Africa is richly endowed with renewable sources of energy. From the high radiation of sunlight to the vast availability of water resources, forests, availability of wind and huge biomass, there is just a lot to tap from its renewable investment bag.
In a report published by Africa Oil Week and Wood Mackenzie, the global energy transition will drive divestment of oil and gas assets in Nigeria and other Sub-Saharan countries. The report further stated that carbon emissions are a priority when screening assets for divestment (learn more).
Based on how the market will retort to the increased divestment, oil price risks and financial access would continue to decrease the number of buyers for these oil and gas assets.
Noteworthy is that while access to finance for fossil fuel assets will continue to decrease, financing for clean energy projects in Africa will rise.
A few weeks ago, the African Development Bank (AfDB), the Korean Ministry of Economy and Finance, and the Export-Import Bank of Korea committed to providing $600 million in co-financing energy projects in Africa, with a primary drive for renewable energy (RE) solutions (learn more).
Alongside the series of renewable investments trooping in Africa, the investments are strengthened by reducing the cost of renewable energy technologies instead of fossil fuel projects. In 2020, two-thirds of renewable power generation accounting for 162GW had lower costs than the cheapest fossil fuel options.
As the costs of RE projects becomes more affordable, the need to transition and harvest Africa’s wealth of renewable resources becomes dire. As a result, development finance organisations, government agencies, private sector players and international banks are putting funds into the RE space.
Finally, as the energy transition enables new financing for renewable projects, investors should play their cards into renewable energy technologies and benefit from the grants and low-interest development loans.