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Advantages of Expanding Renewable Energy to Facilitate Africa's Energy Transition

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by Kerry Westlake , 

Head of Sales, Power and Renewable Energy

19/06/2024

Access to electricity is crucial for promoting food security, economic development, education, and healthcare in Africa. Unfortunately, the World Bank reported that the lack of energy access is the most significant challenge to development progress in Africa today, primarily due to inadequate grid infrastructure development.

While the continent still needs large-scale power projects to meet its energy needs, and challenges exist around the lack of grid infrastructure, many countries have the potential to develop captive and small-scale renewable energy projects.

A combination of government policy, blended financing, and improved technology are necessary to support these projects (for example, solar, wind, and battery power developments), which will be crucial in the continent’s move away from traditional energy sources.

Benefits of Implementing Small-Scale Renewable Energy Projects

There are several reasons why many African countries would benefit from the acceleration of small-scale renewables projects:

  • Increased access to energy: In 2021, only 48 percent of the total population in AFE countries had access to electricity services, with rural areas experiencing the lowest penetration at just 33 percent. In low-income countries such as Burundi, Malawi, and Democratic Republic of Congo, less than 21 percent of people have access to electricity, according to the World Bank. Where access to energy is limited due to a lack of or weak existing grid infrastructure, community-based renewables projects, such as mini grids or solar-powered projects, provide reliable and sustainable energy sources.
  • More affordable energy: According to the World Bank, nearly 600 million people in Sub-Saharan Africa live without access to electricity, representing nearly 83% of the world’s unelectrified population, and with the cost being passed onto the end user. This creates significant barriers to health care, education, productivity, digital inclusivity, and ultimately job creation.
  • The cost-of-living crisis is acute, and typically, the lowest-cost energy source is utilised by most people. Scaling up renewable power projects in communities, by improving the technology that creates and delivers them, will allow people to access affordable energy sources. 

  • Promote economic growth and stability: The development of small-scale renewables projects will almost certainly generate wider economic development opportunities in Africa, including employment, medical, and educational improvements.

The Obstacles of Expanding Renewable Energy in Africa

There are nonetheless challenges to scaling up renewables’ projects across Africa, including ensuring projects are at the same time both affordable and an attractive investment opportunity.

The following can help in the financing of a project:

  • Government policies that encourage project investment through subsidies to developers, and contribution to the tariff consumers are paying. In Uganda, for example, government policy changed recently, so it contributes 60% of the tariff, to drive affordability for the end user.

  • Private and concessional funding to develop energy systems, such as captive power projects, for industrial customers across Africa.

  • Enhanced and cost-effective Risk Transfer Solutions and Insurance Products to mitigate risks associated with Implementing new technologies, such as battery energy storage, and expanding renewable energy projects in Africa. Effective risk transfer is a crucial prerequisite for project lenders and has facilitated the successful implementation of numerous projects. Marsh’s teams across Africa have invaluable experience in helping many of our client’s projects reach financial close.  By combining strategic investments with firm government commitments, consistent policies, and transparent regulatory frameworks, Africa has the potential to take the lead in transitioning towards a cleaner and more sustainable energy future.

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