#COP28: How Africa can become a renewable energy hub

Among Africa’s greatest assets is its vast and untapped renewable energy: abundant year-round sunshine, as well as hydropower, biomass, and geothermal energy. These resources could not only help power the more than 640 million Africans that currently have no access to energy, but could significantly boost the continent’s contribution to global climate change mitigation, increasing the resilience of the continent’s 1.5 billion people.

Kenya’s President Willam Ruto is an advocate for increased stakeholder’ efforts and investment to unlock Africa’s renewable energy potential, and he is walking the talk. In September, he hosted the African Climate Summit, where he highlighted that more than 90% of Kenya’s electricity is derived from renewable resources, and committed to increasing this to 100% by 2030. Following the summit, he also provided just shy of $50m to counties in the form of climate change investment grants to focus on agriculture, water and natural resources management. As the continent’s first mover in green energy transition, Kenya is targeting a 33% reduction of Greenhouse Gas emissions by 2030 and has become the centre of global green energy investment in Africa.

So, how can other countries accelerate their own unlocking of renewable energy potential, thus speeding up the continent’s march to a green economy?

Increased financing

The most important first step is to attract increased investment.

About 70% of Africa’s population is under 30 years old. The continent holds roughly 40% of global reserves of cobalt, manganese, and platinum, and 60% of the world’s solar resources. Combine such a young population with such vast natural resources and renewable energy potential and you have fertile ground for investment in the sector.

Institutional investors at the summit pledged additional investment in renewables in the continent. The African Development Bank led with an announcement of $23bn in financing for green growth, mitigation, and adaptation efforts to the Africa Climate Fund for the next 27 years. The UAE and Germany also pledged $4.5bn and $482.2mn respectively to help with the development of green energy infrastructure. 

But the investments required to unlock Africa’s renewable energy potential are far greater than funds available from public sources. By 2030, Africa needs a staggering $28 trillion in cumulative financing to respond adequately to climate change. Private sector investment, while picking up the pace, needs to increase significantly to accelerate Africa’s transition to a low-carbon economy.

At Maris, we are not only significantly scaling up our equity investments to drive African countries towards harnessing their rich renewable energy resources, but doing this in a way that generates sustainable compelling returns to our investors.

In Kenya, our investment in Equator Energy, the region’s leader in commercial and industrial solar power, is contributing to the country’s march to 100% renewables energy target, providing cheaper and cleaner energy to boost productivity across the industrial sector.

In Equator Mobility, our investment created the country’s first provider of fully electric commercial vehicles, providing businesses in the region with a cost-effective, environmentally friendly mode of transport that is reducing GHG emissions, air pollution, and spurring economic growth.

The positive impact of investing in climate resilience is wide-reaching: compelling returns, economic growth via environmentally sustainable development, and huge social impact by creating jobs and powering millions of Africans towards increased productivity and poverty reduction.

Financial de-risking

Investors like stability. A more stable operating environment, with a transparent regulatory framework and suitable fiscal policies would significantly improve investor confidence across the private sector. Robust incentives, such as tax breaks, subsidies on locally manufactured components, and land concessions would be very welcome.

In Kenya, for a company to import a clean electric powered vehicle, they must pay roughly 35% of the purchase price in taxes (in addition to shipping and clearance) to import and land the vehicle. In such price-sensitive markets, this is a clear roadblock to the electric transition. Reducing such duties would be a win win for African governments – driving EV uptake, decarbonizing the transport industry, and reducing US dollar denominated fuel imports.

Similarly, by developing investment guarantees which offer political and financial risk securities, African political leaders can create a more bankable project landscape and reduce perceived investment risks traditionally associated with large utility-scale renewable energy projects. Improving policy relating to feed-in-tariffs, subsidies, and low-carbon promotion tools such as carbon pricings would significantly increase investor interest.

Closer engagement with the private sector

Stakeholder partnerships, especially public-private partnerships, and fund management cooperatives led by experienced investors, such as Maris, can also encourage risk-sharing and enhanced leveraging of stakeholder strengths to fund large-scale projects.

One of the key resolutions made by leaders at the African Climate Summit held in September, as part of commitments to fast-track green growth, was increased engagement with the private sector. To achieve the target of 300 GW of renewable energy capacity by 2030, African leaders will be on the lookout for strategic private sector partnership discussions that leverage expertise and finance to unlock the continent’s potential.

At Maris, our strategic partnerships across the continent are key to building the right environment for investor confidence. COP28 presents an opportunity for investors to engage with attending policymakers from Africa as a bridge between the private sector and governments across the continent. 

To accelerate such public-private partnerships, investors need to highlight potential savings to be made by governments from large-scale renewable energy projects, as well as potential revenue streams from carbon credits, and show how technology transfers not only boost local capacity but help African countries leapfrog to more sustainable and efficient energy solutions.

At COP28, we hope to see increased private sector interest in the renewable energy sector in Africa. Increasing the continent’s renewables energy capacity quickly is ambitious, but achievable if the right environment is created.

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