As venture capitalists are showing keen interest in investing capital for the development of renewable energy such as solar, wind, hydro and biomass in the country, support from local banks to finance renewable energy projects is gradually growing as some of them have started appraising proposals, BusinessDay has learnt.
Renewable energy, which is also known as clean energy because it does not produce toxins or pollutants that are harmful to the environment in the same manner that non-renewable energy does, is increasingly gaining momentum across the globe as a veritable alternative source of energy with the availability of national and international funds to stimulate its development.
Speaking at a Business Lunch Tuesday on ‘Financing Renewable Energy in Nigeria’ organised by AHK Delegation of German Industry and Commerce in Nigeria, Lawal Gada, renewable energy manager, BoI/UNDP Access to Renewable Energy Project, said venture capitalists were already coming in to see how they could support renewable energy development in the country by injecting funds into banks.
He said the Bank of Industry (BoI) and commercial banks, such as Ecobank and Access Bank, are on the forefront to support renewable energy investors and developers, adding that BoI has dedicated funds which can be sourced from microfinance banks, including funds such as Dangote fund and MTN Foundation fund for small and medium enterprises.
He stated that the African Development Bank had reserved $547 billion to fund cleaner electric power in all the 53 countries in Africa by 2030.
Gada noted that it has become imperative to explore renewable energy sources in Nigeria, where they are currently under-utilised, as conventional energy sources continue to contribute to global warming resulting from the release of carbon-dioxide, which depletes the ozone layer.
He said, “The continuous depletion of fossil fuels such as petroleum and coal, escalating costs of conventional sources of energy, the need to protect the environment and achieve a key Millennium Development Goal of increased access to electricity have made renewable energy very attractive.”
He noted that the major challenge facing most investors and developers was provision of collateral.
Muyi Kazim, head, renewable energy and carbon origination, Ecobank Capital, said Ecobank has positioned itself as an African renewables and clean development mechanism partner with understanding of and ability to manage risks in an African environment and to solve financing problems.
He stated that concerns over ‘destructive and irreversible’ climate change has meant the world needs major ‘de-carbonisation’, adding that this shift in the global energy mix will require massive amounts of capital investment for cleaner technologies.
Citing estimates from International Energy Agency, he said $317 trillion in renewable energy and clean tech capital investment is required to reduce emissions, 50 percent by 2050.
“Investment in cleaner/renewable energy production will need to double and investment in energy efficiency will need to quadruple. Carbon credits have been shown to provide supplementary funding for well-structured African renewable energy projects that can get through the complex carbon credit approval process.”
He observed that much of the world today is converting to renewable energy sources as a means of providing power to homes and businesses in order to operate in a more environmentally-friendly manner.
According to Gada, Africa has the lowest per capita consumption of energy in the world with average energy consumption per capita of 0.66 tons of oil equivalent (TOE) vs 1.8 TOE world average.
In addition to financing from banks, he said other financing alternatives include government loan funds and national and international funds set up to provide grants or interest-free loans to developers of renewable energy projects.
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