How Africa can attract global investments in renewable energy

Africa's renewable energy sector is facing significant challenges when it comes to attracting global investments, despite the immense potential for growth and development in the region. Francesco La Camera, Director General of IRENA, highlighted the stark reality that only 1.6 per cent of global energy investments have reached Africa in the last two decades. This is further exacerbated by the fact that just $2 billion was invested in 2023, a figure that is 40 times lower than the global per capita average. In an exclusive interview with CNBC Africa, La Camera discussed the barriers hindering investment in Africa's energy capacity and the urgent need to bridge the funding gap in order to accelerate the energy transition in the region. One of the key challenges identified by La Camera is the lack of necessary infrastructure to support renewable energy projects. He emphasized the need for interconnected grid pipelines that are flexible, balanced, and designed for decentralized energy systems. Additionally, La Camera stressed the importance of creating a market that is tailored for renewables, as the current market structure is heavily influenced by fossil fuels. Long-term contracts and the strengthening of institutional capabilities were also highlighted as crucial factors in overcoming these barriers. La Camera underscored the importance of restructuring international cooperation to ensure that Africa is placed on equal footing with other regions in terms of energy investment. He drew parallels to the Marshall Plan that contributed to the post-World War II recovery of European countries, emphasizing the need for a similar effort to support Africa's energy transition. The funding gap in Africa's renewable energy sector presents a significant challenge, with investments lagging far behind global averages. La Camera emphasized the need for natural infrastructure to attract private investments, noting that private companies are more likely to invest if there is a guaranteed market for the energy produced. However, he highlighted the reliance on Power Purchase Agreements (PPAs) as the current model, which ultimately places the burden of payment on governments and limits fiscal space for further investment. Building and strengthening infrastructure in Africa not only creates jobs and boosts GDP but also sets the stage for increased energy demand and capacity to pay for renewable energy services. In order to upscale investments in Africa's renewable energy sector, La Camera emphasized the importance of public-private partnerships and the involvement of financial institutions. By bringing various stakeholders together, sharing experiences, and fostering collaboration, the goal is to create a conducive environment for private investments in renewable energy projects. La Camera's insights shed light on the pressing need for concerted efforts to overcome barriers and unlock the full potential of Africa's renewable energy sector.