Since 2014, energy investments in Africa have dropped by nearly 45%.
This is according to the World Energy Outlook released today, October 24 by the International Energy Agency (IEA).
The Outlook stated that energy investments in Africa have experienced a substantial drop of nearly 45% since their peak in 2014. This decline is primarily linked to reduced investments in the oil and gas sector.
While export-oriented oil and gas projects can still attract commercial financing, clean energy projects struggle to secure adequate funding.
Recall that in April 2023, Nairametrics reported that the World Energy Transitions Outlook by the International Renewable Energy Agency (IRENA) highlighted the fact that Africa accounted for only 1% of additional renewable energy investments in 2022.
More Insights on IEA WEO
According to the IEA, clean energy projects in Africa face notable challenges in securing financial backing. Concerns arise from relatively weak regulatory environments and the financial instability of utilities.
These factors diminish the commercial viability of projects, particularly in regions where clean energy industries are in their early stages. This, in turn, results in significantly higher borrowing costs, often two to three times greater than similar projects in advanced economies.
The IEA says that to overcome these hurdles, many projects in Africa require concessional support. Such support serves either as a demonstration of project viability or to facilitate the mobilization of private capital.
To achieve all energy and climate goals in Africa by the end of the decade, it’s estimated that concessional finance of approximately $28 billion per year will be needed.
The Outlook also pointed out that satisfying Africa’s growing energy needs, extending access to modern energy for all by 2030, and achieving critical energy and climate targets involves a significant leap in investment.
In practical terms, this means more than doubling energy investments during this decade. To make this happen, the continent is looking at an annual requirement of over $200 billion from 2026 to 2030, with a substantial two-thirds of these funds allocated to clean energy initiatives.
Specifically, when it comes to the pressing issue of providing electricity and clean cooking facilities to every African, the continent is looking at an investment of $25 billion annually. This amount, which represents a relatively small portion of the total required, is equivalent to just 1% of the current global energy investment.
What you should know
The IEA Outlook noted that today, more than 40% of people living in Africa lack access to electricity and 70% lack access to clean cooking. Also, Africa will be home to one-fifth of the world’s population by 2030 and providing access to modern energy for all while keeping pace with rising energy demand should be a primary focus for African governments.
