Financing options key to Africa’s transition to sustainable energy – WEF report

A new whitepaper outlining the key considerations in setting the course for Africa’s energy future was released at the 2021 Sustainable Development Impact (SDI) summit. The report, “Financing the Future of Energy,” outlined Africa’s electricity landscape and financing options in context with the global drive to reduce carbon emissions.

According to the World Economic Forum (WEF), Africa’s power sector will play a central role in the transition from fossil fuel-driven power generation to a renewable-strong energy mix. The whitepaper, written in collaboration with Deloitte, said the migration to a multi-stakeholder-oriented net-zero power grid is being driven by ‘the 3Ds’.

Africa’s developing nations need investment in renewable energy solutions to fight climate change. But emissions reduction strategies must be balanced with vital needs for economic growth and stability. Many cases will require financing for low carbon energy solutions and transition finance to assist in making the shift. New analysis outlines financing options and investment, for the continent’s energy transition, the report highlighted.

Words like decarbonisation (moving from fossil fuel sources to renewables); decentralisation (shifting from centrally managed generation, transmission, and distribution to decentralized systems); and digitalisation (leveraging digital technology to advance the transition) were freely discussed at the just-ended SDI summit.

The report contends that new coalitions and investments with developed nations and nongovernmental organisations (NGOs), including the World Economic Forum, must coordinate and enable countries to leapfrog existing technologies and infrastructure.

Chido Munyati, head of Africa at the World Economic Forum, said, “The need for digitally smarter utility platforms and sustainable development programmes will guide global leaders in helping to shape equitable and inclusive recovery programmes. The entire continent remains vulnerable, but this whitepaper offers a view on what are viable financing options that exist today for clean energy sustainability and equitable recovery for all of Africa.”

Meanwhile, Mario Fernandes, director, Africa power utilities and renewables at Deloitte, said, “funding will be the biggest hurdle to ensuring Africa’s sustainable transition to renewables at scale.

“There are many financing solutions available. Africa’s winners will be the ones that are able to leverage what exists while creating an enabling environment for the private sector through a Renewables Energy Investment facility,” Fernandes said.

Case studies in China and India showed that financing solutions for a clean energy transition often involve long cycles. Economic booms in these countries resulted in a significant shift in carbon emissions. Since similar economic booms are expected across Africa, the report highlights how crucial it is to anchor growth in technologies that can enable lower emissions.

While Africa’s contribution to greenhouse gas emissions from fossil fuel significantly lags behind those of other continents, it still carries a huge potential to accelerate the transition to a net-zero future. Currently, half of the continent lives without adequate access to electricity. As energy demands increase, the energy gap could be bridged through clean energy alternatives, if the financing solutions are employed now.

Nigeria, the continent’s largest economic power with a burgeoning population, tops African countries’ 770 million people living without access to electric power. In June, the World Bank in its Nigeria development update (NDU) said one in ten residents without access to electricity are in Nigeria. The global lender also informed that Nigeria’s seven million people fell into extreme poverty in 2020 alone.

The Sustainable Development Impact summit brought together global leaders from business, government, and civil society under the theme: ‘Shaping an Equitable, Inclusive and Sustainable Recovery.’ It focused on new technologies, policies and partnerships to advance cooperation, accelerate progress, and highlight tangible solutions to our global challenges.