New analysis from global consultancy Frost & Sullivan (F&S) has found that the sub-Saharan African market for clean energy projects has more than $200-million in financing available from private investors.
The clean energy technologies covered in this study are solar energy, wind energy, biomass power, and small hydropower projects.
F&S noted that two international funds for low-carbon technologies in developing countries have been established recently – a technology development fund and a technology deployment fund.
The main objective of these funds was to capitalise on existing national and international experience to leverage private capital to assist and support entrepreneurs across sub-Saharan Africa. These funds essentially created the confidence needed for early stage technology development and deployment financing and also facilitated a structure for public-private partnerships.
“In spite of its potential, the sub-Saharan Africa region is yet to fully realise the significant prospects to develop renewable energy projects,” said F&S energy programme managerCornelis van der Waal.
The lack of suitable financing has been one of the key reasons for the slow progress in the development of the region’s renewable energy projects.
However, policies and regulations that enhance public and private sector financing assisted in shifting some of the investment costs away from the investor to the public sector, said Van der Waal.
The key challenges to the financing of renewable energy projects in sub-Saharan Africa countries were said to be a lack of clarity on targets for renewable energy projects, an underdeveloped policy and regulatory environment, and a dearth of funding for suitable projects.
“Despite the fact that global private equity (PE) and venture capital (VC) investment grew in 2008, PE investment remains a relatively new asset class,” explained Van der Waal.
“Even in countries where investors are comfortable with PE investments, sustainable investments are unfamiliar, creating an additional challenge for renewable energy companies seeking to raise finance,” he added.
A combination of private sector investment and government funding would be the key to ensuring that sufficient capital was available for the financing of renewable energy projects.
“Governments should use instruments such as subsidies, tax measures, feed-in or quota schemes to lower investment costs,” concluded Van der Waal.