Powering Growth
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- Authors: BENSON IRERI, REBEKAH SHIRLEY
- Published: September 2, 2021
Energy access overview
- 770 million people have no electricity—75 percent of whom live in sub-Saharan Africa (IEA, 2019).
- 900 million lack access to clean cooking in the region (IEA, 2019).
- Lack of electricity and clean cooking limits educational and business opportunities and people’s economic prospects and well-being.
Financing gap and investment needs
- Closing the energy access gap in sub-Saharan African countries will require an estimated annual investment of $28 billion up to 2030 (IEA).
- $13 billion for mini-grids.
- $7.5 billion for grid.
- $6.5 billion for off-grid investments.
- Clean cooking: $131 million committed versus $4.5 billion needed by 2030.
- Countries such as Chad, Ethiopia, and Nigeria face major financing shortfalls.
- The Democratic Republic of the Congo and Ethiopia, where 95 percent of the population lacks access to clean cooking, receive less than 1 percent of the annual investment.
Constraints and risks to scaling investment
- Political instability.
- Macroeconomic uncertainty (because of inflation and exchange rates).
- Policy and regulatory issues.
- Institutional weaknesses.
- Lack of transparency.
- Market failures and insufficient aid to channel financing where it is needed most.
- Several developed economies have failed to deliver on their pledge of $100 billion annually in climate finance and are cutting foreign aid, at a time when investment needs to be doubled.
Successful initiatives and catalytic financing examples
- 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 and industrial sectors and on-grid projects across Kenya, Tanzania, and Uganda.
- Provides structured financing, technical assistance, support for investment structuring, and uses guarantee mechanisms to share some credit risks.
- Sustainable Energy Fund for Africa (multi-donor fund established in 2011, managed by the African Development Bank):
- Provides technical assistance, concessional and catalytic financing instruments to de-risk investments.
- Targets green baseload power, green mini-grids, and energy efficiency.
- Facilitated AfDB’s first two scale-up programs in Burkina Faso and the Democratic Republic of the Congo.
- Played a key role in developing energy blended finance initiatives, including the Africa Renewable Energy Fund.
- Africa Renewable Energy Fund and Frontier Energy:
- 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 committed to investment firms Enabling Qapital and Spark+ to raise equity for clean cooking companies.
- €10 million from the European Union through its blending facility complemented this funding and helped attract investors.
Policy implications and recommended actions
- Urgent mobilization of capital for clean energy investment in the region is needed.
- COP26 and the Energy Transition Council should play a central role in driving this mobilization.
- Replication and scaling of successful catalytic instruments and blended finance facilities can help unlock private capital.
- Addressing political, macroeconomic, policy, regulatory, and transparency constraints is critical to improve the investment climate and channel financing where it is needed most.
Powering Growth — BENSON IRERI, REBEKAH SHIRLEY, F&D Magazine, September 2021.
Content in this bundle
- شحذ النمو
- Potenciar el crecimiento ● Finanzas y Desarrollo ● Septiembre de 2021
- Fighting Climate Change in Africa - IMF F&D
- Nourrir la croissance
- Проблемы климата
- 推动经济增长 - 金融与发展 - 国际货币基金组织季刊 2021年9月号·第58卷·第3期