## POWERING GROWTH

## Source details

**Canonical URL:** [POWERING GROWTH](https://www.imf.org/-/media/files/publications/fandd/article/2021/september/fighting-climate-change-in-africa-ireri.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/fandd/article/2021/september/fighting-climate-change-in-africa-ireri.pdf.md)
- [Structured JSON version](/-/media/files/publications/fandd/article/2021/september/fighting-climate-change-in-africa-ireri.pdf.json)

---

### Energy access gap and development impacts
- 770 million people have no electricity—75 percent of whom live in sub-Saharan Africa (IEA, 2019).
- 900 million people in the region lack access to clean cooking.
- Lack of access to electricity and clean cooking limits educational and business opportunities, economic prospects, and well-being.

### Financing shortfall and priorities
- Closing the energy access gap in sub-Saharan African countries requires an estimated annual investment of $28 billion up to 2030 (IEA).
  - $13 billion for mini-grids.
  - $7.5 billion for grid investments.
  - $6.5 billion for off-grid investments.
- Clean cooking: $131 million committed versus $4.5 billion needed by 2030.
- Ethiopia: 95 percent of the population lacks access to clean cooking and receives less than 1 percent of the annual investment.
- Major barriers to scaling finance:
  - Political instability.
  - Macroeconomic uncertainty (inflation and exchange rates).
  - Policy and regulatory issues.
  - Institutional weaknesses and lack of transparency.
  - Market failures and insufficient aid.
- Several developed economies have failed to deliver on their pledge of $100 billion annually in climate finance and are cutting foreign aid, even as investment needs must be doubled.

### Examples of successful initiatives mobilizing capital
- Sustainable Use of Natural Resources and Energy Finance initiative (French Development Agency facility):
  - Catalyzes commercial lending to the clean energy sector.
  - Has helped finance more than 60 projects in commercial, industrial, and on-grid sectors across Kenya, Tanzania, and Uganda.
  - Provides structured financing, technical assistance, investment structuring support, and guarantee mechanisms that share credit risk with banks.
- Sustainable Energy Fund for Africa (multi-donor fund managed by AfDB, established 2011):
  - Provides concessional and catalytic financing and technical assistance to de-risk investments.
  - Targeted at green baseload power, green mini-grids, and energy efficiency.
  - Facilitated AfDB scale-up programs in Burkina Faso and the Democratic Republic of the Congo.
  - Played a key role in energy blended finance initiatives (including Africa Renewable Energy Fund).
- Private sector example:
  - Frontier Energy has invested over $1.8 billion in more than 45 renewable energy projects in sub-Saharan Africa, with a total capacity of more than 750 megawatts.
- 2020 AfDB commitments via the Sustainable Energy Fund for Africa:
  - $5 million to investment firms Enabling Qapital and Spark+ to raise equity for clean cooking companies.
  - This funding, together with €10 million from the European Union through its blending facility, has attracted many investors.

### Five areas where COP26 commitments could reduce barriers and meet needs
- De-risking investment in sub-Saharan Africa’s clean energy sector:
  - High costs and uncertain energy policies/regulations increase investor risk perception.
  - Existing de-risking instruments are fragmented and do not cover all project life-cycle stages.
  - Innovative instruments such as renewAfrica aim to provide end-to-end de-risking via a one-stop-shop model (technical assistance, financial support, policy help, advocacy).
  - Products like the Green 4 Access first-loss debt facility and policy/regulatory reforms addressing investor risks will help.
- Financing projects that stimulate demand for clean energy:
  - Investments have focused mostly on electricity supply; demand-side financing is limited, making rural electricity largely unaffordable.
  - Examples of demand-stimulating financing: loans to farms for solar-powered irrigation, investment in reliable and affordable energy for production industries along the agricultural value chain.
  - Affordable financing plus technical assistance—particularly in estimating sector energy demand—and mapping of opportunities with energy requirement data will help investors identify financing areas.
  - Policymakers and development partners must adopt integrated planning to break down silos; commercial banks should develop targeted financing packages.
- Modernizing Africa’s power infrastructure to support reliability, flexibility, and sustainability:
  - A reliable, strong, and flexible power system is key to integrating variable renewable energy and attracting investment.
  - Modernizing grids to improve efficiency and flexibility is essential, alongside enhancing power system readiness.
  - Supporting power utilities to develop new business models for integrated energy services and commercial partnerships will address market bottlenecks and improve efficiency, revenue recovery, and losses.
  - Addressing governance challenges facing utilities can restore investor confidence; national government and development partner commitments to deliver energy access create collaboration opportunities.
- Shifting investments away from fossil fuels and large hydroelectric projects:
  - Most funding for new capacity in sub-Saharan Africa goes to large hydroelectric projects and fossil fuels (natural gas and coal).
  - The region’s greenhouse gas emissions remain on average relatively low, but meeting Paris Agreement goals requires pursuing clean energy sources.
  - Reducing overreliance on hydropower—vulnerable to climate change—is essential to long-term energy security.
  - Bilateral partners financing hydropower and coal projects are urged to shift toward non-hydroelectric renewable energy.
- Unlocking clean cooking solutions:
  - Financing for clean cooking has increased (Sustainable Energy for All 2020; Clean Cooking Alliance 2021) but remains well below needs.
  - Innovative mechanisms—concessional and blended finance by development finance institutions—can catalyze private sector participation.
  - Policy and regulatory reforms such as tax exemptions and reductions, plus de-risking investments, will promote uptake of clean cooking technologies.

### Key takeaway
- Reliable, abundant, and clean energy is essential for a prosperous, sustainable, and inclusive economy.
- Africa—with a significant energy access gap and abundant renewable resources—represents the last frontier for transformative clean energy and climate investment, but funding must scale up urgently.

*Article authors: BENSON IRERI (Africa lead for energy access, World Resources Institute) and REBEKAH SHIRLEY (WRI Africa director of research, data, and innovation).*

---


_Source: https://www.imf.org/-/media/files/publications/fandd/article/2021/september/fighting-climate-change-in-africa-ireri.pdf_