brayfoil team hosted several meetings with potential investors on the sidelines of the GEAS.

Benefits beyond green energy

The benefits of investing in green-energy solutions extend beyond the renewables sector, to include Africa’s economy. Research indicates that renewables, and other energy transition-related technologies have already created 1.9 million jobs in Africa.

A significant portion of this growth can be attributed to the pivotal role played by the energy transition in stimulating demand for innovative and affordable energy solutions, and spurring job creation.

Today, Africa’s renewables sector holds immense potential to address the continent’s energy challenges and boost economic growth, while contributing to global sustainability goals. By embracing the growing range of financing options, the continent‘s renewable-energy sector can flourish – and set Africa on a course toward a sustainable, low-carbon future.

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