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Financing Clean Energy Projects in Sub-Saharan Africa
Frost & Sullivan, Dec 2009, Pages: 91
The growth of the renewable energy market in Sub-Saharan Africa has been driven by global interest in clean energy and energy efficiency initiatives. To date the development of this market has been hampered by insufficient capital targeted at financing renewable energy projects. CE investment into SSA has mainly been in the form of climate change development assistance. The total investment between 2004 and 2008 was less than $5 billion. Africa’s first clean technology fund was formed in 2008. However, there are several financial and regulatory challenges that must be overcome before investment into clean energy projects in SSA follows the trend of global spend.
Research Overview
This Frost & Sullivan research service titled Financing Clean Energy Projects in Sub-Saharan Africa profiles key clean energy financial institutions investing into sub-Saharan Africa and identifies and quantifies the risks associated with renewable energy projects from the perspective of financing institutions. In this research, Frost & Sullivan's expert analysts thoroughly examine the following energy sources: solar energy, wind energy, biomass power, and small hydropower projects.
Market Overview
International Funds for Low Carbon Technologies with a Focus on Developing Countries to Facilitate the Financing of Clean Energy Projects in Sub-Saharan Africa
Two international funds for low carbon technologies have been recently established for developing countries – a technology development fund and a technology deployment fund. The main objective of these funds is to capitalise on the existing national and international experience to leverage private capital to assist and support entrepreneurs across sub-Saharan Africa. These funds essentially create the confidence needed for early-stage technology development and deployment financing and facilitate a public-private partnership structure. “Policies and regulations that enhance public and private sector financing assist in shifting some of the investment costs away from the investor to the public sector,” says the analyst of this research. In spite of its potential, the sub-Saharan Africa region is yet to fully realise the significant prospects to develop renewable energy projects. The lack of suitable financing has been one of the key reasons for the slow progress in the development of the region’s renewable energy projects.
The key challenges to the financing of renewable energy projects in sub-Saharan Africa countries are a lack of clarity on targets for renewable energy projects, an underdeveloped policy and regulatory environment, and a dearth of funding for suitable projects. “Despite the fact that global private equity (PE) and venture capital (VC) investment grew in 2008, PE investment remains a relatively new asset class,” explains the analyst. “Even in countries where investors are comfortable with PE investments, sustainable investments are unfamiliar, creating an additional challenge for renewable energy companies seeking to raise finance.” A combination of private sector investment and government funding will be the key to ensuring that sufficient capital is available for the financing of renewable energy projects. “The government should use instruments such as subsidies, tax measures, feed-in or quota schemes to lower investment costs,” concludes the analyst.
Technologies
The following technologies are covered in this research:
By Energy Source:
- Solar
- Wind
- Biomass
- Small hydropower projects
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