There are glass-half-empty and glass-half-full ways to view renewable energy and climate finance in Africa, the second largest and most populous continent.
The somber take: Africa and its countries are not even close to being on track to achieve the Paris Agreement or their own climate goals — their contributions to limiting global warming to 1.5 degrees Celsius or 2.7 Fahrenheit — before 2030. The Climate Policy Initiative estimated the continent will require $277 billion of renewable energy investments each year from 2020 to 2030 to meet its goals and that isn’t happening. There is currently only $29.5 billion invested, a shortfall that will ultimately hamper the collective effort to avoid profound environmental problems and keep the earth livable.
“It is unlikely that global climate change mitigation efforts can be successful without taking Africa into consideration,” Pieter Scholtz, the ESG Africa partner lead at KPMG, said in a statement, commenting on a KPMG report about climate finance on the continent.
A more optimistic view is that Africa has some of the planet’s biggest and most profitable investment opportunities related to the global energy transition. Africa accounts for just 3 percent of global renewable energy investments and there is nearly $250 billion in untapped opportunities every year that investors are missing, according to KPMG’s report.
To be sure, Africa’s energy story is about addition more than transition. Today, African countries are far down the list of the biggest greenhouse gas polluters, according to the World Resources Institute. On an individual basis, CO2-emissions of Africans are more than 10 times lower than those of North Americans. But in the future, the continent’s relatively young and growing population will mean a surge in demand for goods, services, and new infrastructure — and Africa has some of the best solar, wind, and green hydrogen potential, KPMG says.
The continent is also rich in cobalt, platinum, graphite, and other minerals required to make renewable energy viable across the globe.
KPMG’s report acknowledges the challenges and worries investors face in Africa that are keeping them from capitalizing on what appear to be obvious opportunities. Energy-related investments remain low because of unstable currencies, counterparty risks, weak institutions, low technical capacity, and lack of transparency and accountability mechanisms. Infrastructure that does exist is poor, especially regarding electric grids.
“There are numerous risks, some unique to Africa, that need to be mitigated for renewable energy projects. But investors should be careful not to paint the entire continent with one brush: every country is different and there are numerous countries on the continent that have a stable political and regulatory environment,” according to the report.
Still, Africa is home to 1.4 billion people and much of the continent has yet to be industrialized. And renewable energy could unleash economic growth broadly.
“An extensive expansion of investments in the supply and distribution of renewable energy is the precondition for Africa’s economic promise. Driven by population growth, favorable demographics, innovation, and political stability in many countries, Africa is now one of the last frontiers of global economic growth. However, key to local value creation is access to reliable and clean energy across the continent. That’s why climate investing in Africa maximizes positive environmental and social impact,” the KPMG report says.
