The ongoing energy transition from fossil fuels to renewable energy sources is occurring simultaneously with high growth in demand for power within Africa, as a result of the rapidly growing population, continued urbanisation and increasing economic development and industrialisation. With more than 600 million people across Africa lacking access to electricity, the IEA estimates that Africa will need to double its electricity generation capacity by 2040 to meet growing demand. In addition to meeting growing domestic demand, the African continent has been identified as an attractive source for renewable energy for export to other regions looking to reduce their reliance on fossil fuels and meet net-zero targets.
These factors have led to increasing investment in projects based on the attractive geographic conditions for wind, solar and hydropower across Africa. Notable recent examples include the Lake Turkana Wind Power in Kenya (310 MW), the Ouarzazate Solar Complex in Morocco (510 MW, largest in the world), and the Grand Ethiopian Renaissance Dam (GERD) in Ethiopia (5.15 GW), which have greatly increased the available power to local populations. However, numerous projects are also in development based on the export of energy from Africa to Europe – this may be either through direct transfer of electricity, such as the XLinks project, which is planned to supply renewable electricity to the UK from Morocco by subsea cable, or via conversion of renewable energy into fuels such as green hydrogen and ammonia for export, for which there are numerous projects in development in countries such as Namibia, Mauritania, Morocco and Egypt.
Further to the projects under development, there is a clear commitment from multiple parties to making finance available for such projects. Most development banks, bilateral aid and export credit agencies, and development finance institutions have a clear mandate to facilitate the energy transition, and many will provide preferable terms to projects which can help achieve net zero targets. In addition, there are now numerous climate investment funds and venture capital funds dedicated to investments in green energy, including throughout the development stage.
For a green energy project in Africa (as elsewhere in the world) to be considered fully bankable, project development will need to reach certain milestones or have a well-defined roadmap to achieving these. This includes elements such as receiving necessary permissions from relevant authorities, completion of feasibility studies, selection of relevant technologies, execution of basic or front-end engineering defining the project scope, and appointment of contractor(s) for EPC execution of the project. Even at this well-developed stage, there will be various risks identified which require mitigation to attract financing.
