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Abundantly blessed with a variety of natural resources, the African continent is eager to tap into its significant renewable energy potential in a bid to expand energy access, meet rising global demand, and drive economic growth, while at the same time addressing the fundamental challenges of climate change. Accordingly, Africa has risen to the forefront of the global investment agenda, with several overarching reasons motivating green investment across the continent.
Africa is considered the most opportune market for renewable energy, with current estimates placing solar at 10TW; hydro at 350GW; and wind at 110GW. Despite the significant progress made by some countries to expand green energy utilization – Mozambique for example is considered one of the greenest countries in the world, deriving 81% of its electricity from hydropower – much of Africa’s resources remain largely untapped, offering lucrative opportunities for investors.
Ethiopia, for example, has the potential to generate upwards of 60,000MW from hydropower and solar while South Africa has an estimated wind power potential of 6,7000GW. Accordingly, Africa’s multi-sector opportunities have and continue to capture the interest of global players.
Demonstrated Political Will
Recognizing the role that renewable energy will play in mitigating climate change while boosting socioeconomic growth, many African countries have put in place clear green energy development targets. Notably, Ghana aims to increase the proportion of its national energy generation mix from 42.5MW to 1,363MW by 2030; Angola aims for 70% renewable capacity by 2025; and Senegal aims to increase the share of renewables in the country’s energy mix to 30% by 2030. These targets demonstrate both the political will and opportunities present in African markets.
What’s more, the Paris Climate Agreement has motivated many African governments to take the climate crisis more seriously, leading to the uptake of renewable energy specific regulations in national legislature. Governments from across the continent have not only set clear objectives for the uptake of renewable energy, but have implemented regulatory reforms to motivate foreign direct investment and private sector participation in the sector. South Africa’s Renewable Energy Independent Power Producer Program, for example, has created both an enabling and incentivizing environment for increased private sector participation in the renewable energy sector leading to the significant uptake of renewable energy and the mobilization of foreign capital.
High Demand for Energy
Africa’s energy crisis continues to serve as a direct inhibitor to economic growth. Currently, over 600 million people lack access to electricity while over 900 million people lack access to clean cooking fuels. Electrification, particularly in rural areas, has in turn become a priority for many African governments whereby significant levels of investment are required. Infrastructure deficits and untapped resources, coupled with net zero emission targets, have created a notable opportunity for foreign investors, particularly in the green energy space.
As demand for energy increases significantly across the continent – a report by Energy, Sustainability and Society indicates that demand for renewable energy consumption will rise markedly in developing countries, with over 90% of the world’s population growth expected to be in developing countries by 2050 – investors should take hold of the opportunities for renewable developments in Africa.
Scalability and Deliverability
One of the key reasons Africa serves as an ideal green investment destinations is due to the scalability and deliverability offered by renewable energy technologies. While the continent boasts opportunities across multiple sectors, the potential for micro- and off-grid renewable systems in Africa is immense. Currently, the continent is considered the least urbanized, with the World Bank estimating that over 58% of the population is living in rural or remote areas. Accordingly, renewable energy comprises the most ideal energy solution for this demographic, offering scalability that extends grid-connected areas of the continent. The low-cost energy derived from hydro, solar and wind is considered the best method to power isolated communities, enabling governments and private sector players to deliver affordable, viable, and sustainable energy.
Significant Economic Potential
Finally, according to an Attractiveness Programme in Africa report by EY, Africa’s young, vibrant population, and significant economic potential has made it an attractive prospect for foreign investors. Political and economic reforms, new intra-African trade agreements, and the creation of enabling environments continue to attract major players from across the world and within multiple industries. Specifically, continental goals to diversify economies, spur job creation, and reduce the dependency on fossil fuels has opened up new and exciting opportunities for global stakeholders, with the continent’s economic growth potential making it a competitive destination in 2022 and beyond. As the world enters into a post-COVID-19 era, and global economies begin to recover, Africa’s potential has only been further emphasized, with green energy serving as a lucrative and growth-focused industry.