Low renewable energy Investments, manufacturing capacity hurting Africa -Leaders

Africa receives the lowest investments in renewable energy. The issue of disproportionate funding in renewables was again revisited at the just concluded Berlin Energy Transition Dialogue (BETD).

This is an annual dialogue among world leaders on energy transition challenges and solutions. This year’s edition, which is ninth in the series, is themed, “Securing a Green Future.” It aims to drive a global energy transition towards ensuring the security of supply, climate protection and also economic growth.

The World Energy Transition Outlook Preview, which was released by the International Renewable Energy Agency (IRENA) on the sidelines of the event, noted that the world was off track on the path to a global energy transition. And while renewables worldwide, particularly in the power sector, have seen some growth and increased financing, its deployment is limited to a few countries, and the distribution of investments is inequitable. 

The European Union, China and the United States account for 75 percent of added renewable energy capacity which totalled 295 gigawatts (GW) in 2022. At the same time, while investments in renewable energy reached $500 billion in 2022, 85 percent of the investments were concentrated in the hands of a limited few. Africa received only 1 percent of added investments in renewables in 2022 and in total accounts for only 2 percent of the global investments in the past two decades.

This is why African leaders at the Berlin Energy Transition Dialogue called for more investments and partnerships to bolster green industries and transition to clean technologies in Africa. 

President William Ruto of Kenya, who was the keynote speaker at the BETD, called for more support to position Africa as the green industrial powerhouse of the world. He called for innovative financing through various schemes, including high-integrity African carbon credits for EU emission trading compliance markets, concessional finance and low-risk development finance. 

‘With the right level of investment, Africa can provide energy success for all by 2030 while reducing total emissions related to energy generation by approximately 80%’, he said.

Nigeria’s Minister of Power, Abubakar Aliu, also echoed this point on the need for finance, referring to the $1.9 trillion needed to actualise Nigeria’s ambition for carbon neutrality in 2060 as noted in the Energy Transition Plan (ETP) launched last year. He said Nigeria had a vision of 30:30:30, which would raise the capacity of electricity generated in the country to 30 GW by 2030, and 30 percent of this will be by renewables. To do this and the other objectives of the ETP, Nigeria needs $410 billion above business-as-usual levels and an average of $10 billion annually.

“The big elephant in the room,” he said, “is how to finance the ETP.” He called for more concessionary capital. 

‘We are saying Europe should come and partner with us and assist us to drive this energy transition to fruition. Ten billion dollars per annum and we will be able to generate in the plan about 5 GW of solar energy every year,’ the minister said.

More manufacturing needed

As the market for renewables expands and with the abundance of raw minerals and natural resources on the continent, the manufacturing industries in Africa still lags in the production of renewable energy technologies and their different components. 

The UN Special Representative and CEO of Sustainable Energy for All, Damilola Ogunbiyi, said the disparity in renewable energy financing received by the developed countries and the developing countries was unacceptable. Her organisation has developed two initiatives that will promote financing for African countries. One is the Africa Carbon Markets Initiative and the other the Renewable Energy Manufacturing Initiative.

The Renewable Energy Manufacturing Initiative particularly, according to Ogunbiyi, was looking at the manufacturing of PV solar, lithium batteries and two-wheelers.

‘It is critical to understand that the continent should not be seen as an extractive continent but a continent that can really add value,’ Ogunbiyi said.

President of the African Development Bank (AFDB), Akinwunmi Adesina, also called for more efforts to promote manufacturing in Africa rather than just export its abundant raw minerals and metals for clean energy value chains. “We shouldn’t just export. We must and we should manufacture. Africa is the perfect place to build lithium batteries to power German cars,” he said.

He noted that since 2016, 86 percent of the bank’s investment in power generation had been in renewables. There are other initiatives to promote green infrastructure and development such as an ongoing $20 billion desert-to-power initiative, through Chad, Mali, Burkina Faso and Northern Nigeria, among others. When this is completed, he said it would be the largest solar zone in the world. Through its energy fund for Africa, the bank is investing in green baseload power as well as mini-grids and decentralised energy systems. The bank has also launched an Alliance for Green Infrastructure in Africa (AGIA) in partnership with AU and Africa50 to raise funds to build climate-resilient infrastructure.

Adesina said Africa must be given time to transition and allowed to use natural gas as transition fuel like it was in Germany and Europe. “While we must and will do all possible to expand the use of renewable, especially considering Africa’s enormous potential for solar, for hydro, for wind and geothermal energy sources, the intermittency, however, of new renewable energy sources, in particular, wind and solar, makes it currently impossible to guarantee the security of supply. Natural gas is, therefore, a key part of the energy mix for assuring the security of supply and is a critical transition fuel for Africa.”

The risk perception for African countries is high and this continues to affect investments in clean technologies on the continent. Countries and international partners will need to work together to address this to unlock finance for building green industries on the continent, African leaders said.