In its June 2024 report on clean energy investment for development in Africa, the International Energy Agency (IEA) emphasized the critical importance of extending access to electricity and clean cooking. The report underscores these measures are vital for growth, development, and ensuring a just energy transition across the continent.
Financial Requirements for Universal Energy Access
From 2023 to 2030, Africa requires approximately USD 22 billion annually to connect all homes and businesses to electricity. An annual investment of USD 4 billion is needed to provide clean cooking solutions to the population. Despite these figures, Africa’s total annual investment required for energy access represents less than 1% of global energy investments.
Affordability Challenges
The IEA report highlights significant affordability challenges. Only half of households without electricity access can afford basic energy services without financial support. The situation is even more dire for clean cooking solutions, which are financially out of reach for most households without additional assistance.
Role of Private Sector and SMEs
Private companies and small and medium-sized enterprises (SMEs) in Africa are innovating solutions beyond traditional public-sector-led approaches. However, scaling these solutions to reach rural areas requires increased financing and specialized incentives.
Investment in Renewable Energy
The Sustainable Africa Scenario outlined in the report projects a substantial increase in total electricity sector investment, rising from just under USD 30 billion in 2022 to more than USD 120 billion by 2030. Around 50% of this investment is allocated to renewable energy generation. Africa boasts some of the most cost-competitive renewable resources globally, including 60% of the world’s best solar resources. Furthermore, many African countries have high hydropower, geothermal, and wind energy potential.
Challenges in Less Developed Markets
While utility-scale renewable power projects have gained traction in markets with access to commercial finance—where 80% of clean power projects have reached investment decisions in the past five years—less developed markets face greater perceived investment risks. This is particularly true in areas where utilities are not seen as credible off-takers, affecting three-quarters of the African population.
Solutions to Attract Investment
The report suggests several measures to attract new capital to debt-distressed utilities. Authorizing the use of concessional agreements or other regulatory carve-outs for private investors can be beneficial. Additionally, tariff reforms could help, though these approaches must carefully balance the risks of imposing costs on consumers and governments.
The IEA report clearly states that significant investment is crucial for Africa’s energy future. Ensuring universal access to electricity and clean cooking is a matter of growth and development essential for a just energy transition.
While the financial requirements are substantial, they represent a small fraction of global energy investments. Overcoming affordability challenges and leveraging private sector innovations are key to achieving these goals. Furthermore, strategic investments in Africa’s abundant renewable resources and reforms to mitigate investment risks are necessary to unlock the continent’s full energy potential.