The role of the private sector is growing, but there are significant obstacles due to macroeconomic headwinds and grid capacity limitations.
Africa has reached a critical turning point in the deployment of renewable energy at the start of 2024.
It is now undeniable that technologies like solar and wind power have the ability to reduce the disparity in energy access across the continent. However, there are several obstacles in the way of quickening the pace and scope of the shift to renewable energy sources throughout Africa.
Approximately 600 million people, or half of the continent’s population, do not have access to electricity, and millions more live with sporadic or unpredictable supplies.
More dependable access is being provided in large part by solar energy in particular. The majority of Africa has ideal solar energy conditions, making solar power a good choice for both large-scale utility projects and smaller ones intended to supply isolated homes and businesses.
The significance of renewable energy on the continent was emphasized at both the Africa Climate Summit in Nairobi in September of last year and the COP28 climate conference last year.
However, it remains to be seen if donors and development finance institutions (DFIs) will follow through on their promises by 2024. According to the International Energy Agency (IEA), in order to mobilize $90 billion in private sector investment by 2030, or more than ten times the current level, $28 billion in concessional capital will be required annually.
Technology advances
The most important renewable energy source on the continent is still hydropower, which has long been essential to the electrical systems of many African nations. Solar energy is, nevertheless, starting to take the lead as the primary source of new capacity.
According to the African Solar Industry Association (AFSIA), the continent installed a record 3.7 GW in 2023, representing year-on-year growth of 19%. AFSIA notes that utility-scale solar projects are less common in Africa than in the United States, Europe or China. By contrast, it says 65% of the capacity added last year came from commercial and industrial projects – a large share of which are in South Africa.
“In [the] absence of reliable utility companies and grids supplying the required electricity, African companies and businesses finally have found an alternative with solar and storage thanks to plummeting prices of both key components,” AFSIA said in a report.
Meanwhile, cash-strapped utilities are increasingly looking to the private sector to supply electricity from large-scale wind and solar projects to the grid. In South Africa, a bidding round for independent power producer (IPP) projects, which will conclude in April, will be crucial for efforts to end the country’s disastrous power shortages.
Zambia is another country where the government is turning to the private sector, as it looks to extend electricity access to 60% of its population by 2030. Reforms introduced by President Hakainde Hichilema have facilitated private investment in the power market, with a focus on streamlining regulator approvals.
“Most renewable energy projects will continue to be financed at an increasing rate by the private sector in Zambia,” says Kusobile Kamwambi, head of the country’s Presidential Delivery Unit.
But one challenge, likely to become ever more evident in 2024, is that electricity grids in many African countries are struggling to absorb the power supplied by renewables. In Zambia, for example, ZESCO has set a cap of 50 MW on IPP projects – a limit that makes investment less attractive for some players in the sector.
