In depth
Increasing access to a clean energy supply is critical for the continent and is paramount to its sustainable economic development. According to a report by the African Energy Chamber, countries that are key drivers of renewable energy in Africa include Egypt, Mauritania, Morocco and South Africa. These countries will ensure that three-quarters of all renewable energy capacity in Africa will be driven by onshore wind and solar in the next 15 years, with hydrogen also contributing to growing renewable energy capacity through the 2030s. Notably, Djibouti, situated in the Horn of Africa, is actively pursuing a renewable energy program, with significant developments in wind, solar, biomass and geothermal energy in the country. For example, the Ghoubet wind farm has increased the country's energy capacity (at 123 MW in 2021) by 50%. The country aims to generate 100% of its energy from clean energy sources by 2035, and if this is achieved, it will have the distinction of being the first country in Africa to do so.
According to the African Energy Chamber's State of African Energy Outlook, the renewable energy sector is expected to account for 65% of installed capacity in Africa by 2035 and 95% by 2050. To ensure this happens, African countries need access to funding and grants and a boost in investment in their renewable energy projects, which include the development of domestic and regional transmission grids, decarbonization projects, renewable energy power plants and facilities and battery storage projects.
Infrastructure
The African Development Bank recently noted that Africa needs USD 130 billion - USD 170 billion annually to bridge its infrastructure gap, with a financing shortfall of up to USD 108 billion. Many African countries are raising capital and attracting investments to address energy and transport infrastructure needs.
Examples of some of the projects currently underway in Africa include the Mphanda Nkuwa 1500 MW hydropower project in Mozambique and the 600 MW capacity transmission line between Mauritania and Mali, which includes a 50 MW solar project in Mauritania, part of a regional solar power initiative with funding from the African Development Bank. Furthermore, a green hydrogen project in Namibia with the capacity to produce 300 000 tons of green hydrogen a year, the 2 115 MW Rufiji hydropower plant in Tanzania, the 100 MW Redstone solar power project in South Africa and the 800 MW Noor Midelt solar complex in Morocco are also underway.
Egypt is actively pursuing significant energy infrastructure projects. There have been several Build-Own-Operate-Transfer (BOOT) projects completed in the renewable energy space in Egypt, particularly focusing on solar and wind power, in addition to the Benban Solar Park, which hosted the projects that participated in the feed-in tariff programs. Benban is one of the largest solar installations in the world, with a capacity of 1,650 MW. These projects are part of Egypt's efforts to increase renewable energy capacity and reduce its reliance on fossil fuels. The country is also working on expanding its natural gas infrastructure and exploring opportunities in green hydrogen production, positioning itself as a regional energy hub.
Regulatory developments
Across the continent, countries in Africa are gearing up for the energy transition by updating and modernizing policy and legislative frameworks that take into account the need for a renewable, decarbonized, decentralized energy supply that addresses climate change and the commitments made under the Paris Agreement. Further, a just energy transition must consider the requirement to balance the reduction of carbon emissions with the impact of this transition on employment and the need to develop long-term green energy jobs, especially in communities that have a current heavy reliance on fossil fuels. Policies that favor higher feed-in tariffs and quotas, enhanced incentives, streamlined permit processes and improved grid access, for example, are assisting to encourage private sector participation in the sector.
In South Africa, the National Development Plan (NDP), the draft Integrated Energy Plan (IEP) and the Renewable Energy White Paper outline the policy foundation for the energy transition in South Africa and the move away from carbon-fueled energy. The Integrated Resource Plan (IRP) 2019 covers the government's plans for power until 2030 and outlines a decreased reliance on coal-powered energy and an increased focus on a diversified energy mix that includes renewable energy, distributed generation and battery storage. The Energy Action Plan, announced in 2022, outlines the country's plans to enhance its energy sector and ensure a stable energy supply through renewable energy. Further, the Electricity Regulation Amendment Bill, which aims to, among other things, facilitate expanded capacity and improve grid management, is advancing through the parliamentary process.
Egypt is about to officially launch elaborate wheeling regulations. It was recently announced that pilot renewable energy projects will be implemented to test the regulations, whereby certain customers will choose their own electricity trader/retailer through bilateral contracts.
Decarbonization
The Intergovernmental Panel on Climate Change (IPCC) noted that the full decarbonization of the power sector by around 2050 was necessary to meet the Paris Agreement's target of 1.5°C temperature rise. Decarbonization is one of the fastest ways for African countries to meet their Paris Agreement emission reduction targets. Critically, the Paris Agreement also provides crediting mechanisms by which reductions achieved in Africa can be purchased by other countries or companies, thus providing an important potential new revenue source to support decarbonization projects. Africa therefore has the potential to follow a low carbon development path whilst also supporting international decarbonization efforts.
One area that has been a focus for many years is the manner in which African biological sinks can be protected or expanded to mitigate climate change. There are a range of initiatives and projects operating at a country-to-country level. Importantly, there are new sources of private capital looking to support at-scale projects in Africa. However, an exciting future area for development is climate finance under Paris Agreement mechanisms that support low carbon technology solutions in Africa - from energy from waste to low carbon phosphate production. With committed government engagement, this opens the possibility for innovative sector decarbonization that will also bring technology transfer to Africa.
Investment
There has been increasing investment in energy infrastructure, including domestic and regional transmission grids, renewable energy power plants and facilities across Africa. According to data from LSEG Workspace, the African energy and power sector announced 13 deals in 2023, including those in the oil and gas and renewable energy sectors. For example, there were investments in a wind farm in South Africa and a portable solar power project in Nigeria in 2023.
Energy sector investment in Africa has mostly focused on regional transmission grids connecting neighboring states, which assist in the trade of electricity across a region. The Southern African Power Pool, for example, is an effective regional trading structure for power, although South Africa's recent power issues have reduced the amount of electricity it can supply to the pool. This challenge has had the effect of encouraging domestic transmission grid development in neighboring countries in the Southern African Development Community that are members of the Pool. These countries have been focusing on harnessing their own resources to boost domestic transmission. Regional transmission grids are essential to enhance energy security in Africa and diversify energy sources. Domestic transmission grid development is also critical to ensuring all African citizens can access electricity, including those living in rural areas.
Storage, mini-grids and trading
As more of Africa's power is generated via renewable energy, the need for reliable energy storage is becoming increasingly important for grid resilience and flexibility, necessitating the mass adoption of energy storage as a balancing asset. The evolution of battery energy storage systems (BESS) is essential for load management and innovative technologies are allowing batteries to predict demand patterns, which enables the optimization of energy consumption. Front-of-meter storage will also contribute to the growth of utility-scaled renewable energy projects. The use of off-grid solar solutions, including mini grids, is also gaining traction across Africa for both businesses and individual consumers. Energy trading, where excess renewable energy is stored in batteries and sold to the grid, is also growing in popularity.
Funding and grants
To assist in funding the green energy transition, the World Bank announced in 2024 that it would grant nearly USD 300 million to the Eastern and Southern African Trade Development Bank (TDB) to enhance distributed renewable energy and clean cooking ventures in the private sector. Many others have committed to funding Africa's energy transition. For example, in 2022, the G7 countries announced that a USD 600 billion lending initiative, the Partnership for Global Infrastructure Initiative (PGII), would be launched to fund sustainable infrastructure projects in developing countries, with a particular focus on Africa.
Also in 2022, the US announced it would mobilize USD 200 billion for developing countries over the next five years as part of the PGII, with a priority being "tackling the climate crisis and bolstering global energy security." For example, the PGII has facilitated USD 900 million in funding for two solar projects in Angola and signed an agreement with the Tanzanian government to open a new multi-metal processing facility. Both the US and EU are assisting to develop Africa's vast critical mineral potential, including through the construction and development of the Lobito Corridor, which connects the DRC and Zambia to Angola's Port of Lobito. Critical minerals are essential components of items needed to support energy transition, such as electric vehicle batteries.
Further, Power Africa, a US government-led program that focuses on addressing Africa's access to electrical power, noted in its 2023 annual report, that in the last decade it had celebrated 14,300 MW of power projects closed, with 7,600 MW already bringing light to millions; 41.3 million homes and businesses now enjoying new or enhanced connections; and the extension of assistance to 42 countries, all impacting nearly 200 million African lives.
In early 2024, the European Commission and the African Development Bank signed a new framework agreement for their existing partnership to boost the Global Gateway initiative in Africa. This partnership enables investments in energy, transport and digital infrastructure in sub-Saharan Africa. The EU said it would invest around EUR 150 billion in Africa between 2021 and 2027. The Global Gateway has the goal of adding 300 GW of renewable energy to Africa by 2030. Last year, the EC announced funding valued at EUR 20 billion for the Africa-EU Green Energy Initiative, with projects including the construction of a transmission line in Côte d'Ivoire, the rehabilitation of national transmission lines in Ethiopia, the development of mini-grids in Madagascar and the construction of interconnectors between Zambia and the Democratic Republic of the Congo.
China and Africa have also been working together on improving Africa's capacity for green, low-carbon sustainable development. At the 2021 Forum on China-Africa Cooperation, green development was one of nine programs identified as part of the China-Africa Cooperation Vision 2035. The 9th FOCAC is due to take place in Beijing at the end of 2024, with further energy transition initiatives expected to be announced.
Transition Finance
There has been a rise in demand for sustainability-linked loans that incentivize borrowers to achieve pre-determined environmental, social and governance targets in order to access funding. The essential foundation for transition finance is the development and agreement between the parties of a detailed, credible and testable long-view transition plan to engender confidence that the activities being financed are meaningfully contributing to the net-zero target. This mode of finance would be useful in assisting high-emission sectors in Africa, including agriculture and industry, to decarbonize through the increased generation of renewable energy, for example. A harmonized, continent-wide regulatory and investment framework is needed to simplify the funding process and enable businesses to successfully access this type of finance.
Africa is awash with just energy transition projects and developments. With growing access to sustainable funding, grants and investments, the continent is well on its way to a sparkling clean energy future.
