Africa’s electricity challenge is one of the most pressing issues facing the continent today. Despite significant progress in recent years, over 600 million Africans still lack access to reliable and affordable electricity. This lack of access hampers economic development and exacerbates poverty. To address this challenge, a multifaceted approach is required, that includes improving infrastructure, diversifying energy sources, enhancing financial accessibility, and implementing supportive policies.
One of the primary issues is the inadequate energy infrastructure. Many African nations rely heavily on outdated power generation and transmission systems. Currently, a significant portion of electricity generation comes from fossil fuels, particularly oil and gas, which not only contributes to environmental degradation but also poses a challenge to energy sustainability. Most recent clean energy investments in Africa have focused on renewable power generation, which is crucial for meeting the continent’s growing electricity demand sustainably.
However, further growth in renewables is constrained by the outdated and limited grid infrastructure. With average line losses of 15 percent, inefficient grids and a lack of sufficient interconnections are creating bottlenecks for new renewable energy projects across the region. This results in a substantial loss of revenue and exacerbates the existing power shortages. Investments in renewable energy infrastructure in Africa have been growing, but they are still relatively small compared to other regions.
In 2022, renewable energy investments in Sub-Saharan Africa were less than one percent of the global total for renewables. Governments in Africa currently finance around 50 percent of energy infrastructure projects, but fiscal constraints often limit the size and scope of investments. Averagely African countries are attracting around $9 billion per year for energy infrastructure. However, this is far below the actual needs.
According to the International Energy Agency (IEA), Africa requires at least $200 billion annually by 2040 to meet its electricity demand and achieve universal access to electricity. IEA reports that, in 2024, an estimated $110 billion is projected to be invested in Africa’s energy sector. Of this, nearly $70 billion will be directed toward fossil fuel supply and power, with the remainder allocated to various clean energy technologies. Although energy investment patterns differ across the continent, the overall spending and the share of clean energy are insufficient to meet Africa’s sustainable development goals.
Financial barriers also impede the development of sustainable energy projects. High upfront costs associated with renewable energy installations deter both industries and households from transitioning to cleaner energy sources. Limited access to finance further complicates this transition, as most commercial banks prioritize profit-driven projects over those with long-term sustainability benefits. Also, the cost of capital in Africa is significantly higher than in other regions due to political and regulatory risks. Interest rates on energy projects can range between 10-20 percent, while in developed countries, it’s typically around three to seven percent.
To address this, innovative financing models, such as public-private partnerships, microfinance initiatives, and de-risking mechanisms, must be explored. These can provide the necessary capital and safety net for projects that would otherwise be deemed too risky or unprofitable.
A decentralized solution to the energy security problem is the deployment of standalone systems such as solar panels and off-grid renewable energy systems. These systems offer an opportunity to deliver sustainable, affordable electricity to communities without grid access, helping to bridge the energy divide. Solar energy holds immense potential due to Africa’s abundant sunshine. By tapping into this resource, communities can access clean, reliable power that can support basic needs like lighting, refrigeration, and communication, as well as enable economic activities such as small-scale industries.
Africa’s solar energy potential is underscored by its long-term practical yield of 4.51 kWh/kWp/day from utility-scale installations, placing it ahead of regions like Central & South America (4.48 kWh/kWp/day) and North America (4.37 kWh/kWp/day). This shows that Africa’s natural conditions provide a significant advantage for solar energy development, making it a key part of the solution for sustainable energy access and long-term economic growth.
African governments play a crucial role in fostering this transition by implementing policies that incentivize investment in clean energy. To attract both domestic and foreign investment, governments could introduce measures such as tax breaks for renewable energy projects, grants for research and development, and subsidies for the importation of renewable technologies. By reducing the financial burden on companies and consumers, these incentives would help accelerate the adoption of cleaner energy technologies.
Additionally, by reclassifying electric vehicles (EVs) and renewable energy technologies as essential rather than luxury items, African governments can further encourage their widespread adoption. The removal of high import duties and financial barriers would lower costs for consumers, making it more feasible for individuals and businesses to embrace sustainable energy solutions. This, in turn, would stimulate local industries, promote innovation, and contribute to the development of a vibrant renewable energy sector across the continent.
Financial investment is another critical aspect of international partnerships. Development finance institutions and multilateral finance institutions, such as those accredited by the United Nations Framework Convention on Climate Change (UNFCCC) like the GCF and GEF, can provide concessional funding and technical assistance for large-scale energy projects. These funds can help bridge the financing gap for projects that may be too costly for local investors to undertake alone. By leveraging international finance, Africa can accelerate the development of its renewable energy sector and achieve universal access to electricity.
Addressing Africa’s electricity challenge requires a comprehensive strategy. By focusing on sustainable and affordable energy solutions, Africa can overcome its electricity challenges and pave the way for a brighter and more prosperous future.
Aziz, Technical Advisor, The Green Exchange/ Lumina Africa Advisory
