为非洲清洁能源融资（英文版）--国际能源署VIP专享VIP免费

下载本文档

阅读 268
格式 pdf
大小 3.53 MB
约154页
2023-11-05
收藏
点赞(0)
海报
举报

Financing

Clean Energy

in Africa

World Energy Outlook Special Report

In collaboration with

The IEA examines the

full spectrum

of energy issues

including oil, gas and

coal supply and

demand, renewable

energy technologies,

electricity markets,

energy efficiency,

access to energy,

demand side

management and

much more. Through

its work, the IEA

advocates policies

that will enhance the

reliability, affordability

and sustainability of

energy in its

31 member countries,

13 association

countries and

beyond.

IEA member

countries:

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Korea

Lithuania

Luxembourg

Mexico

Netherlands

IEA association

countries:

INTERNATIONAL ENERGY

AGENCY

Argentina

Brazil

China

Egypt

India

Indonesia

Morocco

Singapore

South Africa

Thailand

Ukraine

Please note that this

publication is subject to

specific restrictions that limit

its use and distribution. The

terms and conditions are

available online at

www.iea.org/t&c/

This publication and any map

included herein are without

prejudice to the status of or

sovereignty over any territory,

to the delimitation of

international frontiers and

boundaries and to the name

of any territory, city or area.

Source: IEA.

International Energy Agency

Website: www.iea.org

Norway

Poland

Portugal

Slovak Republic

Spain

Sweden

Switzerland

Republic of Türkiye

United Kingdom

United States

The European

Commission also

participates in the

work of the IEA

AFRICAN DEVELOPMENT BANK

GROUP

The overarching objective of the African Development Bank (AfDB) Group is to spur sustainable

economic development and social progress in its regional member countries (RMCs), thus

contributing to poverty reduction. The Bank Group achieves this objective by mobilizing and

allocating resources for investment in RMCs and by providing policy advice and technical

assistance to support development efforts.

Kenya

Senegal

Special Foreword

I am honoured to introduce this vital report on financing clean energy transitions in Africa,

which sheds light on the crucial actions needed to bring about the transformation of our

continent’s energy systems.

Authored by the International Energy Agency (IEA) and the African Development Bank Group

(AfDB), two organisations dedicated to Africa’s progress, this report serves as an invaluable

guide for charting our course towards a sustainable and prosperous future.

The credibility of the IEA as the world’s authoritative agency for energy policy makes this

report an indispensable resource for decision makers, investors and all those committed to

Africa’s development. Rooted in robust data and case studies from across the region, it

articulates the pressing need for action from all stakeholders: governments, development

finance institutions, the private sector and domestic capital providers.

Energy investment on our continent has fallen short, accounting for a mere 3% of the global

total, even though Africa is home to one-fifth of the world's population. To achieve the

United Nations goals for universal energy access by 2030 and meet international climate

objectives under the Paris Agreement, it is imperative we take bold steps to more than

double energy investment here in the next decade, with a primary focus on clean energy.

The report's examination of the cost of capital in Africa, which is at least two to three times

higher than in advanced economies, is a stark reminder of the formidable challenges we must

address to unleash our continent's full development potential.

Yet this report is not simply a laundry list of Africa's challenges. It is an inspiring testament

to the innovative spirit of our continent. Case studies from the AfDB and other sources

underscore the vast array of transformative solutions emerging from Africa's creative minds.

The report provides invaluable insights on how we can harness the existing clean energy

investment landscape, optimise capital allocation across sectors and technologies, and

generate a transformative cycle of change to scale up investments sustainably.

By effectively mobilising private capital and securing USD 28 billion of concessional funding

by 2030, we can unlock the necessary USD 90 billion in private investment for clean energy

that will revolutionise our continent's trajectory and support global climate ambitions.

As we gather at the African Climate Action Summit in Nairobi, where this report will be

launched, let us stand united in purpose and determination. It is our collective responsibility

to draw on the insights from this report, forging new partnerships and fostering innovation

that can tap into the vast potential of clean energy and improve the lives of millions of people

across our continent.

Dr William Ruto

President of the Republic of Kenya

Chair of Committee of African Heads of State and Governments on Climate, African Union

IEA. CC BY 4.0

/154

下载本文档

文本预览下载提示常见问题

FinancingCleanEnergyinAfricaIncollaborationwithWorldEnergyOutlookSpecialReportINTERNATIONALENERGYAGENCYTheIEAexaminestheIEAmemberNorwayIEAassociationfullspectrumcountries:Polandcountries:ofenergyissuesPortugalincludingoil,gasandAustraliaSlovakRepublicArgentinacoalsupplyandAustriaSpainBrazildemand,renewableBelgiumSwedenChinaenergytechnologies,CanadaSwitzerlandEgyptelectricitymarkets,CzechRepublicRepublicofTürkiyeIndiaenergyefficiency,DenmarkUnitedKingdomIndonesiaaccesstoenergy,EstoniaUnitedStatesKenyademandsideFinlandMoroccomanagementandFranceTheEuropeanSenegalmuchmore.ThroughGermanyCommissionalsoSingaporeitswork,theIEAGreeceparticipatesintheSouthAfricaadvocatespoliciesHungaryworkoftheIEAThailandthatwillenhancetheIrelandUkrainereliability,affordabilityItalyandsustainabilityofJapanenergyinitsKorea31membercountries,Lithuania13associationLuxembourgcountriesandMexicobeyond.NetherlandsAFRICANDEVELOPMENTBANKGROUPTheoverarchingobjectiveoftheAfricanDevelopmentBank(AfDB)Groupistospursustainableeconomicdevelopmentandsocialprogressinitsregionalmembercountries(RMCs),thuscontributingtopovertyreduction.TheBankGroupachievesthisobjectivebymobilizingandallocatingresourcesforinvestmentinRMCsandbyprovidingpolicyadviceandtechnicalassistancetosupportdevelopmentefforts.PleasenotethatthisThispublicationandanymapSource:IEA.publicationissubjecttoincludedhereinarewithoutInternationalEnergyAgencyspecificrestrictionsthatlimitprejudicetothestatusoforWebsite:www.iea.orgitsuseanddistribution.Thesovereigntyoveranyterritory,termsandconditionsaretothedelimitationofavailableonlineatinternationalfrontiersandwww.iea.org/t&c/boundariesandtothenameofanyterritory,cityorarea.SpecialForewordIamhonouredtointroducethisvitalreportonfinancingcleanenergytransitionsinAfrica,whichshedslightonthecrucialactionsneededtobringaboutthetransformationofourcontinent’senergysystems.AuthoredbytheInternationalEnergyAgency(IEA)andtheAfricanDevelopmentBankGroup(AfDB),twoorganisationsdedicatedtoAfrica’sprogress,thisreportservesasaninvaluableguideforchartingourcoursetowardsasustainableandprosperousfuture.ThecredibilityoftheIEAastheworld’sauthoritativeagencyforenergypolicymakesthisreportanindispensableresourcefordecisionmakers,investorsandallthosecommittedtoAfrica’sdevelopment.Rootedinrobustdataandcasestudiesfromacrosstheregion,itarticulatesthepressingneedforactionfromallstakeholders:governments,developmentfinanceinstitutions,theprivatesectoranddomesticcapitalproviders.Energyinvestmentonourcontinenthasfallenshort,accountingforamere3%oftheglobaltotal,eventhoughAfricaishometoone-fifthoftheworld'spopulation.ToachievetheUnitedNationsgoalsforuniversalenergyaccessby2030andmeetinternationalclimateobjectivesundertheParisAgreement,itisimperativewetakeboldstepstomorethandoubleenergyinvestmenthereinthenextdecade,withaprimaryfocusoncleanenergy.Thereport'sexaminationofthecostofcapitalinAfrica,whichisatleasttwotothreetimeshigherthaninadvancedeconomies,isastarkreminderoftheformidablechallengeswemustaddresstounleashourcontinent'sfulldevelopmentpotential.YetthisreportisnotsimplyalaundrylistofAfrica'schallenges.Itisaninspiringtestamenttotheinnovativespiritofourcontinent.CasestudiesfromtheAfDBandothersourcesunderscorethevastarrayoftransformativesolutionsemergingfromAfrica'screativeminds.Thereportprovidesinvaluableinsightsonhowwecanharnesstheexistingcleanenergyinvestmentlandscape,optimisecapitalallocationacrosssectorsandtechnologies,andgenerateatransformativecycleofchangetoscaleupinvestmentssustainably.ByeffectivelymobilisingprivatecapitalandsecuringUSD28billionofconcessionalfundingby2030,wecanunlockthenecessaryUSD90billioninprivateinvestmentforcleanenergythatwillrevolutioniseourcontinent'strajectoryandsupportglobalclimateambitions.AswegatherattheAfricanClimateActionSummitinNairobi,wherethisreportwillbelaunched,letusstandunitedinpurposeanddetermination.Itisourcollectiveresponsibilitytodrawontheinsightsfromthisreport,forgingnewpartnershipsandfosteringinnovationthatcantapintothevastpotentialofcleanenergyandimprovethelivesofmillionsofpeopleacrossourcontinent.DrWilliamRutoIEA.CCBY4.0PresidentoftheRepublicofKenyaChairofCommitteeofAfricanHeadsofStateandGovernmentsonClimate,AfricanUnionSpecialForeword3ForewordIEA.CCBY4.0EnergyiscentraltoAfrica’sfuturedevelopment,andAfricainturnwillplayanincreasinglyimportantroleinshapingglobalenergytrends.Howtheserolesplayoutinpracticewilldependinlargepartoninvestment,particularlyinaffordable,reliableandcleanenergyforAfricanconsumers.Africancountrieshavehugeenergypotential,includingaspectacularrangeandqualityofrenewableenergyresources.Africaishometomorethanhalfoftheworld’sbestsolarresources,aswellasgreatpotentialforhydro,windandgeothermalpower,amongothers.Buttheserichesarelargelyuntappedandtheywillremainsowithoutgreatlyimprovedaccesstocapital.Africancountriesshouldmaketheirenergydecisionsbasedontherealitiestheyfaceandtheprioritiestheyhavesetout.In2022,theInternationalEnergyAgency(IEA)publishedalandmarkAfricaEnergyOutlook,whichhighlightedthechallenges,trendsanddynamicsatworkinAfricanenergysystemsandhowtheycouldevolveinthecomingdecades.Itlaidoutanambitiouspathforthecontinent’senergysystemsintheformofanewSustainableAfricaScenarioinwhichallAfricanenergy-relateddevelopmentgoalsareachievedontimeandinfull.Italsorevealedamajorshortfallintermsofinvestment:energyspendinginAfricahasbeenfallingforoverfiveyearsbutneedstodoubleby2030.Ournewanalysis,workinginclosecooperationwithourfriendsandcolleaguesattheAfricanDevelopmentBankGroup,showswhatitwilltaketoexpanddramaticallytheflowsofinvestmentcapitaltocleanenergyprojectsacrossAfrica.Aparticularlyurgenttaskistoexpandenergyaccess,progressonwhichhasbeenslowedinmanycountriesbytheCovid-19pandemic,theglobalenergycrisisandmountingindebtedness.Africancountriesarealsofacingsomeofthemostsevereconsequencesofclimatechangedespitecontributingtheleasttoglobalemissionstodate.Today,over600millionpeopleacrossAfricalivewithoutaccesstoelectricityandnearlyonebillionwithoutaccesstocleancooking.AkeypriorityforthecontinentanditsinternationalpartnersmustbetoensurethatallAfricanshaveaccesstosecureandaffordableelectricityandcleancookingfuels.Ouranalysishighlightsthatclean,affordablesolutionsareavailabletomeetAfrica’senergyneeds,bothinrelationtoenergyaccessandinmanyotherareas.Butinvestmentsareheldbackbyarangeofpolicyandregulatoryhurdles,weaknessesinprojectpreparationandscale,andalackofalignmentbetweentheneedsofprojectdevelopersandthoseoffinanceproviders.Africancountriesareoftenunabletoaccessaffordablecapital:financingcostscanbeatleasttwo-tothree-timeshigherthaninEuropeandNorthAmerica.Asaresult,projectsremainonthedrawingboardandenergycostsriseforAfrica’sconsumers–includingthepooresthouseholdsandleastdevelopedeconomies.Breakingtheregionoutofthiscyclerequiresconcertedeffortsfrompartiesonallsidesofthetable.Africanpolicymakersmustensuretheyhavestrongpolicyandregulatoryenvironments,withaclearvisionforhowcleanenergycancontributetoreachingbroaderdevelopmentgoals,includinguniversalaccess.ManyrecommendationsforthiswerelaidoutintheAfricaEnergyOutlook,andtheIEAcontinuestosupportcountriesintheregionbyForeword5conductingin-depthreviewsoftheirenergypolicies,developingenergytransitionplansthatcanhelpdrivethisforward,andprovidingtrainingandcapacity-buildingprogrammesforpolicymakers.UnlockingthenecessarycapitalforAfrica’senergyfuturewillnotbepossiblewithoutconcessionalpublicfinanceproviders.Developmentfinanceinstitutionsareessentialnotonlytomobiliseprivatecapitalbutalsotoprovidekeygrantandconcessionalfinanceforareassuchasnascenttechnologiesornewmarkets.Resourcesfromtheseprovidersareunderstrain,withmultiplecompetingprioritiesglobally,soitisimperativethatthiscapitalisusedeffectivelytoachievethemaximumimpact.Despitethechallenges,therearenumerousexamplesofinnovativeanddiversesolutionsthathaveemergedfromAfrica,includingopportunitiesforcountriestoparticipateinnewglobalcleanenergysupplychains.Thisreportbringstogetherareviewofover85casestudiesfromacrossthecontinentandover40interviewswithkeystakeholderstofocusattentiononwhathasworkedandwhatlessonscanbelearned.ThereportisareflectionoftheIEA’slongstandingandexpandingcommitmenttoAfricanenergyissues.ThiscommitmentisfoundedontheIEA’sunparalleleddataandanalyticalstrengths,andonstrongpartnershipswithkeyAfricanenergyplayersandinstitutions.OpeningthedoorsoftheIEAtokeyemerginganddevelopingeconomieshasbeenamajorpriorityformeasExecutiveDirector,andIamdelightedthatwenowhavefiveAfricanmembersoftheIEAfamily:Egypt,Kenya,Morocco,SenegalandSouthAfrica,withKenyaandSenegalthemostrecenttohavejoined.SupportingasustainableenergyfutureforallAfricanswillcontinuetobeatoppriorityfortheIEA,andIhopethatouranalysiswillunderpinproductivediscussionsattheAfricanClimateActionSummitinNairobiandatCOP28inDubai.IwouldliketothankthededicatedIEAteamthatledthepreparationofthisreport,ourexcellentpartnersattheAfricanDevelopmentBankGroup,andalsotheleadingexpertsfromacrossAfricaandtheworldwhocontributedtheirexpertiseasreviewers.DrFatihBirolExecutiveDirectorInternationalEnergyAgency6InternationalEnergyAgencyFinancingCleanEnergyinAfricaForewordAfricaremainsenergypoor,accountingforonly6%ofglobalenergyuseandjust3%ofglobalIEA.CCBY4.0electricitydemand.Thisisdespitetheimportantprogressmadeintermsofaccesstoelectricityoverthelastdecade.Today,closeto600millionpeopledonothaveaccesstoelectricity,andaboutabillionAfricanslackaccesstocleancookingenergy.TomeetSDG7goals,Africaneedstoconnect90millionpeopleannuallytoelectricityinthenexteightyearsandshift130millionpeoplefromdirtycookingfuelseveryyear.IntheSustainableAfricaScenario(SAS),whichachievesuniversalenergyaccessby2030,aroundUSD20billionperyearisrequiredforbuildingthenecessaryinfrastructuretoconnectpeopletoelectricitysourcesandalmostUSD2.5billiontoprovidethemwithcleancookingdevices.Nonetheless,universalaccesstoelectricityispossibleinAfrica,ifthecontinentharnessesitsmassivepotentialinrenewableenergysources.Thedecliningcostsofsolarandwindenergytechnologies,coupledwithmoreaffordableenergystoragesystemsmakesrenewablescostcompetitiveandpresentsauniqueopportunityforthecontinenttounderpinitsfutureenergyneedsbasedonrenewables.ThisiswhytheAfricanDevelopmentBankGroupisspearheadingeffortstounlockAfrica’svastrenewableenergypotential.TheBanknolongerfundscoalenergyprojects.Since2016,87%ofourinvestmentsinpowergenerationareinrenewables,includingtransformativeprojectssuchasthe510megawatts(MW)NoorOuarzazatesolarprojectinMorocco,whichistheworld’slargestconcentratedpowerplantandthe310MWLakeTurkanawindprojectinKenya,whichisSub-SaharanAfrica’slargestwindfarm.TheBank’sUSD20billionDeserttoPowerprogrammeisdeveloping10000MWofsolarpoweracross11countriesintheSahelandEastAfricathatwillproviderenewableenergyviasolarfor250millionpeople.Whencompleted,itwillbecomethelargestsolarzoneintheworld.WemustbringdownthecostofcapitalforcleanenergyprojectsinAfrica.Treadingalow-carbondevelopmentpathwaynecessitatestargetedconcessionalsupportandtechnicalassistancefrominternationalfinanceinstitutionsandmultilaterals.ThroughtheBank’sSustainableEnergyFundforAfrica(SEFA)weareunlockingprivate-sector-ledrenewableenergyandenergyefficiencyprojectsacrosstheAfricancontinentbyde-riskinginvestmentsingreenbaseloadpower,greenmini-grids,anddecentralisedoff-gridenergysystems.SEFA’scurrentportfolioisexpectedtoleverageatotalofUSD9.2billionininvestment,deliveringapproximately3700MWinnewcapacityandaround2millionnewconnections.WeareconvincedthatitisintheinterestofAfricatogreenitseconomies.Whilewemust,andwill,doallthatispossibletoexpandtheuseofrenewableenergy,especiallygivenAfrica’senormouspotentialforsolar,hydro,windandgeothermalenergysources,globaldialoguesonAfrica’senergytransitionsmustbepragmaticandnotideological.Asweacceleratethedevelopmentofourmassiverenewableenergysources,Africamustalsobegiventimetotransitionandallowedtouseitsnaturalgasasatransitionfuel.Anotherimportantfeatureofthisreportisthespotlightoncriticalminerals.Africaisuniquelypositionedtohelpleadtherevolutiononcleanenergyindustrialvaluechainsbecauseitaccountsfor80%oftheworld’splatinumreserves,50%ofcobaltreservesand40%ofForeword7manganesereserves,aswellashugeresourcesforgraphiteandlithium.Africaisthereforeacrucialsourceformineralsandmetalsforcleanenergyvaluechains,includingelectricvehiclesandutility-scalebatterystorage.Andweshouldnotonlyexport–weshouldmanufactureonthecontinent.Strongpolicysupportandrobustregulatoryframeworkswillberequiredtoprovideincentivesforinvestment,nurturethedevelopmentoflocalworkforcesandensurereliablesupplies.WemustalsounlockAfrica’spotentialforemergingtechnologicalsolutions,particularlygreenhydrogen,estimatedatUSD1trillion.SomeAfricancountrieshavealreadystarteddevelopinggreenhydrogenprojects.Tospurthisdevelopment,aswellasdrivethegrowthofgreeninfrastructureinAfrica,theAfricanDevelopmentBankGroup,alongwithotherpartners,launchedtheAllianceforGreenInfrastructureinAfrica(AGIA)atCOP27.AGIAaimstoraiseuptoUSD500milliontoprovideearly-stageprojectpreparationandprojectdevelopmentcapital.Thisiscapitalthatwillgeneratearobustpipelineofbankableprojects,startingwithpre-feasibilitystageallthewaythroughtocommercialandfinancialclose.ThisisprojectedtogenerateuptoUSD10billionworthofinvestmentsingreeninfrastructure.Althoughminimalnow,domesticmarketswillprovideavitalsourceofcapital.UndertheSAS,financeeitheroriginatingordisbursedthroughlocalchannelsincreasesnearlythreefoldby2030.Intheinterim,whatAfricaneedsisalotmorefinancingtosupportitsdrivetouniversalaccesstoqualityenergy.Weshouldleveragetheprivatesectorforclimatefinance.Weshouldaccelerateinvestmentsinrenewableenergy.Weshouldhavejustandfairenergytransitions–butalsoguaranteeuniversalenergyaccess,andaffordableandsecurepowerforAfrica.WeshouldacceleratethesupporttocountriesonthedevelopmentoftheirNationallyDeterminedContributionsandtheLong-TermStrategiestosupportgreentransitionsandgreengrowthforoureconomies.TheInternationalEnergyAgencyandtheAfricanDevelopmentBankGroupsharecommongoalsofpromotingcleanenergy,addressingclimatechangeandsupportingsustainabledevelopmentinAfrica.WehavepooledourstrengthstoproducethisspecialreportwiththehopethatitwillserveasaninformativetoolforpolicymakersinAfricawhileprovidingvaluableinsightsfordevelopersandcapitalprovidersusingbestpracticecases.DrAkinwumiA.AdesinaPresidentAfricanDevelopmentBankGroup8InternationalEnergyAgencyFinancingCleanEnergyinAfricaAcknowledgementsThisreportwaspreparedbytheEnergySupplyandInvestmentOutlook(ESIO)teamintheDirectorateofSustainability,TechnologyandOutlooks(STO)andtheDivisionforEurope,MiddleEast,AfricaandLatinAmerica(EMAL)intheOfficeofGlobalEnergyRelations(GER),inco‐operationwithotherdirectoratesandofficesoftheInternationalEnergyAgency(IEA).ThereportwascarriedoutinpartnershipwiththeAfricanDevelopmentBankGroup(AfDB).ThestudywasdesignedanddirectedbyTimGould,ChiefEnergyEconomist(IEA)andEmmaGordon,InvestmentandEnergyPolicyAnalyst(IEA),inclosecollaborationwithRitaMadeira,AfricaProgrammeOfficer(IEA).PrincipalIEAauthorsinclude:AlanaRawlinsBilbao(renewableenergy),ArnaudRouget(criticalminerals),CeciliaTam(concessionalfinance),CorneliaSchenk(energyefficiency),EmmaGordon(privateinvestment,localcapital),GianlucaTonolo(energyaccess),LucaLoRe(carbonmarkets,climatefinance),RitaMadeira(cross-cuttingrisks,low-emissionsfuels),SannevanderMijl(carbonmarkets,climatefinance),SimonBennett(privateequityandventurecapital)andTanguydeBienassis(concessionalfinance).EleniTsoukalaprovidedessentialsupport.OthervaluablecontributionsweremadebyBrendanReidenbach,CamillePaillard,CarloStarace,DanielWetzel,DavidFischer,EricBuisson,Franced’Agrain,FrancescoPavan,JavierJorquera,JonathanCoppel,JoséMiguelBermudezMenendez,LucilaArboleyaSarazola,MichaelDrtil,NadimAbillama,NouhounDiarra,RebeccaGaghen,SiddharthSingh,SyrineElAbed,Tae-YoonKim,TaylorMorrison,TomásdeOliveiraBredariolandThomasSpencer.ContributionsfromtheAfricanDevelopmentBankwerecoordinatedbyKevinKariuki,VicePresident,Power,Energy,ClimateandGreenGrowth,andWaleShonibare,Director,EnergyFinancialSolutions,PolicyandRegulations.KeycontributorsincludeDavidAshiagbor,KolawoleDairo,MolkaMajdoub,MonojeetPalandFredaAkyeabeaOpoku.StakeholderdiscussionswerealsoheldwithmultipleteamsfromacrosstheAfricanDevelopmentBankGroup.Expertsconsultedinclude:AkaneZoukpo,AnthonyKarembu,AyodejiAdebola,CallixteKambanda,CarlosMollinedo,DanielSchroth,DavinahMilengeUwella,FatmaBenAbda,FranklinGbedey,GoranLima,IbrahimaKonate,JalelChabchoub,JoãoCunha,MarinaFinken,MatthieuJalard,NirinaLetsara,ReginaNesiamaMiller,RhodaMshanaandSylvieMahieu.JustinFrench-Brookscarriededitorialresponsibilityforthereport.ErinCrumprovidedcopy-editingoftheAnnex.ThanksgoestotheIEA’sCommunicationsandDigitalOfficefortheirhelpinproducingthereportandwebsitematerials,particularlytoJethroMullen,PoeliBojorquez,CurtisBrainard,AstridDumondandThereseWalsh.Acknowledgements9IEA.CCBY4.0Thisreportbenefitedgreatlyfromstakeholderdiscussionsfromkeyexpertswithexperienceinvestingintheregion.Theyinclude:OsaruyiOrobosaAfricaFinanceCorporationJohannesBaakeAfricaGreenCoLionMashiriAfricaGreenCoCathyOxbyAfricaGreenCoOlivierGuiAfricaLinkCapitalJean-ChristianKoudouAfricaLinkCapitalMehdiBenaïssaAgenceFrançaisedeDéveloppementJoséLopezAgenceFrançaisedeDéveloppementObbieBandaAfricanTrade&InvestmentDevelopmentInsuranceAurelienPilletBaselAgencyforSustainableEnergySargaCoulibalyCréditAgricoleMaryseDournesCréditAgricoleLaurentHaikCréditAgricoleVincentDuijnhouwerEuropeanBankforReconstructionandDevelopmentKevinMinkoffEDFRenewables(SouthAfrica)HubertZanEnergyCommissionGhanaMartinKesslerFinDevLabNicolasHaquetteFinergreenLamineKoneFinergreenJean-JacquesNgonoFinergreenGuilhemDupuyGaiaImpactFundMichaelFeldnerGET.investMichaelFranzGET.investDanielTutuBenefohGhanaCarbonMarketOfficeMalleFofanaGlobalGreenGrowthInstituteAndreaBertelloGreenmap10InternationalEnergyAgencyFinancingCleanEnergyinAfricaEricOlanyaGridworksIEA.CCBY4.0MarjoleinvanKampenGuarantCoTolaOdukomaiyaGuarantCoMarinaDiagouInternationalFinanceCorporationOusmaneFallInternationalFinanceCorporationFaridMohamedFormerTransactionalAdvisor,SouthernAfricaPowerPoolChinuaAzubikeInfraCreditNgatiaKirungieKenyaPensionFundsInvestmentConsortiumEdwinWachiraKenyaPensionFundsInvestmentConsortiumYannickTräris-KahrimanKlikFoundationEmmanuelMundelaMeridiamLindseyAllwrightMobilistThomasSamuelMoonMarkStehleNamPowerDierdreCooperNinetyOneNazmeeraMoolaNinetyOneSherifAyoubSustainableEnergyforAllRimAzirarSunFunderDavidNewellSwedishEnergyAgencyHaraldHirschhoferTheCurrencyExchangeFundNellyLehnTheCurrencyExchangeFundSophiePeetersTheCurrencyExchangeFundFilippoBerardiTheGlobalEnvironmentFacilityJigbaJosephusYillaTranscoCLSGJean-PaulAdamUnitedNationsEconomicCommissionforAfricaLinusMoforUnitedNationsEconomicCommissionforAfricaMitchSauersUpEnergyAcknowledgements11PollyStebbingsUpEnergyTimilaDhakhwaWorldBankGroupSamuelJovanOkulloWorldBankGroupSandhyaSrinivasaWorldBankGroupPeerreviewersManyotherinternationalexpertsprovidedinputandreviewedpreliminarydraftsofthereport.Theircommentsandsuggestionswereofgreatvalue.Theyinclude:CathyOxbyAfricaGreenCoHubertDansoAfricainvestorGroupAniborKraghaAfricanRefiners&DistributorsAssociationElitsaGeorgievaCITACAfricaLtdManagementJilleneBelopolskyCleanCookingAlliancePerrineToledanoColumbiaCenteronSustainableInvestmentOlalekanDavidAdeniyiCovenantUniversity,Ota,NigeriaHaraldHirschhoferCurrencyExchangeFund(TCX)KevinMinkoffEDFRenewables(SouthAfrica)SheilaOparaochaENEGIANetworkHubertZanEnergyCommissionGhanaMandyRambharosEnvironmentalDefenseFundFaridMohamedFormerTransactionalAdvisor,SouthernAfricaPowerPoolMichaelFranzGET.InvestHenryJumbaGIZ/GET.TransformKimballChenGlobalLPGPartnershipDinaRamaromandrayGlobalWaterPartnershipSouthernAfricaBradMattsonHuskPowerWilliamBrentHuskPowerHabibElAndaloussiIndependentexpertAstridManrothIndependentexpert12InternationalEnergyAgencyFinancingCleanEnergyinAfricaZachariaKingoriIntergovernmentalAuthorityonHiroshiHigashiDevelopmentFrankVanGansbekeRobertStonerJapanInstituteforOverseasInvestmentJoséIgnacioPerez-ArriagaMiddleburyCollege,UnitedStatesofAmericaHaruperiRudoMumbengegwiMassachusettsInstituteofTechnologyJanPetterNoreMassachusettsInstituteofTechnologyEmanuelaColomboUniversityofComillas,SpainJemPorcaroMekaliaPaulosMultilateralInvestmentGuaranteeAgency(WorldBankGroup)Jean-PaulAdamNorwegianAgencyforDevelopmentJesseBurtonCooperationClaudiaSchwartzSamsonMasebinuPolitecnicodiMilano,ItalySamuelJovanOkulloSandhyaSrinivasanSustainableEnergyforAllMichaelKellyUnitedNationsEconomicCommissionforAfricaUnitedNationsEconomicCommissionforAfrica(UNECA)UniversityofCapeTown,SouthAfricaUSAID/PowerAfricaUSAID/PowerAfricaWorldBankGroupWorldBankGroupWorldLPGAssociationThisreportwasproducedwiththefinancialassistanceoftheEuropeanUnionaspartofitsfundingoftheCleanEnergyTransitionsinEmergingEconomiesprogramme(CETEE)withintheIEA’sCleanEnergyTransitionsProgramme(CETP).ThisreportreflectstheviewsoftheInternationalEnergyAgency(IEA)SecretariatbutdoesnotnecessarilyreflectthoseofindividualIEAmembercountriesortheEuropeanUnion.TheIEAmakesnorepresentationorwarranty,expressorimplied,inrespecttothereport’scontents(includingitscompletenessoraccuracy)andshallnotberesponsibleforanyuseof,orrelianceon,thereport.Acknowledgements13IEA.CCBY4.0TableofcontentsIEA.CCBY4.0Forewords.......................................................................................................................3Acknowledgements...........................................................................................................5Executivesummary........................................................................................................111Cleanenergyinvestmentlandscape1.1Introduction...................................................................................................241.2TheSustainableAfricaScenario......................................................................241.2.1Cleanenergyinvestmentneeds..............................................................261.3Thecycleofchange........................................................................................281.3.1Theimportanceofaccesstoaffordablefinance.....................................291.4Factorsaffectingthecostofcapital................................................................301.4.1Country-leveldrivers...............................................................................311.4.2Sector-ortechnology-leveldrivers.........................................................362Designingfinancesolutionsforcleanenergy2.1Introduction...................................................................................................422.2Energyaccess.................................................................................................432.3Renewablepowergeneration........................................................................502.3.1Utility-scaleprojects................................................................................502.3.2Distributedrenewablepowerforbusinesses..........................................532.4Gridsandstorage...........................................................................................572.5Energyefficiency............................................................................................602.6Criticalminerals.............................................................................................642.7Low-emissionsfuelsandfeedstocks...............................................................663Mobilisingcapitalforasustainablefuture3.1Introduction...................................................................................................723.2Maximisingconcessionalcapital.....................................................................723.2.1Enhanceexistingconcessionalfinancesystem.......................................733.2.2Mobilisingprivatecapital........................................................................78Tableofcontents153.3Unlockinginternationalprivateinvestment...................................................813.3.1.Carbonmarkets......................................................................................833.3.2.Sustainablebondissuances....................................................................863.3.3.Publicequityinvestment........................................................................893.3.4.Privateequityandventurecapital.........................................................923.4Increasingtheinvolvementoflocalcapital.....................................................953.4.1Bankingsector.........................................................................................963.4.2Capitalmarkets.......................................................................................98AnnexesAnnexA:Casestudies...................................................................................................103AnnexB:Definitions......................................................................................................131AnnexC:Referencess....................................................................................................13116InternationalEnergyAgencyFinancingCleanEnergyinAfricaExecutivesummaryAdramaticincreaseinenergyinvestmentintoAfricancountriesisessentialMultiplerecentcriseshavemadeitincreasinglychallengingformanyAfricancountriestoraisefinancingtosupporttheircleanenergyambitions,despitethecontinent’shugeneedsandrichandvariedresources.Africaaccountsforaround20%oftheworld’spopulationbutattractslessthan2%ofitsspendingoncleanenergy.Inrecentyears,Africancountrieshavehadtodealwithaseriesofoverlappingcrises,includingtheCovid-19pandemic,theenergyandfoodcrisesfollowingRussia’sinvasionofUkraineandworseningclimaterisks.Borrowingcostshavereachedunsustainablelevelsinmultiplecountries,anddebtservicingcostsarenowdoublethelevelofcleanenergyinvestmentacrossthecontinent.Achievingtheregion’senergydevelopmentandclimategoalsrequiresenergyinvestmenttomorethandoublefromtoday’sUSD90billionby2030,atwhichpointnearlytwo-thirdsofspendingwouldgotocleanenergy.EnergyinvestmentinAfricahasbeenfallinginrecentyears.Spendingonfossilfuels–whichhastypicallyaccountedforaroundtwo-thirdsofinvestment–hasdeclinedandcleanenergyinvestmenthasremainedflat.Thisreportexploresthecontinent’sinvestmentneedsundertheSustainableAfricaScenario(SAS)developedintheIEA’sAfricaEnergyOutlook2022.ThescenarioconsidersthediverseneedsofdifferentAfricancountriesandsectorsandlaysoutapathwaytoachievetheenergy-relatedSustainableDevelopmentGoals,includinguniversalaccesstomodernenergyby2030,aswellasfulfillingallannouncedclimatepledgesinfullandontime.Thisrequiresastepchangeininvestment,shiftingawayfromfossilfuelprojectsdesignedtosupplyforeigncountriestowardscleanenergyprojects,includingalargerrolefordecentralisedsystems.Allofthisrequiresopeninguparangeofnewcapitalsourcesandfinancingapproaches.MakingcapitalmoreaffordablecanunlocksignificantdevelopmentacrossIEA.CCBY4.0AfricaDespiteampleresourcesandfavourableunderlyingeconomics,multiplebarriershinderthedevelopmentofbankablecleanenergyopportunitiesinAfricaanddeterprivateinvestmentsinprojectsandcompaniesatthenecessaryscale.Thedebtcrisisinmanypartsofthecontinentmeansthereislimitedpubliccapitalavailable,includingforstate-ownedutilities.Privatecapitalthereforeneedstoplayakeyrole,butmanyprivateinvestorsarereluctanttoenterAfricanmarketsbecauseofhighperceivedandactualrisks.Inmorenascentmarkets,theregulatoryenvironmentisoftennotfullydevelopedandmayleadtocontractinstabilityanddelays.Incountrieswithrisingdebt,therearehigherpaymentrisksfromstate-ownedutilities.Andinfragilestates,thepoliticalandreputationalriskscanbetoohigh.Theresultofthisenvironmentisthatmostinvestorsfeeltherearenotenoughinvestableprojects.Forthemoment,developmentfinanceinstitutionsarethelargestcleanenergyinvestorsintheregion.Higherperceivedandactualriskspushupthecostofcapital,whichcanmakeprojectsuncommercialormoreexpensiveforendusers.ThetechnologiesdeployedatscaleintheSustainableAfricaScenarioarematureandcommerciallyviable,utilisingsomeofthehighest-qualityrenewableresourcesintheworld.Yetdespitethelimitedtechnologyrisk,theExecutivesummary17costofcapitalforutility-scalecleanenergygenerationprojectsinAfricaisatleasttwotothreetimeshigherthaninadvancedeconomiesandChina.Itisevenhigherforsmallerscaleprojects,especiallythosethatcanonlyaccessdebtfromlocalcommercialbanks.Measuresbylenderstomitigaterisks,suchasdemandinghighcollateralrequirements,canbeprohibitive.Thisnotonlyactsasabrakeoninvestmentbutalsopushesupthecostsofelectricityforconsumers,leavingthemreliantonpollutingoptionswithlowerupfrontcostsbutmuchhigheroperatingexpenses.AchievinguniversalenergyaccessrequiresastepchangeinenergyprojectfinancingBy2030,investmentinenergyaccessinAfricaneedstoreachnearlyUSD25billionperyeartoensuremodernenergyforall–asmallshareofoverallenergyinvestmentbutadramaticincreasecomparedwithtoday’sspending.Today,morethan40%ofthepopulationinAfricalivewithoutaccesstoelectricity,and70%withoutaccesstocleancookingfuels.Thesocioeconomicimpactsofthisarehuge.Thelackofcleancookingcontributesto3.7millionprematuredeathsannually,disproportionatelyaffectingwomenandchildren.WhileUSD25billionisonlyasmallamountinthecontextofglobalenergyspending–theequivalentofonenewLNGterminal–itrequiresaverydifferenttypeoffinance.Investmentisneededinsmall-scaleprojects,ofteninruralareas,byconsumerswhohaveverylimitedabilitytopay.Affordabilityconstraintsmakeitlesslikelyprojectswillbecommerciallyviable,butthereisastrongcaseforconcessionalfinancinggiventheirsocialimpact.Weestimatethatduetoaffordabilityconstraints,onlyaroundhalfofnewelectricityaccessconnections(includinggrid,mini-gridandstand-alonesystems)providingthemostbasicenergyservicesarelikelytobecommerciallyviablewithoutincentivessuchasreducedconnectioncharges,lowertariffsandsubsidisedelectricalappliances.Withoutexternalsupport,mostcleancookingaccessprojects,exceptforimprovedcookstoves,wouldnotbeaffordable.Grantsthereforeplayakeyrolebothtofundaccessprogrammesforthepooresthouseholds,asseenwiththemini-gridprogrammeforruralcommunitiesinNigeria,andtoprovideearly-stagefinancingforlocalcompanies,suchaswomen-ledoff-gridcompanies(asseeninRwanda,supportedbyGET.invest,aEuropeanprogrammespecificallydesignedtosupportinvestmentindecentralisedrenewables).Concessionalfinanceproviderscanalsodrivefurtherprivatecapitalinvolvementviathecreationofmoreequityfinancingvehicles(suchasBeyondtheGridFundforAfrica),pilotinginnovativeoff-balancesheetfinancingapproaches(asinTogo),supportingcommercialbankstoprovidemoreaffordablelong-termdebt(asinKenya),andfinancingproductiveuses(asinUganda).MultiplefinancinginstrumentsneedtobescaleduptoAfrica’senergyfutureAsthingsstand,thereisamismatchbetweenthetypeofcapitalavailableandtheneedsofAfrica’semergingcleanenergysector,withaparticularlackofearly-stageandequityfinancing.IntheSustainableAfricaScenario,significantinvestmentisneededacrossallareasofthecleanenergyspectrum.Thisrequiresabroadrangeofinstrumentstomoveprojectsthroughthedevelopmentcycle.Grantsandequitytendtoplayalargerroleintheearly,18InternationalEnergyAgencyFinancingCleanEnergyinAfricariskierstages,whileaffordabledebtbecomesmoreimportantonceaprojectmovesintoIEA.CCBY4.0constructionoroperation.Thiscapitalevolutionvariesbytechnology,asdoesthemomentatwhichtheprivatesectorismostlikelytogetinvolved.However,acrossallareasofcleanenergy,investorsoftencitealackofinvestableprojects,indicatingthereisnotenoughfundinggoingintothepre-bankabilitystagestosupportareaslikefeasibilitystudies.Forutility-scalecleanpower,privatecapitalcantakethelead,butconcessionalfinancestillplaysakeyde-riskingroleinlessdevelopedmarkets.Renewablepowerprojectsrepresentamajorinvestmentopportunity,accountingfor80%ofcapacityadditionsacrossthecontinentthisdecadeintheSustainableAfricaScenario.Privateinvestmenthasbeengrowing,forexampleinsolarPVinSouthAfricaandEgypt,wheremultipleauctionroundshaveresultedinprivate-leddevelopments.Inmanycountries,however,renewablesprojectsareeitherfullyorpartiallyreliantontheinvolvementofconcessionalcapital.Manyprojectscommissionedtodatehaverequiredmultiplecreditenhancements,includingguaranteesandrisksharingwithdevelopmentfinanceinstitutions.Innovationsinthisspace–suchasthecreationofdedicatedguaranteeprovidersthatcansupportcleanpowerprojectsinnascentmarketslikeMadagascar,thedevelopmentofcurrencyhedgingproductssuchasthoseofferedbythedevelopmentfinanceinitiativeTheCurrencyExchange,andthepilotingofnewliquiditysupportmechanismsinGabon–arealreadyallowingforthedeploymentofmoreprivatecapital.Butgreatertransparencyaroundthefinancingtermsandcreditenhancementsusedwouldbelikelytosupportmoreefficientmobilisationofprivatecapital,allowingdevelopmentfinanceinstitutionsanddonorstoconcentrateonthemostcomplexinvestmentenvironments.Reliableandrobustelectricitygridsareamissingpieceofthepuzzle.IntheSustainableAfricaScenario,gridinvestmentsrisefromaroundUSD10billionperyeartodaytonearlyUSD50billionby2030,requiringnewfinancingmodelsthatarelessreliantonlimitedstatefunds.ManyAfricanstate-ownedutilitiesstrugglewithpoorfinancialhealthandhighsystemslosses,whichaveraged15%acrossthecontinentin2020comparedwiththeglobalaverageof9%.Asaresult,theyareunabletofinancethenecessaryexpansionandmodernisationofgridsthattheinfluxofrenewablesrequires.Alongsideeffortstoimprovethefinancialhealthofutilities,achievingthespendingincreaseislikelytorelyongrantsandhighlyconcessionalcapitaltodevelopandpilotmodelsthatshiftsomeofthefinancingtoprivateplayers.CountrieslikeKenyaandUgandaarealsoalreadytestinginnovativeconcessionorbrownfieldassetrefinancingapproacheswiththesupportofdevelopmentfinanceinstitutions,whichcanserveasmodelsforelsewhereonthecontinentifsuccessful.EnergyefficiencyneedstoplayakeyroleinAfrica’senergyeconomyasdemandexpands,butitisnotyetgettingenoughpriority.Energyefficiencyspendingincreasessevenfoldby2030intheSustainableAfricaScenario,inareassuchasefficientgreenbuildingsandconsumerapplianceslikerefrigeratorsandairconditioners.However,financingefficiencyprojectscanbechallenging,withinvestmentinefficiencycoveredbylessthan15%ofconcessionalfundinginstruments.Whilemanyefficiencyprojectsarecost-effectiveandresultinsavings,theyarerelativelysmall-scaleandthereisalowawarenessoftheirExecutivesummary19potential,risksandbusinessmodels.Increasingpubliccapital–fromgovernments,developmentfinanceinstitutionsanddonors–willbeessentialtoraiseawareness,aswillthecreationofconsumerfinanceschemessuchasgreenmortgagesoron-wageandon-billpaymentplanssuchasinKenya,Ghana,SenegalandRwanda.Affordablelow-costdebt,throughinstrumentssuchasgreenbonds,canalsoproveparticularlyimpactfulforthebuildingssector.Theglobalprivatesectorcanplayasignificantroleinmobilisingfinanceforthedevelopmentofcleanenergysupplychainprojects.Africancountrieswithcriticalminerals–suchastheDemocraticRepublicofCongo,MozambiqueandMadagascar–orwithlow-emissionshydrogenpotential,suchasNamibiaandMauritania,cantakeadvantageofgrowingglobaldemandforcleanenergytodrivedomesticindustries.Muchofthiscriticalmineraldevelopmentcanoccurviathebalancesheetofmajorminingcompanies,althoughtheirinvolvementwillbeincreasinglydependentonboththeregulatorysituationandthestrengthofenvironmental,socialandgovernance(ESG)dataandpolicies.Mostlow-emissionshydrogenprojectswillrelyonpublicsupport,includingthecriticalstepofcreatingcommonstandardsforhydrogentradeandalargerpoolofbuyerswillingtounderwritesupplyprojectswithlong-termcommitments.ConcessionalcapitalmustactasacatalystforprojectdevelopmentandprivateinvestmentAlongsideimprovementsinpolicyandregulation,concessionalcapitalofaroundUSD28billionperyearisneededtomobilisetheUSD90billionofprivatesectorinvestmentby2030intheSustainableAfricaScenario.Thisisamorethantenfoldincreasefromtodayandrequiresasignificantchangeinhowconcessionalfinanceprovidersoperate.WhiletheseproviderscontinuetoactinsomecasesasdirectfinanciersofprojectsundertheSustainableAfricaScenario,amuchlargerroleforthemistospurthemobilisationofprivatesectorfinancing.Variousinitiativesareunderway,notablytheBridgetownInitiative,toreviewandreshapehowmultilateraldevelopmentbanksoperate.Steppinguptheirsupportforcleanenergyinvestmentwilllikelyrequiregreateruseofblendedfinanceinstruments.Guaranteesandconcessionalequitycancomewithhighmobilisationratiosandaddgreaterflexibilitytothefinancingsourcesavailable.Withtherightregulatoryenvironmentandsupportinreducingrisk,theglobalinvestmentcommunitycouldbemobilisedtoplayalargerrole,includinginfinancingexistingassets.InstitutionalinvestorsworldwideholdtrillionsinassetsbutcurrentlyhavelimitedinvolvementintheenergysectorinAfricancountries.Understandingwheretheycanbestbedeployedanddevelopingtherightinstrumentsiskey.Institutionalinvestorsareunlikelytofundgreenfieldprojectsbutcaninvestinbrownfieldprojects,eitherviagovernment-sponsoredassetrecyclingprogrammes–asseeninTheGambia,ZimbabweandTogo–orbyprovidingrefinancingviagreenorsustainablebonds,asseeninEgyptandNigeria.Suchinvestmentshavetheadditionaladvantageoffreeingupconstructionanddevelopmentcapitalforothergreenfieldprojects.Internationalbondmarketscanalsobetappedfordevelopingenergyefficiencyprojects–asseeninthebuildingssectorinSouthAfrica,Kenya20InternationalEnergyAgencyFinancingCleanEnergyinAfricaandCôted’Ivoire–orforinnovativesolutions,likesettingupasecuritisationcompanythatusesbondissuancestograntloanstofinancialinstitutions,asdonebyimpactinvestorplatformSymbiotics.Governmentscandeveloptaxonomiestohelpthesemarketsgrow–anduseasovereignbondprogrammetohelpdevelopthecorporatebondmarket,ashasbeendoneinIndiaandColombia.Strongerdomesticfinancialsystemsarevitalforlong-termenergysectorinvestmentIntheSustainableAfricaScenario,financeoriginatingfromordisbursedthroughlocalchannelsincreasesnearlythreefoldby2030.Localfinanceremovescurrencyrisk,reducesexposuretoexternalshocks,andcanpriceriskmoreeffectivelyduetofamiliaritywiththelocalmarkets.Localprivatefinancecancomeprimarilyfromcommercialbanksandthegrowingbaseofinstitutionalinvestors,notablypensionfunds.Today,apartfromthelargepan-Africanbanks,mostoftheseinstitutionslackthefamiliaritywiththeindustrytoparticipateorprovideaffordablecapital.Governmentscanstimulatethisinvolvementviathecreationofpublicgreenfinancefacilities,supportedbycapacitybuildingandconcessionalfundsfromdevelopmentfinanceinstitutionsanddonorsforonwardlending,asseeninSouthAfrica,RwandaandtheAfricanDevelopmentBankGroup’sAfricaGreenBankInitiative.Equally,developmentfinanceinstitutionscansupportthecreationoffacilitiesthataretargetedtoincreaselocalcapitalinvolvement,suchastheprovidersoflocalcurrencyguaranteesseeninNigeria.ExistingsolutionsdemonstrateenergyinvestmentneedsareachievablebutchallengingScalingupandreplicatingexistinginnovativefinancingsolutionsrequiresacoordinatedapproachfromAfricangovernments,developmentfinanceinstitutions,donorsandprivatecapital.Forthisreport,withthesupportoftheAfricanDevelopmentBankGroup,wereviewedover85casestudiesandconductedinterviewswithmorethan40stakeholdersoperatingsuccessfulcleanenergyprojects,companiesorfundingprogrammesonthecontinent.Thisresearchrevealedaseriesofbestpracticesthatcanbereplicated.Italsohighlightedsomemajorrecurringobstacles.Forexample,concessionalfinanceprovidersmayneedtotakeonmorerisk,includingforpre-developmentstages,tohelpgetmorebankableprojectsinfrontofinvestorsandtoincreasesupportinfragileandlow-incomecountries.Africangovernmentsalsoneedtocreatetherightenablingenvironment,ensuringstableregulationandfinanciallyreliableutilities.Meanwhile,theprivatesectorcanensureitaccuratelypricesrisksandworksintandemwithconcessionalprovidersofblendedfinanceinstruments,particularlyintechnologiesandmarketsthatarealreadyproven.TheAfricancleanenergyspacerepresentsamassiveopportunityforgrowth,employmentandinnovation.Allstakeholders–publicandprivate,domesticandinternational–willneedtoplaytheirparttomovethecontinenttowardsasustainableenergyfuture.Executivesummary21IEA.CCBY4.0Chapter1CleanenergyinvestmentlandscapeSettingthesceneSUMMARY•TheIEA’sAfricaEnergyOutlook2022laidoutanewscenario–theSustainableAfricaScenario(SAS)–whichseesthecontinentachieveby2030,infullandontime,allofitsenergyandclimate-relatedgoals,includinguniversalenergyaccessanditsNDCs.•RealisingtheSASrequiresmobilisingoverUSD200billionannuallyby2030,butenergyinvestmenthasbeendeclininginAfricaandin2022wasunderUSD90billion.CleanenergyspendingwasafractionofthisataroundUSD25billion–only2%oftheglobaltotaldespitetherecentriseinglobalcleanenergyinvestment.Thisisfarfromwhatisrequiredtomeetthegrowingenergyneedsof20%oftheglobalpopulation.•Undercurrentfinancingnorms,projectdevelopersoftenstruggletoaccessadequatecapitalandcapitalproviderstoidentifyinvestableassets.Resolvingthisdisconnectrequireseffortonbothdemandandsupply,withAfricangovernments,donors,developmentfinanceinstitutionsandprivatecompaniesallplayingarole.Increasingtheavailabilityofaffordablecapitalcanbeakeylevertotriggeraseriesofreinforcingpositiveoutcomes,includingdrivingthedevelopmentofmorebankableprojects.•Thecostofcapitalisanimportantfactorsincemanycleanenergyandend-useinvestments(includingenergyaccessprojects)requirehighupfrontspending.Thecostofcapitalforutility-scaleenergyprojectsinAfricaistwotothreetimeshigherthaninadvancedeconomiesandisoftenhigherforsmallerprojectsthathavefewercapitalprovidersavailable.Thiscanactasamajorbarriertoscalingupinvestment.•Costofcapitallargelyreflectstwosetsofrisks:thoseassociatedwiththecountry,andthoseassociatedwiththesectorortechnology.Addressingtheserequiresdifferentcountry-specificsolutions,withcountryrisksgenerallyrequiringlonger-termstructuralreforms,andmorespecificrisksaddressedwithenergypolicyreforms.•Atthecountryrisklevel,themacroeconomiccontexthassignificantlyworsenedinmanyAfricancountries,withaverageexternaldebtonthecontinentincreasingbothinabsolutetermsandasashareofGDP,from16%in2011to31%in2021.WhencombinedwithcurrencydepreciationsandUSandEUinterestratehikes,thishasdrivenupdebtservicingcosts,whicharenowdoublethelevelofcleanenergyinvestmentacrossthecontinentasawhole.•Energysector-specificrisksvarysignificantlybycountry,technologyandfinancingprovider.Oneoftheprimarydifficultiesforutility-scalerenewableorgridprojectshasbeenofftakerrisk,withonlyaboutoneinthreeutilitiesinAfricaabletocovertheiroperationalanddebtservicingcosts.Thisincreasestransmissionriskduetounderinvestmentingridinfrastructure.Decentralisedsolutionsplayacriticalrole,butadvancingthemcanfaceregulatoryhurdlesorfinanceill-adaptedtosupportingthem.Chapter1Cleanenergyinvestmentlandscape23IEA.CCBY4.01.1IntroductionOneoftheprincipalconclusionsoftheIEA’sAfricaEnergyOutlook2022,whichlaidoutpathwaysforAfricatoachieveallitsenergyandclimate-relatedgoalsby2030,wastheneedfortherapidscale-upofcleanenergyinvestment.OverallinvestmentinAfrica’senergysector,acrossfossilfuelsandcleanenergy,hasbeenfallingsince2014.Despitemakingupone-fifthoftheglobalpopulation,Africacurrentlyaccountsforonly3%ofglobalenergyinvestmentandamere2%oftheworld’scleanenergyinvestment.WhiletrendsvaryacrossaverydiverseAfricanenergylandscape,thisshortfallininvestmentisalarming.Itputsatrisktheachievementofahostofsustainabledevelopmentgoalsandcouldopenupnewdividinglinesinenergyandclimateatatimewhencleanenergytransitionsaregatheringspeedinotherpartsoftheworld,notableadvancedeconomiesandChina.Thisreport,FinancingCleanEnergyinAfrica,digsdeeperintotheopportunitiesandbarriersfacinginvestorsincleanenergyandinfrastructureacrossthecontinent.Itexploresboththefinancingneedsfordifferentelementsoftheenergysector(Chapter2)andthetypesoffinanceavailable(Chapter3).Indoingso,itrevealsfundamentalmismatcheswithinthecurrentsystemthatarepreventingadequatefinancialflowsreachingcleanenergyprojectsinAfrica.Projectdevelopersoftenfindcapitaltobetooexpensiveandwithunworkableterms,whileonthefinancesupplyside,investorsfindmanycleanenergyprojectsonthecontinenttobetoosmallorrisky.Reducingthesemismatchesrequiresprogressonboththedemandandsupplysides.Thisreportusescasestudiestodemonstratehowtheseobstaclescanbeovercome.ItopenswithadiscussionintroducingAfrica’sinvestmentneedsundertheIEASustainableAfricaScenario(SAS)andconsiderstherisksandotherfactorscontributingtotheelevatedcostofcapitalforcleanenergyprojectsinAfrica.1.2TheSustainableAfricaScenarioTheAfricaEnergyOutlook2022laidoutanewscenario–theSustainableAfricaScenario(SAS)–forthecontinent’scleanenergyfuture.UndertheSAS,universalaccesstomodernenergyservicesisachievedby2030inlinewithSustainableDevelopmentGoal7(SDG7),andallAfricannationallydeterminedcontributions(NDCs)areassumedtobemetinfullandontime,includingconditionalNDCs.Thescenariounfoldsagainstthebackdropofthepushtolimittheincreaseintheglobalaveragetemperaturetowellbelow2°Cabovepre-industriallevels,withallthatthisimpliesforglobalenergytradeandtechnologycosts.TheSASgivescentrestagetoeconomicandsocialdevelopment.Providingmodernenergyservicestothemorethan600millionpeoplestilllackingelectricityandthe990millionwithoutaccesstocleancookingremainsthefirstpriority,tohelppopulationsachievehigherstandardsoflivingacrossthecontinent.Economicgrowthacrosstheregionalsodriveshigherenergydemandfromindustry,freightandagriculture,whichgrowsbyalmost40%by24InternationalEnergyAgencyFinancingCleanEnergyinAfrica2030(seeBox1.1).Thescenarioprioritisesthemostcost‐effectivetechnologiesthatmanagetoattractinvestmentandwhicharereadilyavailableanddeployedinAfrica.IntheSAS,modernprimaryenergysupplyrisesbyathirdoverthedecade2020-2030,1althoughenergyusepercapitaremainslessthanone-thirdoftheworldaverage.Householdscontinuetobethelargestfinalenergyconsumersonthecontinentin2030,withthenumberofairconditioners,fansandrefrigeratorsmorethandoubling,theirimpactsonenergydemandmitigatedbyminimumenergyperformancestandards.Electricitydemandonthecontinentincreasesby75%between2020and2030.Renewableenergygeneration,mainlyfromsolarPV,accountsforthemajorityofcapacityadditionsastheirever-decliningcostisdrivenbyrapidglobaluptake.By2030solarandwindtogetherprovide27%ofthecontinent’spowergeneration,eighttimesmorethantoday.Box1.1⊳Africa’seconomicdevelopmentopportunitiesintheSASAfrica’seconomicgrowthintheSASaverages4.2%peryearto2030asitseconomiesrecoverfromthestrainsofaturbulentfewyears,helpedbyprogresstowardsuniversalaccesstomodernenergy,moreavailableandreliableelectricity,andlessvolatileenergyprices.Thisgrowthrateiscomparablewiththeaverageforemergingmarketanddevelopingeconomiesandis0.6%abovetheglobalaverage.Keyindustriesstarttoexpand,suchasproductionoffertilisers,steelandcement,andthemanufactureandassemblyofappliances,vehiclesandcleanenergytechnologies.InlinewiththeirNDCs,manycountriesinAfricahavealreadydevelopedgreengrowthplansthatcansupportclimate-consciouschoiceswithinindustrialdevelopment.Developmentsintheenergysectoralsoplayaroleineconomicadvancementviathecreationofdecentjobsrequiringwide‐rangingskills.Africahastheyoungestpopulationintheworld,witharound15millionpeoplejoiningthelabourforceeachyear.Astoday,informaljobsdominatethecontinent’seconomies,53%ofthepopulationbeinginformallyemployed.Insub-SaharanAfricaalonethisshareis67%,almostdoubletheworld’saverage.Energy-relatedemploymentvariesbyregion,frompredominantlyoilandgasinNorthAfricatoasignificantcoalsectorinSouthernAfrica,andmanyhundredsofthousandsofworkersemployedintheminingofarangeofmineralsthatarecriticaltoglobalenergytransitions.IntheSAS,around4millionadditionalenergy-relatedjobsarecreatedacrossthecontinentby2030,manyofwhichareassociatedwiththepushforuniversalaccess.Jobcreationasaresultofextendingenergyaccessgoesbeyondtheenergysectoritself,stimulatingeconomicactivityinthecommunitiesgainingaccess,andthereforethenumberofjobscreatedthiswayispotentiallyfargreaterthanthoseintheenergysectoritself.Note:ForfurtherinformationrefertoChapter4oftheAfricaEnergyOutlook2022.Chapter1Cleanenergyinvestmentlandscape25IEA.CCBY4.0DespitegrowingconsumptionwithinAfrica,theprospectsforoilandgasproductionhingeprimarilyonexports,whichmeansthatfutureoilrevenuesaremoresensitivetothepaceofglobalenergytransitionsthantodomesticdemandtrends.OiloutputdeclinesintheSAS,asexportdemandto2030falls.Naturalgasproductioncontinuestoincreaseinthenearterm,playinganimportantroleintheindustrialisationofthecontinent.Monetisingtheseresourceswillrequirecarefulbalancingofdomesticandexportneedsandtailoredinfrastructureexpansionplans,alongsidemajoreffortstokeepprojectcostsanddelaysdown.TheassumptionsandoutcomesintheSAScontrastwiththoseintheStatedPoliciesScenario(STEPS),anexploratoryscenariobasedonprevailingpolicysettingsacrossdifferentsectorsandeconomies.TheSTEPSprovidesanindicationoftoday’sdirectionoftravelfortheenergysystem,anddoesnotautomaticallyassumethattheSDGsorotherenergy-orclimate-relatedtargetsaremet.1.2.1CleanenergyinvestmentneedsUndertheSAS,energyinvestmentacrossthecontinentduring2026-2030doublesfromthatseenduring2016-2020(seeFigure1.1).By2030three-quartersofinvestmentisincleanenergy,representingamajorbreakfromthepatternofenergyspendingtoday,whereover70%ofspendinggoesonfossilfuelprojects,primarilyanchoredbyexports.IntheSASfossilfuelinvestmentdecreases,drivenbyareductioninprivatesectorspendingandshiftstowardsmeetingdomesticdemand,primarilyfinancedbystate-ownedenterprises(SOEs).Giventhechangingglobalenvironment,withcountriesmovingtowardsnetzerotargets,continuedfossilfueldevelopmentcomeswithregulatoryreformstostrengthengovernanceatSOEstoensurecarefulmanagementofresources.Theprivatesectorcontinuestomaintainaroleinfuelsupply-sideinvestmentviacleanfuels,suchaslow-emissionshydrogenandbiofuels.Renewablesandgridsaccountforoverhalfofcleanenergyinvestmentby2030undertheSAS.Africaishometo60%ofthebestsolarresourcesglobally,yetonly1%ofinstalledsolarPVcapacity.By2030solarPV–alreadythecheapestsourceofpowerinmanypartsofthecontinent–outcompetesallothersourcescontinent-wide.Thishelpspushrenewablestoover80%ofallnewpowergenerationcapacityaddedby2030.Supportingthesecapacityadditionsrequiresinvestmentingridinfrastructure,notjusttoexpandnetworks,butalsotoupgradethemtoprovideadequateflexibilityandsupporttheintegrationofdigitaltechnologies.Theriseofrenewablesalsorequiresasystem-wideapproachtoensurethatintermittencydoesnotresultinunsustainableandunreliablepowersystems.Baseloadpowerproviderssuchashydropowerand(whererelevant)naturalgassupportthis,butsotoodoarangeofsolutionssuchasbatteryandpumped-hydrostorage(seeSpotlightinChapter2).26InternationalEnergyAgencyFinancingCleanEnergyinAfricaFigure1.1⊳AnnualenergyinvestmentintheSAS,2016-2030BillionUSD(2022)1225Other180OtherenduseEfficiency135Access90Grids45RenewablesFossilfuels2016-202026-302026-30AmountofprivateSTEPSSASfinanceIEA.CCBY4.0.Energyinvestmentnearlydoublesby2030undertheSAS,withashifttocleanpower,includingachievementofuniversalenergyaccess,andaccompanyinggridinfrastructureNotes:Other=cleanfuels,nuclear,batterystorage,andfossilfuelpowerwithcarboncapture,utilisationandstorage.Otherenduse=non-efficiencyinvestmentsinbuildings,industryandtransport.InvestmenttosupporttheSDG7goalofachievinguniversalaccesstoenergyreachesUSD25billionperyearby2030undertheSAS.Thisrepresentsonly1%ofcurrentglobalenergyinvestment.Bycontrast,prevailingpolicysettingsintheSTEPSseeaccessinvestmentreachingonlyUSD5billionby2030.Thishighlightstheimportanceofimprovingthepolicyenvironmentforaccessprojects,particularlyviathecreationofnationaltargetsandactionplansthatclearlylayouttherolefordifferentenergyaccesssolutionsandproviders.Thispolicyactionneedstobecoupledwithnewfinancingsolutionstosupporttheeffectiveuseofpubliccapitalandtoactivateprivatecapitalwherepossible(seeChapter2).Investmentdirectedtowardsend-useactivitiesincreasesundertheSAS.Thissurgeinspendingfocusesprimarilyonenhancingtheefficiencyofbuildings,vehicles,appliancesandlighting.Theseeffortsaredrivenbystricterregulationsandaimtoreduceenergyconsumptionandenvironmentalimpact,forexamplebyphasingoutthetraditionaluseofsolidbiomassforcooking.Otherend-useactivitiesgrowinginprominenceincludetheswitchtoelectrictwo-andthree-wheelers,aswellasgreenpublictransportsuchaselectricbusesandurbanrailsystems,andtheuseofrenewablesinbuildingsandindustryforheatingandcooling.Theseareascombinedaccountfor20%ofspendingin2030comparedwithroughly5%adecadeearlier.Chapter1Cleanenergyinvestmentlandscape27IEA.CCBY4.01.3ThecycleofchangeUndertheSAS,Africancountriesfacetheneedformajorinvestmenttoputinplaceenergysystemsthatdeliverreliable,affordable,modernandcleanerenergytoall.Thesesystemslookquitedifferentfrommorematuremarketsinadvancedeconomies,withdecentralisedoff-gridsolutionsplayingakeyrole.Meetingtheseinvestmentneedsrequiresashiftinhowenergyprojectsarefinancedintheregion.Theycannotbemetbypublicfundsalone,giventhestartingpointofhighindebtednessinmanycountriesandarangeofcompetingprioritiesforpublicspendingthatareonlylikelytoincreaseastheimpactsofclimatechangeintensify.Domesticcapitalmarketsinthecontinentarealsostilltoosmalltofullyfundthespendingrequired.Morecapitalisthereforeneededfromabroad.Someofthiscancomefromconcessionalsources,includingthegrowingpoolofclimate-relatedfundingfromdonorsandmultilateraldevelopmentbanks,butalargepartneedstocomefromtheprivatesector,particularlyinternationalsourceswhiledomesticcapitalmarketsdevelop.ThesolutionspresentedintheSASto2030arebasedonmature,commerciallyviabletechnologies.However,aseriesofbarriersarepreventingthedevelopmentofbankableopportunities,andrisks–bothrealandperceived–arepreventingcapitalfromflowingtotheprojectsandcompaniesatthenecessaryscale.Thisisreflectedbothintheslowerpaceofenergydevelopmentinmanypartsofthecontinentandinhigherfinancingcosts:forcleanenergyprojectsinAfricathecostofcapitalisatleasttwotothreetimeshigherthaninadvancedeconomiesandChina(IEA,2023).1Thisactsasabrakeonprivatesectorinvolvementasitmakesprojectseitherunaffordableorunviablefortheinvestor.Itcanalsoleavecountriestrappedinaloopofhigherrisks,highercosts,energydeficitsanddeepenedrelianceonfossilfuels,whichtypicallyrequirelowerupfrontinvestmentbutleaveconsumersandgovernmentswithongoingexposuretovolatilefuelpricesaswellasenvironmentalrisks.Breakingoutofthislooprequiresaseriesofco-ordinatedactionsfromAfricangovernments,thecommunityofdonorsanddevelopmentfinanceinstitutions(DFIs),andprivatecapitalproviders.Thewayforwardwillvarybycountry,butincludescross-sectoralcapacitybuildingingovernmentsandfinancialinstitutions,energysectorreformsandthedevelopmentofproject-levelfinancingstructures.Keyelementsinclude:Apolicyandregulatoryenvironmentthatfacilitatesinvestmentincost-effectivecleantechnologiesbyremovingmarket-distortingsubsidies,ensuringcost-reflectivetariffsandallowingnewmarketentrants.Thisnewenvironmentshouldbeanchoredineach1ThisanalysisisbasedondatafromtheCostofCapitalObservatory,whichcollectedsurveydataonsolarPVandgas-firedpowerprojectsinSouthAfricaandotheremergingmarketanddevelopingeconomies(EMDEs).Stakeholdersinterviewedforthatreportindicatedthatthecostofcapitalinless-developedmarketsinAfricaissignificantlyhigher,butlimiteddataareavailabletoquantifythescale.28InternationalEnergyAgencyFinancingCleanEnergyinAfricacountry’scommitmentstogoalsthatalignwiththeParisAgreement,convertingthemintocleanenergyplans,targetsandroadmapsthatalsomeetSDG7.Buildingcapacityinenergyinstitutions,regulatorsandindustrialpolicydepartmentsto1improvedata,policyformulationandimplementation,inturnstrengtheningenergysectorgovernance.Theseeffortsarelikelytoneedfundingsupportfordatacollectionandmanagementsystems,aswellastrainingandknowledgesharing.Targetedtechnicalassistanceandfinancialsupportforprojectpreparationandearly-stagedevelopmenttoensurethecreationofapipelineofbankableprojects.Ensuringtheavailabilityofpatientequityandaffordabledebtforlocalbusinesses–particularlysmallandmedium-sizedenterprises(SMEs)–isparticularlyvitalastheyoftenfacethegreateststruggletoaccesscapital.Aspecificefforttoidentifyandaddresstherisksthatdiscourageinvestors,whichcanvarybycountry,sectorandtechnology.2Publicisingdataonthecostofcapital,theleveloofcreditenhancementsusedinprojects,anddefaultratescanalsoplayanimportantpartindifferentiatingbetweenactualandperceivedrisks.Theuseoftargetedconcessionalcapitaltoreducerisksinpartnershipwithnationalgovernmentsandprivatecapitalproviders,andtoensuretheaffordabilityofprojects.NotethatDFIsanddonorcapitalwillalsobeneededtoprovidegrantsforareassuchasthehardesttoreachenergyaccessprojectsorfragileandconflict-affectedcountries,wheretheprivatesectorislikelytoplayalimitedrole.Thesestepscanleadtoaseriesofreinforcingpositiveoutcomes.Clearenergysectordevelopmentplanscombinewithstrongerdomesticinstitutionstocreateastrongerpipelineofbankableprojects.Meanwhile,reducedpoliticalandregulatoryriskhelpsreducethecostofcapitalandimprovetheadjustedreturnsonprojects.Insodoing,moremoneyflowstocleanenergyprojects,drivinggreatereconomicdevelopmentandsimultaneouslysupportingnationalandglobalsustainabledevelopmentandclimateobjectives.1.3.1TheimportanceofaccesstoaffordablefinanceImprovingaccesstoaffordablecapitalcanserveasakeylevertotriggerthepositivecycleofchangeoutlinedabove.Understandingtheavailabilityofaffordablecapitalrequiresanalysisofthedriverspushingupthecostofcapital,thefinancingneedsofenergydevelopmentsundertheSAS,andthepossibilitiestoincreasethesupplyoffinancefromavarietyofdifferentchannels.Theseissuesareexploredinthethreechaptersofthisreport,withthediscussionhereusingthecostofcapitaltoexplorevariouselementsthatcanpreventthescale-upofcleanenergydevelopmentinAfrica.Thecostofcapitalreflectshowmuchconfidenceinvestorshaveinobtaininganexpectedreturnonequity,andhowmuchconfidencedebtprovidershaveinbeingpaidbackthe2OneapproachforsuchanassessmentisproposedintheCostofCapitalObservatory,ajointinitiativeIEA.CCBY4.0betweentheIEA,theWorldEconomicForum,ETHZurichandImperialCollegeLondon.Chapter1Cleanenergyinvestmentlandscape29moneytheyhavelent.Ariskierprojectorcompanywillfaceahigherrequiredrateofreturnfromequityinvestors,ormoreexpensivedebtfinancing.ThiscanprovedebilitatingforSMEs,whichplayacriticalroleinimprovingaccesstoenergy,butwhichstruggletoraisefinancingthatmatchestheirneeds.Ahighcostofcapitalhasaparticularlylargeimpactoncapital-intensiveinvestmentssuchasrenewablepowerprojects,includingoff-gridsolutions,whichrequirelargeupfrontexpenditure.Itcanleadtohigheroverallgenerationcoststhatareeitherpassedthroughtocustomersorsubsidisedbygovernments.InEMDEsfinancingcostsaccountedforaroundhalfofthelevelisedcostofelectricity(LCOE)ofasolarPVplantreachingfinalinvestmentdecisionin2021,comparedwith25‐30%inadvancedeconomiesandChina.ThisnotonlyleadstoadisproportionateimpactoninvestmentspendinginEMDEs,butcanalsomakefossilfuelprojectsappearmoreattractivebycomparisoneventhoughhigheroperatingcostsandvolatilefuelpriceswouldincreasethelikelihoodofsubsidiesinthefuture(IEA,2023).1.4FactorsaffectingthecostofcapitalThecostofcapitallargelyreflectstwosetsofrisks:thoseassociatedwiththecountry(thebaserate)andthoseassociatedwiththesector,projectorcompany(apremium).Theserisksvarysignificantlyacrossthecontinent–somecountrieshaveinvestment-gradecreditratingsand/orawell-developedenergysector,whileothersexperienceconflictorinstabilitywithloweconomicgrowthandstruggletoattractinvestment.Costsalsovarybycapitalproviderandcurrency,dependingonwhethertheprovideristakingoncurrencyrisk,theirfamiliaritywiththelocalmarketandthebaserateintheircountryoforigin.Andfinallytheyvaryaccordingtothecompanyorprojectthatisseekingtoraisecapital.LargerinternationalcompaniesaremoreabletotapintoconcessionalfinancefromDFIsanddonorsorcheapercapitalininternationalmarkets.Meanwhile,localcompaniesthataremorereliantondomesticcapitalmarketscanstruggletoaccessbothearly-stagefinancingtobringprojectstobankabilityandsufficientaffordablecapitaltodevelopprojects.InEMDEsthebaseratetendstoaccountforalargershareofthecostofcapital.Forexample,inlarge-scalesolarPVplantsinadvancedeconomiesandChinathebaserateaccountsforaround10%and35%respectively,butinEMDEsthisrisestobetween60%and90%(IEAandIFC,2023).Thishassignificantimplicationsforthepolicysolutionsandde-riskingmechanismsadoptedtoreducethecostofenergyfinancing.Solutionstoreducethebaseratewillprimarilybeeconomy-widedevelopments,suchasstructuralreformsthatdriveeconomicgrowth,increasedebtsustainabilityormanageinflation,whicharelikelytotakeseveralyearstoimplementbutcoulddrivesignificantcostreductions.Meanwhile,solutionsforhighersectororprojectrisksdrivingapremiumarelikelytobemoretargetedandmay,insomecases,bequickertoimplement,albeitwithapotentiallysmallerimpactontheoverallfinancingcosts.Worktoquantifytherisksdrivingthecostofcapitalatacountrylevelcanbehelpfultodifferentiatebetweenactualandperceivedrisks,aswellasfordesigningsolutionsto30InternationalEnergyAgencyFinancingCleanEnergyinAfricaovercomethem.ThefollowingisananalysisofsomeofthemajorrisksaffectingcleanenergyprojectsinAfricaneconomies.Duetotheheterogeneityofthecontinent,thislistisnotcomprehensive;issuessuchasland-orproject-specificrisksarenotdiscussedbelowbut1insteadcoveredintheCostofCapitalObservatory.Whiletheanalysisaggregatesregionalandcontinent-widetrends,itdrawsonexperiencesfromindividualcountriesasmuchaspossible.1.4.1Country-leveldriversMacroeconomicenvironmentThemacroeconomicenvironmentofmanyAfricancountrieshasdeterioratedinrecentyears,worsenedbyCovid-19andthefoodandfuelpricespikesfollowingRussia’sinvasionofUkraine.Thesecriseshavefurtherdrivenupoveralldebtburdensonthecontinent,whichhadbeenrisingsince2010,bothinabsolutetermsandasashareofGDP.Overaten-yearperiodstartingin2011,Africa’saveragedebt-to-GDPrationearlydoubledto31%.Sincemostofthisdebtisheldinforeigncurrency,thestrengtheningdollarandmonetarytighteningintheUnitedStatesandEuropeoverthepastyearhavealsocausedasignificantriseindebtservicingcostsformostAfricancountries.In2021annualdebtservicingpayments3acrossAfricancountriesrosetooverUSD72billion,or11%ofgovernmentexpenditure,comparedwith5%ofgovernmentspendingin2011.Giventhatthisriseindebthascoincidedwithafallinenergyinvestment,forthelastfiveyears,debtservicingcostshavebeendoublethelevelofcleanenergyinvestment(seeFigure1.2).ThishasimplicationsfortherolethatAfricangovernmentsareabletoplayinenergyinvestinggoingforward.Asaresultofthisworseningdebtsituation,12countriesinAfricaarenowlistedbytheIMFasbeingathighriskofdebtdistressandnineasalreadybeingindebtdistress.Italsocontributestothenegativeoutlookofmanycountries’sovereignratings.AsofJune2023onlytwocountries(BotswanaandMauritius)hadaninvestment-gradesovereignrating;sevencountrieshadanegativeoutlook.Thisdrivesupthecostofaccessingcapitalasinvestorspriceintheadditionalrisk.Forexample,Ghana’syieldsrosefrom7.5%inJanuary2021to15.78%inMarch2022(B&FT,2022),asitscreditratingdropped(TradingEconomics,2023).3Coveringinterestplusprincipalonpublicandpubliclyguaranteeddebt.IEA.CCBY4.0Chapter1Cleanenergyinvestmentlandscape31Figure1.2⊳Debtservicingcostsandenergyinvestment,2014-2022BillionUSD(2022)15012090603020142016201820202022DebtserviceCleanenergyinvestmentOtherenergyinvestmentIEA.CCBY4.0.Debtservicingcostshadrisentoroughly11%ofthecontinent’stotalgovernmentexpenditureby2022,onlyone-fifthlessthantotalenergyinvestmentNotes:Debtserviceisinterestplusprincipalpaymentsonpublicandpubliclyguaranteeddebt.Governmentexpenditurereferstogeneralgovernmentspending,netofacquisitionofnon-financialassets.Source:IEAanalysisbasedondatafromtheWorldBank(2023),InternationalDebtStatistics.ThestructureofAfrica’sexternaldebtstockshasalsochangedovertime,withtheshareofconcessionallendingdecreasingcontinent-wide(Figure1.3).Thisslumpisparticularlysignificantinsub-SaharanAfricaandincountriesreliantonconcessionalfinance,whicharelesslikelytobeabletoabsorbtheadditionalcoststhataccompanycommercialdebt.Acrossthecontinent,traditionallenderssuchasofficialbilateralandmultilateralcreditorswentfromholding20%ofitsdebtin2011to16%in2021,evenasnewbilaterallenderssuchasChinatookonamoreprominentrole.Abroaderandmorediversecreditorbasecancomplicatedebtrestructuringprocesses,asillustratedbyZambia’stwo-year-longnegotiationsbeforereachinganagreementwithcreditorsonnewrepaymenttermsforuptoUSD6.3billionofdebt(Reuters,2023a).Ghana,whosedebtstructurealsoincludesasignificantamountofdomesticdebt,hasrecentlysecuredanagreementwiththeIMFandtheWorldBankonanextendedcreditfacilityofUSD3billion(BBC,2023),whichcouldsignalareplicablebreakthroughforothercountriesfacingsimilarchallenges.32InternationalEnergyAgencyFinancingCleanEnergyinAfricaFigure1.3⊳EvolutionofexternaldebtinAfrica,2011-2021100%80%160%40%20%20112021201120212011202120112021AfricaSub-SaharanAfricaCountrieswithaccessCountrieseligiblefortocommercialfinanceconcessionalfinancebyMDBsPublic-concessionalPublic-nonconcessionalPrivateExternaldebtasshareofGDPIEA.CCBY4.0.ThedebttoGDPratiohassoaredacrossAfrica,butparticularlyinthemostvulnerablecountries,whichhavealsoseentheshareofconcessionaldebtdecreasesignificantlyNotes:Sub-SaharanAfricaexcludesSouthAfrica.CountrygroupingsrefertoanaggregationoftheAfricanDevelopmentBankGroup(AfDB)countryclassificationsystem,basedonper-capitaincomeandcreditworthinesstosustainnon-concessionalfinancing.Countrieseligibleforconcessionalfinance=countrieswithlowerper-capitaincomethattheAfDBclassifiesashavingaccesstotheAfricanDevelopmentFund.Countrieswithaccesstocommercialfinance=countrieswithhigherper-capitaincomeandcreditworthinesstosustainnon-concessionalfinancing.Detailedcountryclassificationisincludedintheannex.MDB=multilateraldevelopmentbank.Source:IEAanalysisbasedonWorldBank(2023),InternationalDebtStatistics.GovernmentscantakestepstoreducetherisksassociatedwithhighdebtlevelsbypublishingIEA.CCBY4.0regularandtransparentdataondebtandimplementingsounddebtmanagementpractices,suchasdisclosingactualassetsandliabilities,andtrackingpossiblebutuncertain(contingent)liabilities–forexample,thepotentialneedtopayindemnitiesforabreachofcontractthatleadstotermination.Failuretodosoreducesgovernmentreliabilityasapartnerforfutureinvestors,raisingthedefaultrisk,whilealsopreventinggovernmentsfrominvestinginmuch-neededinfrastructure.Greaterinvestmentincleanenergyonthecontinentrequirestheprivatesectortoplayasignificantrole,whichinmostAfricancountriesrequirescarefulmanagementofcontingentliabilitiesbutdoesnotnecessarilyentailraisingpublicdebt.Agrowingselectionoftoolsareavailabletosupportdebtrestructuringandrefinancing(UNECA,2021).Countriesthatarealreadyindebtdistress,i.e.thatareunabletotakeonfurtherconcessionalloansbutwheredebtrepaymentsarestillmanageable,canattractclimate-conditionalgrantsorusedebt-for-climate(ornature)swaps.Theseswapshavebeengrowinginscale,withEcuador’sgovernmentannouncingthelargestdebt-for-natureswaptodateinMay2023,coveringUSD1.6billionofdebt.WithintheAfricancontext,in2015theChapter1Cleanenergyinvestmentlandscape33SeychellesrefinancedUSD21.6millionofitsdebtviaadebt-for-natureswapand,inwhatcouldbeaground-breakingtransactionfortheregion,thePortuguesegovernmenthasannounceditisexploringaswapfortheentiretyofitsEUR140million(USD152million)debtowedbyCaboVerde,convertingitintoinvestmentinthecountry’senvironmentandclimatefund.Countriesnotyetindebtdistressthatstillhaveaccesstocapitalmarketscanexploretheuseofsovereigngreenbondstoeitherrefinancetheirdebtorraisefundsforaparticulargreenobjective,suchgreenpublictransport,atacheaperrate(seeChapter3).CurrencyvolatilityThevastmajorityofinvestmentsinthecontinent,exceptforSouthAfricawhichhasdeepcapitalmarkets,occurinforeigncurrencybecauseofconcernsaroundcurrencyvolatilityandtheshallownessoflocalcapitalmarkets(seeChapter3).Internationalprovidersofcapital,whoseownbalancesheetsareinforeigncurrency,areoftenunwillingtobecomeinvolvedinlocalcurrencylendingforfearthatdepreciationwillaffectthevalueoftheirasset.In2022mostAfricancurrenciesexperiencedacceleratedexchangeratedepreciation.Forexample,theEgyptianPoundandSierraLeoneLeonelostaround40%oftheirvalueagainsttheUSD,whileotherslostonaverage11%(seeFigure1.4).ThepressuresofCovid-19droveawaveofcurrencydepreciationin2021,onlyforcurrenciestobefurtherdrivendownbyinflationarypressuresfollowingthehighcommoditypricescausedbyRussia’sinvasionofUkraine.InflationinmostAfricancountriesremainedhighin2022,withatleast20outof45countriesexperiencingdouble-digitinflation(IMF,2023a).Althoughinflationstartedtodeclineinearly2023,thesefactorscombinetopushinvestorsawayfromlocalcurrencytransactions.Theimplicationofinvestmentinforeigncurrencyassetsisamismatchbetweenthefinancingandrevenuecurrencies.Mostcleanpowerprojectsearnrevenueinlocalcurrency.Currencyriskisthereforeessentiallypassedontotheutilityandinsomecasesendusers.Theofftakermaystruggletoserviceforeigncurrencydebtifthelocalcurrencydepreciatesorifashortageofforeignreservesisaffectingcurrencyconvertibility.Thisaddspressuretonationalforeigncurrencyreserves,particularlyinperiodsofsteepdepreciation.In2022multiplecountriesappliedadministrativemeasurestocontrolforeignexchangeflows,suchasforeignexchangerationing(Ethiopia,Nigeria)(IMF,2023b).Shortagesofforeigncurrencyorcapitalcontrolscanhaveanimpactonprojectdevelopersbyrenderingthemunabletoaccessforextopayforimports,orinextremecasespreventingtherepatriationofprofits,whichdirectlyaffectsnotjustongoingprojectsbutalsothebankabilityofnewones.34InternationalEnergyAgencyFinancingCleanEnergyinAfricaFigure1.4⊳NationalcurrencyexchangeratesperUSDandinflationinselectedAfricancountriesover2022-231ChangeincurrencyperUSDMMeettiiccaall--MMoozzaammbbiqiquueeInflationrateShilSlihniglli-nUgg-aUngdaandaDirDhiarmha-mM-oMroocrcooccoShiSllhinilglin-gTa-nTzaannzianiaNairaN-aNiriage-rNiaigeriaPulaP-uBlao-tsBwoatsnwaanaDaDlaslais-iT-hTehGeaGmambiabiaKwaKcwhacha-ZambiaShilliSnhgil-linKgen-yKaenyaRaRnadn-dS-oSuothutAhfrAicfraicaKwaKnwzaan-zAan-gAonlagolaCedi-CGehdain-aGhanaPounPdo-uEngdyp-tEgyptLeLoenoene-S-iSeirerraraLeLoenoene--5500%%--4400%%--3300%%--2200%%--1100%%10%20%30%40%50%IEA.CCBY4.0.ThenationalcurrencyofmostAfricancountrieshasdepreciatedagainsttheUSdollarwhileinflationhassoared,makingdebtrepaymentsincreasinglydifficultNotes:Inflationratescoverthelastknown12-monthperiod,startinginAprilorMay2022dependingonthecountry.CurrencydatacovertheperiodbetweenJune2022andMay2023.TheMozambicanmeticalremainedstableduetomonetarypolicyaimingtoreversepreviousdepreciationtrends.Hedgingmechanismssuchasforexoptionsorforwardscanprotectinvestorsagainstfuturedepreciations,buttheyremainexpensiveoptions.Whilecommercialbankshavehedgingproducts,theavailabilityoftheseinAfricanmarketstendstobelimited,withtheexceptionofSouthAfrica,duetobanks’ownriskmanagementandtheunderlyingilliquidityoflocalcapitalmarkets(AVCA,2022).GlobalhedgingplatformssuchastheCurrencyExchangeFund(TCX)fillthatspacebyprovidingswapsandforwardcontractsthatshiftthecurrencyriskawayfrominvestors,projectsorcountriestoTCXandcurrencymarkets.TCXmanagesthecurrencyriskviaitscurrencypoolingmechanismandlargebalancesheet.4Currently,TCXisprimarilyusedbyMDBsandotherdevelopmentfinancierstoprovideloansinlocalcurrency,butthereisscopetoexpanditsusetootherprivateinvestorsiftheycanabsorbthecost.Inthelongterm,developinglocalcapitalmarketstoprovidefinancinginthelocalcurrencywillbekeytoscalingupinvestmentincleanenergyprojectswithlowexposuretocurrencyfluctuations(seeChapter3).PoliticalriskGovernancefactors,includingtheruleoflawandpoliticalstability,haveamajorimpactontheperceptionofriskandinvestorsoftenseekinsurancetocounterthis.Politicalriskinsurance,suchasthatprovidedbytheWorldBankGroup’sMultilateralInvestment4FormoreinformationonTCX,seethecasestudyintheannex.IEA.CCBY4.0Chapter1Cleanenergyinvestmentlandscape35GuaranteeAgency,cancoverriskslinkedtobreachofcontract,expropriation,warandcivildisturbance,aswellastransferandconvertibilityrisklinkedtorestrictivecentralbankorgovernmentdecisions.However,therearesomecountries,suchasthosethatareinactiveconflict,wheretherisksaretoohighformostinvestors,evenwithsuchinsurancesinplace.TheAfDBlists20countriesasfragileorconflict-affected,whichrequireparticularsupportto‘’consolidatepeace,buildresilientinstitutions,stabilizeeconomies,improvethelivesofvulnerablepopulations,andlaythefoundationsforsustainableinclusivegrowth’’(AfDB,2023).Countrieswithsuchfragilitiesfacechallengesinattractinginvestment,buttargetedconcessionalsupportandtechnicalassistancefrommultilateraldevelopmentbankscancontributetoimprovingtheenablingenvironmentandcountersuchdifficulties.Whilepoliticalriskiscountryspecificandcanvaryovertime,someinvestorstendtooverlooktheheterogeneityofthecontinentandplacesimilarriskratingsacrossallAfricancountries–thisisreferredtoinformallyasthe“Africapremium”anddenotesacommonblanketphenomenonwherebyAfricansovereignsandcorporationsareconsistentlyperceivedasriskierthanthoseinotherpartsoftheworld(Fofack,2021).Ouranalysisunderlinestheimportanceofbetterdatatoensurethatriskperceptionsarealignedwithriskrealities.Measuresadoptedbygovernmentstostrengtheninstitutionsandtheruleoflawcancontributetochangingriskperceptionsovertime,whileinvestorsareencouragedtofocusonthespecificsofeachcountry.Giventhatprojectfinanceandindependentpowerproducer(IPP)projectsarestillrelativelynascentonthecontinent,atrackrecordofsuccessfulIPPprocurement(e.g.inSouthAfricaandEgypt)canreducetheperceptionofriskandforceinvestorstopriceaccordingtoactualrisk.1.4.2Sector-ortechnology-leveldriversProject-specificfactorsnaturallyvaryacrossdifferentkindsofcleanenergyproject.Inthediscussionthatfollowswefocusonrisksfacingrenewablepowerprojects.Some,butnotall,ofthesewouldapplytoothercleanenergyinvestments.Keytechnology-andsector-specificdriversforrenewablepowerprojectsincludetheregulatoryenvironment,thereliabilityoftheofftakearrangement,theclarityofpricesignalsandtheavailabilityofbankableprojects.RegulatoryenvironmentThedegreeofregulatorydevelopmentforcleanenergyvariesacrossthecontinent.AccordingtotheAfDB’sElectricityRegulatoryIndex(AfDB,2022),theregulatoryframeworkofcountrieslikeUganda,Egypt,Senegal,GhanaandKenyaarewelldevelopedandtheirrespectiveutilitiesrespondpositivelytoregulatoryguidelines.However,whilehigherthanthepreviousyear,thecontinent’saveragescoreremainslowmostlybecauseofthepoorfinancialhealthofutilitiesanddisparitiesinregulatoryoutcomesacrossthecontinent.Regulatoryenvironmentscanaffectprojectsindifferentways,fromawiderinvestmentclimatetospecificenergysectorregulation.Clearpermittingandlicensingregimesreassureinvestorsthatprojectswillnotsufferlongdelaysduetoonerousandlengthyapproval36InternationalEnergyAgencyFinancingCleanEnergyinAfricaprocedures,whichinturnpushupprojectcosts.One-stopshopshavebecomeacommonsolutiontosimplifyandexpeditesuchprocesses.Broaderlegalframeworksalsohaveanimpactonriskperceptionandtheabsenceofspecificregimesforcleanenergyprojectscan1affectinvestors’appetiteinthosemarkets,whilealsoplacingaburdenoncontractnegotiation.Whereregulationisinplace,marketdesigncanattractordeterinvestment,particularlyinthepowersector,whereprivateparticipationhasbeengraduallyincreasing(seeChapter2).Forexample,Namibiahasintroducedamodifiedsinglebuyermodel,whichallowsIPPstogenerateandsellelectricitytoregionaldistributors,aswellaslargecommercialandindustrialcustomers,withoutgoingthroughthenationalutilityNamPower.Thebroadeningofmarketparticipantsrequiresindependentregulatorswithstrongmandatestoapplyandenforcerules,notablynon-discriminatoryaccesstothegridandcleartariff-settingprinciples.Fiscalregimesandincentivescanalsohaveasignificantimpactoncleanenergyprojects,especiallyinmarketswithdistortedpricesignals.Taxandcustomsexemptionsfortheimportofsolarpanels,invertersandothernecessaryequipmentcancontributetolevellingtheplayingfieldandsupportinvestmentincleanenergy,particularlywherefossilfuelsubsidiesarealsoinplace.Buttheycouldhaveimplicationsfordomesticvaluechaindevelopment,industrialpolicyandjobcreationgoalsthatmightsolicittrade-offsinlong-termpolicymaking.Forsometechnologiesthathaveparticularlylongcontractdurations,suchaslargehydropowerdams,investorsoftenlooktoincludestabilisationclausesfixingtheapplicablefiscalregimetominimisetheriskofunexpectedcostincreasesovertime.Thesecontractscanalsoincludebenefitsharingprovisionstoincentivisebalancedagreementsthatminimisethelong-termriskofcontractrenegotiationandterminationprovisionstoreassurelendersthattheirdebtwillberepaidintheeventofbreachofcontract.InstitutionssuchastheAfricanLegalSupportFacility,whichsupportsAfricangovernmentsintheirnegotiationofcomplexcommercialtransactionswiththeprivatesector,contributetobalancedcontractsbetweensovereignsandinvestorsintheenergysector,whilealsobuildingcapacityamonggovernmentsforimprovedcontractnegotiationsandprocurementprocesses.ReliabilityofofftakeIEA.CCBY4.0Wheninvestinginapowerproject,thecreditworthinessoftheofftakerisofvitalimportancetoassurethecapitalproviderthattheywillreceivepaymentsinfullandontime.Themajorityofutility-scaleprojectsinAfricawillsellpowertoastate-ownedutility.Although30countriesallowprivateparticipationingeneration,onlyfourallowprivateparticipationintransmission.MostutilitiesinAfricafacesignificantfinancialchallenges,bothintheirlong-termsustainabilityandshort-termliquidity,andmanyreceivebudgetarysupportfromtheirgovernments.OnlyaboutoneinthreeutilitiesinAfricarecovertheiroperationalanddebt-servicingcosts,includingsubsidiesfromcentralgovernment;excludingsuchsubsidies,theChapter1Cleanenergyinvestmentlandscape37ratiodropstooneinfour.Manyutilitiesarestrugglingwithlowcollectionratesandtariffsthatarenotcost-reflective,whicharecompoundedincaseswhereutilitieshavepushedaheadwithrapidelectrificationprojects(ESMAP,2021).OperationaldifficultiesputadditionalstrainonAfricanutilities.Closetotenutilitiesexperiencesystemlossesofover20%,andonlyahandfulreportlossesbelow10%(seeFigure1.5).Theselossesnotonlyreflectpowerthatisnotdeliveredduetoinefficienciesinthetransmissionanddistributionnetworks(technicallosses),butalsopowerthatisdeliveredtocustomerswithoutgoingthroughanymeter(non-technicalorcommerciallosses),mostlythroughillegalconnections.Countriesthathavemanagedtosuccessfullyreducesystemlosses(e.g.Côted’Ivoire)havemostlydonesothroughtheimplementationofstrongmanagementinformationsystemstosupportoperations,coupledwiththeadoptionofefficientprocessesacrossthebusiness(ESMAP,2021).Figure1.5⊳Shareofnetworklossesandnetprofitmarginofstate-ownedelectricutilitiesinselectedAfricancountries,202025%20%15%10%5%-5%-10%-15%NamibiaMauritiusSenegalGabonDRCongoCôteBeninMozam-Networklossesd'IvoirebiqueUtilitynetprofitmarginIEA.CCBY4.0.HighsystemlossesputstrainsonutilitiesbyaffectingrevenuesandcontributetoworseningfinancialconditionsNote:Lossescomprisetechnicalandnon-technical(includingtheft).Sources:IEAandWorldBank.Thepoorfinancialhealthofutilitiesalsoincreasestransmissionrisksinceinmanycasestheyhavelimitedabilitytofinancethenecessaryinvestmentingridmaintenanceandexpansion.Thegrid’sinabilitytoabsorbpowerhasmultipleimplications.Wherethegridisnotreadybyaproject’scommercialoperationdate,itcanresultintheutilitypayingforpowerthatisdeemedtobegenerated(e.g.theLakeTurkanawindprojectinKenya),or,inextremecases,developersmaybeforcedtoutilisedistributionlinestoevacuatepower,leadingtoheavylossesandpotentiallydamagingthelines.Successstories,suchasRwanda,showcasehow38InternationalEnergyAgencyFinancingCleanEnergyinAfricaincreasinggenerationcapacityinlockstepwithinvestingingridrehabilitation,expansionandupgradecansignificantlyimprovesystemreliabilityandreducelosses(ESMAP,2021).Regionalpowerpoolscanmitigatethetransmissionrisk,includingthroughemergingprivate1sectorpowertraderssuchasAfricaGreenCo,whichparticipatesintheregionalSouthernAfricanPowerPoolandactsasanintermediarydemandaggregator.Attractingprivateinvestmentintogriddevelopmentwillbecriticaltobuildthetransmissioninfrastructureattherequiredscale(seeChapter2).Othersolutionsareemergingonthecontinenttomitigateofftakerrisk,notablyforcommercialandindustrialcustomers.Here,theofftakerisanorganisationorcommercialentity,oftenwithalongtrackrecordandprovenrepaymentability,whichcanhaveahighercreditratingandthereforebeconsideredmorecreditworthythanthepublicutility.However,domesticregulationtoallowthisdoesnotalwaysexistorisnotclearenoughtosupportmarketgrowth(Res4AfricaFoundation,2021).Asthesearrangementsemergeandexpand,governmentsandutilitiesneedtobewaryofworseningthefinancialhealthofutilitiesbydivertingreliablecustomerswiththecapacitytopay.Planningandefficientregulationarekeytominimisingthisrisk.ClarityofpricesignalsClearpricesignalsarecriticaltoinvestors,buttheprevalenceoffossilfuelconsumptionsubsidies(includingforelectricitygeneration)inmanyAfricancountries,andindeedinmanyotheremergingeconomies,canhinderinvestmentincleanenergy.IEAtrackingofthevalueofthesesubsidiesshowsasubstantialdeclinesincethemid-2010s,butthistrendhasrecentlybeenreversedduetohighlyvolatilefossilfuelpricesfollowingRussia’sinvasionofUkraine.In2022fossilfuelconsumptionsubsidiesskyrocketedworldwidetomorethanUSD1trillion,accordingtotheIEA’slatestestimate.ThisisbyfarthelargestannualvalueregisteredsincetheIEAstartedtrackingthesesubsidies.ManycountriesinAfricathathadalreadybeensubsidisingfossilfuelseitherkeptthosesubsidiesorundertookpolicyinterventionstoinsulateconsumersfromballooningprices,whichnotonlydeterioratedtheirfiscalpositionbutalsohadtheadverseeffectofkeepingfossilfuelsartificiallycompetitivewithlow-emissionsalternatives.Intheelectricitysector,end-usertariffsaresubsidisedinmanyAfricancountries.Withtariffsthatarenotcost-reflective,moststate-ownedutilitiesdonotrecovertheiroperatinganddebtservicingcosts.AccordingtoastudyfromtheWorldBank,themediancostofsupplyingelectricityforverticallyintegratedanddistributionutilitiesincreasedby21%between2012and2018,whiletariffsincreasedbyonly16%(ESMAP,2021).ManyAfricancountrieshavethereforeannouncedcost-reflectivetariffreforms,with17currentlyundergoingsuchreforms,withninemoreindiscussion(AfDB,2021).Suchreformiscriticaltoimprovethefinancialhealthandsustainabilityofdebt-saddledstate-ownedutilities,andsimultaneouslyadoptmeasuresthatprotectthemostvulnerablemembersofthepopulation.Chapter1Cleanenergyinvestmentlandscape39IEA.CCBY4.0Fossilfuelsubsidyandelectricitytariffreformsremainadifficultpoliticalchallenge.Tobedurableandeffective,pricingreformsneedtobecoupledwithabroaderpolicypackagedesignedtostimulateamorerobust,secureandsustainableenergysector,whileprotectingvulnerablegroupsofthepopulation.Buttheprospectsforbuildingcleanenergysystemsareinextricablylinkedwithgettingthesepricesignalsright,allowingpricestocoverfullcosts.Somecountriesaretakingstridesinphasingoutsubsidiestoenhancethehealthofutilitiesandreducefiscalburdens.In2023thegovernmentofSenegaldecidedtoprogressivelyremovesubsidiesintheenergysector(forelectricity,oilproductsandbutanegas)by2025(Enerdata,2023).Thereformaimstoreduceenergysubsidiesto1%ofGDP(fromthecurrent4%)bytheendof2024,beforeeliminatingthementirelyby2025.InNigeria,thenewlyelectedPresidentBolaTinuburemovedgasolinesubsidiesinMay2023(Reuters,2023b).AvailabilityofbankableprojectsCapitalprovidersoftenarguethatthelackofbankableprojectslimitstheirabilitytoinvest.Anumberofissuesareatplayhere,includingthebarforbankabilityandthechallengeofearly-stagefinancing.Someprojectsareunlikelytobebankablewithouteithergovernmentsubsidiesorgrants,orotherconcessionalfinancesolutions.Forexample,manyelectricityandcleancookingaccessprojectswouldbeunaffordableforenduserswithoutsubsidies,particularlyinruralareas(seeChapter2).Similarly,large-scalepowerprojectsandgridinvestmentsincountrieswithnascentenergysectorsarelikelytocarryanumberofadditionalrisksthatpreventprivateinvestorsfromseeingthemascommerciallyviablewithoutpublicorconcessionalsupport.Inthesecases,thethresholdofbankabilityisthereforedependentonthesupplyofsubsidisedorconcessionalfunds.Anothermajorobstacleisthelackofearly-stagefinancingforprojectplanning,feasibilitystudies,andgeneralbusinesssupportforSMEsandstart-ups(seeChapter3).Early-stagefinancingishighriskandisoftenintheformofgrantsandequity;itthereforecannoteasilybefinancedbycommercialbanksandislikelytocomefromDFIs,donorsornationalgovernments.Forutility-scaleinfrastructureprojects,whichgenerallyrequireDFIsupport,someinitiativesliketheAfDB’sSustainableEnergyFundforAfricacanprovideearly-stageconcessionalsupport.Butsmallerprojects,especiallyinvolvinglocalSMEsinthewideningofenergyaccess,areunlikelytohavethecapacitytoapplytosuchfundingsources,asthisprocesstendstorequiresignificanttimeandexpertise.Beyondfinancing,thepre-developmentstagecanalsofaceanumberofregulatoryhurdles.Alackofclearenergysectorplanningoraccompanyingtenderingprocessescanmakeitcomplexandtime-consumingfordevelopers.Forexample,whilethereareseveralDFI-fundedtechnicalassistanceprogrammestosupporttheestablishmentoftenderprocessesforutility-scalegenerationprojects,manyprojectsarestilldevelopedthroughunsolicitedproposals,whichdependonprivatesectoradhocinitiatives.Tosupportthegenerationofapipelineofbankableprojects,governmentscanworkwithdevelopmentpartnerstostrengthentheregulatoryenvironmentandcreatefinancingfacilitiesmadeupprimarilyofgrantsandequityinstrumentsspecificallytargetedatthepre-developmentphase.40InternationalEnergyAgencyFinancingCleanEnergyinAfricaChapter2DesigningfinancesolutionsforcleanenergySolutionsforkeysectorsSUMMARY•ThedoublingofenergyinvestmentinAfricaseenundertheSustainableAfricaScenario(SAS)requiresinnovativesolutionstofullymobilisecapitalfromarangeofproviders–nationalgovernments,DFIsandprivatecapital.Privatecapitalplaysakeyroleby2030,increasingsixfoldfromtoday’slevels,butunderstandingwhereitcanbedeployedisessentialtoenablethedesignoftargetedinterventions.Andtherearestillsomecountriesandsectorswheregrantsandconcessionalfundingneedtolead.•Achievinguniversalaccesstomodernenergyrequiresamajoruptickinspending,reachingroughlyUSD25billionperyearby2030.Affordabilityconstraintsriskactingasabrake:onlyaroundhalfofthenewelectricityaccessconnectionsprovidingthemostbasicenergyservicesarelikelytobeaffordableintheabsenceofadditionalfinancialsupport,suchassubsidies,grantsortariffreform.Cleancookingprojectsbeyondimprovedcookstovesfacesimilarchallenges.Grants,concessionalcapitalandgovernmentsupportwillthereforeplayacriticalrole,particularlyinruralareas.•Investmentinrenewablepowerprojectsissettotripleby2030undertheSAS.Whileinvestmenthasbeengrowing,thereisariskthatlower-incomecountriesrelyingonconcessionalfundsareleftbehind.Thesecountriesaccountforthree-quartersoftheregion’spopulation,but,giventheirlessdevelopedregulatoryenvironmentandlowerdemand,attractonlyasmallshareofinvestment.Ensuringconcessionalcapitalistargetedtosupporttheselower-incomecountriesisvital.•MassiveinvestmentinAfrica’sgridsiscriticaltoimprovesystemreliability,expandaccessandfacilitatetheintegrationofvariablerenewables.Thepoorfinancialhealthofutilitieshashamperedinvestmenttodate,butmodelshaveemergedforgreaterprivatesectorparticipationinthissegment.Adoptionofthesemodelsincreasesprivatesectorinvestmentingridsfrom4%to10%by2030.•Energyefficiencyisnotcurrentlyapriorityformanysourcesofconcessionalcapital:itisonlyexplicitlycoveredinaround15%offinancinginstruments.EfficiencyplaysamajorroleintheSAS,buthigherupfrontcostscancomplicateinvestment.Numerousinnovativefinancingmodelsarebeingtrialled,fromlarge-scaleapproachestothosetargetingsmallandmedium-sizedenterprisesandconsumers,butmanyrequirepolicysupportandconcessionalfundingtoachievethenecessaryscale.•Africancountriescantakeadvantageofgrowingglobaldemandforcriticalmineralsandlow-emissionsfuelstodrivedomesticindustrialdevelopment,creatingvalue-addedactivitieswithinthemineralsupplychainandpursuinglong-termprospectsforlow-emissionsfuels.Manyoftheseprojectscanbefinancedbyprivateactors,butlow-emissionshydrogenwillneedsubstantialpublicsupporttogainmomentum.Chapter2Designingfinancesolutionsforcleanenergy41IEA.CCBY4.02.1IntroductionMobilisingcapitaltomeetAfrica’srequirementforcleanenergyinvestmentmeanstappingintoallsourcesoffinance,leveragingdebttodevelopcapital-intensiveprojectsandbringdowntotalcosts,andraisingequityforsmaller,riskierundertakingsthatlenderswouldstruggletofinance.Matchingthesealternatives–aswellastheneedsoffinanceproviders–withtheprofilesofdifferentsubsectors,technologiesandcountriesiskeytoscalingupinvestmentinanefficientway.Thischapterexaminesthedifferencesamongprojectsbyfocusingontheinvestmentprofilesoftheirrespectivesubsectors–energyaccess,renewablepower,grids,energyefficiency,andthedevelopmentofcriticalmineralsandlow-emissionshydrogen.EachoftheseareasplaysacriticalroleundertheSASandneedstobefinancedbytherightmixofpublic,concessionalandprivatesectorcapital.Thischapteridentifiesbusinessmodelsalreadyinuseintheregiontohighlightwhereconcessionalcapitalismostneededandtodemonstratehowprivatecapitalcanbedeployed.Box2.1⊳SourcesoffinanceScalingupinvestmentincleanenergymeansmobilisingcapitalprovidersandfinancinginstrumentstomatchthecapitalstructureofenergycompaniesandassets.Traditionally,debtplaysalargeroleincleanenergydevelopmentsduetotheprominenceofthepowerandend-usesectors,whereprojectsgenerallyhavehighupfrontcosts.IntheAfricancontext,debtcanbeexpensiveandinshortsupplysinceprivatedebtmarketsaresmalloutsideSouthAfrica,andpublicdebthasbecomingincreasinglyunsustainableinmanyeconomies.Thisposesamajorchallengetotheexpansionofcleanenergyprojects;however,avarietyofalternativefinancingapproachesexists,eachutilisingdifferentdebt-to-equityratiosaccordingtothestageoftheprojectcycle,asbrokendowninthesectionsthatfollow.WhiletheroleofdebtincreasesundertheSAS,equityremainsessentialwhererisksarehigher,suchasinnewmarkets,fornewtechnologiesorduringthedevelopment,constructionandgrowthphaseofprojects.EquitycapitalislimitedacrossAfricancountries,withmanyoftheequityfundscurrentlyactiveinenergyprojectfinanceonthecontinentfundedbyDFIs.Othersourcesofequityincludecorporatebalancesheetsand,morecommonly,privateequityandventurecapitalfirms,whichareakeysourceofcapitalforstart-ups,includingforenergyaccessprojects.Accessingequitycanbeachallenge,particularlyforsmallandmedium-sizedenterprises(SMEs),giventhatmostequityprovidersarebasedabroad.Equally,thereisashortageofgrowth-stageequity,whichcanpreventthescaling-upofindustriesoncetheyhavepassedthepilotstage.UndertheSAS,privateinvestmentincreasessixfoldinabsoluteterms,buoyedbypolicyreformsandeffectiveuseofconcessionalcapitaltode-riskprojects.DFIsplaythedualroleofinvestingtheirowncapital–bothinprojectsviadebtandequityandinearly-stage42InternationalEnergyAgencyFinancingCleanEnergyinAfricadevelopmentfinancing–andusingtheirconcessionalfundstomobilisetheprivatesector.ThismeansDFIcapitalisparticularlyactiveinrenewablepowergeneration,includinginrelationtoelectricityaccessprojects,emergingtechnologies(suchaslow-2emissionshydrogen)andcleancooking.Meanwhile,state-ownedenterprisesmaintainakeyroleingridsandstorage,althoughachievingthenecessarylevelofinvestmentwillrelyonimprovingtheirfinancialhealthandislikelytorequiregrantsandconcessionalsupportfromdonors.Figure2.1⊳SourceoffinancebytechnologyintheSAS,2030ByproviderByinstrumentRenewablepowerPrivateGridsandstorageDFIsEfficiencyPublicOtherenduseDebtLow-emissionfuelsEquity50%100%50%100%IEA.CCBY4.0.Theprivatesectorplaysamajorroleacrossallsectorsexceptforgridsby2030;useofdebtrises,butequityremainsimportantfornewtechnologiesandend-usesectorsNotes:Accessprojectsarecapturedwithingrids,renewablepowerandefficiency.DFI=developmentfinanceinstitution.2.2EnergyaccessIEA.CCBY4.0Morethan600millionpeopleinAfrica(over40%ofthepopulation)hadnoaccesstoelectricityin2022,and990million(nearly70%ofthepopulation)lackedaccesstocleancooking.Themajorityofpeoplewithoutmodernenergyservicesareconcentratedinruralareas–around80%forelectricityandtwo-thirdsforcleancooking.Fivecountries–theDemocraticRepublicoftheCongo(DRC),Ethiopia,Nigeria,TanzaniaandUganda–togetheraccountforaroundhalfofthepeoplewithoutaccesstoelectricityinAfrica,withasimilartrendforcleancooking.IntheSAS,whichachievesuniversalenergyaccessby2030,aroundUSD22billionperyearisrequiredtoconnectpeopletoelectricitysourcesandalmostUSD4billionannuallytoprovidethemwithcleancookingdevices.Eventhoughthisrepresentsjust1%ofcurrentglobalenergyinvestment,historicallyspendingonaccessprojectshasbeendramaticallyChapter2Designingfinancesolutionsforcleanenergy43lowerthantheserequiredlevels,withaverysmallpresenceofprivatecapital(seeFigure2.2).Achievingenergyaccessgoalswillrequireastep-changeininvestmenttosupportelectricityandcleancookinginfrastructureanddevices,alongsideimprovementsintheoperatingenvironmenttoallowprivatecompaniestoplayalargerrole.Figure2.2⊳Annualinvestmentinandpeoplegainingaccesstoelectricityandcleancooking,Africa,2019and2023-2030intheSASBillionUSD(2022)Electricity906CleancookingMillionpeople30180206041201030260002023-2030201920192023-2030HistoricGridInfrastructureMini-gridsStand-aloneEnd-useequipmentPeoplegainingaccessIEA.CCBY4.0.Toachieveuniversalaccessgoals,investmentinaccesstoelectricityneedstoincreasesevenfoldandinvestmentincleancookingovertwenty-foldNote:Historicaldataforinvestmentinaccesstoelectricitycomprisenotonlyfirstaccessprojects,butalsoinvestmentaimedatimprovingthelevelofaccessforhouseholdsalreadywithaccess.Sources:IEA(2023).AVisionforCleanCookingAccessforAll;SE4AllandClimatePolicyInitiative(2021).EnergizingFinance:UnderstandingtheLandscape.Achievinguniversalaccessrequiresasignificantshiftinthetypesofprojectsthatarefinanced.Around42%ofthepopulationgainingaccesstoelectricityby2030intheSASdoessowithagridconnection,withgridseventuallyreachingalmosteverycustomerby2050(IEA,2022).Particularlyinthecomingdecade,decentralisedsolutionsplayanimportantrole:ofthepeoplegainingelectricityaccessby2030,30%dosoviamini-gridsandtheremaining27%withstand-alonesystems,mostlysolarPVbased.Onthecleancookingside,newIEAanalysishighlightsthataroundUSD250millionofcookingequipmentneedstobedistributedtoachieveuniversalaccessby2030(IEA,2023a).Improvedbiomasscookstovesaccountfor40%ofthis,representingaviableandaffordablesolutioninruralareas,33%LPG,10%electriccookingdevicesandtheremaining15%biogasandethanolstoves.Inordertosupporttherolloutofdecentralisedsolutionsandend-usedevices,localcompaniesincludingSMEsarelikelytoplayanimportantrole.Projectsizeissignificantly44InternationalEnergyAgencyFinancingCleanEnergyinAfricasmallerthanutility-scaleenergydevelopmentsandevenmanyotherend-useinvestments,andtheriskassociatedwiththeendconsumercanalsobemuchhigher.Thetraditionalchannelsforenergyfinancingarenotwelladaptedtosupportthesesmaller,higher-risk2projects,ortofinanceSMEsandlocalstart-ups.Therewillneedtobeanincreaseinpatientequityandaffordablelocalcurrencydebt,andanemphasisonearly-stagefinancing,tosupportthedevelopmentofbankableprojects.Concessionalcapitalhasacriticalroletoplayinde-riskingprojectsandincreasingtheroleoftheprivatesector,butgovernmentsupportanddonorandDFIgrantswillalsobeessentialfortheharder-to-reachhouseholds.AffordabilityofenergyaccessprojectsInsub-SaharanAfricanearly400millionpeople(roughlyone-thirdofthepopulation)liveinextremepoverty(WorldBank,2023);mostofthepopulationwithoutaccesstomodernenergyfallwithinthisgroup.Manyofthesehouseholdsstruggletoaffordnotonlytheupfrontcostsassociatedwithgainingaccess–electricityconnection,wiringthehouse,electricalappliances,efficientcookingstoves–butalsothecostofenergytokeepbenefitingfromit.Affordabilitychallengesalsodrasticallylimittheprofitabilityofmanyenergyaccessprojectsduetothelowdemand,especiallyinruralareas.Weestimatethatduetoaffordabilityconstraintsonlyaroundhalfofthenewelectricityaccessconnections(includinggrid,mini-gridandstand-alonesystems)providingthemostbasicenergyservices1arelikelytobecommerciallyviablewithoutincentivessuchasreducedconnectioncharges,lowertariffsandsubsidisedelectricalappliances(seeFigure2.3).IftheseprojectsaimforslightlyhigherlevelsofenergyserviceasintheIEAessentialbundle,2only5%ofthemwouldbeaffordablewithoutpublicsupport;thisfallstoalmostzerofortheextendedbundle.3Atthesametime,utilities,mini-gridoperatorsandotherenergycompaniesneedtocharge,orrecover,theequivalentofcost-reflectivetariffstocontinueoperatingandexpandingnewconnections.Thisindicatesthatend-userrisksarelikelytobetoohighforprivatecompanieswithoutacombinationofwell-targetedgovernmentsubsidiescoveringgridandoff-gridsolutions(e.g.cross-subsidisation),de-riskingmechanismsincludinggrants,andrelianceonproductiveusesasanchorloads.GovernmentincentivesinmanyAfricancountriesareconcentratedongridconnections.Roughly80%ofcountriesinsub-SaharanAfricaofferlow-incomeelectricityrates,whileonlyaround40%havefinancialsupportschemesformini-gridsandstand-alonesystems.Asaresult,therehasbeenariseinmulti-donorresults-basedfinancingfundsthatmini-gridandstand-aloneprojectscantapinto,suchastheBeyondtheGridFundforAfricaandtheSE4All-1Thebasicbundleincludesmorethanonelightpointprovidingtasklighting,phonechargingandaradio.ForIEA.CCBY4.0furtherinformationonthesedefinitionsseeGuidebookforImprovedElectricityAccessStatistics(IEA,2023b).2Theessentialbundleincludesfourlightbulbsforfourhoursperday,afanforthreehoursperdayandatelevisionfortwohoursperday.3Theextendedbundleincludesfourlightbulbsoperatingforfourhoursperday,afanforsixhoursperday,aradioortelevisionforfourhoursperdayandarefrigerator.Chapter2Designingfinancesolutionsforcleanenergy45managedUniversalEnergyFacility.Salesofoff-gridsolarsystemsincreasedfrom5millionunitsinsub-SaharanAfricain2019toalmost7millionin2022(GOGLA,2023).However,four-fifthsofthesalesaresmallerdevicessuchassolarmulti-lightsystemsandsolarlanternsthatarelimitedmostlytobasiclighting.Salesoflargersolarsystemsareoftenlimitedtobetter-offhouseholds,whichinsomecasesalreadyhaveaccessandneedaback-upsolution.Businessmodels,suchasPayGoSolar,allowconsumerstospreadoutupfrontcostsintomonthlypayments,buteventhesearetoocostlyforthepoorestconsumerstoaffordlargerdeviceswithoutadditionalsupport.Figure2.3⊳Shareofhouseholdswithoutaccessthatcanaffordelectricity,byenergyserviceandtechnology,Africa,2022LightingBasicbundleEssentialbundleExtendedbundleUnaffordable100%80%Affordablewithsubsidies60%Affordable40%20%SLMLSGridMGSHSGridMGSHSGridMGSHSIEA.CCBY4.0.Excludingsubsidiesandprovidedthatlow-costcreditisavailable,onlylimitedandbasiclevelsofenergyserviceareaffordablebyhouseholdscurrentlywithoutaccessNotes:MLS=multi-lightingsolarsystem;SL=solarlantern;MG=mini-grid;SHS=solarhomesystem.SHSsizesconsideredincreasefromthebasic(≥10Wp)totheessential(≥50Wp)andextended(≥100Wp)bundles.ForfurtherinformationonthebundlesseeGuidebookforImprovedElectricityAccessStatistics(IEA,2023b).Intheanalysisitisassumedthatupfrontcostsarespreadovertheinfrastructureorproductlifetime.Theanalysisisbasedonhouseholdincomedatabypercentile(WorldBank,PovertyandInequalityPlatform)andasolutionisconsideredaffordableifitscostislowerthanorequalto5%ofhouseholdincome.Off-gridsolarcompaniesandmini-gridoperatorsthataresuccessfullargelytargetthemostprofitableprojects,suchasperi-urbanareas,back-uppowerorsmallerproducts.However,thepresenceofthesecompaniesprovidesausefulsourceoftechnicalexpertiseandtheopportunitytodevisemodelstoenablethemtodeployinmorechallengingareaswhenfinancialschemesandincentivesbecomesavailable.Thesituationissimilarforcleancookingaccessprojectswheretheupfrontcostofstovesandthecostoffuel(electricity,LPGorcharcoal)undermineadoption(seeFigure2.4).AlthoughLPGisoneofthekeysolutionstoclosingtheaccessgap,onlyone-fifthofthepopulation46InternationalEnergyAgencyFinancingCleanEnergyinAfricawithoutaccesscanaffordtoswitchtoitwithcurrenttariffsandprovidedtheyhaveaccesstoaffordablecredittopurchasetheLPGstoveandcylinder.Ifweexcludecurrentsubsidies,only5%ofthosewithoutaccesscouldaffordLPGcooking.SolutionsbasedonPayGomodels,2wherefamiliescanpartiallyrefillcylindersatdistributedstations,haveprovensuccessfulinsomemarketssuchasSouthAfrica.Figure2.4⊳Shareofhouseholdswithoutaccessthatcanaffordcleancooking,bytechnologyandfuel,Africa,2022100%Unaffordable80%60%Affordable40%withsubsidies20%AffordableElectricElectricLPGICSICSwoodBiodigesterhotplateinductioncollectionIEA.CCBY4.0.Withoutexternalfinancialsupportandaccesstocredit,mostcleancookingaccessprojectsarenoteconomicallyviablebecauseofthelackofcustomers’affordabilityNotes:ICS=improvedbiomasscookstoves(ISOTIER>1).ICSwoodcollection=improvedcookstoveswherewoodiscollectedorharvestedatnoadditionalcost,asopposedtobeingpurchased.Intheanalysisitisassumedthatupfrontcostsarespreadovertheinfrastructureorproductlifetime.ICSandbiogasdigestersalsoreceivesubsidies,butintheabsenceofcomprehensiveinformationtheseareexcludedfromtheanalysis.Theanalysisisbasedonhouseholdincomedatabypercentile(WorldBank,PovertyandInequalityPlatform)andasolutionisconsideredaffordableifitscostislowerthanorequalto5%ofhouseholdincome.Withoutreducedelectricitytariffscurrentlyinplace,nohouseholdswithoutaccesstocleanIEA.CCBY4.0cookingwouldbeabletoswitchtoelectriccooking.Improvedbiomasscookstovesaregenerallymoreaffordable.Suchcookstovesdonotrequirethehouseholdtochangefuelandbyreducingconsumptionleadtoenergyandexpendituresavings,payingbacktheupfrontcostalmostfourfoldwithinoneyear(IEA,2022).Alongwiththeoverallhouseholdsavingsassociatedwithaswitchtocleancooking,therearesignificantpositivehealthimpacts,particularlyforwomen.Poorairqualityfromtraditionalcookingindoorsisamajorcontributortoprematuredeath,whichifassessedonitsownwouldrankthirdamongtheleadingcausesofdeathglobally,andsecondinAfrica,whereover60%ofprematuredeathsareamongwomenandchildren(IEA,2023a).Thesemultiplebenefitsindicatethatcleancookingshouldbeapriorityareaforpublicsupport.Chapter2Designingfinancesolutionsforcleanenergy47BestpracticestoovercomefinancingbarriersforaccessInternationalsupportiskeytoacceleratinginvestmentandovercomingthechallengesassociatedwithaccessfinancing,butgovernmentsmustalsoplaytheirrolebycreatingatransparentenablingenvironment.Currently,only48%ofthepeoplewithoutaccesstoelectricityinAfricaarebasedincountrieswithofficialnationaltargetsandplansinlinewithSDG7.1goals,andonly17%ofthosewithoutaccesstocleancooking.Developingintegratedenergystrategiesincludingsuchtargets,accompaniedbyactionplansanddedicatedgovernmentagenciesandprogrammes,isafundamentalbuildingblocktoidentifywhereinvestmentneedsaregreatestandhowprojectscanbefinancedwhileprovidingcertaintytoinvestorsandtheprivatesector.Governmentsalsohaveamajorroletoplayinfundingaccessprojects.Gridextensionsaregenerallypubliclyfunded,althoughthereareseveralmodelsofprivateinvolvementbeingtrialledintheregion(seeSection2.4).Somesuccessfulgridextensionprogrammeshavecombinedcentralgovernmentandlocalcommunityfinancing,ensuringlocalengagement.Forexample,in2020GhanaintroducedtheSelf-HelpElectrificationScheme,whichallowedcommunitiestobeconnectedtothegridearlieriftheycouldprovidepolesforlow-voltagelinesandguaranteethatatleast30%ofthehouseholdsinthecommunityarereadytostartusingtheelectricityprovided(IEA,2022).Upfrontconnectioncostsareoftenasignificantbarrierforhouseholdsclosetothegridbutwithoutaccess.Somecountrieshaveimplementedtheoptionofon-billrepaymentofconnectioncosts,reducingtheupfrontburdenandpermittingmanyhouseholdstolegallyconnect–asinCôted’Ivoire.Mini-gridprojectsalsorequirepublicsectorassistancetosupporttherelativelyhighupfrontcostsandtoensureatariffstructurethatisbothcost-reflectiveandsensitivetoendusers’affordabilityneeds.Mini-gridsservearoundfivemillionpeopleinNigeriathankstothecombinationofelectricityreforms,theexistenceofdedicatedgovernmentagenciessuchastheRuralElectrificationAgencycatalysingastrongpresenceofdevelopmentagenciesanddonors,andtheabilitytoaccessfinancefromtheNigeriaElectrificationProject.Up-frontgrantsweremadeavailableduringthefirstmini-gridprogrammesintheearly2010s,creatingastrongpresenceoflocalplayers.Developersarenowabletoaccessresults-basedfinance,particularlysincemini-gridscanalsobeusedasacleanalternativetodieselgenerators,andtakeoutcommercialloansfromlocalbanks(GET.transform,2021).However,accessinggrowth-stageequityremainsamajorchallenge–itisinshortsupplyandoneofthemajorobstaclestoscalinguptheindustry.Oneofthegreatestchallengestofinancingstand-aloneelectricityandcleancookingprojectsistheirsmallscaleandhowtogetlocalSMEsfullyinvolved.Larger,ofteninternational,companiescanaccessinternationalgrantsandequityinvestment,andcanseektoaggregateprojectseithertosupporteconomiesofscaleduringprocurementor,dependingonthecreditworthinessofendusers,tocreatetradablesecuritiestoraisedebt(seeChapter3).Smaller,localcompaniesoftenstruggletoaccessDFIcapitalorimpactfundsthatarebasedabroadandtheyarethereforereliantoncommercialbanks,whohavedifficulty48InternationalEnergyAgencyFinancingCleanEnergyinAfricaunderstandingoff-gridbusinessmodels.Manycompaniesthereforeoperateasretailbusinesses,whichcanattractmoreprivatecapitalbutneedtofocusonthemostprofitableprojects.Analternativetothisapproachwouldbeanenergy-as-a-servicemodelviapublic–2privatepartnership,wherethegovernmentleveragesDFIcapitaltobuythesolarhomesystemsfromaprivatedeveloper,andthehouseholdspayaffordabletariffsfortheuseofenergy(andprovidingforequipmentmaintenance),whichisensuredviaalong-termcontract.Identifyingproductiveactivitiesthatcouldbenefitfromelectricity(whilealsostimulatingruraleconomicdevelopment)isalsokeytoincreasingdemandandimprovingtheprofitabilityofruralelectrificationprojectsandhenceattractinggreaterlevelsofprivatefinance.Examplesincludethehybridsolarmini-gridplantonBugalaIslandinUganda,whichsaw400additionalbusinessesconnectedintheframeworkofaproductiveusesprogramme,increasingdemandbyalmost50%(PowerAfrica,2021).Productiveusesrequirestrongerupfrontplanningandinvestmentsincedemandcanbefourtimeshigherpercapitathantheprovisionsolelyofessentialhouseholdservices(TheRockefellerFoundation,2023).Developingproductiveusesalsorequiresmuchbroadereconomicdevelopmentprogrammes,particularlytargetingruralareas,whicharelikelytorelyongovernmentfundingwithdonorgrantcapital.Financingcleancooking,aswithoff-gridsolar,requiressupportingseveralsmallandlocalactors,butwiththeaddedcomplicationofunderstandingwhichtechnologyisbestsuitedtothehouseholds’needs.Thepoorestfamiliesmightinitiallybenefitfromswitchingtoimprovedbiomassstoves,usingamicro-creditloanthattheypayoffusingsavingsfromreducedcharcoalorwoodpurchases.Familiesrelyingoncollectedbiomasspresentparticularchallengesforaccesstocleancooking.Improvedbiomasscookstoves(andinsomecasesbiodigesters)representthemostviablesolutionintheshorttermforthesefamilies,buttheupfrontcostswouldneedtobefullycoveredinmostcases.Wealthierfamilies,especiallyinurbanareas,havebetteraccesstoLPGorelectriccookingataffordablerates,butawarenesscampaigns,accesstocreditandregulatedenergypricesareallrequiredtoensuresustainableandlong-termadoption.End-useLPGinvestmentsrelyoninfrastructureforimport,localproductionanddistribution,whichifnotdesignedcorrectlycanpushupthepricefortheenduser.However,innovativebusinessmodelssuchasPayGoLPG,asseeninKenyaandSouthAfrica,canhelplowerthecostofsupplyaswellastheupfrontcostofcylinderstohouseholds.Meanwhile,financeforelectriccookingcancomefromelectricityproviders;forexample,theKenyanutilityKPLCisexploringon-billrepaymentforhouseholdstopurchaseelectriccookingappliancesandalreadyhasaresults-basedfinancingfacilityinplaceforcleancookingproviderstoaccess(IEA,2022).Carbonmarketsarealreadyplayingaroleinprovidingcleancookingsolutions.CreditsforIEA.CCBY4.0cleancookingstovesrepresentedalmostaquarterofthevoluntarycarbonmarketcreditsissuedinAfricabetween1996and2023,andwiththemarketsettogrow,thisislikelytoprovideamajorrevenuestreamforcleancookingprojects.However,therearestillChapter2Designingfinancesolutionsforcleanenergy49significantgapsinregulatoryframeworksandmonitoringandverificationsystems,discussedinmoredetailinChapter3,whichneedtobeaddressedtoensurethepositiveimpactofthisgrowingmarket.Table2.1⊳CommonfinancingtypesbyprojectstageAreaDevelopmentandimplementationOperationMini-gridsGrantsConcessionalequityandloansCommercialdebtStand-aloneCommercialdebtResults-basedfinancesolarViabilitygapfundingAggregation,securitisationPrivateequityandventurecapital(PE/VC)Corporate(growth)equityand,whereCleancookingTechnicalassistanceandgrantspossible,publiclistingConcessionalequityanddebtCorporateequity(PE/VC)Concessionalorcommercialdebt,basedonend-userriskTechnicalassistanceandgrantsResults-basedfinancingConcessionalequityanddebtAggregation,securitisationCorporateequity(PE/VC)CarbonmarketsCorporate(growth)equityand,wherepossible,publiclistingCarbonmarketsResults-basedfinancingAggregation,securitisationNotes:Gridextensionsarecoveredinthegridssectionbelow.Aggregationandsecuritisationrefertothepoolingofassetsandsellingthecashflowstoinvestorstoraisecapital,generallyviaanasset-backedsecurityorabond;thisisdiscussedinmoredetailinChapter3.Viabilitygapfundingcantakeseveralforms,butreferstothepracticeofprovidinggrantsorconcessionalshort-termloanstoprojectsthatareeconomicallysignificantbutnotfinanciallyviable.Results-basedfinancingreferstoapproacheswherepaymentsaremade,usuallybygovernments,donorsorDFIstotheprivatesector,ontheachievementofpredefinedresults.2.3Renewablepowergeneration2.3.1Utility-scaleprojectsRenewablepowerbecomesthelargestsectorbyshareoftotalinvestmentin2030undertheSAS,reachingoverUSD50billioncomparedtolessthanUSD20billionin2022(seeChapter1).SolarPVisthemostprominentplayer,asalreadyseenwithnewenergyinvestmentinSouthAfricawhereanimpressiveUSD2.7billionwasspentin2022,accountingfornearlyhalfofthecountry’scleanenergyinvestmentthatyear.Windenergyinvestmenthasalsoexperiencedstronggrowth,particularlyinNorthAfrica,expandingby70%between2016and2022.Alongsidethegrowthinvariablerenewables,hydropowerandgeothermalprovidekeysourcesofdispatchablepower.By2030hydropoweraloneaccountsforalmosthalfoftotalgenerationintheregion.Thisshifttowardsrenewablesisdrivenbyfallingcostsandpoliciespromotinglow-carbonenergy,capitalisingonAfrica'sabundantpotentialforrenewableresources.50InternationalEnergyAgencyFinancingCleanEnergyinAfricaCleanenergyprojects,especiallyinlessmaturemarkets,oftenfacechallengesthatcanslowinvestment.Theserisksaregenerallyhigherinthedevelopmentandconstructionphases,requiringhigherlevelsofequityfinancing,aswellaspublicspendingand/orconcessional2supportfromDFIs.Geothermalprojectshaveparticularlyhighrisksduringexplorationandareoftenlocatedinsensitiveareas.Hydropowerprojectsalsorequirelongduediligence,permittingandenvironmentallicensingprocedures.Thiscanpresentamajorhurdle,particularlyforlargeprojectssuchastheproposedGrandIngaDamprojectinDRC,whichhasbeenstalledforyearsduetotheimplicationsofitsscale(40GW)forbothtransmissionworksandcross-borderagreements,aswellasitspotentialenvironmentalimpact.AccordingtotheAfDB,22countriesinAfricaareconsideredabletosustaincommercialcapital–basedontheirdegreeoffinancialandeconomicdevelopment;allothercountries,whichaccountforthree-quartersoftheregion’spopulation,arereliantonconcessionalsupport.Renewablepowerinvestmenthasbeenconcentratedincountrieswithaccesstocommercialcapitalduetotheirbroaderaccesstofinanceandtheirhigherelectricityneeds(seeFigure2.5).Avoidingtwin-trackdevelopmentacrossthecontinentwillrequireincreasingtheamountoffundingtolower-incomecountries,accompaniedbysupporttostrengthentheregulatoryenvironmentandbuildcapacity.Therearesignsofprogress;forexample,lower-incomecountriesareseeingashiftfromlicensedschemestocompetitivebidding,whichaccountedfor20%ofrenewablesprojectsin2017-2018,risingto90%in2019-2021.ProgrammessuchastheAfDB’sDeserttoPowerInitiative,whichbeganworkingwithfivecountriesintheSahelandisnowenteringasecondphaseinEastAfrica,demonstratethevalueofaco-ordinatedapproachthatincludesworkingwithgovernmentsonnationalsectorroadmaps,aswellassupportingindividualprojectsthroughviabilitygapfunding(seeBox2.2).Inmoredevelopedcountriesintheregion,especiallythosewithstrongrenewables-relatedregulationandexistingprojects,oneofthekeyimpedimentstotheirwidespreadadoptionisthebankabilityoftheofftake(seeChapter1).Severalmeasurescanbetakentomitigatetherelatedrisks,notablyofftaker,transmissionandregulatoryrisk.Theseincludeestablishingaclearstrategyforrenewableenergydevelopment,settingrenewableenergycapacitytargets,implementingindependentpowerproducer(IPP)frameworksandclearpowerpurchaseagreements(PPAs),andconductingcompetitiveauctions.However,itiscrucialtoensurethatthesemechanismsshareriskbetweenparties,withoutputtingtoomuchpressureontheofftakers,manyofwhomarealreadyinfinancialdifficulties.Greatertransparencyaroundfinancialterms,includinganyde-riskingorcreditenhancementsprovidedbyDFIs,isneededtoensurerisksaresharedadequatelyandallowforreplicability.Chapter2Designingfinancesolutionsforcleanenergy51IEA.CCBY4.0Figure2.5⊳Cleanpowerprojects’financialclosebyabilitytoaccesscommercialcapital,Africa,2017-2022BillionUSDCountriesreliantonCountrieswithaccesstoGWHydroconcessionalcapitalcommericalfinance2040Gridsandstorage1530Wind1020510SolarPV2017-2019-2021-2017-2019-2021-Renewables201820202022201820202022capacity(rightaxis)IEA.CCBY4.0.Renewablepowerinvestmentsareconcentratedinlargereconomieswithgreateraccesstocommercialcapital,riskingleavingbehindlower-incomecountriesNote:CountrycategoriesbasedonAfDBandWorldBanklendingpolicies.Sources:IEAanalysisbasedonIJGlobalandWorldBankPrivateParticipationinInfrastructuredatabase.Oncecountriesalreadyhaveadevelopedmarketforrenewablesprojects,thepipelineofnewprojectscanprimarilybefundedviacommercialdebtwithpartialassistancefromthepublicsector.ThisopensthecountryuptoalargerpoolofcapitalproviderswhilealsofreeingupDFIordonorcapitaltoinvestinmorenascentmarkets.BenbanSolarParkinEgypt(380MW)wasoriginallyfundedwithequityfromtheprivatesectoranddebtsolelyfromdevelopmentbanks.InApril2022Scatecanditpartnersrefinancedthenon-recourseprojectdebtthroughtheissuanceofa19-yearUSD335milliongreenprojectbond(OECD,2022).Thistransaction–thefirstofitskindinAfrica–allowedforthereductionoftheproject’sfinancialcostswhilealsofreeingupdevelopmentbankcapitaltoreinvestelsewhere.Theprojectalsoincorporatesriskmitigationinstruments,notablyguaranteesfromtheMultilateralInvestmentGuaranteeAgency(MIGA)protectingoverUSD50millionfromcurrencyriskfor15years.ThesekindsoftransactioncouldsetaprecedentforfuturedealsthatmoveAfricatowardstheobjectivesoftheSAS.Box2.2⊳DeserttoPowerprogrammeDeserttoPowerisaninitiativefromtheAfDBthataimstoharnesstheexcellentsolarpotentialoftheSaheltomassivelydeployrenewableenergyinoneofthemostvulnerableregionsinAfrica.Thisflagshipprogrammeseekstoadd10GWofsolargenerationcapacityandprovideelectricitytoaround250millionpeopleinthe11Sahelcountriesby2030.ThefirstphasefocusesontheSahelG5(BurkinaFaso,Chad,Mali,52InternationalEnergyAgencyFinancingCleanEnergyinAfricaMauritaniaandNiger)and,withstrongpoliticalsupport,hascontributedtothedevelopmentofnationalenergyroadmapsandprovidedcapacitybuildingtoenhancetheexpansionofon-gridsolarPVgenerationwhileleveragingprivatecapital.2Byprovidinganoverarchingschemetofacilitateinvestment,DeserttoPowersupportsthemobilisationofprivatecapitalinaregionwhereindividualprojectswouldotherwisestruggletoattractinvestment.TheinitiativehelpsbringprojectstofruitionbyenhancingtheapprovalofviabilitygapfundingforprojectpreparationthroughtheAfDB’sSustainableEnergyFundforAfrica,whosemainroleistoprovidegrantsandtechnicalassistancetobringviablerenewableenergyprojectstobankabilityandenablefinancialclosure.TheDjermayasolarPVprojectinChadisanexampleofsuchsynergies,withtheAfDBhavingapprovedagrantofUSD695000foritspreparation.This32MWproject,whichhasyettoreachfinancialclosure,alsoincludes4MWhofstoragecapacityandwillnotonlybethefirstrenewableenergyprojectinthecountry,butalsoitsfirstIPP.2.3.2DistributedrenewablepowerforbusinessesAfricangridsarepronetofrequent,plannedandunplannedpoweroutages.Asaresult,manyusers,rangingfromSMEsandsmallholderfarmersthroughtolargecommercialandindustrial(C&I)users,areforcedtooperatedieselgeneratorsasaback-up.Thiscanbesignificantlymorecostlythangeneratingtheirownpowerviarooftopsolar,particularlywithfossilfuelpricesspikingafterRussia’sinvasionofUkraine.Inrecentyears,asthecostofsolarmoduleshasfallen,thesectorprovidingdistributedsolarPVforbusinesseshasgrown.Projectsaregenerallyfinancedontheconsumers’balancesheetorviaoff-balancesheetarrangements,suchasthird-partyownershipsupportedbycorporatePPAs.TheenduserwilloftenbeacreditworthyC&Ibusiness,butthesethird-partyarrangementsarealsosuitedtocash-constrainedcompanies,includingSMEs.Lastyearsawseveralmajordevelopmentsforthird-partyproviders,includingrecordequityanddebtissuancesandnotableM&Aactivity:InOctober,NorwegiandeveloperEmpowerNewEnergyraisedUSD74millioninequityfromClimateFundManagers,ajointventurebetweenDutchDFIFMOandSouthAfrica’sSanlamGroup(AfricaEnergyPortal,2022).Thefollowingmonth,SouthAfricanfirmSolariseAfricacompletedaUSD33.4milliondebtissuance,thelargestforC&IsolarinAfrica,financedbytheFacilityforEnergyInclusion,OikocreditandtheAfricaGoGreenFund(RenewablesNow,2022).4InSeptember,DaystarPower,oneofthemajorsolar-as-a-servicebusinessesinNigeria,wasacquiredbyShell,markingtheoilandgasgiant’sfirstacquisitionofapowerfirmon4TheFacilityforEnergyInclusionisadebtfundthatisanchoredbyAfDBandsupportedbyarangeofEuropeanIEA.CCBY4.0DFIs;theAfricaGoGreenFundisalsoaDFI-backeddebtfund,initiatedbyKfWandsupportedbytheAfDB.Chapter2Designingfinancesolutionsforcleanenergy53thecontinent.UtilisingnewcashflowfromShell,Daystaraimstoincreaseitsinstalledsolarcapacityfrom32MWto400MWby2025(Bloomberg,2022).AlsoinSeptember,Nigeria-basedStarsightEnergymergedwithSouthAfrica-basedSolarAfricatocreatethelargestpure-playC&Ienergyserviceprovideronthecontinent.Themergedcompanyhasaportfolioofover220MWofoperatedandcontractedgenerationcapacity,40MWhofbatterystorage,andapipelineexceeding1GW(CleanTechnica,2022).AlthoughthemajorityofprojectstodatehavebeenconcentratedinSouthAfrica,EgyptandNigeria,announcementshavebeenmadeinatleast12othercountriesintheregion.Nationalpolicies,particularlyaroundthird-partyownership,interactionswithutilitydistributionandbillingsystems,andtaxexemptionsforimportingsolarequipment,willplayanimportantroleinsupportingthefurthergrowthofdistributedsolarPV.Table2.2⊳CommontypesofrenewablesfinancingbyprojectstageandtechnologyTechnologyDevelopmentConstructionOperationSolarPV/wind–TechnicalassistanceConcessionaldebtCommercialdebtnascentmarketgrants;seedgrantsViabilitygapfundingAggregation;ConcessionalequityCorporateequitysecuritisationCorporatecashflow(PE/VC)SolarPV/wind–CorporatecashflowProjectfinanceCommercialdebtdevelopedmarketEquityCommercialdebtCorporateequityRefinanceviacorporate(PE/VC)bond(ifcreditratingallows;onlocalmarketsideally)GeothermalandhydroTechnicalassistanceFundingfromstate-CommercialdebtgrantsinnewmarketsownedenterprisesProjectfinanceRefinanceviacorporateEquityConcessionaldebtbondCorporateequity(PE/VC)Notes:Equitycanbeconcessionalifitisprovidedinasubordinatedorfirst-losscapacity,orifithaslowerreturnexpectationsoralongertimeperiodtoexit.Viabilitygapfundingcantakeseveralforms,butreferstothepracticeofprovidinggrantsorconcessionalshort-termloanstoprojectsthatareeconomicallysignificantbutnotfinanciallyviable.54InternationalEnergyAgencyFinancingCleanEnergyinAfricaSPOTLIGHTEnsuringsecurityofelectricitygenerationSecurityofelectricitysupplyisakeyconsiderationwhenassessinginvestmentrisk.Itis2estimatedthat,asaresultofelectricityoutages,companiesinemergingmarketsanddevelopingeconomiescouldexperienceefficiencylossesandcostsforback-upelectricitygenerationtotallingalmostUSD1.3trillionthroughto2030(IEA,2023c).Concernsaboutthereliabilityofelectricityprovisionandthecostofgrid-suppliedelectricityaredrivingincreasingnumbersofconsumerstoinvestinalternatives,oftenfossil-fuelledgeneratorsbutalsorooftopsolar.Thisplacesadditionalpressureonalreadystrainedutilitiesandfurtherreinforcestheviciouscycleofunderinvestmentinelectricityinfrastructure.Forexample,inNigeriaalone40%ofalltheelectricityconsumedisproducedfromback-upgeneration.Alongwiththesystemimplications,thisendsupbeingmorecostlyforconsumers.Between2021and2022electricitycostsforNigerianconsumersusingamixofgridandback-upgenerationincreasedby150%to170%;forthosedependentondieselgeneratorsalone,costsincreasedbybetween220%and260%(IEA,2023c).UndertheSAS,theincreasedshareofvariablerenewablesinpowersystemscreatestheneedformoreflexibilityandenhancedfrequencyregulationcapacity.Inadditiontocoreinvestmentsingridstrengtheningandupgrading,arangeofassetsandmeasuresaredevelopedtosupporttheseneedsandensureenoughflexiblecapacitytobalancesupplyanddemand.Theyincludehydropowerfacilities(includingpumpedstorage),gas‐firedpowerplants,chemicalenergystorage(suchaslithiumbatteriesorhydrogen),geothermalplantsanddemandresponse(wherebyconsumersadjusttheirelectricityconsumptioninresponsetoeconomicincentives).Increasedinvestmentincross‐borderelectricitytransmissioninfrastructurealsoplaysanimportantroletoensurereliability,withnationalsystemsgraduallyintegratedintoregionalpowerpoolswithincreasedcross‐bordertrade(seebelow).Fossilfuelpowerplantsaccountedforalmost80%offlexibilitysourcesforpowersystemsacrossAfricain2020(naturalgasfornearly45%,coal–mainlyinSouthAfrica–for15%,andoilforover20%),withhydropoweraccountingformostoftheremainder.IntheSAS,naturalgasremainstheleadingsourceofflexibilityin2030,withanadditional25GWonanetbasis,accountingforaquarteroftotalinstalledcapacity(seeFigure2.6).Hydropower(includingpumpedstorage)isthesecondlargestsourceofflexibilityby2030,overtakingoil.Geothermalandconcentratingsolarpower(CSP)playanincreasinglyimportantroleingeneratingbaseloadelectricity,aswellasboostingflexibilityasdispatchablelow-emissionssources.Batterystoragealsostartstoemergeasasolution,butplaysalargerrolepost-2030.Chapter2Designingfinancesolutionsforcleanenergy55IEA.CCBY4.0Figure2.6⊳ElectricitygenerationcapacityandflexibilityintheSAS,2020and2030InstalledGenerationShareof:Flexibilitycapacity110000%%CapacityGW15008800%%Other12006600%%Batteries4400%%Hydro900Naturalgas6003002200%%20202030202020302020203020202030IEA.CCBY4.0.Gasremainsthemainsourceofflexibilityin2030,despiteadropinitsshareoftotalgenerationandcapacity,withincreasingcontributionsfromhydropowerandbatteriesNote:Other=coal,oil,nuclear,geothermal,bioenergyandconcentratedsolarpowerSource:IEA(2022).AfricaEnergyOutlook.Digitallyenabledsolutions,suchassolarPVplusbatterybehind-the-metersystemsormini-grids,arealsooftenacost-effectiveapproachtoensuringreliabilityinnewdemandcentres.Forinstance,arecentpilotprojectinUgandacalledUtilities2.0hasdemonstratedthepotentialforprivatedeveloperstofundremotemini-gridprojectsthatareoperatedusingdigitalmetersmonitoredbythenationaldistributionsystemoperator,Umeme.Thisapproachensuresthatthelocalnetworkisinstalledaccordingtotheutility’stechnicalstandards,guaranteeinginteroperabilityforthefuture,whilealsominimisingcostsforconsumers.RegionalpowerpoolsAggregatingmultiplesourcesofsupplyviapowerpoolscanenabletheintegrationofhigherlevelsofvariablerenewableenergythankstosupplydiversification.Onthecontinent,theSouthernAfricanPowerPool(SAPP)andtheWestAfricanPowerPool(WAPP)arethemostdeveloped,andbothincludereplicableelementsthathavehelpedattractinvestment.WAPPisdesignedtoconnectthegridinfrastructureandoperatingprotocolsof14EconomicCommunityofWestAfricanStatesmembercountriestocreateafullyfunctioningmarkettotradepower.Thisrequirestheaccelerationofregionalinterconnections,includingthetransmissionlinelinkingCôted’Ivoire,Liberia,56InternationalEnergyAgencyFinancingCleanEnergyinAfricaSierraLeoneandGuinea.Toattractfinancemoreeffectively,thefourcountriesestablishedasupranationalcompany,TransmissionCompanyofCôted’Ivoire,Liberia,SierraLeoneandGuinea(TranscoCLSG),whichestablishedaclearlegalbasisforthe2project.TranscoCLSGwasabletosecureconcessionalloansfromtheWorldBank,theEuropeanInvestmentBank,KfWandtheAfDB.InMarch2022itreported96%completionofconstructionworkontheline,withworkremainingonsomesegmentsandassociatedinfrastructure.SAPP,whichconnectsSouthernAfricaDevelopmentCommunity(SADC)countries,hashadafunctioningpowermarketsince2001.SAPP’smembercountries,representedbytheirrespectiveutilities,participateinthepowertrading,whichhasallowedmanycountriesintheregiontorelyonimportsfromneighbouringcountries.Inadditiontoutilities,SAPPincludesseveralprivateoperatorsandanadditionalparticipant–AfricaGreenCo–whichactsasanintermediaryaggregatorbetweenbuyersandsellers.BypurchasingpowerfromrenewableIPPsandsellingittobothutilitiesandprivatesectorofftakersthroughtheSAPPmarket,iteffectivelycontributestode-riskingthoseprojectsbyaddressingtheofftakeriskthroughthenaturalhedgeofdemandaggregation.Note:ForfurtherinformationonthesetopicsseeIEA(2023)UnlockingSmartGridOpportunitiesinEmergingMarketsandDevelopingEconomiesandIEA(2022)AfricaEnergyOutlook2022.2.4GridsandstorageMassiveinvestmentinAfrica’sgridsiscriticaltoimprovesystemreliability,expandaccessandfacilitatetheintegrationofvariablerenewables.Theworseningfinancialdifficultiesbeingexperiencedbymanyutilitiesarehamperinginvestmentinnewtransmissionanddistributionassetsaswellasmaintenance,resultinginaprogressivelyobsolescentsystem.Theseproblemsaremanifestedinextremelyhighsystemlosses(includingnon-technical),withmostAfricanutilitiesreportinglossesof10-19%andanaverageof15%acrossthecontinentin2020–morethandoubletheglobalaverageof7%(seeChapter1).AnnualinvestmentingridsinAfricagrewatonly5%between2019and2022,butundertheSASannualinvestmentingridstriples,reachingoverUSD50billionby2030(seeFigure2.7).Distributionnetworksaccountforovertwo‐thirdsofthetotal,withelectricityaccessneedsaloneattractinganannualaverageofoverUSD5billionayearby2030.Withmillionsofnewcustomersandincreasingdemand,investmentisfocusedonnewlinesandincreasinggriddensitytosupportgreatergeneration.Chapter2Designingfinancesolutionsforcleanenergy57IEA.CCBY4.0Figure2.7⊳Annualgridinvestmentto2030basedonrecentgrowthrates,60Africa,2022-2030BillionUSD(2022)45301520222023-20262027-2030SAS2030Investmentlevelwith2019-2022CAGRGapIEA.CCBY4.0.Growthingridinvestmentoverrecentyearshasbeenminimal;continuingatthispacewouldleaveinvestmentatroughlyonlyaquarterofthelevelnecessaryundertheSASNote:CAGR=compoundannualgrowthrate.Investmentingridsalsoneedstofocusonimprovingexistinginfrastructure,aswellasensuringthesystemcandealwiththeinfluxofmorevariablesources.UndertheSAS,maintenanceandmodernisationofexistinginfrastructurerepresentsalmostaquarterofthetotalspendongridsto2030,helpingtoreducelossesin2030by30%comparedwith2022(IEA,2022).AvarietyofsourcesofflexibilityareutilisedundertheSAS(seeSpotlight),includingasmallamountofbatterystorage,primarilynearlargeutility-scalesolarandwindprojects.Atcurrentpricepoints,theuseofbatteriesislimitedtoshort‐durationflexibilityandprovidingstorageinremoteapplications.Howeverglobalpricedeclinesshowpromiseinmakingbatteriesincreasinglycost-competitivebeyondthe2030outlook.PublicutilitieswillneedtoberesponsibleformuchoftheinvestmentinupgradingelectricitysystemsacrosstheAfricancontinent,accountingfor80%ofgridinvestmentin2030.Thisisadauntingprospectgiventheirperilousfinancialstatetoday.Poorpaymentcollectionrates,illegalconnections,costincreases(includingthecostofcapital),operationalproblemsandsupplychainconstraintsarereducingcashflowsanddrivingupdebt.Privatesectorfinancingwillthereforeneedtotakeonalargerrole,althoughthisislikelytobelimitedtocountriesthathaverelativelywell-developedpowersystemsandastableregulatoryenvironment.Avarietyofapproachestothiskindofinvestmentareusedglobally(seeTable2.3).Governmentscanprepareforitbycarryingouttariffstructurereformandauthorisingtheuseofconcessionagreementsorotherregulatorycarve‐outsforprivatesectorinvestmentandownership,aswellastheintroductionofauctionsandcompetitivetenders.58InternationalEnergyAgencyFinancingCleanEnergyinAfricaTable2.3⊳MainbusinessmodelsforprivatelyfinancedtransmissionBusinessmodelDescriptionContractcoverageExamples2Long-termconcessionPrivatecompanymanagesandAllexistingandnewIndia,Philippines,operatesexistingassetsandlinesinacountry/regionUnitedKingdomexpandsinitsareaofoperationBOOTPrivatecompanyfinances,buildsNewline(orpackageofAustralia,Brazil,(build,own,andoperateslineunderlong-lines)Chile,India,operateandtermcontract;transfersitlatertoUnitedKingdom,transfer)governmentNewlineUnitedStatesFinancialPrivatecompanypartiallyDenmarkandownershipfinancesnewline;builtandGermanyoperatedbysystemoperatorMerchantlinePrivatecompanyfinances,buildsNewline,oftenhigh-UnitedStatesandandoperatesline;revenuesfromvoltagedirectcurrentAustraliashort-termwholesalemarketDedicatedlineNewlineevacuatespowerfromNewlineGloballyapplied(forIPP)IPPtoexistinggridSource:AdaptedfromIEA(2021).FinancingCleanEnergyTransitionsinEmergingandDevelopingEconomies.AlthoughprivateparticipationingenerationinAfricahasbeenincreasinggradually,withIEA.CCBY4.0overhalfofAfricancountriesnowallowingit,onlythreecountries(Gabon,Côted’IvoireandZambia)haveprivatesectoroperatorsrepresentedacrossgeneration,transmissionanddistribution.Privatesectorparticipationindistributionisauthorisedineightcountries,butfortransmissionthisfallstofour.Analysisshowsthatprivateoperatorsoutperformtheirpubliccounterpartsacrossarangeoftechnicalandcommercialindicators(Grids4Africa,2021).However,itisimportantthatanyeffortstoopenuptransmissionanddistributionareaccompaniedbystrongregulationthatensuresprivateoperatorsorconcessionairescontinuetoinvestinless-profitableareassuchaselectrificationofruralareas.Severalcountriesareexploringwaystoopenupnetworkstoprivateinvestors,butpublicconcessionalfinanceislikelytobenecessarytode‐riskprojects,particularlyintheearlystages.Forexample,Gridworks,aninvestmentplatformownedbytheDFIBritishInternationalInvestment,isworkingwiththeUgandangovernmentonapilotforprivateinvestmentintransmission.TheKenyangovernmentalsosignedanagreementwithIndia’sPOWERGRIDin2022tocreateAfrica’sfirstindependentpowertransmissionproject.Alongsidethephysicalinfrastructure,digitalisationplaysakeyroleingridinvestmentundertheSAS,offeringopportunitiestoreducelosses(particularlynon-technical)costeffectively;recentanalysisfromtheIEAfoundthatthecommercialeffectofthesenon-technicallossesisestimatedtocostutilitiesgloballyintherangeofUSD80-100billioneachyear(IEA,2023c).Prominentmeasuresincludegeographicinformationsystems,outagemanagementsystemsandsmartmetering.Severalcountrieshavealreadybegunpilotingthesemeasures,notablysmartmetering(Benin,Kenya),smartsubstations(Senegal,DRC),fibreopticcommunicationaddedtotransmissionlines(Ethiopia,Kenya)andtheuseofthermal-basedtoolswithdronestosupportroutineinspectionofhotspotsonthegrid(Ghana,Kenya).MuchofthisChapter2Designingfinancesolutionsforcleanenergy59investmentislikelytooccurviapublicutilities,butitcanalsobesupportedbytheprivatesector,particularlyifaccompaniedbytheregulatoryopeningupoutlinedabove.Policymakerscanfurthersupporteffortstoattractprivateinvestorsbyensuringrobustplanningtosignaltothemarketthatthereisastrongpipelineofpotentialprojects.Table2.4⊳CommonfinancingtypesbyprojectstageAreaDevelopmentConstructionOperationTransmissionandGrantsGrantsCorporatebond(ifcreditdistributionConcessionalequityViabilitygapfundingratingallows;onlocalCorporatecashflowConcessionaldebtandmarketsideally)equityNotes:Equitycanbeconcessionalifitisprovidedinasubordinatedorfirst-losscapacity,orifithaslowerreturnexpectationsoralongertimeperiodtoexit.Viabilitygapfundingcantakeseveralforms,butreferstothepracticeofprovidinggrantsorconcessionalshort-termloanstoprojectsthatareeconomicallysignificantbutnotfinanciallyviable.2.5EnergyefficiencyAfricaissettoexperienceanunprecedentedincreaseinenergydemandoverthecomingdecades,drivenbyrapidlygrowingeconomiesandpopulations,risingincomesandsignificantinfrastructureexpansion.Energydemandinindustry,freightandagricultureisexpectedtoincreasebyalmost40%by2030,andasclimatechangeandurbanisationdriveuptheneedforcooling,electricitydemandforhouseholdappliancescouldmorethandoubleto350TWhby2030.Inthiscontext,energyefficiencyinvestmentbecomesanimportantbalancetothegrowthindemand:energyefficiencyisoneofthemostcost-effectivemeasurestomitigateGHGemissionswhilereducingstressonpowergrids,easingsecurityofsupplypressuresandkeepingenterprisescompetitive.Investmentinenergyefficiency5,electrificationandrenewablesforenduseinAfricahasbeenrelativelystaticformorethanfiveyears,accountingforslightlybelowUSD6billionin2022.WhileseveralcountriesinAfricahaveputinplacebuildingcodesandminimumenergyperformancestandards(MEPS)forcertainappliancetypes,thereisstillalackofintegratedandcomprehensivepolicyframeworksinmanycases.In2022MEPSandlabelsforairconditionerscoveredaround50%ofthefinalenergyconsumedbyallsuchequipmentinAfrica,andforrefrigerationitstoodat60%,comparedtotheglobalaverageforbothendusesofcloseto90%.Minimumstandardsandlabelsforroadtransportvehiclesandindustrialmotorscoveredlessthan5%ofenergyconsumption(TCEP2023).Risingincomes,expandedaccesstoelectricity,andclimatechangewillmorethandoubletheelectricitydemandforhouseholdappliancesfromaround160TWhto350TWhbetween2020and2030intheSAS.Coolingandrefrigerationappliancesdrivemostofthisincrease,5Energyefficiencyinvestmentcomprisestheincrementalspendingonnewenergy-efficientequipment,thefullcostofrefurbishmentsthatreduceenergyuse,andinvestmentinenergy-efficienttransport.ForamoredetaileddefinitionseeIEA(2023)WorldEnergyInvestment2023MethodologyAnnex.60InternationalEnergyAgencyFinancingCleanEnergyinAfricawhilerapidimplementationofMEPSandlabelsslightlyreducetheaverageelectricityconsumptionperhouseholdoverthesametimeframe.Nationalandinternationalmeasurestohaltthedumpingofinefficientsecond-handappliancesandbanningapplianceswiththe2lowestefficiencyratingssavesover40TWhofelectricitydemandin2030intheSAS,equivalenttoone-thirdoftotalappliance-relateddemandtoday(IEA,2022).UndertheSAS,energyefficiency-relatedspendingrisessevenfoldtoaroundUSD43billioninthesecondhalfofthisdecade.IncreasesinspendingaredrivenbysurgingdemandforhousingcombinedwithstrongerpolicyframeworksincludingbuildingcodesandMEPS,purchasesofmoreefficientandelectrifiedvehicles,appliancesandcoolingsystems,aswellaselectrificationandefficiencyimprovementsinindustrialprocesses.Strongerpolicyframeworkstoreduceinvestmentrisk,theuseofpubliccapitaltoleverageprivatesourcesandharnessnewfinancingstructureswillbeneededtoaccompanythistrend.Figure2.8⊳Energyefficiency-relatedinvestmentandcurrentfinancinginstruments,Africa,2016-2030End-useinvestmentbysectorFinancinginstumentsbysupportarea4575BillionUSD(2022)Numberofinstruments305015252016-2026-2026-DebtEquityGrantGuarantee202020302030STEPSSASCleanenergyEnergyefficiencye-MobilityBuildingsIndustryTransportIEA.CCBY4.0.Energyefficiency-relatedspendingincreasessevenfoldduring2026-2030intheSAS,callingforastrongerenergyefficiencyfocusofavailablefinancinginstrumentsNote:Thiscoversinstrumentsexplicitlytargetingenergyefficiency.Elementsofenergyefficiencyimprovementsinbuildings,industrialfacilities,SMEsandtransportmaybecoveredunderothercategories.Source(right):IEAanalysisbasedonGET.investFundingDatabase.Energyefficiencyfinanceisstillanascentmarketinmanyeconomies,yettobeprioritisedIEA.CCBY4.0forconcessionalandcommercialcapital.Only13%oftheinstrumentsanalysedforthisreportexplicitlycoverenergyefficiencyprojects,while16%covere-mobility(seeFigure2.8).Thecomplexandrelativelysmall-scalenatureofenergyefficiencyprojects–combinedwithlowawarenessabouttheirpotential,risksandbusinessmodels–requiresamoresystemicapproach.Projectsoftenneedde-risking,standardisationandaggregationmechanismstomitigatetransactionandfinancingcoststhatreflecthigherriskperceptionamonglocalChapter2Designingfinancesolutionsforcleanenergy61financialinstitutions.Initially,thisislikelytorequiregrantsandequitycapitalasmarketsandbusinessmodelsdevelop.DFIsplayakeyroleinprovidingcatalyticcapitalforenergyefficiency.Forexample,theAfDBhasincreaseditssupportforenergyefficiencyinthreeways:viaequityinvestmentintargetedfundssuchastheAfricaGoGreenFund,concessionalloansforenergyefficiencyimprovementsingovernment-ownedfacilities,andtechnicalassistancegrantsforlarge-scaleapplianceprogrammessuchastheintendedreplacementofonemillionrefrigeratorsinEgypt.Technicalassistanceandearly-stagegrants,forinstancethroughAfDB’sSustainableEnergyFundforAfrica(SEFA)ortheEnergyandEnvironmentPartnershipAfrica,alsoplayanimportantcatalyticrole.AnothercommonapproachforDFIstofundefficiencyprojectsisviaapartnershipwithalocalcommercialbank.Forexample,afterthe2020accreditationofKenya’sKCBwiththeGreenClimateFund,theIFCprovidedaUSD150millionseniorunsecuredloanin2022tosupportthebank’sclimatefinanceportfolio.Box2.3⊳SuperESCOsinAfricaTheenergyservicecompany(ESCO)model–wherebyanESCOprovidesenergyefficiencyimprovementsandiscompensatedbasedontheenergysavingsachieved–isnotwidelyusedinAfrica.Publicsector“SuperESCOs”cancatalysethegrowthofenergyefficiencymarketsbyactingastechnicalandfinancialpartnersforgovernmententitiesandprivateESCOs,creatingaprojectpipelinewhiledrivingdowncoststhroughbulkprocurement.ThefirstSuperESCOinAfricawascreatedinMoroccoinFebruary2021whenanexistingentitymandatedtoinvestinenergyefficiencytransitionedtoapublicSuperESCOwiththehelpofatechnicalassistancegrantfromtheAfDB.TheSuperESCOwillinitiallyfocusonenergyefficiencyprojectsinpublicbuildingsandstreetlighting,laterfollowedbyindustryandtransportprojects,aswellasprovidingsupportservicestoprivateESCOs.Moroccoisalsohometotheregion’sfirstprivateSuperESCO,theAfricaEnergyEfficiencyFund,establishedin2023.Thefundwillbeaprojectaggregatorwithastandardisedtenderingprocess,offering100%non-recoursefinancingwithsharedsavings.TheSuperESCOapproachislikelytobecomemorecommonplace,particularlyfollowingthelaunchoftheAfDB’sAfricaSuperESCOAccelerationprogrammeinMarch2023.TheprogrammeseekstosupporttheestablishmentofpublicSuperESCOsincountriessuchasRwanda,SenegalandSouthAfrica,providesupportservicestoprivateESCOsanddevelopharmonisedregionalcertificationschemesforESCOsandenergyserviceprofessionals.KenyahasalsoembarkedonthecreationofaSuperESCOwithinthemajoritygovernment-ownedutility.Numerousinnovativebusinessmodelsexist(seeTable2.5).Forlargeprojectsinthebuildingsandtransportsectors,green,social,sustainabilityandsustainability-linkedbondshavebeenrisinginpopularity(seeChapter3).Whileenergyefficiencywasnotanexclusiveuseofproceedsinanyofthebondsissuedtodate,itfeaturedinmultipleusesofproceedsinover62InternationalEnergyAgencyFinancingCleanEnergyinAfrica40%ofgreenbondsandathirdofsustainabilitybonds.AccesstoavailablefinancingoptionsforsmallerinvestmentsbySMEscanbeimprovedviadedicatedcreditlinesandloanproductswithpartialgrantcomponentsorenergysavingsinsuranceschemes,combined2withpositivelists.Increasinglevelsofdigitalisationandsmartmeteringenablethecollection,monitoringandanalysisoflargedatasetstooptimisetheoperationofanasset–allowingfortheemergenceofnewenergy-relatedservicesandbusinessmodels.Numerousend-userfinancingapproachesintendtolowerorremovetheupfrontinvestmentbarriersforprice-sensitiveendusers,suchasgreenmortgageschemesoron-wage/on-billfinancingmodels.Table2.5⊳InnovativefinancemodelsandsupporttoolsModelDetailsExampleSustainableCôted’Ivoire:GreenbondtorefinanceandebtissuancesDebtissuancesthattendtohaveEDGE-certifiedefficientshoppingcentrelowerservicingcostsbecauseoftheirKenya:GreenbondforstudenthousinginPositivelistsgreencredentials.ThesecanbeusedNairobiorenergyforgreenbuildings,cleantransporttechnologyandenergyefficiencyprojects.Egypt,Morocco,Tunisia:PartofthelistsEuropeanBankforReconstructionandListscontainingpre-approvedDevelopment’sGreenTechnologySelectorGreenenergy-efficientappliancesthatlistshigh-efficiencyproductsandvendorsbymortgageautomaticallyqualifythepurchasercountry,andisembeddedinitsGreenschemesforsubsidiesorconcessionalfundingEconomyFinancingFacilitiesEnergy-as-a-ConcessionalloanswithlowerKenya:USD20millionfinancingpackagefromserviceinterestrates,longertenorsorIFCtogrowaccesstogreenhousingfinancehigherloanamountstobuildorSouthAfrica:AbsaEcoHomeLoanforEDGE-Energysavingsrenovateahomeaccordingtohighcertifiedbuildingsinselecteddevelopmentsinsurance(ESI)sustainabilitystandardsmodelSouthAfrica:Cooling-as-a-servicefortheAserviceprovideroffersenergyupgradeofaplantatafruitcompanyOn-wageandserviceslikelighting,cooling,Nigeria,Kenya:Off-gridcoldstorageasaon-billheating,compressedairande-servicefinancingmobilitybasedonpaymentsperuseMultiple:Battery-as-a-servicemodelsforratherthanthepurchaseofphysicalelectrictwo-wheelersassetsMorocco:PilotESIschemeforenergyESIoffersthird-partycoverageefficiencyimprovementsinSMEs(BASE,againstfailuretoachieveagreed2022)energysavings.Typically,itincludesastandardisedenergyperformanceGhana:GreenOn-wagefinancingmechanismcontract,anESI,independentforairconditionersandrefrigeratorsvalidationandafinancingstructureSenegal:Bankloanforcoolingequipmentwithutilityon-billrepaymentConsumerfinanceschemewherebyaRwandaCoolingInitiative’sGreenOn-wageloan,generallybelowmarketrateorfinancingmechanism,includingatake-backat0%,forefficientappliancesispaidandrebateschemeforoldappliancesbackviamonthlydeductionsfromsalariesorelectricitybillsCertificationforbuildingswithatleast20%lessenergy,waterandmaterialconsumptioncomparedtoanequivalentlocalbenchmark.IEA.CCBY4.0Notes:Thislistisnotcomprehensive.Severalexamplesarefurtheranalysedintheannex.Chapter2Designingfinancesolutionsforcleanenergy63Governmentscansupportinnovativefinancingmechanismsthroughthecreationofconducivepolicyandgovernanceframeworksandenergymarketstructures,withMEPSandlabels,importrestrictionstoavoiddumpingofinefficientproductsonAfricanmarketsandgreenlendingtargetsforbanks,andalsobyprovidingincentivesandtechnicalassistance.Collaborationwithrelevantinstitutions,allocationoflong-termresourcesforsettingupandmanagingsuchprogrammesandcontinuousawarenessraisingareimportantfactorstoensuretheirlong-termsustainability.Table2.6⊳CommonfinancingtypesbyprojectstageAreaDevelopmentandimplementationOperationEnergysavingsinsurance,reinsuranceCommercialTechnicalassistancegrants;seedfundingRefinanceviasustainabledebt(includingESCOs,Concessionalandcommercialdebtmarketmanufacturers,Equityandcorporatecashflowdevelopers)Energysavingsinsurance,reinsuranceConcessionaldebtandinsuranceOn-bill/on-wagefinancingConsumerTechnicalassistancegrants;seedfundingAs-a-serviceandleasingmodelsConcessionalandcommercialdebtEnergysavingsinsurance2.6CriticalmineralsAfricaholdsasignificantshareoftheworld’smineralresources,manyofwhicharecriticaltoseveralcleanenergytechnologies.Thecontinentdominatesglobalproductionofcobalt,platinum-groupmetalsandmanganese,andhasasizeableshareoftheproductionofothermineralresourcessuchasgraphite,bauxiteandcopper.Africancountrieshavecontributedtoarecentuptickinglobalproductionforseveralminerals:in2023DRCissettoincreaseitsproductionofcobaltby60%comparedwith2020,keepingitsshareofglobalproductionabove70%,whileincreasingcopperproductionby45%.Meanwhile,graphiteproductioninMozambiqueandMadagascarissettorisealmostsevenfoldin2023,whentheircombinedshareofglobalproductionwouldexceed20%;thecontinentcouldovertakeChinaasthelargestproducingregionbythemid-2020s.Followingglobaltrends,investmentintheminingsectorinAfricahasbeenrisingsince2020.Pricesofcriticalmineralssuchascopperandaluminiumarewellabovehistoricalaverages,althoughtheyrecentlymoderatedaftersurgingin2021and2022.CombinedwithpolicyincentivessuchasEUCriticalRawMaterialsAct,highpricestriggeredariseinglobalinvestmentspendingby20%in2022,followingthe30%increasein2021.Theoperatingprofitsandcashflowsofminingcompanieshavegrownsignificantly,pushingupexplorationspending,mostlyledbylithiumandcopper.However,Africa’sshareofglobalinvestmentincriticalmineralscontinuestofallfromhighsof15%in2014to8%today(seeFigure2.9).64InternationalEnergyAgencyFinancingCleanEnergyinAfricaFigure2.9⊳Investmentinexplorationforselectedmineralresources,Africa,2012-2022MillionUSD(2022)150020%Others21200Nickel16%Zinc90012%UraniumPlatinium6008%Lithium3004%Copper201220142016201820202022Shareofglobalinvestment(rightaxis)IEA.CCBY4.0.Despitearecentspikeinexplorationbudgets,Africa'sresourcesremainunderexplored;itsshareofglobalspendinghasbeendecliningsince2014ResourcesinAfricaremainunderexploredlargelyduetoinsufficientgeologicaldata.Improvingsurveysandmappingisthereforeafirstmajorsteptoattractinginterest.Africangovernmentsmayalsoneedtostrengthentheirenvironmental,socialandgovernance(ESG)dataandpolicies,sinceinvestorsgloballyarefacingpressuretoincludeESGfactorsintotheirdecision-making.Privatecapitalproviders,especiallyfromEuropeandNorthAmerica,arelikelytorequireenhancedgovernanceandtransparentmineralwealthmanagementatthecountrylevelandstrongenvironmentalandsocialmanagementpracticesattheprojectlevel.TheextractiveindustryalreadybringssignificantrevenuestoAfricancountriesandthissourceofincomeissettogrowasglobaldemandsoars.In2021metalsandminerals(excludinggoldandotherpreciousstones)generatedUSD70billionofsalesrevenueandaccountedfor20%ofAfrica’soverallexports,comparedwithonly11%in2016.Currently,sub-SaharanAfricaaccountsfor13%ofglobalmarketrevenuesforcopperandbatterymetals.Withasimilarmarketshareby2030,revenueswoulddouble,andwithasharereaching20%by2050,theywouldexceedUSD100billion,onaparwithcurrentrevenuesfromfossilfuels(IEA,2022).Dependencyoncommodityexportsmay,however,createeconomicvulnerabilitiesaswellassocialandgovernancerisks.OfallAfricancountries,45areconsideredcommodity-dependent,andmineralsrepresentover50%oftotalproductexportsin14Africancountries,upfrom9in2016(UNCTAD,2022).Thereisastrongneedfortransparentmineralwealthmanagementtotranslateminingrevenuesintowidespreadeconomicprosperityandusethemtosupportdiversificationoftheeconomy.Chapter2Designingfinancesolutionsforcleanenergy65IEA.CCBY4.0Somecountriesareeyeingopportunitiesbeyondminingsuchasthevalue-addedtransformationofminerals(e.g.refiningandactivematerialproduction),althoughstrongpolicysupportwouldbeneededtoprovideincentivesforinvestment,nurturethedevelopmentoflocalworkforcesandensurereliableelectricitysupplies.In2022DRCandZambiasetupacommongovernancestructure–theDRC‐ZambiaBatteryCouncil–tocreateabusinessenvironmentconducivetothedevelopmentofabatteryvaluechain.Wheregovernmentshavethefiscalspacetofunddownstreamprojectstheycanbedrivenbypublicfinance,althoughprivateminingcompaniescanalsoplayarole.Forexample,inGuineathegovernmentrequiredfinancingfora670kmraillinkfromtheironoredepositsatSimandoutotheForécariahporttobeincludedinanydevelopmentagreement.Table2.7⊳CommonfinancingtypesbyprojectstageAreaExplorationDevelopmentProductionCriticalmineralsEquityofminingCorporatecashflowminingjuniorsMiningjuniorsCorporatecashflowacquiredbymajorsRefinanceviapublicDomesticvalue-andprojectsmarketstolowercapitaladditionindustriesGrantsanddevelopedusingcostsconcessionalequitycorporatecashflowProjectfinanceEquityfromdownstreamofftakeagreementPublicfinanceviastate-ownedenterprisesConcessionaldebtNotes:Miningjuniors,oftenfundedbyspeculativestockmarketinvestors,aresmallersizedproject-developingcompaniesinterveninginearlydevelopmentphasessuchasexplorationandpre-feasibility/feasibilitystudies.Thesearecharacterisedbylowercapitalrequirementsandahigherlevelofrisk,duetoinherentgeologicalincertitude,commoditypricesfluctuationsandlongleadtimes.2.7Low-emissionsfuelsandfeedstocksIntheSAS,countriesacrossAfricaseekeyindustriessuchasfertiliser,iron,steelandcementproductionexpand,aswellasthemanufactureandassemblyofappliances,vehiclesandcleanenergytechnologies.Productionofbasicmaterialsgrowsby50%between2020and2030,drivenbyeconomicgrowthonthecontinent,whichincreasesdemandforgoods,buildingsandinfrastructure(IEA,2022).Thegrowingenergydemandneededfortheseindustriesismetmostlywithelectricityandnaturalgas.By2030low-emissionshydrogenrepresents1%ofindustrialenergydemand,butisexpectedtoplayanincreasedrolebeyondthen,astheworldacceleratesitscleanenergytransition.Africa’svastlandareacoupledwithexcellentwindandsolarresources,particularlyinitsnorthernandsouthernregions,provideopportunitiesforlow-emissionshydrogenproduction.AccordingtoIEAestimates,justfromareaswithin200kmofitscoastline,the66InternationalEnergyAgencyFinancingCleanEnergyinAfricacontinenthastherenewableenergypotentialtoproduceupto5000Mtoflow-emissionshydrogenperyearatacostbelowUSD2/kg(IEA,2022).DevelopingAfricanmarketsforlow‐emissionshydrogeninindustry,notablyforfertiliserproduction,andinshipping,aviation2andpowergenerationwouldrequirecarefulplanningandsupportbygovernmentsandinternationalfinance.Thereisscopetoimprovetheeconomicsofprojectsbyfocusingondomesticindustrieslocatedclosetoexportfacilities,transmissionlinesandsolarresources,andwherethereislandandseawaterforuseafterdesalination.Thepaceofdevelopmentofthehydrogenindustrywoulddependcriticallyonthatofthepowersector.Therearequestionmarksoverwhethersufficientelectricitycouldbeavailableforelectrolysersgiventheneedtoincreaseelectricitysupplytoothersectors,includinghouseholdslackingaccess.Stimulatingdomesticdemandforlow-emissionshydrogenisexpectedtobedifficultinAfricaduetosignificantcapitalrequirementstobuildproductioncapacity,hinderedbythehighcostofcapitalandcompetinginfrastructureneeds.Low-emissionshydrogenwouldnotbecompetitiveagainstfossilfuelsintheneartermformostendusesinAfricawithouttargetedpoliciestostimulatedomesticdemand(seeFigure2.10).Figure2.10⊳Industrialsectornaturalgaspricesandrenewables-basedhydrogenproductioncostsinselectedAfricancountries,2030MoroccoNigeriaKenyaSouthAfrica3530USD/GJ2520IEA.CCBY4.015105NaturalHydrogenNaturalHydrogenNaturalHydrogenNaturalHydrogengasgasgasgasIEA.CCBY4.0.Withoutdemand-sidepolicies,domesticlow-carbonhydrogenproductionwouldstruggletocompetewithnaturalgasforindustrialusesSource:IEA(2022).AfricaEnergyOutlook.Anchoringdemandforlargelow-emissionshydrogenprojectsinaforeignofftakercanprovidethestablerevenuestreamneededtomobiliseinvestorsatthenecessaryscale.However,suchprojectsshouldretainastrongfocusonleveraginginflowsofhardcurrency,technologicalcapacityandskillstospurdomesticbenefitsbeyondpocketsofdomesticChapter2Designingfinancesolutionsforcleanenergy67industrialapplication.Suchbenefitscouldbeachievedbyoversizingfacilitiestoprovidepowertolocalcommunities–criticalinacontinentwithanaverageelectricityaccessrateof57%–andbytrainingaskilledworkforcetobenefitfromthecreationofnewjobs.Namibiahastakentheleadinthisregard,signinganMoUwiththeEuropeanUnionandapartnershipwithGermanyatCOP27in2021.InMay2023NamibiasignedafeasibilityandimplementationagreementwithaGermancompany(Hyphen)todevelopaprojectthatwouldproduce2Mtoflow-emissionsammoniaperyearforanestimatedinvestmentofUSD10billion(equaltoover80%ofthecountry’sGDPin2021).ThecountryalsomobilisedconcessionalfundingofEUR540million(USD579million)fromtheEuropeanInvestmentBankandDutchfirmInvestInternationaltofinanceitsindustrialcleanenergyecosystemandtofundapotentialequityshareintheproject.MauritaniaandEgyptalsosignedagreementswithprivatedevelopersformajorprojectsandMoUswithpotentialofftakers.Fewhydrogenprojectshavereachedafinalinvestmentdecisionandconcessionalfinancecanplayakeyroletofunddemonstrationprojects.Forexample,theGermangovernmentsetupaEUR350million(USD414million)grantprogrammetosupporthydrogenproductionprojects,notablyinAfrica.Initiativesalsoexisttoreduceuncertaintyarounddemand.In2021GermanyestablishedtheH2Globalinstrument,aEUR900million(USD1.04billion)auction-basedmechanism,usingacontracts-for-differenceapproachtoofferlong-termpurchaseagreementstohydrogenproducersandshort-termcontractsalestoendusers.SouthAfricaannouncedinJune2023,withDenmark,theintentiontolaunchanewhydrogenblendedfinancefund(SA-H2)toacceleratethedevelopmentoflow-emissionshydrogen.Whilepubliccapitalcanplayacriticalroleinsupportingthisnascenttradebystimulatingbothsupplyanddemand,significantcapitalfromtheprivatesectorwillalsoberequired.Ultimately,thecontinent’sparticipationinthelow-emissionshydrogentradewilldependonactualproductioncostsandfinancingarrangements,whiletheeventualvolumesexportedwillbecontingentontheevolutionofglobaldemand.Currentlyonly17%ofexportprojectsworldwideplannedfor2030havepotentialofftakers(IEA,2023d).Regulatoryrisksaresignificant,asmanygovernmentshaveyettoimplementspecificpoliciesandregulationsonhydrogentrade,andnostandardcertificationsystemfortheemissionsintensityofhydrogenproduction,conversionandtransporthasbeendeveloped.Inaddition,existingtransportinfrastructurewouldneedtobescaleduptowithstandhightradevolumesataglobalscale.Table2.8⊳CommonfinancingtypesbyprojectstageAreaDevelopmentConstructionOperationLow-emissionsfuelsGovernmentgrantsConcessionalandBalancesheetandfeedstocksConcessionaldebtcommercialdebtRevenuefromfrommultilateralEquitygovernmentsubsidiesdevelopmentbanksGrantsGreen,sustainabilityortransitionbondsNote:Althoughnotyetinuse,green,sustainability-linkedandtransitionbondsmayallowexistingusersorproducersofhydrogenfromunabatedfossilfuelsourcestoraisedebttoshifttolower-emissionhydrogen.68InternationalEnergyAgencyFinancingCleanEnergyinAfricaBox2.4⊳NaturalgasdevelopmentsThecontinent’slargeresourcediscoveriesinthepastdecadeprovideanopportunityfor2naturalgastoplayanexpandedroleinAfrica’senergysystem.Currently,gasmeetsaroundhalfofNorthAfrica’senergyneeds,whileinsub-SaharanAfricatheshareofnaturalgasintheenergymixisamere5%.Largeresourcediscoveriesprovideanopportunityfornaturalgastoplayanexpandedroleintheregion’senergysystem.Aroundone-quarterofthe7000bcmofnaturalgasresourcesdiscoveredinthepastdecadeinAfricahasbeenapprovedfordevelopment,includinglargedevelopmentsinMozambique,MauritaniaandEgypt.Iftheseprojectsareallcompletedontime,theywouldprovidearound70bcmofgasayearby2030.CumulativeCO2emissionsfromtheuseofthesegasresourcesoverthenext30yearswouldbearound10Gt—aroundfourmonthsofglobalemissionsfromtheenergysectortoday.Africa’sshareofcumulativeenergy-relatedCO2emissionsfrom1890totodayisaround3%.IfthecumulativeemissionsfromburningthisgasovertheentirelifetimewereaddedtoAfrica’scurrentcontribution,itwouldraisethissharetojustunder3.5%.However,thereisariskthatnewprojectswithlongleadtimescouldstruggletorecovertheirupfrontcostsiftheworldissuccessfulinbringingdowngasdemandinlinewithreachingnetzeroemissionsbymid-century.NaturalgasdemandinAfricarisesthroughto2030intheSAS,helpingtodisplacecostlyoilprojectsandmeettheneedsofindustry–notablyfertiliser,steel,cementandwaterdesalination–andthepowersectorasadispatchablesourceofelectricitygeneration.Asaresult,fromnowto2030domesticdemandaccountsfortwo-thirdsofnaturalgasproductionundertheSAS.Yettherearemajorbarrierstostimulatingdemand,includingtherelativelysmallsizeofindividualmarketsandthelackofcreditworthyofftakers,whichweakensthecaseforinvestingincapital-intensive,long-livedinfrastructure.Thereisalsoincreasingcompetitionfromrenewablesinpowergenerationandfromelectricityinend-usesectors,includingindustry.Note:ForfurtherinformationseeIEA(2022)AfricaEnergyOutlook2022.Chapter2Designingfinancesolutionsforcleanenergy69IEA.CCBY4.0Chapter3MobilisingcapitalforasustainablefutureThekeytoaSustainableAfricaScenarioSUMMARY•TomobilisetheoverUSD200billionneededannuallyby2030undertheSustainableAfricaScenario(SAS),thefullrangeofcapitalsourcesneedtobedeployed.Increasingconcessionalfundingwhilesimultaneouslymobilisingmoreprivatecapitalmustbeapriority;inparallel,strengtheningdomesticfinancialsystemsisvitaltocreatesustainablelong-termfinancingoptions.•Despitetheirimportance,theamountofconcessionalfundsisnotincreasinginAfrica.Theyarealsofailingtotargetsomeoftheriskiestareaswheretheyaremostnecessary,suchasearly-stageprojectfinancing,newtechnologies,andfragileorconflict-pronecountries.Itisurgenttoreorientthesefundstoincreasetheirimpact,includingviatheongoingdiscussionaroundreformingmultilateraldevelopmentbanks,andbyreviewinghowdeliverymechanismscanbestreamlined.•Inmoredevelopedmarketsandtechnologies,mobilisingprivatefinanceshouldbeacoreobjectiveforconcessionalcapital.Innovative,flexibleoptionsforcreditenhancementabound,andusingblendedfinancestructurescanadjustprojectrisk–returnprofilestoappealtoprivateinvestors.UndertheSAS,concessionalfundstosupportprivatemobilisationincreasetenfoldtoUSD28billionby2030.•Carbonmarketscanattractinvestmentbysupportingprojectrevenuestreamsforavarietyofprojects.Theycanhaveaparticularlystrongimpactoncleancooking,whichalreadyaccountsforalmostaquarterofcreditsissuedfromAfricainthevoluntarymarket.However,toensuretheeffectivenessofcarbonmarkets,countriesfirstneedtoadoptsolidregulatory,monitoringandverificationframeworks.•Theglobalinvestorcommunityalsorepresentsanimportantcapitalsource,althoughinvestorexpectationsofprojectsizeandrisk–returnprofilemaymeantheyrequireblendingwithconcessionalsourcesinriskierareas.InvestorscanprovidedebtviathesustainablebondmarketandrefinancingtoolscanbeusedtoreplacepublicorDFIcapitalinbrownfieldassetswithprivatesources.Privateequityandventurecapitalalsoplayakeyroleinfundingstart-upstosupportthedevelopmentoflocalindustry,includinginrelationtooff-gridelectricityandcleancookingsolutions.•Althoughasmallplayernow,overthelongtermdomesticmarketsarefundamentaltoenergysectordevelopment.UndertheSAS,financeoriginatingfromordisbursedthroughlocalchannelsincreasesnearlythreefoldby2030.Developinggreenfinancefacilitiesprovidesachannelforfinancewhilealsosupportingthecreationofbankableprojectsandthedevelopmentofcapacityatotherfinanceinstitutions.Therearealsoinnovativewaystotapintothegrowingdomesticcapitalmarkets,particularlypensionfunds,suchaslocalcurrencyguaranteesorsecuritisationofdistributedenergyassets.Chapter3Mobilisingcapitalforasustainablefuture71IEA.CCBY4.03.1IntroductionManycleanpowerprojectsinAfricaarereliantonconcessionalfunding,withdevelopmentfinanceinstitutions(DFIs)actingassomeofthelargestenergyinvestorsonthecontinent.Thereissignificantvarianceacrosscountriesandtechnologies,asoutlinedinthepreviouschapter,butthecurrentapproachtofinancingenergydevelopmentintheregionisfailingtokeepupwiththeneedsoftheSAS.Thischapterlooksatthechallengethroughthelensofthesupplyoffinance,andunderstandinghowthemainsourcescanbebettermobilisedtosupportthegrowinginvestmentneedsundertheSAS.EnhancedcommitmentsbydonorsandDFIsareanessentialconditiontoscalingupcleanenergyinvestment.However,thisalsoneedstobeaccompaniedbyimprovementstotheirexistingdeliverychannels,reviewingtheirbusinessmodelstotakeamoreactiveroleinriskierearly-stageprojectdevelopmentandfocusingonhowtomobilisemoreprivateinvestment.DFIsanddonorsalsoplayaparticularlyvitalroleinfragileandconflict-pronecountries,whereothercapitalisseverelylacking.Thesemarketscontinuetobeunderservedandriskbeingfurtherleftbehind.Thereisanopportunitytoattractcapitalfrominstitutionalinvestors–whocanprovidelong-termfinancingwell-suitedtocleanenergyprojects–viatoolssuchassustainabledebtissuancesandrefinancingbrownfieldassets.Privateequityandventurecapitalalsoplayanimportantroleinfundingstart-ups,includingcompaniesthataretacklingenergyaccessgapsorprovidinginnovativesolutionstodeveloplocalcleanenergy-relatedindustries.Overthelongerterm,thecontinent’scleanenergypathwaywillonlybesustainableiflocalcapitalcanplayalargerrole.Thiswillmeansupportingbanksandthegrowinglocalinstitutionalinvestorbasetoincreasetheirinvolvementincleanenergyprojects.Thissectionexploreshowtomaximiseconcessionalcapitalaswellastheroleofinternationalandlocalcapital,fromtheperspectiveoftheproviders.3.2MaximisingconcessionalcapitalDFIs–bothmultilateraldevelopmentbanks(MDBs)andbilateralDFIs–arecriticalactorsinfinancingcleanenergytransitionsinAfrica.Butthelevelofinvestmentbeingmadethusfarfallswellshortofwhatisrequiredtomeetrisingdemandforenergyservices.Astrongerfocusonprivatecapitalmobilisationandashiftawayfromdirectfinancingtowardsde-riskingcleanenergyprojectscanhelptoscaleupprivatefinanceintheregion.Supportisalsoneededforprojectpreparationandstructuringtobuildprojectpipelinesthatcanscalerapidlyandaddressthecurrentlackofbankablecleanenergyprojects.TotalbilateralODAfromOECDcountriestoAfricahasrisenslightlyinrecentyears,butenergycontinuestoaccountforarelativelylow6%share–alevelthathasbeenrelativelystatic(Figure3.1).ThelargestsharesofODAsupporthealth(20%)andeducation(9%).Aidbudgetsfromdonorgovernmentshavecomeunderincreasingpressureinrecentyears,andtheyarelikelytocontinuetostruggletoallocatemorecapitaltoenergyprojectsinAfricaduetoaddedpressuresonbudgets.Ensuringthiscapitalisworkingaseffectivelyaspossible72InternationalEnergyAgencyFinancingCleanEnergyinAfricaisthereforeparamount.Thiscanbeachievedbyaddressingtheexistingsystem’sshortcomingsindisbursingconcessionalcapital,aswellasdramaticallyincreasingtheshareofcapitaltargetedatmobilisingprivateactors.3Figure3.1⊳Officialdevelopmentassistancefrombilateralsources,Africa,2012-2021BillionUSD(2021)4040%Other3030%sectorsEnergy2020%Africaasa1010%shareofglobalODA(rightaxis)2012201320142015201620172018201920202021IEA.CCBY4.0.DonorsupporttoAfricahasincreasedmarginallyoverthepastdecade,andenergyprojectsmustcompetewithmultipleotherprioritiesNote:ODA=officialdevelopmentassistance.Source:OECD(2022a).Developmentfinanceassistance.3.2.1EnhanceexistingconcessionalfinancesystemIEA.CCBY4.0The2018MDBjointdeclarationonParisAlignmentcommittedMDBstoalignalltheirfinancialflowswiththeobjectivesofthe2015ParisAgreement,creatinganimportantdriverforchannellinggreatersupporttocleanenergytransitions.However,multiplecallsonavailablefundingforAfricaacrossdifferentsectors,combinedwithrecentprioritiesrelatedtotheglobalpandemic,havelimitedthepotentialforstrongergrowthinthesector.Forexample,theWorldBankGroup’slendingforenergyandextractioninAfricararelygoesabove10%ofitslendingportfoliointheregion,asthemajorfocusisputonstrengtheninggovernmentcapacityandlendingtootherdevelopment-focusedsectors.WhileMDBsneedtocontinuetoprovidefinancingtocross-sectoralareas,suchasgovernanceandsocio-economicdevelopment,akeyquestionforthisreportishowtoincreasetheircapacitytoraisecapitalandrespondtomultiplecleanenergychallenges.Partoftheanswerliesinnewenergy-specificinitiatives:onepromisingrecentdevelopmentinthisrespectwasthelaunchinlate2022oftheDistributedAccessthroughRenewableEnergyScale-UpPlatform,intendedtohelpachievethegoalofuniversalelectricityaccessby2030byleveragingtheWorldBank’sexpertisetodevelopinnovativefinancialandde-riskinginstrumentstofinanceelectricityaccess.Chapter3Mobilisingcapitalforasustainablefuture73AnotherpartoftheanswerrequiresabroaderreflectionontheroleandoperationofMDBs.AnimportantelementoftheMDBbusinessmodelistoleveragetheirgovernment-providedcapitalandraiselow-costdebtonthebondmarketstorefinancetheloanstheymaketodevelopingcountries.Historically,MDBshavebeencautiousabouttheamountofdebttheyissuecomparedwiththeamountofequitytheyown,stayingwellbelowa1:1debt-to-capitalratio,whichdoesnottakeintoaccounttheadditionalcallableportionofthecapitaltheycanpotentiallydrawfromtheirgovernmentshareholdersinspecialcases.Thereisanongoingdebatewhethertheyshouldlookmoretothedebtmarketsandextractmorefundsfromtheirbalancesheettoaddresstoday'smultifacetedcrises.Inordertobetterleveragetheirbalancesheets,MDBsinAfricahavetakenseveralinnovativeapproaches.In2018theAfricanDevelopmentBankGroup(AfDB)signedarisktransferagreement,knownasRoom2Run,wherebythebanktransferredthemezzaninecreditrisk1ofaUSD1billionportfolioof47privatesectorloanstoinvestorsforafee,freeingupanexpectedUSD650millionincapitalforadditionallending(seeannexformoredetails).Thiswasthefirstsyntheticportfoliosecuritisation2betweenanMDBandprivatesectorinvestors.Meanwhile,since2013theTradeandDevelopmentBankGroup,anMDBinEastandSouthernAfrica,hasallowedinstitutionalinvestors(primarilygovernmentpensionfundsfromelsewhereintheregion)tobecomeshareholders–amodelthatprovesmutuallybeneficialasitbroadensthebank’scapitalbasewhilealsoallowinginstitutionalinvestorstoparticipateintheenergysectorviaaninvestment-gradepartner.MDBsalsokeepaclosewatchontheircreditratings,althoughthecostofborrowinghasonlybeenmarginallyaffectedbytheseratings.MDBscurrentlyreporthalftheleveloflossallowancescomparedwithlargecommercialbanks,highlightingamoreconservativeapproachtolendingthantheprivatesectorandroomtoincreaselendingtoriskerprojects(IEA,2021).However,increasingtheirleveragemayrequireMDBstoevaluatethequalityandliquidityoftheiroverallassetportfolioandpreventthemfrombeingabletoreachriskierinvestmentareasintheAfricancontinent.TheG20-commissionedIndependentReviewofMDBs’CapitalAdequacyFrameworksprovidedsomeideasonwaysforthemtorampuplending,notablyby:Refiningrisktolerance.Furtherconsideringcallablecapitalinfinancialdecisions.Focusingoncrowding-inprivatesectorfinancethroughtheuseofinnovativefinancingmechanisms.Focusingonde-riskingtoimproverisk-adjustedreturns.TheWorldBankdecisiontoloweritscapitaladequacyratiofrom20%to19%,freeingupanadditionalUSD4billionperyearinfinancing,didnothaveanyimpactonitscreditrating.1Mezzaninefinanceisaformofsubordinatedebtfinancingthatallowslenderstoconverttheirdebttoequityinthecaseofdefault.Theincreasedriskassociatedwithbeingsubordinatetosecuredlendersistypicallycompensatedbyhigherinterestratesandtheoptiontoreceiveequityinsteadofinterestincome.2Asyntheticsecuritisationallowsthetransferofriskfromonepartytoanotherwithouttransferringownership.Itallowstheissuertofreeupcapitalanddiversifyitsportfoliobytransferringpartofitsloanbooktoaspecialpurposevehiclethatisthensoldtootherinvestors.74InternationalEnergyAgencyFinancingCleanEnergyinAfricaEffortsareunderwaytotransformtheglobalfinancialarchitecturetoaddressbarrierstofinancingclimateactioninemergingmarketanddevelopingeconomies(EMDEs).TheBridgetownInitiative,ledbytheUNSecretaryGeneralandthePrimeMinisterofBarbados,3focusesontheimmediateneedsofdevelopingcountriesfacingdebtdistressandliquidityconcernsandcallsforalarge-scalestimuluspackagetosupportinvestmentintheSustainableDevelopmentGoals(SDGs)whilealsocallingforwholesalereformofthedevelopmentfinancearchitecture.Theinitiativehighlightssixpriorityactions:addresstheimmediateliquidityneedsofcountriesaddresscurrentandlong-termdebtsustainabilitysetagoaltoreachUSD500billioninannualstimulusforSDGinvestingmobiliseoverUSD1.5trillioninannualprivatesectorinvestmentingreentransformationreforminternationalfinancialinstitutiongovernancetomakethemmorerepresentative,equitableandinclusivecreateinternationaltradethatsupportsgreenandjusttransformation.ClimatefinanceundertheUNFCCCClimatefinancerepresentsanincreasinglyimportantpoolofcapitalforcleanenergyprojectsasdevelopedcountriesstrivetogrowtheamountdeliveredtodevelopingcountries,inlinewithapreviouscommitmenttoreachUSD100billionby2020.AccordingtothelatestnumbersfromtheOECD,developedcountriesjointlyprovidedandmobilisedUSD83.3billioninclimatefinancein2020,ofwhichroughlyUSD10.3billion(12.4%ofthetotal)wenttoenergy3projectsinAfrica(OECD,2022b).Aspartoftheseefforts,theUnitedNationsFrameworkConventiononClimateChange(UNFCCC)hasestablishedafinancialmechanismfordevelopingcountriestogenerateprojectsandactivitiesrelatedtoclimatemitigationandadaptation.ThismechanismisrunbytheGlobalEnvironmentFacility(GEF)andtheGreenClimateFund(GCF)(UNFCCC,2023).GEFfundingisdeliveredthrough18GEFagencies,4whileGCFoperatesthroughanetworkofover200AccreditedEntities.5TheGCFisintendedtobeamainchannelforfinancerelatedtotheUSD100billiongoal,meanwhiletheGEFhasabroaderenvironmentalremit.InAfrica,theGEFhasdisbursedUSD2.6billion(11.8%oftotalGEFdisbursements)to859mitigationandadaptationprojects,withanadditionalUSD19.7billioninco-financing.Meanwhile,GCFhasprovidedUSD6.17billioninfinancingtoAfricancountries,attractingafurtherUSD18.8billioninco-financing;ofthe228approvedprojectsinGCF’sportfolio,92areinAfrica(GCF,2023a).3Energyprojectsincludepower,industryandtransport.IEA.CCBY4.04TheseincluderegionalMDBs,UNagencies,governments,civilsocietyorganisations,privatesectorenterprises,andresearchinstitutions.5Theseincludeinternationalandnationalcommercialbanks,multilateral,regionalandnationaldevelopmentfinanceinstitutions,equityfundsinstitutions,UNagencies,andcivilsocietyorganisations.Chapter3Mobilisingcapitalforasustainablefuture75FundssuchasGEFandGCFhavetheadvantageofbeingabletoblendaflexiblerangeofinstrumentstoattractprivateco-investors(seeTable3.1).Forexample,theirabilitytoprovidepolicysupportalongsideconcessionalfundingcanproveparticularlyhelpfulinscalingupnascentmarketsortechnologies.Equally,theirabilitytoaggregateprojectsandtakearegionallensallowsthemtoquicklyreplicatesuccessfulapproaches.Table3.1⊳ExamplesofGEFandGCFfundedprojectsinAfricaFundProjectnameTargetareaVolumeoffundingGEFGlobalprogrammetoLarge-scaleintroductionofe-GEFgrant:USD50.1millionsupportcountrieswithmobilitythroughfiscalandCo-fundingtotal:theshifttoelectricregulatorypolicies,innovativeUSD651.8millionmobility(10270)businessmodelsandfinancemechanismsgloballyand12Africancountries1GEFGEF-7AfricaMinigridsCostreductionandinnovativeGEFgrant:USD33.2millionCo-fundingtotal:Programme(AMP)businessmodelsin21AfricanUSD532.7million(10413)countries2GCFProgrammeforEnergyStimulatinginvestmentinGCFloanandgrant:USD233.8millionEfficiencyinBuildingsenergy-efficientbuildingsinCo-fundingAFD:USD1.2billion(PEEB)Cool(FP194)11countries,including4Africancountries3GCFLeveragingEnergySupporting6Africancountries4GCFloan,guarantee,grant:AccessFinance(LEAF)todevelopdistributedrenewableUSD170.9millionFramework(FP168)energy(DRE)Co-fundingAfDB:USD164millionCo-fundingprivatesector:USD315millionGCFDeserttoPowerG5FacilitatingprivateinvestmentinGCFloan,grant,guarantee,SahelFacility(FP178)solartechnologicalinnovationsinreimbursablegrant:5countriesintheSahelregion5USD150millionCo-fundingAfDB:USD380millionCo-fundingprivatesector:USD437millionGCFGCF-EBRDGEFFCo-EncouragingprivateinvestmentGCFloanandgrant:financingProgrammeinenergyefficiency,renewableUSD378million(FP025)energy,andclimateresilienceinCo-fundingEBRD:USD1billion10countries,including3Africancountries61Theseare:Tunisia,SierraLeone,Côted’Ivoire,Togo,Burundi,Seychelles,Madagascar,Mauritius,SouthAfrica,Zambia,ZimbabweandSenegal.21stround:Angola,BurkinaFaso,Comoros,Djibouti,Ethiopia,Eswatini,Madagascar,Malawi,Nigeria,SomaliaandSudan;2ndround:Benin,Chad,Mali,Mauritania,Niger,SãoToméandPríncipe,andZambia;3rdround:Burundi,DemocraticRepublicoftheCongo(DRC)andLiberia.3Theseare:Nigeria,Tunisia,DjiboutiandMorocco.4Theseare:Ethiopia,Guinea,Nigeria,Ghana,KenyaandTunisia.5Theseare:BurkinaFaso,Chad,Mali,MauritaniaandNiger.6Theseare:Morocco,EgyptandTunisia.Note:Theseprojectsarefurtheranalysedintheannex.EBRD=EuropeanBankforReconstructionandDevelopment;GEFF=GreenEconomyFinancingFacility.Source:GEF(2023).GEFProjectDatabase;GCF(2023b).Projectportfolio;plusstakeholderconsultations.76InternationalEnergyAgencyFinancingCleanEnergyinAfricaGEFandGCFremainimportantvehiclesforclimatefinanceforAfricancountries.Thatsaid,stakeholdersinterviewedforthisreporthighlightedthreemainchallengescommontothetwofunds:3Lengthofprocesstoaccessfunding:Thenumerousrequirementstoaccessfundsmeanitcantakeyearsbetweenaproposalandthedisbursaloffunds.EventhoughGEFandGCFhavesignificantlystreamlinedtheirprocedures,recipientcountriesandMDBsstillperceivethemtobeamajorhurdle.Navigatingtheprocessesalsooftenrequirestheexpertiseofdedicatedclimatefinanceexpertsatrecipientgovernments,orofexternalconsultants,whichareoftenfromadvancedeconomies,makingthegeographicaldistributionofknowledgechallengingandaddingextracoststotheprocess.Aligningrecipientandfunderneeds:GEFandGCFattractfundsthrougheconomiesofscale,oftenaggregatingcountriesintoregionalprojects.Thisapproachcanfailtoadequatelyaddresscountry-specificneeds,mayriskloweringcountryownership,andleadstohighertransactionandoperatingcostsandpossiblysub-optimalresults(Mubisa,etal.,2022).However,thealternative–prioritisingnationalprogrammes–wouldoftenmeantryingtoattractfinancefordistributedprojectsthatdonotalignwiththesizerequirementsofcapitalproviders.Accreditationchallenges:SeveralAccreditedEntitiesandagenciesconsultedforthisreportexpressedconcernsaboutthecomplexityoftheinformationrequestedforaccreditation.Thisresultsinhightransactioncostsandlengthyprocessesthatcangenerallyonlybetakenonbylarge,internationalinstitutions.Nationalentitiestakeonaverageover10monthslongertogothroughtheGCFaccreditationprocessthaninternationalentities(IndependentEvaluationUnit,2023).Theselengthyprocessesarealsolikelytohaveanadverseimpactonprojecttimetables.Moreover,incertaincases,nationalAccreditedEntitiesarerequiredtomanageandexecuteprojects,butinmanyAfricancountriespotentialentitieslackthecapacityandresourcestodoso.Whilenotthemainfocusofthisreport,stakeholdersalsoflaggedchallengesspecifictofinancingadaptationprojects,wheresignificantfurtherworkisneededtodevelopclearbenchmarksforinvestorsandtounlockfinancingforclimateadaptation.ThenewlyintroducedAfDBAdaptationBenefitMechanismacknowledgesthatthemajorityofadaptationeffortshaveafinancialbarrierandarenotfinanciallyviableforprivatesectorinvestors.Themechanismoffersaclearandreliablemethodtoassesstheleveloffinancialassistanceneededtoattractdeveloperstoanadaptationactivity.ThistopicisexploredinmoredetailintheIEA’sAfricaEnergyOutlook2022.Box3.1⊳JustEnergyTransitionPartnershipsinsub-SaharanAfricaInrecentyears,JustEnergyTransitionPartnerships(JETPs)haveemergedasanewmeansofchannellingtargetedfundstoEMDEstosupporttheirtransitionplans.AttheGlasgowCOP26in2021,thefirstpoliticalagreementforaJETPwasannouncedforSouthAfricaastheEuropeanUnion,France,Germany,theUnitedKingdomandtheUnitedStatesChapter3Mobilisingcapitalforasustainablefuture77IEA.CCBY4.0proposedtosupportapackageofUSD8.5billionoverthreetofiveyearstofundthecountry’stransition.Sincetheannouncement,SouthAfricahasdevelopedaUSD98billionJustEnergyTransitionInvestmentPlan2023-2027,whichidentifiesprioritysectors(power,electricvehiclesandlow-emissionshydrogen)forJETPsupport.Transmissioninfrastructureisexpectedtoaccountforalargeshareofthesupportgiventheparticularchallengesinattractingfinancetothisarea(seeSection2.4).However,thereisstillalackofclarityoverseveralkeyaspectsoftheJETP.Forinstance,difficultieshavearisenwhendefiningthebreakdownoffundsintotheshareofgrantsandconcessionalfunding,andthecontributionsfromeachofthefivefunders.Althoughimplementationcanbecomplex,JETPsprovideausefulframeworkforinternationalco-operationthatiscentredonthebeneficiary’spriorities.Successwilldependonsecuringmatchfundingtosupportthem.AdditionalJETPshavesincebeenannouncedatCOP27forIndonesia(USD20billion)andVietNam(USD15.5billion).InJune2023aEUR2.5billionJETPwasdeclaredforSenegal.ThiscountryisthefirstLeastDevelopedCountryrecipient,andnotalargeemitter.FundspledgedareonparwithSouthAfricaandVietNamonaper-capitabasis,but7to15timeshigherrelativetonationalemissions.3.2.2MobilisingprivatecapitalDFIscanutiliseawiderangeofproventoolstofacilitategreaterlevelsofprivateinvestment.Technicalassistanceandcapacity-buildinggrantscanhelpimprovethebroaderoperatingenvironment,butdealscanalsobestructuredtoincludeacombinationofcreditenhancements,suchasguarantees,risk-sharingmechanismsandtargetedmeasureslikecurrencyhedging(seeTable3.2).Theuseofthesemechanismshasevolvedsignificantlyovertimeand,asgovernmentguaranteeshavefallenoutoffavourduetohighdebtlevelsinmanycountries,innovativesolutionshaveemergedthataremoretailoredtotheneedsofthecountryandtechnology.OneexampleofthisisthefinancingstructurefortheKinguéléAvalhydroplant,thefirstgrid-connectedindependentpowerproducer(IPP)inGabon.This35MWprojectwassponsoredbyFrance-basedprivateinvestorMeridiamalongsidetheGabonesesovereignwealthfund.DebtwasraisedfrombothDFIsandprivateinvestmentfundsviaaspecialpurposevehicle.Inordertomitigateliquidityriskattheofftaker,anescrowaccountwasestablishedandpaymentstotheprojectwillbechannelledviaamobilemoneyoperator,Airtel,basedonprepaidelectricitypayments.78InternationalEnergyAgencyFinancingCleanEnergyinAfricaTable3.2⊳CreditenhancementscommonlyusedinAfricanenergyprojectsEnhancementInstrumentsRiskmitigatedExamples3groupGovernmentSovereignguaranteeRegulatoryriskEgypt:BenbansolarprojectsupportLetterofsupportPoliticalriskKenya:ThikapowerprojectOfftakerriskTerminationriskMultilateralPartialrisk/creditOfftakerriskProviderssuchasAfDB(PRGandguaranteeguarantee(PRG/PCG)PoliticalriskPCG),GuarantCo,MIGA,AfricaandPoliticalriskinsuranceRegulatoryriskTradeInsuranceRegionalinsuranceReinsuranceTerminationriskLiquidityExportcreditguarantees/tradeproductsKenya:LakeTurkanawindpowerFactoringSenegal:TaïbaNdiayeEthiopia:TuluMoyegeothermalRisksharingFirst-lossprovisionsLackofprojectDjibouti:GhoubetwindfarmandpoolingMezzaninefinancepipelineproductsContingentloansOfftakerriskFundssuchasSEFA,EmergingViabilitygapfundingAfricaInfrastructureFund,AfricaDemandaggregationGuaranteeFundLiquidityEscrowaccountOfftakerriskMultipleprojectsincludingChadsupportLetterofcreditInflation(DjermayasolarPV),GuineaLiquidityfacilityCurrencyriskBissau(Saltinhohydro),SãoCurrencyOvercollateralisationToméandPríncipe(mini-hydro)hedgingandTogo(mini-grid)LocalcurrencyguaranteeCurrencyriskCurrencyswaporCommonlyusedinprojectderivativeproductfinance,notablyintransactionsstructuredbyorinvolvingDFIsupportGabon:KinguéléAvalTheCurrencyExchange(TCX)Nigeria:InfraCreditNotes:Thislistisnotcomprehensive.Manyoftheseexamplesareexploredinmoredetailintheannex.DFIswilloftenapplycreditenhancementsviablendedfinancetransactions.Blendedfinance6isastructuringapproachthatusesconcessionaldevelopmentfundingtomobiliseprivatecapitalbyimprovingtherisk–returnprofileofprojects.Thisisprimarilyachievedbyloweringthecostofcapitalwithconcessionalcapital,usingguaranteesorotherrisk-sharingandliquiditysupporttomitigaterisks,orprovidinggrantstosupportprojectpreparationandprojectstructuring.TheAfricanregionhasbeenoneofthemainrecipientsofblendedfinancebothinthenumberofdealsandtotalamount,withcurrentannualspendingofaroundUSD3billion(seeFigure3.2).However,thisfallsshortbyafactorofnearlytentheneedsoftheSASin2030,bywhichtimeanestimatedUSD28billioninconcessionalfundswouldberequiredto6TheOECDdefinesblendedfinanceasthestrategicuseofdevelopmentfinance(frompublicandphilanthropicIEA.CCBY4.0funders)forthemobilisationofadditionalfinancetowardssustainabledevelopmentindevelopingcountries.Chapter3Mobilisingcapitalforasustainablefuture79mobilisesomeUSD90billioninprivatefinancing.7Abouthalfwillbeneededtocreateandexpandrenewablepowersystems,withanotherthirdgoingtoefficiencyandend-use,andtheremaindersupportingdevelopmentoflow-emissionsfuels,gridsandenergystorage.Concessionalfinancingwillplayakeyroleinsupportingnewertechnologiessuchasbatterystorageandlow-emissionshydrogenthatarenotyetcost-competitive.Figure3.2⊳Blendedfinancebyregion,2019-20217.5USDBillion50%SouthAsia6.040%LatinAmericaandtheCaribbeanEuropeandCentralAsia4.530%EastAsiaandPacific3.020%MiddleEastandNorthAfrica1.510%Sub-SaharanAfrica201920202021ShareofSub-SaharanAfrica(rightaxis)IEA.CCBY4.0.Theuseofblendedfinanceinstrumentshasbeensteadilyincreasing,withsub-SaharanAfricanowaccountingforover40%oftransactionsNote:Therearesomeprojectsatagloballevelthatareexcludedfromthisfigure.Source:AnalysispreparedbyConvergence(2022).Partofthechallengeindesigningblendedfinancetransactionsisensuringtherightproportionofconcessionalfundingisused–enoughtoattracttheprivatesectorwhilestillensuringthemostefficientuseofpubliccapital.AccordingtoConvergence,morethanhalfoftheblendedfinancetransactionsforallclimate-relatedprojectsincludeconcessionalloans,whereasonlyabout20%utiliseguaranteesandriskinsuranceandanother20%usetechnicalassistancegrants.Ashifttowardsguaranteesandinsurancewouldhelptoleveragehigheramountsofprivatecapitalandrequirelessconcessionalfundsastheprovisionofaguaranteewouldrequireholdingjust25-30%oftheamountinreserve,thereforeallowingmoreprojectstobesupported.Equally,datacollectedbyMoody’sshowsthatdefaultratesoninfrastructureprojectsinAfricaareamongthelowestintheworld–5.5%comparedwith8.8%inAsiaand12.9%in7Theseestimatesdonotincludeanyconcessionalsupporttostate-ownedenterprises,whicharelikelytoneedDFIanddonorcapitaltoshoreuptheirfinancesandmakepublicinvestments,orforgovernmentcapacitybuilding,whichwillbeessentialtoensurethatthereareenoughbankableprojectstoabsorbthecapitalraised.80InternationalEnergyAgencyFinancingCleanEnergyinAfricaLatinAmerica(TheEastAfrican,2022).ThisislikelytobeduetothehighbarthatprojectsmustclearinAfricatoattractfinanceandimpliesthatatleastsomeoftherisksbeingmitigatedareperceivedasopposedtoactual.Furtherdataonbothdefaultratesandthe3extentofcreditenhancementsoneachprojectwouldallowforamoregranularanalysisofrisk,potentiallyreducingthelevelofconcessionalfinancenecessaryforfutureprojects.3.3UnlockinginternationalprivateinvestmentInternationalinvestmentplaysakeyroleincleanenergydevelopment,particularlywhilelocalcapitalmarketsarestilldeveloping.However,overallforeigndirectinvestment(FDI)intoAfricahasbeenvolatileoverrecentyears,fallingtoitslowestlevelsince2005in2020.WhilethiswasprimarilytheresultoftheCovid-19pandemic,eveninthefiveyearsprior,FDIhadfallenfromUSD55billiontoUSD40billionasinvestorinterestinEMDEswaned.Flowshavesincereboundedbut,excludingSouthAfrica,inflowsarestillnearly20%lowerthantherecordhighreachedin2015.Figure3.3⊳RoleofFDIindomesticcapitalformation,andinternational80%investmentintheenergysector,regionsofAfricaFDIasashareof60%grossfixedcapitalformation40%20%Internationalinvestmentas201120162021201120162021201120162021shareoftotalNorthAfricaSub-SaharanAfricaSouthAfricaenergyinvestmentIEA.CCBY4.0.Foreigninvestmentinenergyhasfallenoverthepastdecade,alongwitheconomy-wideFDI,whichstillaccountsforasmallshareofinvestment,particularlyinNorthAfricaNotes:SouthAfrica’sFDIin2021wasskewedbytheshareexchangebetweentwotechnologycompaniesandthecountrydrawingdownonspecialdrawingrights.Thesewerebothone-offeventsandarethereforenotindicativeofbroadertrend.Source:WorldBank(2023).WorldDevelopmentIndicators.GreenfieldFDI–investmentintonewproductionfacilitiesasopposedtotheacquisitionofIEA.CCBY4.0existingones–hasalsofailedtosignificantlyrampup.Globally,greenfieldFDIfellatanaveragerateof3%peryearbetween2010and2021;Africaaccountedforlessthan10%ofChapter3Mobilisingcapitalforasustainablefuture81thisinvestment.Despitethis,therearesignsofprogressinsub-SaharanAfrica,withFDItakingonalargershareofgrossfixedcapitalformationsince2016–ameasureoftotalinvestment(seeFigure3.3).Increasingthelevelofforeigninvestmentinthecontinentreliesonunderstandingwherethiscapitalcanmosteffectivelybedeployedandcreatinganappropriatepipelineofinvestableproducts.Thegrowthofmandatoryandvoluntarycarbonmarketscanhelpwiththeprojectpipelinesince,althoughtheydonotprovideupfrontfinancing,theycanproviderevenuestreamsthatstrengthenthecommercialviabilityofprojects.Overtime,theymayalsoleadtothecreationofnewfinancialinstruments,includingthesecuritisationofrevenuestreams,inordertoattractfurthercapital.Outsidetheirroleasbuyersofcarboncreditsandthusasourceforgeneratingprojectrevenue,internationalinvestorsparticipateinenergyprojectsviaequity(ineitherpublicorprivatecompanies,oroff-balancesheetstructures),orviadebtfinancingfrombanksorthebondmarket.Thelimitedpooloflarge,creditworthyprojectsmeansmuchinvestmentischannelledthroughspecialistinvestmentfundstoaccessnon-listedcompaniesortofinanceprojectsdirectly.Thisalsomeansprivateequityandventurecapitalhaveaparticularlysignificantroletoplayinsupportinginnovationandstart-ups.Box3.2⊳ThechangingroleofChinesefinancingChina’sroleinAfricaneconomieshasbeenincreasingsincetheearly2000s.Itbecamethecontinent’slargesttradingpartnerin2009.ChinaisnowthefourthlargestinvestorinAfricaandaccountsforaboutone-fifthofalllending,muchofwhichgoestoenergyandinfrastructureprojects.ChinacommittedUSD148billioninloanstoAfricabetween2000and2018,roughlyaquarterofwhichwereintheenergysector(Brautigam,etal.,2020).However,lendingtoAfricanpowerprojectsfellfromitspeakofalmostUSD8billionin2016toUSD1.5billionin2019asChina’spolicybanksfocusmoreondomesticprojects(Brautigam,etal.,2020).FinancingfromChinahasprimarilybeenintheformoflargelow-costloansfromdevelopmentbanksorstate-ownedenergyandconstructionenterprises.ChangingdynamicspointtoashiftinChina’sdealingswithAfrica.AttheForumonChinaAfricaCo-operationinNovember2021,China’spresidentannouncedaone-thirdreductioninpublicfinancingtoAfricaandemphasisedthegrowingroleofChineseprivateinvestment,althoughnospecifictargetshavebeenannounced.TogetherwithChina’smoveawayfromfundingcoalplantsabroadandthecountry’shugecapacityforcleanenergymanufacturing,thisislikelytoresultinmoreemphasisonrenewableenergyprojectsviaChinesedevelopers.Note:ForfurtherinformationrefertoChapter3oftheAfricaEnergyOutlook2022.82InternationalEnergyAgencyFinancingCleanEnergyinAfrica3.3.1CarbonmarketsInternationalcarbonmarketsallowcountriesandcompaniestogenerateandtradecarboncredits,eachofwhichisverifiedmetrictonneofGHGsreduced,avoidedorremovedfrom3theatmosphere.ThesemarketscanprovideflexibilityastowhereandwhenGHGemissionsarereducedorremoved,andindoingsooffereconomicefficiency.Carbonmarketsalsoprovidehostcountriesandprojectdevelopersextrarevenuestreams,whichde-risktheircleanenergyinvestmentswhileenablingbuyercountriestoadoptmoreambitiousmitigationtargets.ProjectdeveloperscangenerateandsellcreditseitherundertheinternationalcreditingmechanismoftheUNFCCC(suchastheCleanDevelopmentMechanism[CDM]undertheKyotoProtocolinthepre-2020period,orArticle6undertheParisAgreementpost-2020),orviavoluntarycarbonmarkets(VCMs),whichareindependentcreditingmechanisms,self-regulatedandmanagedbynon-governmentalentities(suchasVerraorGoldStandard).MostAfricancountrieswerenotabletotakefulladvantageoftheCDMduetoacombinationoftheslowpaceofestablishingthenecessaryinstitutionalandgovernanceframeworks,difficultieswithprivatesectorengagement,uncertaintyovertheinvestmentenvironment,andrelianceonimportedtechnologies(HunzaiandKrämer,2021).Collectively,all54Africancountriesaccountedforonly3%ofCDMcreditsissuedglobally;moreover,fourcountries(Egypt,SouthAfrica,UgandaandKenya)accountedfor83%ofthese.Onesinglenitrousoxide(N2O)destructionprojectinEgyptalonerepresentedalmost30%ofallCDMcreditsissuedinAfrica.Inthepost-2020regime,Article6oftheParisAgreementpresentsnewopportunitiesforAfricancountriestoengageincarbonmarkets.TheycanexchangeInternationallyTransferredMitigationOutcomes(ITMOs)amongeachotherorwithotherbilateralpartners(underArticle6.2)orissuecreditsinanewUNFCCC-governedinternationalcarbonmarket,knownastheArticle6.4mechanism.Voluntaryco-operationunderArticle6.2hasalreadystarted,whiletheSupervisoryBodyoftheArticle6.4mechanismaimstohaveitoperationalbyCOP28.Atleast42AfricancountrieshaveexpressedtheirinterestinorintentionofengagingunderArticle6intheirlatestNDCsubmissions,withthemajorityseeingthemselvesasasellerofcredits.IntheIEA’sAfricaEnergyOutlook2022,anassessmentofthepotentialofArticle6forAfricancountriesshowedthatthiscouldgenerateUSD225-245billionby2030,whilereducing3500-3850MtCO2comparedwithscenarioswithoutArticle6co-operationoverthesametimeframe(seeFigure3.4).ThisimpliesthattheimplementationofArticle6coulddeliverfinancialflowsthatexceed20%ofcleanenergyinvestmentneedsinAfricaby2030.Whiletheseinvestmentflowswouldapplyacrossallsectors,theycouldnonethelessbeanimportantinvestmentsourcefortheenergysector,helpingtipcleanenergyprojectsintobankablepropositions.Chapter3Mobilisingcapitalforasustainablefuture83IEA.CCBY4.0Figure3.4⊳FinancerequestedinlatestNDCs,potentialArticle6financialflowsandCO2emissionsreductionpotentialinAfricaFinancialflowpotentialNetmitigationpotential816612428TrillionUSD(2021)4FinancerequestedforGtCO2mitigationinNDCsConditionalmitigationpledgedinNDCsUnconditionalmitigationpledgedinNDCsCleanenergyinvestmentneedinSASArticle6potentialT2o022003-0To22002300-To20250-2020-2020-2020-203020302050203020302050IEA.CCBY4.0.Article6financialflowscouldreachover20%ofthetotalinvestmentincleanenergyrequiredundertheSASinAfricain2020-2030androughly30%in2020-2050Notes:TheestimationofArticle6financialandmitigationpotentialisfromtheresearchproject“ModellingtheEconomicBenefitsofArticle6”bytheInternationalEmissionsTradingAssociation(IETA)andtheCenterforGlobalSustainabilityattheUniversityofMaryland.Levelsreportedrepresentupperbandsofthescenariosincludedinthemodel.ThemodelsimulatesdemandandsupplyofcreditsthroughArticle6co-operationbycountries,andpresentssomelimitations,suchastheassumptionthatallrevenuesfromArticle6co-operationarereinvestedinincreasedmitigationambition.Source:IEAanalysisbasedondatafromYuetal.(2021).ThePotentialRoleofArticle6CompatibleCarbonMarketsinReachingNet-Zero.ToparticipateinArticle6,interestedcountrieshavetodevelopneworupdateexistinginstitutionalframeworks,monitoringproceduresandGHGinventories.Somecountrieshavealreadymadesignificantprogress:Ghanaisamongthemostadvancedcountriesglobally,withKenya,Malawi,Nigeria,Rwanda,Senegal,UgandaandZambiaalsoactivelypreparingforArticle6implementation(Hynes,Hall,andMachnik,2023).GhanatookearlystepstodevelopandenforcethenecessarylegislationtoparticipateinArticle6.2,adoptingaframeworklawin2022followedbythecreationoftheCarbonMarketOfficeandaccompanyingwebsitefortransparentreportingonArticle6co-operation.Thishighlevelofpreparednessandtransparencyhasbuiltconfidenceinprospectivebuyercountries,andasofJune2023GhanahasalreadysignedfourArticle6.2agreements,withSwitzerland,Sweden,SingaporeandKorea.ThebilateralagreementwithSwitzerlandincludestheNationalCleanEnergyAccessProgramme(NCEP),whichenablesSwitzerlandtopurchaseITMOsgeneratedbyprivate-sectorledsolarPVandimprovedcookstoveprojectsthroughapayment-for-resultsmechanism(UNDP,2023a).AccordingtotheUNDevelopmentProgramme(UNDP),privatesectorinvestmentinprojectscoveredbythisinitiativecanbeequivalenttofourtimestherevenuesgeneratedbytheITMOs(UNDP,2023b).84InternationalEnergyAgencyFinancingCleanEnergyinAfricaAfricancountriescanalsotapintothepotentialofVCMstodevelopclimatemitigationprojects.However,only11%ofallcreditsusedinVCMsbetween2016and2021wereissuedinAfricancountries.TheAfricanCarbonMarketsInitiative(ACMI)estimatesthatAfrica3currentlyutilisesonly2%ofitsyearlycarboncreditpotential(ACMI,2022).VCMprojectsarecurrentlyconcentratedinfivecountries(Kenya,Zimbabwe,DRC,EthiopiaandUganda),whichaccountfor65%ofcreditsissuedoverthepastfiveyears.Moreover,15projectdevelopersownprojectsthathaveissued73%ofallcreditsontheAfricancontinentoverthepasttenyears(ACMI,2022).And85%ofallAfricanVCMcarboncreditsissuedbetween1996and2023arefromtwotypesofproject:forestryandlanduse,andcleancookstoves(seeFigure3.5).Figure3.5⊳VolumeofVCMcarboncreditsissuedinAfricabyprojectandcountry,1996-2023ForestryKenyaCookstovesUgandaZambiaHydropowerSenegalWindMoroccoSolarSouthAfricaOtherDRCCôted'IvoireN₂OdestructionGhanaOtherindustry20406080100120140OtherMillionOtherIndustryRenewablesIEA.CCBY4.0IEA.CCBY4.0.Around85%ofVCMcreditsinAfricahavebeenissuedfromprojectsrelatingtoforestryandlanduseandcleancookstovesinahandfulofcountriesSource:IEAanalysisbasedonBerkeley(2023).VoluntaryRegistryOffsetsDatabaseSomeAfricanleaders,suchasKenya'sPresidentWilliamRutoinhisaddressatCOP27(NTVKenya,2023),havecalledforhighertransparencyandfewerintermediariesinVCMs.8Costly(international)intermediariesbetweenprojectdevelopersandbuyers,andalackofoveralltransparencyonbenefitsharingcansignificantlyreducetheamountoffundingtoAfricaandlocalcommunities,oftentoaslittleas10%ofthecarbonrevenue(ClimateActionPlatformAfrica,2023).ThelackofregionalvalidationandverificationbodiesalsoaddscoststotheVCMcredits.Somecountries,suchasZimbabwe(Bloomberg,2023a),Kenya,Malawiand8H.E.WilliamSamoeiRutostatedthat,“Kenya’snextsignificantexportwillbecarboncredits.Thisiswhywecallforsimplified,moretransparentcarbonmarketsystemsthatdirectlybenefitcommunitiesandnotjustintermediaries”.Chapter3Mobilisingcapitalforasustainablefuture85Zambia(Bloomberg,2023b)haveproposedmeasuresthatstipulatetheshareofcarboncreditrevenuethatmustbeallocatedtothegovernmentandlocalinvestors.Box3.3⊳CarboncreditsforcleancookstovesCleancookstovesarethemostrepresentedtypeofenergy-relatedprojectinVCMs:15%ofthealmost8000VCMprojectsthatissuedcreditsareforcleancookstoves(UniversityofCalifornia,Berkeley,2023).Ofthese,almost60%arebasedinAfrica,whichhaveissuedaround54millioncredits,or68%ofallcarboncreditsissuedbythistypeofprojectglobally.Cleancookstoveprojectshavetheadvantagesoftypicallybeinghighlyadditional(i.e.theprojectswouldnothavehappenedintheabsenceofthepricesignalfromcarboncredits)andofbringingvaluablesustainabledevelopmentco-benefitstothelocalpopulation,suchasincreasedenergyaccessandhealthbenefits.However,accordingtotheCarbonCreditQualityInitiative,creditingfromcleancookstoveprojectsalsopresentssomeknownlimitations,suchas:Overestimationofemissionreductions:Mostcleancookstovesprojectsuseamanualmonitoring,reportingandverification(MRV)systemtoverifythevolumeofcreditsthatcanbeissued.Thisofteninvolvesrandomsamplingtoestablishusagetrendsofthenewcookstove,whichcaninevitablyleadtoextrapolateduncertainty.TheCarbonCreditQualityInitiativeestimatesthat70%ofenergy-efficientcookstoveprojectsgloballyarelikelytobeoverestimatingthereducedemissions(CalyxGlobal,2023).Althoughsomepartialtechnicalsolutionsareknown,theirimplementationcostsarestilldisproportionatelyhigh.Non-permanenceofemissionsavoided:CleancookstovesreduceboththeGHGemissionsassociatedwiththecombustionoftraditionalbiomasswhilealsoreducingdeforestationandtheemissionofCO2stockedinforestsorotherlandareas.However,forestsarealsovulnerabletoseveralothernaturalrisks,includingclimatechangeorforestrypolicychangesthatcouldreversetheemissionsavoidanceeffectofcleancookstoves.Doubleissuanceofcredits:Withoutasystematiccheck,thereispotentialforoverlappingclaimsofavoideddeforestationbetweenforestryandcleancookstoveprojectsoperatinginthesamearea.3.3.2SustainablebondissuancesWorldwide,bondsareacommonwayforcompaniestoraisedebt,buttheyarelessprevalentinEMDEssinceissuancesmaynotbelargeenoughtomeetinternationalmarketexpectationsandmanywould-beissuerslackinvestment-gradecreditratings.BondmarketsinAfricaarestillnascent,totallinglessthanUSD1trillion–theequivalentoflessthan1%oftheglobaltotal.Theyarealsoheavilydominatedbygovernmentbonds,whichaccountedforjustunder90%oftotalissuancesin2021.Mostofthesegovernmentissuancesareinthedomesticmarket,althoughsince200721Africancountrieshaveaccessedinternationaldebt86InternationalEnergyAgencyFinancingCleanEnergyinAfricamarketsviaEurobonds(foreigncurrencybondsissuedinmajorglobalfinancialhubs)(IMF,2021).By2021theseEurobondissuanceshadreachedUSD140billion,orroughly20%oftotaloutstandinggovernmentbondsintheregion.3Althoughthisaccesstotheinternationalmarkethasaddedtothedebtlevelsoftheregion(discussedinChapter1),italsopresentsasignificantopportunitytoraisecapitalforenergyprojects.Inparticular,green,social,sustainableandsustainability-linked(GSSS)debtinstrumentshavebeengrowinginpopularitysincetheyoftenattractaloweryieldthantheirvanillacounterparts(knownasthe“greenium”).Theseinstrumentscanbeissuedbycorporatestosupportprojectorcompanyfinance,byfinancialproviderstosupportgreenlending,orbygovernmentbodiestosupportdebtmanagementandraisegreenpubliccapital.Figure3.6⊳Sustainabledebtissuancesbycountryandtype,Africa,2016-202237503000IssuancesbycountryIssuancesbytype22501500MillionUSDBOADissuancesofUSD900million750IEA.CCBY4.020162017201820192020202120222016201720182019202020212022SouthAfricaOthercountriesGreenSocialSustainabilitySustainability-linkedIEA.CCBY4.0.GSSSissuanceshavebeensteadilyincreasing,butaredominatedbySouthAfricaexceptforone-offissuances,mostlybypan-AfricanbanksNote:BOAD=LaBanqueOuestAfricainedeDéveloppement(WestAfricanDevelopmentBank).Sources:IEAanalysisbasedonEnvironmentalFinance(2023).Data;andBloomberg(2023c).SustainableDebtIssuancesGSSSissuancesinAfricahaveincreasedfromUSD207millionin2018tonearlyUSD1.9billionin2022,butstillaccountforlessthan1%oftheglobalGSSSmarket.IssuancesareconcentratedinSouthAfrica,whichaccountsforover35%ofissuancesbydollarvaluetodate(seeFigure3.6).9Corporatesmakeupthelargestgroupofissuers,althoughlargeregionalbankshavebecomingincreasinglyactiveinthespaceoverthelasttwoyears.For9ThisreferstotheGSSSlabelledspace.TheunlabelledspaceislargeinmanyemerginganddevelopingmarketseitherbecauserelevanttaxonomiesarenotinplaceorbecauseissuersarenotfamiliarwiththeprocesstosecureaGSSSlabel.Chapter3Mobilisingcapitalforasustainablefuture87example,theBanqueOuestAfricainedeDéveloppement(WestAfricanDevelopmentBank,BOAD)issuedaEUR750million(USD890million)12-yearsustainabilitybondin2021,markingthelargestGSSSissuanceonthecontinent.Greenbondsaregenerallythepreferredinstrumentbynumberofissuances.Useofproceedsaredominatedbyrenewableenergy,whichaccountsfor40%ofcumulativeissuances(seeFigure3.7).Publictransporthasbeenakeytargetforpublicsectorbonds;forexampleEgypt’sfirstsovereigngreenbond,issuedin2021,willbepartiallyusedtofinancetheCairoMonorail,andMorocco’srailoperatorissuedagreenbondin2022torefinancedebttobuildanelectrifiedhigh-speedline.Withinthepasttwoyearsgreenbuildingshavealsobecomemoreprominent,particularlyinSouthAfricaandfollowingKenya’sfirstgreenbondissuance,whichwillfundefficientstudenthousinginNairobi.Figure3.7⊳CharacteristicsofsustainabledebtissuancesinAfrica,2014-2023,bydollarvalueUseofproceedsCurrencyMoroccanOther4%Non-energyGreendirham4%related8%buildings7%Greentransport18%MultipleSouthAfricanUSdollar45%energy-rand28%related27%Euro19%Renewableenergy40%IEA.CCBY4.0.Greenbondsmostcommonlytargetrenewableenergy,withsovereignissuersfocusingongreentransport;issuancesaredominatedbyhardcurrencyoutsideSouthernAfricaNote:Useofproceedsallocatedaccordingtoprimaryuseunlessnotpossibletodetermine.Source:IEAanalysisbasedonEnvironmentalFinance(2023).Data;andBloomberg(2023c).SustainableDebtIssuances.Alongsidemoretraditionalgreenbonds,therehasalsobeenariseinsustainabilityandsustainability-linkedbonds,whichcanbeparticularlyusefulforsovereignssincefungibilityrulescanprohibittheissuanceofa“use-of-proceeds”bonds.In2021BeninbecamethefirstcountryinAfricatoissueasustainabilitybond–aEUR500millionbondwitha12.5-yeartenorthatwasreportedlythreetimesoversubscribedandattractedagreeniumof20basispoints.AlthoughBenin’ssovereigncreditratingwasbelowinvestmentgrade,thebondwas88InternationalEnergyAgencyFinancingCleanEnergyinAfricaabletoattractinternationalinvestorsthankstoitsdetailedSDGFramework,costinganalysisandmonitoringandevaluationplans,aswellasapartialcreditguaranteeprovidedbyAfDB.Nearlytwo-thirdsofissuancesoccurinhardcurrency,whichisthenaturalresultofboththe3dollarisationofmanylargeinvestmentsintheregionandtheneedtoappealtointernationalinvestors.InotherEMDEstherehasbeenariseinlocalcurrencysovereignissuances,includingIndia’srecentissuancethatattracteda5-6basispointpremiumandwasfourtimesoversubscribed.Theseareoftenusedasatooltospurlocalcurrencycorporateissuances.LocalcurrencybondsaremostlikelytobeissuedincountrieswithmoreliquidfinancialmarketsorinWestandCentralAfricancountrieswherethecurrencyispeggedtotheeuro.Outsidetheseareas,issuancesmayalsoneedtobeaccompaniedbyade-riskingelement–eithercurrencyhedgingoraguaranteefromaninvestment-gradeissuer,suchasaDFI.ThesizeandcreditworthinessrequirementsforbondissuancesarelikelytoserveasablocktothewidespreadroleofGSSSbondsoutsidecountrieswithwell-developedcapitalmarketsandcreditworthyentitiesintheenergysector.However,usingDFIanddonorguarantees,asseenwiththeBeninsovereignissuance,canhelpabroaderrangeofactorsutilisethesetools,includingcountrieswithcreditratingsbelowinvestmentgrade.Innovativesolutionsarealsoemergingtotargetunderservedmarkets.Forexample,impactinvestorplatformSymbioticshassetupasecuritisationcompany,MSME,thatusesGSSSbondissuancestograntloanstofinancialinstitutionsinEMDEs.Applicationoftheproceedsincludesseveraloff-gridprojectsinAfrica,includingGreenlightPlanet(nowSunKing)inDecember2021.Similarly,inNigerialocalcurrencyguaranteeproviderInfraCredithashelpedgrowthelocalgreenbondmarket(seeSection3.4).Governmentscanalsoplaytheirpartbydevelopingsustainablefinancetaxonomiesandenvironmental,socialandgovernance(ESG)reportingframeworks,inlinewithinternationalbestpractices.Currently,fewofthesearepresentacrossAfrica:notableexceptionsincludeSouthAfrica’sESGtaxonomy,publishedinApril2022,andNigeria’sGreenBondFramework,developedin2017andallowingforthelaunchofthecontinent’sfirstsovereigngreenbonds.Countrieswithlargerfinancialmarkets,suchasMauritiusandKenya,havealsosoughttodevelopsustainablefinanceregulations,especiallywithinthebankingsector.3.3.3PublicequityinvestmentCapitalmarketsinAfricaaresignificantlysmallerandgenerallylessliquidthanadvancedeconomies(withtheexceptionofSouthAfrica),whichlimitstheroleofpublicequityinvesting.Therearecurrently29stockmarketsinAfrica,butonlythree–SouthAfrica,EgyptandNigeria–havemorethan100companieslisted,andthemajorityhavelowstockturnoverrates,indicatingthelackofliquidity(seeFigure3.8).Thesmallsizeoflistedmarketsandthelowsovereigncreditratingsacrossthecontinent,meanthatonly12countries1010Morocco,Nigeria,Kenya,Mauritius,Côted’Ivoire,Tunisia,Botswana,Ghana,Namibia,Zambia,EgyptandIEA.CCBY4.0SouthAfrica.Chapter3Mobilisingcapitalforasustainablefuture89featureonmajoremergingandfrontierindexes,whichserveasbenchmarksformanyinvestors.Accessingassetsbeyondthesecountriesislefttospecialistswiththeexpertiseandfiduciarycapacitytoexploresuchopportunities.Figure3.8⊳CharacteristicsofthelargeststockmarketsinAfrica50%40%StockmarketturnoverratioEgyptSouth30%Africa20%313%NigeriaMauritius10%KenyaMorocco10%20%30%40%50%60%70%=numberoflistedcompaniesStockmarketcapitalisationtoGDPIEA.CCBY4.0.OnlysixstockmarketsinAfricahaveover50listedcompanies;turnoverratesarelowoutsideEgyptandSouthAfrica,demonstratingthelimitedliquidityNote:Bubblesize=numberoflistedcompanies.Sources:WorldBank(2023).WorldDevelopmentIndicators;Statista(2023).Africa:NumberofPubliclyListedCompaniesbyCountry.Thepoolofinvestableassetsisalsosmall.Energyandutilitycompaniesmakeupasmallproportionoflistedcompanies,andthesector’sassetsinmostcasesareconcentratedintooneortwocompanies.Equally,infrastructureassetsonthecontinentdonotgenerallymeettheneedsofinvestors.Infrastructureassetsareoftenappealingtoinvestorsduetotheirnon-cyclicalnature,whichstemsfromtheirrecurringrevenues.However,manyassetsinAfricaaregreenfieldandexitopportunitieshavehistoricallybeenlimitedbythesmallsecondarydebtmarketsandilliquiditywithintheequityspace.Asaresultofthesechallenges,mostinvestmentsinAfricaninfrastructureareunlisted–eitherthroughdirectprojectfinanceorviaprivateinvestmentfunds–andareonlyaccessibletoamuchsmallerpartoftheglobalinvestmentindustry.UndertheSAS,opportunitiesemergetobuildonrecentprogressandtakeadvantageofthegrowingnumberofbrownfieldassetsthatwillcometomarketastheenergysectordevelops.OverrecentyearstherehavebeenseveralexamplesofusingpubliclistingstoraiseinstitutionalinvestorcapitalforexistingassetswhilealsoprovidingDFIsameansofexit.Forexample,in2019HeliosTowers,whichownsover7000mobilecommunicationstowersacrossthecontinent,completedaninitialpublicoffering(IPO)ontheLondonStock90InternationalEnergyAgencyFinancingCleanEnergyinAfricaExchange,raisingGBP250million(USD317million)andallowingtheIFC,oneofitsexistingshareholders,toreduceitsstake(MOBILIST,2021).AnothermeansofexitisforDFIstoselltheirassetstoacompanythatisalreadylisted,asoccurredin2020whenNorfundsoldits3sharesinSNPower–acompanycreatedbyNorfundandNorwegiangovernment-ownedhydropowercompanyStatkraftAS–toOslo-listedScatecSolarforUSD1.17billion(MOBILIST,2021).SNPoweracquired,developed,constructedandoperatedhydropowerassetsinEMDEs.Bothoftheseexamplesinvolvedinternationalstockexchanges,whicharemoreabletohandletransactionsofthislargerscale.Africangovernmentshavetheopportunitytoseektogrowlocalcapitalmarketsbyincludingrequirementsthatatleastsomeoftheequityinenergyprojectsislistedonlocalstockexchanges.Anotherareawithsignificantpotentialisrefinancingandassetrecycling,particularlyinthelargercapitalmarketsthataremorefamiliartobroaderinvestors.Refinancingvehiclescanbecreatedpriortoassetsbecomingoperational–asseenwiththethree-stepClimateInvestorOnefund(seeBox3.4)–orpreparationsforrefinancingcanbemadeatfinancialclose,allowingtheconstructionfinancetobeprovidedbycommercialbanksandlaterreplacedbyinstitutionalinvestorsanddebtproviders.Thisprovidesequityinvestorswithameansofexit,andlonger-termdebtprovidersalowerriskopportunitytoenter.Therehavealreadybeendevelopmentsinthisarea,withareportfromAIIMfindingthat24%ofinfrastructuredealsonthecontinentbetween2009and2017wereexitsforequityholders.GovernmentsandDFIscansupporttheseeffortsbydesigninganassetrecyclingprogrammethatfreesuptheircapitaltoreinvestingreenfieldassets.Box3.4⊳PilotingapproachestobrownfieldassetfinancingBrownfieldassetsinAfricaareinshortsupplyandmanyarepublicassetsthatmayhaverestrictionsonwhocanownthem.However,stepscanbetakentoprepareforthenextwaveofassetsthatcomeonline,asevidencedbythecompletelifecycleprojectfinancingfundClimateInvestorOne,operatedbyDutchDFIFMO.Thefundissplitintothree–adevelopmentfund,aconstructionequityfund,andarefinancingfund–withthelevelofconcessionalcapitaldecreasingasprojectsmovethroughthefunds.Noprojectshaveyetreachedtherefinancingfund,butthevehicleisdesignedtoprovidelong-termseniordebt,allowingforareductioninthecostofcapital,andhopefullyattractingprimarilyprivateinvestors.Thefundwillprovideaninterestingtestcaseforrefinancingasitwillindicatethelevelofblendingthatprivateinvestorswillfindnecessary.AnotherkeyprogrammetochangetheapproachtobrownfieldassetfinancingisAfrica50’sAssetRecyclingProgramme.InJanuary2023Africa50,thepan-Africaninfrastructureinvestmentplatform,signedanMoUwiththeGambiangovernmenttomanageandoperatetheSenegambiaBridgeunderapublic–privatepartnership(PPP),freeinguppublicresourcestoinvestinotherinfrastructureassets.AsimilararrangementwassignedwiththeZimbabweangovernmentforthreeairportsinDecember2022,andwiththeTogolesegovernmentinJuly2023toconvertaroadprojectintoaPPP.Chapter3Mobilisingcapitalforasustainablefuture91IEA.CCBY4.03.3.4PrivateequityandventurecapitalGlobally,cleanenergytransitionswillresultinatriplingofthecurrentmarketformass-manufacturedcleanenergytechnologies,themarketreachingavalueofUSD650billionayearby2030ifcountriesworldwidefullyimplementtheirannouncedenergyandclimatepledges(IEA,2023a)).Africa’seconomygrowsfasterinIEAscenariosto2050thananyotherregionexceptIndia,increasingitsshareofglobalGDPbymorethan50%.Thispresentsasignificantopportunityforthecontinenttoincreaseitsroleinglobalmarketsforindustrialmaterials,constructionandconsumergoods,includingthoserelatedtocleanenergy.Venturecapital(VC)andprivateequitycanplayakeyroleinfinancingthedevelopmentofthesenewproductsandservices.VCisthetypicalwayinwhichearly-stageentrepreneursarefinancedtotestandbringanideatomarket.In2022early-stageVCforenergystart-upsgrewby20%toUSD6.7billionglobally(IEA,2023b).Asstart-upsgrowintomoreestablishedprivateenterprises,theyseektotapintogrowth-stageequityinvestment,amarketthatreachedUSD34billiongloballyin2022forenergystart-ups.Figure3.9⊳Venturecapitalinvestmentinenergystart-upsbasedinAfrica,bycountry,2013-2022MillionUSD(2022)2002%KenyaTanzania150GhanaNigeria1001%SouthAfricaEgypt50SenegalOther2013201620192022ShareofglobalenergyVC(rightaxis)IEA.CCBY4.0.WhileAfricanenergystart-upsattractedoverUSD130millionin2022,substantialyear-on-yeargrowthinthesectorhaseludedAfricancountriesoverthepastdecadeNote:Includesearly-stageandgrowth-stageinvestmentsaccordingtothemethodologyusedinIEA(2023).WorldEnergyInvestment2023.Source:CleantechGroup(2023).Just0.3%ofthisearly-andgrowth-stageinvestmentwenttoAfrica-basedstart-upsin2022(seeFigure3.9).WhiletheglobalamountofVCforenergystart-upshasrisensixfoldsince92InternationalEnergyAgencyFinancingCleanEnergyinAfrica2015,andmorethandoubledsince2020,Africanstart-upshaverepresentedasteadilydecreasingshare.Justfivecountries–Kenya,Tanzania,Ghana,NigeriaandSouthAfrica–represent95%oftheAfricantotalsince2015.Thisconcentrationis,inlargepart,duetothe3financingchallengesinsmallermarkets.Shiftingthistrendtoamorepositiveoutlookwilltakealong-termcommitmenttoaddressingbarriers,someofwhichliefaroutsidethepurviewofenergyandenvironmentministers(IEA,2020).ThedevelopmentofinstitutionsthatnurtureandformaliseprivateequityinvestmentisastepthatunderpinsthedevelopmentandgrowthaspirationsofmostEMDEs(BoniniandAlkan,2012).Attentionalsoneedstobegiventorelevanttechnologiesfromnon-Africanstart-upsthataresupportedbyVCportfoliosinadvancedeconomies.Equityinvestmentinstart-upsaimingtoimproveaccesstoenergyservicesinEMDEsroseaboveUSD400millionin2022,butstillrepresentedjust1%oftotalenergyVCglobally.Thissharereflectslowerprofitexpectationsforenergyaccesscomparedwithotherenergyareasandalackofawarenessofthiscriticalchallengeamonginnovatorsandinvestorsinadvancedeconomies(seeChapter2).Yettheaddressablemarketopportunityislargeandtheneedforappropriateinnovationisstriking.Figure3.10⊳VCinvestmentinstart-upsdevelopingenergyaccessproductsandbusinesses,Africa,2010-20225004%MillionUSD(2022)2502%IEA.CCBY4.02010201220142016201820202022SolarPVandequipmentbundlesRetailandfinancesolutionsCleancooking,heating,coolingShareofglobalenergyVC(rightaxis)IEA.CCBY4.0.VCinvestmentinenergyaccessreachedanewhighin2022,inabsolutetermsandrelativetootherenergyVC;thiswasdominatedbyfundingforstart-upsproducingsolarPVsystemsNote:Includesearly-stageandgrowth-stageinvestmentsaccordingtothemethodologyusedinIEA(2023).WorldEnergyInvestment.Source:CleantechGroup(2023).Todate,VC-backedenergyaccessstart-upshavepiggybackedonbroadertechnologytrends.Digitalsolutionsforcleanenergyretailledduring2015-2019,beforebeingovertakenbymakersofbundlesofsolarPV,batteriesandappliances.Thatmanyofthesestart-upsarebasedinAfricaandAsiaishighlyencouraging,showingthevalueoflocalknowledgeofwhichChapter3Mobilisingcapitalforasustainablefuture93solutionsareaffordableandattractivetoconsumerswithlimitedresources.However,otherimportanttechnologyareasappearunderserved,includingculturallysuitableelectricstoves,low-costefficientcooling,passivebuildingdesignsforhotclimates,electrificationofappropriatetransportmodes,affordablelong-durationenergystorageandothers.EncouragingcleanenergyinnovationinEMDEsisnotonlyaninvestmentinfutureeconomicopportunities,butisalsomorelikelytodelivertechnologiessuitedtothelocalcontext.Table3.3⊳SelectedAfricancleanenergystart-upsNameCountryFocusFoundedVCraisedBasiGoKenyaElectricbuses,2021USD15millionchargingandfinanceBeaconPowerNigeriaDigitalgridand2013USD2.7millionServicesenergymanagementservicesBrayfoilSouthAfricaWindturbine2017SeedfundingTechnologiesbladesCellaMineralKenyaCO2storage2021SeedfundingStorageColdHubsNigeriaColdrooms2014SeedfundingpoweredbysolarPVforfoodstoragei-G3NSouthAfricaLithium-ion2014USD1.3millionbatteriesM_KOPASolarKenyaPay-as-you-go2011USD230millionsolarPVandequipmentbundlesNuruDRCRenewableproject2015USD41milliondevelopmentPowerstoveEnergyNigeriaCleancookstoves2017SeedfundingShiftEVEgyptElectricvehicle2020USD13milliondrivetraintechnologyandfleetservicesWidEnergyZambiaPay-as-you-go2016SeedfundingsolarPVandequipmentbundlesThereareexcellentexamplesofenergyinnovationpoliciesinAfricaandaroundtheworldfromwhichgovernmentsandtheirpartnerscanlearn.Thesearenotlimitedtoenergyaccesstechnologies,andsomeextendtosupportinginnovationinfieldswhereEMDEscanaccessrapidlygrowingmarketsinadvancedeconomies,suchascriticalmineralsprocessingorelectricvehiclecomponentmanufacturing.TherangeofpoliciesincludessystemsforsupportingtechnologyincubatorsinIndiaandhelpingresearchersinMoroccotoscaleuptheirideas(IEA,2022).Kenya’sClimateInnovationCenterhasbeenactivesince2012,withDanishandUKpublicfunding.94InternationalEnergyAgencyFinancingCleanEnergyinAfricaRecently,intergovernmentalorganisationsandMDBshavebeguntotakeastrongerinterestinthechallengesofcleanenergyecosystemsinEMDEs.TheUNFCCClauncheditsClimateChangeGlobalInnovationHubinlate2021andin2023G7leadersconfirmedthatthey“will3keepsupportingtheresearch,development,anddeploymentofcleantechnologiesasacriticalenablerofanacceleratedcleanenergytransitioninLMICs[low-andmiddle-incomecountries]”(G7,2023).AsanexampleofMDBactivity,FondsInnovInvestwasestablishedinMoroccowithsupportfromtheWorldBanktosupportstart-ups,andthismodelcouldtargetcleanenergyspecifically.Morerecently,MDBshavecommittedseveralbillionUSdollarstoprojectsforlow-emissionshydrogenproductioninEMDEs,creatingaclearopportunitytobuildlocalcapacityandvaluechains(IEA,2023c).3.4IncreasingtheinvolvementoflocalcapitalAfricacurrentlysuffersfromanover-relianceonhardcurrencytofinanceitscleanenergyprojects,withlocalcurrencyfinancebeinginshortsupplyandoftenatprohibitivelyhighcosts.LocalcapitalmarketsinAfricaareunderdeveloped,oftencharacterisedbylowlevelsofdomesticsavings,limitedavailabilityofprivatedebtandequity,andilliquidcapitalmarkets(seeFigure3.11).SouthAfricastandsoutduetoitslargestockmarket,butotherwiseallotherAfricancountriesfallbelowtheglobalaverage,whichislikelytolimittheavailabilityoflocalcapital,particularlydebt.Figure3.11⊳Financialsystemdevelopmentindicatorforselectedcountries200%150%Globalaverage100%50%DRCongoGuineaGabonUgandaAngolaZambiaLiberiaNigeriaTanzaniaAlgeriaGhanaArgentinaSenegalBotswanaEgyptRwandaKenyaMexicoIndonesiaNamibiaTunisiaMoroccoIndiaMauritiusSpainChileChinaJapanUnitedStatesSouthAfricaIEA.CCBY4.0.IEA.CCBY4.0Financialconditionsvaryacrosstheregion,butthevastmajorityofAfricancountrieshaveunderdevelopedbankingsectorsandcapitalmarketscomparedwiththeglobalaverageNotes:Thisindicatorshowstheaverageoftheshareofprivatecreditandtheshareofstockmarketcapitalisation(bothasapercentagesofGDP)over2017-2021;theglobalaverageisweightedbyGDP.Source:CalculationsbasedonWorldBank(2022).WorldDevelopmentIndicators.Chapter3Mobilisingcapitalforasustainablefuture95Despitethenascentstateofcapitalmarkets,domesticsavingsinsub-SaharanAfricahaverisenfrom19%ofGDPin2017to25%in2021.Thereisalsosignificantscopeforfurthergrowth.Asof2021only8.5%ofAfrica’sworking-agepopulationwereactivelycontributingtopensionschemes(therateinNorthAfricaasasub-regionisnotablyhigherat17.4%);thiscomparestotheglobalaverageof32.5%(ILO,2022).ImprovingsavingsrateswillrequireAfricangovernmentstodesignpensionschemesthatspecificallytargetunderservedcommunities,includingworkersintheinformalsector,whichaccountsforupto90%ofthelabourforcebysomeestimates(ILO,2018).UndertheSAS,effortsbylocalpensionregulatorstoboostsavingsratescombinedwithimprovingsocio-economicdevelopmentsupportscapitalaccumulation,allowinglocalcapitaltoplayalargerrole.Thisreducescurrencyrisk(althoughdoesnotentirelyeliminateitasimportsarelikelytobeinUSdollars)andexposuretoexternalshocks,creatingamoresustainablefinancingenvironment.Aslocalcapitalmarketsdeepen,governmentsandinternationalinvestorscanalsoplayarolebyensuringthatinstrumentsexisttochannelthisnewsourceofcapitaltoenergyandinfrastructureprojects.Capitalmarketauthoritiescanensurethattheregulatoryenvironmentencouragesinvestmentinalternativeassetclasses,aswellasfamiliarisinginvestorswiththerisksandopportunitiesassociatedwiththeseinvestments.Meanwhile,internationalinvestorscanco-investwithlocalpartners,whichcanbemutuallybeneficialbycombiningforeigninvestors’familiaritywithenergyinvestmentmechanismswithlocalinvestors’familiaritywiththeriskenvironment.3.4.1BankingsectorMostfinancialsystemsinAfricancountriesareheavilyreliantonbanksduetothesmallsizeofcapitalmarkets.Fivecountriesdominatetheregionalbankingsector,butmanyofthelargestbanksarepan-African,sometimesreferredtoasnetworkbanks.Thesebanksplayakeyroleinfinancingprojectsincountrieswithsmallerbankingsectors.Cross-borderbankingislikelytoreceiveaboostfromtheintroductionoftheAfricanContinentalFreeTradeArea,whichincludesasystemforinstantcross-borderpayments,supportedbyAfreximbank.Evenasbankingassetsscaleup,thereisstillamisalignmentbetweenbankingproductsandcleanenergyprojectneeds.Inthemoredevelopedbankingmarkets,long-termcreditamountedtoanaverageofnearly25%ofGDP,butthisfallsto5%inlessdevelopedmarkets(seeFigure3.12).Large-scaleprojects,includingIPPs,generallyneedloansof10-15years,butmanybanksstruggletoprovidetenorsofoversevenyearsduetotheabsenceoflong-termsavings.96InternationalEnergyAgencyFinancingCleanEnergyinAfricaFigure3.12⊳DepthandcharacteristicsofbankingsectorasapercentageofGDPamongAfricancountries,2021BankassetsDomesticcredittoLong-term3150%privatesectorcreditPercentageofGDP120%90%60%30%FiveOtherFiveOtherFiveOtherlargestmarketslargestmarketslargestmarketsFullrange25thto75thpercentileMeanIEA.CCBY4.0.Outsidethefivelargestbankingmarkets,privatesectoraccesstocapitalislimited,withlong-termcreditinlimitedsupplyeveninlargermarketsNotes:Fivelargestbankingmarkets=Egypt,Kenya,Morocco,NigeriaandSouthAfrica;Othermarkets=restofAfricaSource:WorldBank(2023).WorldDevelopmentIndicators.Beyondthetenor,thetermsofavailablebankfinancingcanbeunfavourableforenergyprojects.Banksoftenhavetolendathigh,variableratestoaccountforinflationandthehighinterestrateongovernmentsecurities.AsofJune2023,16Africancountrieshaveinterestratesover10%–thiscompareswith5.25%intheUnitedStatesand4%intheEurozone.Additionally,smallerbanksstruggletoassesstheriskofcomplexcleanenergyprojects,particularlydistributedrenewableenergyprojects,andcanthereforerequiresignificantcollateral(AfDB,2020).Suchtermsareparticularlyprohibitiveforenergyaccessprojects,whichofteninvolvelocalSMEswithnotrackrecordandhighpotentialend-userrisk.Suchprojectsneedaccesstocheapdebt,ideallyviaarevolvingfund,andareunlikelytobeabletoprovideahighlevelofcollateral.Bankshaveindicatedthattheyareinterestedinbecomingmoreinvolvedingreenfinance,includingcleanenergyprojects.Forexample,StandardBank–thelargestlenderbyassetsintheregion–exceededtheirinternaltargetforlendingtosustainableprojectsin2022.AccordingtotheEuropeanInvestmentBankandMakingFinanceWorkforAfricaannualsurveyofsub-Saharanbanks,nearly70%ofbanksseeclimatelendingasanopportunity,buttodateonlyone-fifthhavededicatedgreenlendingprojects(EuropeanInvestmentBank,2022).Inorderforbankstofullytakeadvantageoftheopportunity,theyarelikelytoneedChapter3Mobilisingcapitalforasustainablefuture97IEA.CCBY4.0supporttodeveloptheirexpertise,aswellasdataandtoolsforassessingclimateriskandopportunities(EuropeanInvestmentBank,2022).Box3.5⊳TheroleofdedicatedgreenfinancefacilitiesDedicatedgreenlendinginstitutionscanhelpfinancecleanenergyprojectswhilealsoboostingthepipelineofbankableprojectsviatheuseoftargetedde-riskingmechanisms.GreenbanksorfinancefacilitiesareabletoaccessconcessionalcapitalfromMDBsandclimatefacilities,whichtheytheninvesteitherindedicatedinstruments,suchasinvestmentfunds,ordirectlyintoprojectswhileaimingtocrowd-inprivatecapitalasco-investors.Theyprimarilyprovidelocalcurrencyfinancing,oftenusingacurrencyhedgingmechanismifonlyhardcurrencyfinanceisavailable.Africacurrentlyhastwomajorgreenbanksorfacilities:theClimateFinanceFacility(CFF)oftheDevelopmentBankofSouthAfrica,andRwanda’sGreenFund–FONERWA–whichispartneringwiththeBankofRwanda.TheCFFwasestablishedin2017,becomingthedevelopingworld’sfirstgreenfacilitywiththeaimofco-financingprojectswithlocalcommercialbanks.Thefacilityprimarilyofferssubordinateddebtandfirst-losspositions,aswellasothercreditenhancementstoextendthetenorofloans.Meanwhile,FONERWAcombinesaprojectpreparationfacilitywithacreditfacilitythatwillofferdebt,equityorventurecapitaltoworkwiththebroaderecosystemofinvestors.Thesedifferentmodelsdemonstratethepotentialroleofgreenlendinginstitutionsinmarketswithvaryingdegreesofenergyandfinancialsectordevelopment.AfDBislookingtosupportthecreationoffurthergreenfacilitiesandisworkingwithbanksinBenin,Ghana,Mozambique,Tunisia,UgandaandZambiaunderitsAfricanGreenBankInitiative.InMay2023AfDBannouncedthatUSD1.6millionhadbeensecuredtosetupthefirsttwofacilitiesunderthisinitiative,whichwillbehousedatLaCaissedesDépôtsetConsignationsduBéninandtheIvorianNationalInvestmentBank(AfDB,2023).TheinitiativewillbesupportedbytheAfricanGreenFinanceFacilityFund(AG3F),whichwillprovidetechnicalassistancetogovernmentsandfinancialinstitutionsincreatingandcapitalisinggreenfacilities.Thefundwillthenco-investalongsidethosefacilitiesandprovidede-riskinginstrumentstomobiliseprivatecapital.Thecombinationoftrainingalongsideco-investmentoron-lendinghasprovenparticularlyeffectiveatmobilisingnewactorsandcanserveasausefulmodelforothereffortstoincreaselocalbankingsectorinvolvement.3.4.2CapitalmarketsThankstothecombinationofpensionfundreformtoallowprivatelymanagedfundsandrisingper-capitaincomes,thesizeofpensionfundsonthecontinenthasbeengrowing.TheSouthAfricanpensionindustryisstilloverfivetimeslargerthaninanyotherAfricancountry,butassetsundermanagementinpensionsinNigeriagrewoverninefoldbetween2006and98InternationalEnergyAgencyFinancingCleanEnergyinAfricatheendof2020,sevenfoldinKenyaandoverfivefoldinGhana(AfDB,2022).Despitethisprogress,thereisstillsignificantopportunitytofurtherthegrowthofthesefunds.GrosssavingsratesasaproportionofGDPaveraged20%in2020insub-SaharanAfrica,compared3with42%indevelopingeconomiesinEastAsiaandthePacific(AfDB,2022).Figure3.13⊳Pensionfundsassetallocation,selectedcountries,2022Shareofassetallocation100%80%60%40%20%EgyptGhanaKenyaNamibiaNigeriaSouthSouthZambiaAfricaAfrica(public)(private)OtherBillsandbondsEquitiesCashanddepositsIEA.CCBY4.0.PensionfundsoutsideSouthernAfrica,wherefundshaveaccesstotheSouthAfricanstockexchange,areheavilyconcentratedingovernmentsecuritiesNotes:Infrastructureassetswouldfallintothe“Other”category,whichalsoincludesrealestate,insuranceandprivateequityandcorporatebonds.InKenya,“Other”assetsareprimarilyrealestate;inprivatepensionsinSouthAfricatheyareprimarilyinsurancepolicies.Source:Annualreportingfromcountryregulators.MostpensionfundsinAfricastillhaveastrongpreferenceforgovernmentsecurities,whichIEA.CCBY4.0providerelativelyhighrisk-freeyields(seeFigure3.13).Forexample,pensionsinEgypt,GhanaandNigeriaallocateover75%oftheirassetstogovernmentsecurities.EquitiesplayalargerroleinSouthAfricaandNamibiaduetothesizeandliquidityofthemarket,butonlyinprivateSouthAfricanpensionsandKenyanpensionsdootherassetclasses,includinginfrastructure,makeupmorethan25%.Inordertoincreasepensionfundallocationstoinfrastructureassets,capitalmarketauthoritiesthatregulatepensionfundscanclearlydefinealternativeassetclassesandraisetheceilingforinvestmentintheseareas.Forexample,inKenyatheRetirementBenefitAuthorityincreasedthethresholdforpensionfundallocationstoinfrastructureassetsfrom5%to10%in2021,whichresultedintheKenyaPensionFundsInvestmentConsortium(KEPFIC)committingtoinvestoverKES25billion(USD229million)ininfrastructureover2021‐2026(USEmbassyKenya,2020).Pensionsfundswillalsoneedtrainingonhowtoinvestintheseassetclasses,aswellasapipelineofappropriateinvestmentopportunitiesthatmeetChapter3Mobilisingcapitalforasustainablefuture99theirrisk,returnandsizerequirements.Inmarketswithastockofexistingenergyassets,localcurrencyguarantees,accompaniedbytechnicalassistanceprogrammes,canproveparticularlyeffective,asseeninNigeria(seeBox3.5)Box3.6⊳LocalcurrencyguaranteesinNigeriaNigeriahasthesecondlargestpensionindustryonthecontinent,withlargepublicandprivatefundsandabroadrangeofinvestableinstrumentsinuse.Nigerianpensionfundshaveoneofthelargestsharesofassetsundermanagementinvestedinlocallydomiciledalternativeassets.Muchofthiscomesviagovernmentsukuk(Islamicsecurities),whichareearmarkedtofinanceinfrastructure(AfDB,2022),butalsothankstothepresenceoflocalcurrencyguaranteesforinvestmentsininfrastructure,providedbyAAA-ratedprovider,InfraCredit.InfraCreditwasestablishedbyGuarantCoandtheNigerianSovereignInvestmentAuthorityin2017andsincethenhasissued16guaranteestomobiliseNGN159billion(USD206million)into10differentinfrastructureprojects.Over19localpensionfundshaveinvested,demonstratingappetitefromthedomesticmarket.IssuersincludeNorthSouthPowertosupporttheoperationoftheirhydrodams,whosefirstissuanceofaNGN8.5billiongreenbondfor15yearsin2019wassupportedbyanInfraCreditguarantee;theywerethenabletogotomarkettwoyearslaterforasecondissuancewithoutaguarantee.Morerecently,InfraCreditannouncedaninnovativeblendedguaranteetosupportanaggregatedportfolioofmini-gridprojectsbylocalfirmDarwayCoast–asectorthatpensionfundsgenerallyconsidertoosmallandrisky.TheUK-fundedClimateFinanceBlendingFacilityprovidedsubordinateddebt,which,combinedwithInfraCredit’sguarantee,wasabletomobiliseNGN800million(USD1million)fromlocalinstitutionalinvestors.Todate,InfraCredithasbeenabletoleverageitsownequitythreefoldviaitsguarantees,demonstratingthecatalyticimpactoffirst-losscapital.AggregationandsecuritisationSecuritisation,wherebyassetsarepooledintoaspecialpurposevehicletocreateatradableasset-backedsecurity,canbeaneffectivemeansofraisingdebtfromcapitalmarketsinlocalcurrency,particularlyfordistributedenergyassets.Asset-backedsecuritiesarecomplexinstrumentsandareunfamiliartomanydevelopersandfinanciersinAfrica,andsoarenotcurrentlywidelyused.However,therehasbeenprogress;forexample,theWestAfricanEconomicandMonetaryUnionhasseen12securitisationdeals,sixofwhichhaveoccurredsince2020.Numerouschallengesaboundbeforesuchinstrumentscanbemorewidelyused.Initialasset-backedsecurityofferingsarelikelytoneedde-riskingsupport,eitherintheformofguarantees,orwithDFIsasinvestors,potentiallyinafirst-lossrole.ThesecuritisationmodelwasgivenaboostinJune2023whenUS-basedSunKingandCitibankannouncedarecord100InternationalEnergyAgencyFinancingCleanEnergyinAfricaUSD130milliondealtosupportoff-gridsolarsystemsinKenya.Thesecuritisationstructure,whichisentirelydenominatedinKenyanshillings,willbebasedontheexpectedreceivablesofoveramillioncustomersandhasattractedarangeoflocalcommercialbanksandDFIs.3Asset-backedsecuritiesareonlyeverlikelytofinanceasmallshareoftheenergyinvestmentnecessaryundertheSAS.In2021(latestestimate)theUNDPestimatedthepotentialsizeofthefinancialaggregationmarketfordistributedrenewableenergyinsub-SaharanAfricaatUSD400million–whilethisrepresentedlessthan1%oftotalenergyinvestmentinthecontinentthatyear,itistheequivalentof88%ofoff-gridspendinginthesameyear(UNDP,2022)(GOGLA,2023).Theirpotentialtofinancevitalenergyaccessprojectsandtobefundedbylocalinvestorsmeansthattheseinstrumentswouldalsohavesignificantindirectpositiveimpacts.Theycouldpotentiallylowerthecostofenergyaccessfinancing,freeupequitytobeinvestedelsewhere,andfamiliariselocalcapitalproviderswiththeenergysector.TheevolvingrangeoftoolsavailabletoattractbothlocalandinternationalcapitaltoenergyprojectsinAfricademonstratethatitispossibletoachievetheinvestmentneedsoftheSAS,buttherearestillsignificantchallengestoovercome.ManycleanenergyprojectsinAfricaarestillconsideredtooriskybyprivateinvestorsandtheover-relianceonlimitedconcessionalfinanceresourcesactsasabreakondevelopments.Urgentstepsareneededtounlockprivatecapital,startingwithsomeofthelower-riskinvestments,suchascleanpowerprojectsincountrieswithasuccessfultrackrecordandestablishedregulatoryenvironment.Thiscanallowconcessionalfundstofocusonsomeofthemorecomplexornon-commercialareas,suchasearly-stagefinancing,energyaccessprojects,orfragileandconflict-affectedstates.Concessionalfundsalsoplayavitalroleinsupportinggovernmentsastheyimplementregulatoryreformsandbuildcapacityatenergyinstitutions.Thisreviewoffinancingchannelshassoughttohighlightwhereeachtypeofcapitalcanimmediatelyfocusitsattentioninordertomostrapidlyscale-upspendingoncleanenergyinAfricancountries.AsoutlinedinthecycleofchangelaidoutinChapter1,thisfinancingincreasecannotberealisedwithoutaseriesofcoordinatedactionsfromAfricangovernments,donorsandDFIs,andtheprivatesector.TheseeffortscannotonlyensureAfrica’ssecureandsustainableenergyfuture,butalsohelpachieveurgentclimateobjectivesanddrivethecontinent’ssocioeconomicdevelopment.Chapter3Mobilisingcapitalforasustainablefuture101IEA.CCBY4.0AnnexACasestudiesIEA.CCBY4.0Forthepreparationofthisreport,theIEAreviewedover85casestudiesandcarriedoutover40stakeholderinterviews.Casestudieslistedinthisannexrespondtoawidevarietyofsolutionsdesignedtoovercomebarrierstoinvestment,acrossdifferentsectors,technologiesandregions.TheselectionofcasestudiesfeaturedinthisannexisnotexhaustiveanddoesnotrepresentanendorsementbytheIEASecretariatoftheinstitutionsorprojectsreferredthereinoverotherstakeholdersconsulted.Thisannexfeaturesfurtherdetailonthefollowingcasestudies,listedinalphabeticalorder:AcornGreenBond–sustainabledebtissuanceforgreenbuildingsAfricaGreenCo–aggregatingrenewableenergysupplythroughintermediarypowertradingservicesAfricaMinigridsProgramme,GEF-7–improvingthefinancialviabilityofrenewableenergymini-gridsAfricanTrade&InvestmentDevelopmentInsurance–providinginsurancetoinvestorstode-riskprojectsCurrencyExchangeFund(TCX)–hedgingcurrencyrisktoenableinvestmentindevelopingandfrontiermarketsDeserttoPowerG5SahelFacility–usingblendedfinanceinnascentrenewablesmarketsEBRD-GCFGreenEconomyFinancingFacility–extendingcreditlinestolocalfinancialinstitutionsECOFRIDGESInitiative–on-billandon-wagefinancingforefficient,climate-friendlyrefrigeratorsandACsEmergingAfricaInfrastructureFund–leveragingconcessionalfinancetomobiliseprivatecapitalGET.invest–providingearly-stagefinancingtocleanenergyGlobalElectricMobilityProgramme,GEF–targetingthenexusofe-mobilityandrenewablepowerintegrationGuarantCo–usinglocalcurrencyguaranteestomobiliseprivatecapitalforinfrastructureprojectsInfraCredit–usinglocalcurrencyguaranteestoattractdomesticinstitutionalinvestorsKinguéléAval–enhancingthebankabilityofanIPPprojectthroughinnovativesecuritisationLeveragingEnergyAccessFinance(LEAF)Framework–addressingfinancialbarrierstodeliverdistributedpowerMoon–publicprivatepartnershiptoprovideelectricityasaserviceforlast-mileruralhouseholdsAnnexesCasestudies103MUNYAXECO–supportingwomen’sempowermentalongsideenergyaccessNationalCleanEnergyAccessProgramme(NCEP)Ghana–usingcarbonmarketstodriveenergyaccessProMiniGrids,Uganda–improvingenablingenvironmentformini-gridsinruralareasProgrammeforEnergyEfficiencyinBuildings(PEEB)Cool–dualfundsprovidingfinanceandtechnicalsupportRoom2Run,AfDB–freeingupconcessionalcapitaltoreinvestSustainableEnergyFundforAfrica–providingcatalyticfinancetounlockprivate-sectorinvestmentSpark+Africa–dedicatedcleancookinginvestmentfundTranscoCLSG–financinggridswitharegionalapproachUpEnergyImprovedCookstoveProgramme–voluntarycarbonmarketssupportingefficientcookstoves104InternationalEnergyAgencyFinancingCleanEnergyinAfricaAcornGreenBond–sustainabledebtissuanceforgreenbuildingsSector:Energyefficiency,emissionsreductionACountries:KenyaFinancialmechanism:SustainabledebtissuanceOverviewAcornHoldingLimitedissuedKenyaandEastAfrica’sfirstgreenbondinOctober2019,raisingKES4.3billion(USD41.5million)fortheconstructionofsixstudentaccommodationpropertiesinNairobi.ThebuildingswillbecertifiedwiththeInternationalFinanceCorporation’sEDGE(ExcellenceinDesignforGreaterEfficiency)standardfor20%lesswateruse,energyefficiencyandlowembodiedenergyinbuildingmaterials.Thebond’sprimarybuyersincludedlocalinstitutionalinvestorsandcommercialbanks,developmentfinanceinstitutions(DFIs)andtheEmergingAfricaInfrastructureFund(ablendedfinancefund).KeyelementsKenya’sfirstgreenbondwasissuedunderthePolicyGuidanceNoteonGreenBonds,publishedbytheKenyanCapitalMarketsAuthorityinFebruary2019withstrictreportingrequirementsonallocationofproceedsandimpact.Asanewproductinthemarket,effortsweremadetoincreaseinvestorconfidence,withGuarantCoprovidingapartialcreditguaranteeon50%oftheprincipalandinterest.EngagementwiththeGreenBondProgrammeKenya(GBPK),EDGEgreenbuildingcertificationandClimateBondInitiativecertificationalsoraisedawarenessandofferedinvestorsaclearunderstandingoftheproject’senvironmentalandenergyperformance.TableA.1⊳BarriersaddressedormitigatedBarrierDetailLimitedaccesstoappropriatefinanceEnergyefficiencyprojectscanstruggletoattractlong-term,affordabledebt.Greenbondscancomplementtraditionaldebtfinancing,allowingformediumHighriskperceptionandlong-termdebtfrominstitutionalinvestors.InAcorn’scasetheirexistingandlackofdataassetpipelinewithenvironmental,socialandgovernancecredentialstogetherwiththepartialcreditguaranteeimprovedtheriskprofileofthebond.LackofawarenessandcapacityGreenbuildingsreducecomplianceandconstructionrisksaswellasoperatingcosts,makingthemahighervalueandlowerriskassetforinvestors.CBIandEDGEcertificationtogetherwithstrictreportingrequirementsimprovedriskassessment,accountabilityandtrust.GreenbondsareanewinstrumenttomanyAfricancapitalmarkets.Governmentsupport,inthiscaseviatheGBPK,isthereforeoftencrucialfortheinitialissuances.TheKenyangovernmentalsoincludedaffordablegreenhousingasacorepillarofthegovernment’snationaldevelopmentagenda,lendingfurthersupporttotheproject.AnnexesCasestudies105IEA.CCBY4.0AfricaGreenCo–aggregatingrenewableenergysupplythroughintermediarypowertradingservicesSector:RenewableenergyCountries:Zambia,Namibia,SouthAfrica,ZimbabweFinancialmechanism:Aggregationofrisk,creditworthyofftakerOverviewAfricaGreenCo(GreenCo)actsasanintermediaryaggregatorofrenewableenergy,buyingandsellingpowerfromrenewableindependentpowerproducers(IPPs)onaportfoliobasis.Thisservestode-risktheofftake,facilitatinginvestmentintheenergysectorwhilereducingfinancialrelianceonnationalutilitiesandhostgovernments.ItisheadquarteredinLusaka,Zambiawhereitholdsanelectricitytradinglicence,andin2021itbecamethefirstmarketparticipantmemberoftheSouthernAfricanPowerPool(SAPP),enablingittotradeontheregionalpowermarkets.ItscurrentinvestorscomprisetheDanishInvestmentFundforDevelopingCountries(IFU),theEU-fundedElectrificationFinancingInitiative(EDFIElectriFI)andInfraCoAfrica,partofthemulti-donorPrivateInfrastructureDevelopmentGroup(PIDG).KeyelementsGreenCo’smodelmitigatesagainsttheriskofnon-paymentbythebuyer.ItdoesthisthroughacombinationoftheliquiditysupportitprovidestoIPPsandbyaggregatinggenerationandsupplyacrossaregionalportfoliotodiversifytherisk.GreenCo’sportfolioapproachenablesittotakemoreriskonanysinglebuyerandalsoacceptmismatchesbetweenbuyandsellsidetransactions,providingflexibilitytobridgeIPPbankabilityrequirementsandcustomeroperationaldemands.Itoperatesinclosecollaborationwiththestate-ownedutilitiesinitscountriesofoperations,whichitpaysforwheelingandsystemoperationsservicesincludingenergybalancing.TableA.2⊳BarriersaddressedormitigatedBarrierDetailCreditworthinessofpublicofftakersCleanpowerprojectsrequirethepurchaseofpowerproduced,whichistypicallydonebystate-ownedutilities(offtakers).Moststate-ownedutilitiesRelianceonasingleareinpoorfinancialhealthandtheirlackofcreditworthinessposestheriskofftakerthatpurchaseswillnotbepaidontimeorinfull.Withitsstrongbalancesheetandoperationalcapabilities,GreenComitigatesthisriskthroughitsabilitytosecurealternativebuyersincaseofdefault.Relianceonasingleentityincreasestheofftakerrisk.ByimplementingaportfolioapproachandaccessingtheSAPPregionalmarkets,GreenCoeffectivelycontributestode-riskingIPPprojectsbyreducingtherelianceonasingleofftakerthroughthenaturalhedgeofdemandaggregation.106InternationalEnergyAgencyFinancingCleanEnergyinAfricaAfricaMinigridsProgramme,GEF-7–improvingthefinancialviabilityofrenewableenergymini-gridsSector:Energyaccess,renewableenergyACountries:Angola,Benin,BurkinaFaso,Burundi,Chad,Comoros,Djibouti,DemocraticRepublicofCongo(DRC),Eswatini,Ethiopia,Liberia,Madagascar,Malawi,Mali,Mauritania,Nigeria,Niger,SaoTomeandPrincipe,Somalia,Sudan,andZambiaFinancialmechanism:Climatefinance(theGlobalEnvironmentFacility[GEF])OverviewTheAfricaMinigridsProgramme(AMP)isaUSD565.9millionprogrammeaimingtoincreasecleanenergyaccess.Byprovidingcost-reductionlevers(inhardwarecosts,softcosts,andfinancingcosts)andinnovativebusinessmodels,AMPimprovesthefinancialviabilityofmini-grids.Asmini-gridsbecomemorecompetitive,thiscanleadtogreaterprivatecapitalflow,inturnresultinginbothGHGemissionreduction,andlowertariffsforend-users.KeyelementsAMPworksatbothregionalandnationallevels.TheregionalKnowledgeManagementplatformsupportsthemini-gridmarketthroughknowledgeexchange,tailoredtechnicalassistance,regionalCommunitiesofPractice,digitaltools,andsolutionsformini-gridcost-reduction.Withinthecontextof21nationalprojects,AMPwilldevelopcomparativeadvantagesacrossthreekeyareasofopportunity:nationaldialoguesondeliverymodels,productiveuseofenergyanddigitalisationformini-gridstodrivecostreduction.Thelinkbetweentheregionalandnationalprojectsensuresconsistencywhilemainstreamingdigitaltoolsandsolutionsformini-gridcostreductionandscale-up.AMPaimstodirectlyavoid380000tCO2-eqandreach430000directbeneficiaries.TheUSD33.2milliongrantfromGEFwillleverageUSD532.7inco-financingfromtheUnitedNationsDevelopmentProgramme,theAfDB,RockyMountainInstituteandtheprivatesector.TableA.3⊳BarriersaddressedormitigatedBarrierDetailLackofearly-stagedevelopmentfinanceTheprivatesectorfacesarangeofbarriersholdingbackinvestment.Nearlyallcurrentinvestmentinmini-gridsisintheformofgrantsandnon-commercial,Lackofawarenessandpatientcapital.AMPwillhelpmini-gridbusinessdeveloperstoaccesslargecapacityvolumesofcommercialfinancing,particularlycommercialdebt,thatisnecessarytoscalethesector’sgrowth.IEA.CCBY4.0Acceleratingthelearningcurveforthecomplexarrayofstakeholdersinvolvedindeliveringmodernelectricityservicesisneededtoscaleupmini-grids.AMPhelpsdeveloperstocollectdatafromasubstantialsampleofmini-gridsusingauniformsetofmetricsandguidelinesandderivesinsightsfromnationalprojects’data.TheseinsightsarethensystematicallydisseminatedwithparticipatingAMPcountriesandthebroadermini-gridssectorinAfrica.AnnexesCasestudies107AfricanTrade&InvestmentDevelopmentInsurance–providinginsurancetoinvestorstode-riskprojectsSector:Renewableenergy,energyaccess,energyefficiencyCountries:21AfricancountriesthataremembersofATIDIFinancialmechanism:Investmentandtradeinsurance,reinsurance,suretybondsOverviewAfricanTrade&InvestmentDevelopmentInsurance(ATIDI)isamultilateralorganisationthatprovidespoliticalriskinsurancetoinvestorsandlenders.Itoffersarangeofsolutionstomitigaterisk,includingliquiditysupportandinsurancepoliciestailoredtotheenergysector.WithsupportfromtheEuropeanDFIs,ATIDIhasdevelopedproductsthatenhancethebankabilityofenergyprojects,makingiteasierforprivatesectorinvestment.KeyelementsTosupportIPPprojects,ATIDIandKfWDevelopmentBanklaunchedtheRegionalLiquiditySupportFacility(RLSF),whichlaterdrewadditionalfundingfromtheNorwegianAgencyforDevelopmentCooperation.TheRLSFtargetssmallandmid-scalerenewableenergyprojectswithinstalledcapacityofupto100MWbyinsuringIPPsagainsttheriskofdelayedpaymentsbystate-ownedutilities–oneofthelargestconcernsofprivateinvestors,particularlyinthecurrentdebtcrisis.Thefacilitycanalsosupportlargerprojects,onacase-by-casebasis.WithsupportfromtheEuropeanInvestmentBank,KfWDevelopmentBankandMunichRe,ATIDIhasalsosetuptheAfricanEnergyGuaranteeFacility,whichisareinsuranceplatformthatprovidesuptoUSD1billionofadditionalunderwritingcapacitytosupportenergyaccess,energyefficiencyandrenewableenergyprojectsbyinsuringagainstpoliticalrisk.Manyinternationalinvestorsrequiresuchinsuranceproductsinordertoprovidelong-termcapital.TableA.4⊳BarriersaddressedormitigatedBarrierDetailCreditworthinessofpublicofftakersInmostAfricancountries,state-ownedutilitiesaretheprimaryorsoleofftaker.TheseutilitiesaregenerallyinpoorfinancialhealthandtheirlackofPoliticalriskcreditworthinessposestheriskthatpurchaseswillnotbepaidontimeorinfull.Byinsuringagainstdelayedpayments,ATIDIenhancesthebankabilityofrenewableenergyIPPswithoutrequiringthenationalgovernmenttoprovideaguarantee,whichisincreasinglychallenginggivenrisingdebtintheregion.Politicalriskssuchasexpropriation,transferrestrictionsandcurrencyinconvertibility,warorcivildisturbance,and/orthebreachofcontractualobligationsbythehostgovernmentcanhinderinvestment.Internationalinvestorstypicallyneedtohavepoliticalriskinsurancebutcanstruggletoaccessthisforsomeofthemostcomplexcountriesintheregion.108InternationalEnergyAgencyFinancingCleanEnergyinAfricaCurrencyExchangeFund(TCX)–hedgingcurrencyrisktoenableinvestmentindevelopingandfrontiermarketsSector:Renewableenergy,energyaccessACountries:AllofAfrica,mostlylow-incomecountriesFinancialmechanism:Currencyriskhedging,swapsandforwardcontractsOverviewTheCurrencyExchangeFund(TCX)isadevelopmentfinanceinitiativeandglobalcurrencyhedgingfacilitydesignedtoreducethecurrencyriskassociatedwithprojectsborrowinginhardcurrency,butearninglocalcurrencyrevenues.TCXfacilitatesindexedlocalcurrencylending,whereborrowersreceivehardcurrencybutalloftheloanrepaymentsareindexedtothelocalcurrency.Thismakesdebtrepaymentspredictableandunimpactedbyfluctuationsintheexchangerate,enhancingdebtsustainability.Atthesametime,TCXsupportscapitalmarketdevelopmentbysellingsomeofthefrontiercurrencyexposuretoprivateinvestors,therebytransferringriskfromborrowersindevelopingmarketstointernationalinvestorsfromdevelopedmarkets.KeyelementsTCXofferscross-currencyswapsandforwardcontractsinmorethan70low-andmiddle-incomecountries.Asadevelopmentfinanceinitiative,TCXpursuesmaximumdevelopmentimpactandpriceshedginginstrumentsonarisk-reflectivebasis.Thecombinationoffundingcosts,creditmarginandswapratescanattimesleadtounaffordablefinancingcostsinlow-income,high-riskcountries.Toensuretheaffordabilityofindexedlocalcurrencyfinancing,TCXhasworkedwiththeEuropeanCommissionandotherdonorsonaninnovativeblendingapproachtomakecurrencyhedgingmoreaccessible.BecauseTCXpoolstheriskofawidevarietyofemergingandfrontiermarketcurrencies,itcanachievediversificationandscalethatnoneofthedevelopmentfinancierscanaccomplishontheirown.TableA.5⊳BarriersaddressedormitigatedBarrierDetailCurrencyriskMostcleanenergyinvestmentinAfricaisdoneinhardcurrencies,creatingaLimitedlong-termmismatchbetweenthefinancingandrevenuecurrencies,asmostprojectslocalcurrencyfinanceearnrevenueinlocalcurrency.TCX’shedgingmechanismstransferthecurrencyriskfromtheutilityorenduserstoTCX’sbalancesheet,whereitmanagesexposuretoalargenumberofcurrencies.Capitalmarketstoprovidelocalcurrencyfinancingarestillnotlargeordeepenoughtomeetthecleanenergyinvestmentneedsacrossthecontinent.TCXenablesMDBsandotherdevelopmentfinancierstoprovideloansinlocalcurrencybyhedgingthecurrencyriskresultingfromtheirbalancesheetsinforeigncurrency.AnnexesCasestudies109IEA.CCBY4.0DeserttoPowerG5SahelFacility–usingblendedfinanceinnascentrenewablesmarketsSector:Grids,renewableenergyCountries:BurkinaFaso,Chad,Mali,Mauritania,NigerFinancialmechanism:Climatefinance(GreenClimateFund(GCF))OverviewTheDeserttoPower(DtP)G5Facility1isaUSD966.7millionprogrammethataimstoassistfivecountriesintheSahelregioninachievinguniversalaccesstoelectricitybyharnessingtheirlargelyuntappedsolarpotential.Theinnovativeblendedfinanceapproachofthefacilityincreasesengagementofprivatesectorfinancingforrenewableenergyprojectsinmarketsthatareotherwisechallengingforthemtoaccessduetotheirnascentstate.KeyelementsThefacilityisexpectedtoresultin500MWadditionalsolargenerationcapacity,with239MWhofinnovativegridstoragecapacity,andtofacilitateelectricityaccessto700000households.Bydoingso,itaimstoavoid14.4MtCO2-eqanddirectlybenefit3.5millionpeople.TheprojectfacilitybenefitsfromconcessionalfinancefromGCF(USD150million)andAfDB(USD380million);thisaimstoleverageUSD437million(45.2%ofthetotalbudget)inprivatesectorfunding.Theconcessionalfundingprovidedisviaamixofinstruments.Forexample,GCFcontributesviagrants(5%),loans(55%),guarantees(13%)andreimbursablegrants(27%).Thisallowsforarangeofde-riskingsupport,includingtechnicalassistancegrantswhichareparticularlyimportantinnewermarkets.TableA.6⊳BarriersaddressedormitigatedBarrierDetailUnclearpoliciesandregulationsTheDtPcountriesrepresentnascentmarketsforutility-scalesolargeneration.Thishasanumberofmajorimplications:theabsenceofaclearframeworkforTransmissionriskdueIPPs,alackofclearinstitutionalrolesbetweenagencies,lowplanningcapacity,tolimitedgridthemismatchbetweentariffsinurbanandruralareas,andabsenceofinfrastructureincentivesforenhancinggendermainstreaming.TheDtPfacilityincludesatechnicalassistancegrantcomponenttosupportgovernmentreforms.Gridinfrastructurecanbeparticularlychallengingtofinancesinceitoftenreliesonpublicfunding,whichisalreadyconstrainedintheDtPcountries.FailuretoexpandandmodernisegridsmeansnewIPPprojectsmaynotbeabletoevacuatepoweronceonline.TheDtPfacilityincludesinvestmentingridinfrastructuretoactasade-riskingfactorforIPPs.1TheDeserttoPowerG5FacilityispartofthebroaderDeserttoPower(DtP)flagshipInitiativeoftheAfDB.DtPwilladd10GWofsolargenerationcapacityintheSahelregionandprovideelectricityto250millionpeopleinthe11Sahelcountriesby2030.TheimplementationofDtPstartedin2019.110InternationalEnergyAgencyFinancingCleanEnergyinAfricaEBRD-GCFGreenEconomyFinancingFacility(GEFF)–extendingcreditlinestolocalfinancialinstitutionsSector:Emissionsreduction,energyefficiency,renewableenergy,energyaccessACountries:10countriesacross3continents.InAfrica:Egypt,Morocco,andTunisiaFinancialmechanism:Climatefinance(GreenClimateFund(GCF))OverviewTheEuropeanBankforReconstructionandDevelopment(EBRD)ispartneringwiththeGCFtoscaleupprivatesectorclimatefinancingbyextendingcreditlines(GreenEconomyFinancingFacilities)toparticipatingfinancialinstitutions(PFIs).ThePFIs2on-lendthefundstoborrowers–micro-,smallandmedium-sizedEnterprisesorandhouseholds–forenergyefficiency,renewableenergy,andclimateresilienceprojects.Theprogrammewillsupportover20000projects,designedtobescalableandreplicable,throughatleast32localPFIs.KeyelementsTheprogrammewillcontributetothecountries’NationallyDeterminedContributions(NDCs)throughaninnovativecombinationoffinancialsupport,capacitybuildingandtechnologytransferandsupportedbyadeeplevelofcountryownership.TheGEFFprogrammeisnotjustAfricafocusedandhasthebroadergoalsofdemonstratingandscalingupsustainableenergyandclimateresiliencefinancing,skillstransfertoPFIs,andraisingpublicawarenessofthebenefitsoftheseprojects.TheGEFFprogrammeaimstoavoid27.5MtCO2-eqgloballyandbydevelopingamarketforsustainableenergysolutions;theProgrammeisanticipatedtocreate11500greenjobs.GEFFhasablendedfinanceapproach.GCFcontributedUSD378million,primarilyinconcessionalloanswithasmallshareoftechnicalassistancegrants,thatwillleverageUSD1billionfromtheEBRDanduptoUSD200millionfromtheprivatesector.TableA.7⊳BarriersaddressedormitigatedBarrierDetailLimitedlong-termlocalcurrencyfinanceFinancingfacilitiescancontributetoincreasedmarketconfidenceandreducedriskperception.TheGEFFcountriesarecharacterisedbyadiversityinfundingLackofawarenessandsources,pricingandmarketpenetration.GEFFwilladdressfinancialbarrierscapacityspecifictoeachcountry’smarketcontext.Financialinstitutionsandendborrowerslackexperienceandexpertiseindevelopingeconomicallyviableenergyefficiencyandrenewableenergyprojects,areoftenunawareofthepotentialofenergycostssavingopportunitiesandlackthetechnicalexpertiserequiredforfeasibilitystudiesandenergyaudits.Energytechnologylistsandtechnicalassistancehelpinovercomingthese.2PFIsincludebanks,leasingcompaniesandmicrofinanceinstitutions.IEA.CCBY4.0AnnexesCasestudies111ECOFRIDGESInitiative–on-billandon-wagefinancingforefficient,climate-friendlyrefrigeratorsandACsSector:Energyefficiency,emissionsreductionCountries:Ghana,SenegalFinancialmechanism:DebtfinanceandtechnicalassistanceOverviewTheECOWASRefrigeratorsandAirConditioners(ECOFRIDGES)Initiative,developedbyUNEPUnitedforEfficiency(U4E),BASEFoundationandthegovernmentsofGhana(EnergyCommission)andSenegal(NationalEnergyConservationAgencyAEME),aimstoacceleratetheadoptionofcertifiedenergyefficientandclimate-friendlydomesticrefrigeratorsandroomACswhilemitigatingupfrontinvestmentcosts,loweringelectricitybillsandrelievingstrainsonthepowersystem,therebyexpandingaccesstoenergyservices.KeyelementsInGhana,aGreenOn-wage(GO)financingmechanismcomprisesabankloanwithzeroorpreferentialinterestratesforsalariedemployeeswithrepaymentthroughpayrolldeductions.AsofJune2023,ECOFRIDGES-GOhadunlockedUSD1.6millionforthepurchaseofover3300highperformancecoolingunits.InSenegal,utilitycustomersofSENELECwithpre-paidmeterscanapplyforabankloan(zeroorpreferentialinterestrate),repayingthecoststhroughamonthlyfeeontheirelectricutilitybill.By2024,ECOFRIDGESSenegalaimstounlockUSD5.6milliontosupportthepurchaseofover19200efficientcoolingunits.Keyelementsincludeapositivelistofeligiblecoolingproducts(ACsandrefrigerators)withanegotiateddiscountfromvendorsandpreferentialfinancingconditionsfromparticipatinglocalfinancialinstitutions(LFIs).Thisiscomplementedbyawarenessraisinganddedicatedmarketingcampaignsandmeasurement,reportingandverification(MRV)GuidelinestoestimatetheGHGemissionsreductions,mobilisedfundingandotherco-benefits.Atake-backschemeforthecollection,recyclinganddisposalofdiscardedapplianceswasdesigned.TableA.8⊳BarriersaddressedormitigatedBarrierDetailAffordabilityconstraintsThemarket-basedconsumerfinancingmodeleliminatestheupfrontcostbarrierforenergyefficientappliancesforhouseholdsandlowersrepaymentHighriskperceptionrisks.ThroughcollaborationwithLFIs,itofferspreferentialfinancingterms.andlackofdataEnergyefficiencyprojectsareoftenconsideredtoosmallandriskyformanyLackofawarenessandfinanciers.TheECOFRIDGESinitiativecollaborateswithLFIsandvendorstocapacitycreateamarketforhigh-performanceproductsandfacilitatesriskassessment.Buildingonexistinggovernmentprogrammes,minimumenergyperformancestandards(MEPS)andenergylabels,theinitiativeraisesend-userawarenessandenhancescapacitiesatLFIs.RobustandcertifiedMRVprocessesallowLFIstoalignwithprinciplesofgreenfinance.112InternationalEnergyAgencyFinancingCleanEnergyinAfricaEmergingAfricaInfrastructureFund–leveragingconcessionalfinancetomobiliseprivatecapitalSector:RenewableenergyACountries:CoversallofAfrica.ClosedprojectsinBurkinaFaso,Cameroon,Chad,Côted’Ivoire,DRC,Djibouti,Ghana,Guinea,Kenya,Mali,Mozambique,Nigeria,Rwanda,Senegal,SierraLeone,Tanzania,UgandaandZimbabwe.Financialmechanism:BlendedfinanceOverviewTheEmergingAfricaInfrastructureFund(EAIF)wasestablishedasthefirstentitywithinthePrivateInfrastructureDevelopmentGroup(PIDG).ManagedbyNinetyOne,EAIFisablendedmulti-donorfundthatprovideslong-termdebttofinanceinfrastructureprojectsinAfrica.AsofJune2023,theloanportfoliosizewasUSD1.25billion,fundedbydebtandequity.KeyelementsEAIFwascreatedtoprovideaplatformthatwouldactasaspecialisedDFIandleverageconcessionaldonorfundingtomobiliseprivatesectorinvestmentforinfrastructuredevelopment.Itcoversseveralsectors,includingpower,andhasalreadycontributedtothefinancingofmorethan90projectsacrosstheAfricancontinent.EAIFprovidesfirstlossequity,seniordebtandsubordinateddebtforthedevelopmentofinfrastructure,withaparticularfocusonlow-incomecountries.EAIFscapitalcomesfromDFIs,MDBs,commercialbanks,andinstitutionalinvestors–effectivelymakingitasuccessfulblendedfinancevehicle.Itincreasinglyattractscapitalfrominstitutionalinvestors.Byresortingtodifferenttypesofcapital,itisabletobothde-riskprojectsandleveragetheuseoflimitedamountsofpubliccapitaltocatalyseprivatesectormobilisation.TableA.9⊳BarriersaddressedormitigatedBarrierDetailLimitedaccesstoappropriatefinanceCleanenergyprojectsgenerallyrequireaffordablelong-termcapital,whichisnotalwaysavailable.EAIFprovidesarangeoffinancingoptions,includingfirst-Lackofpipelineoflossequityonsub-commercialterms,andseniorandsubordinateddebtonbankableprojectscommercialornear-commercialterms.LackofcatalyticByestablishingatrackrecordofcompletedprojects,whichhaveproventheconcessionalcapitalviabilityofprivatesectorfinancingofinfrastructureonthecontinent,EAIFcontributestoreducingthemismatchbetweenavailabilityofcapitalandofbankableprojectsinAfrica.ThepoolofconcessionalcapitalavailabletosupportenergyprojectsinAfricaislimited.EAIFusesrelativelysmallamountsofpublicfundstode-riskprojectsandcatalyselargeramountsofprivate-sectorcapitaltobuildandoperateinfrastructureonthecontinent,particularlyinlow-incomecountries.AnnexesCasestudies113IEA.CCBY4.0GET.invest–providingearly-stagefinancingtocleanenergySector:Renewableenergy,energyaccess,energyefficiency,e-mobilityandlow-emissionshydrogenCountries:Sub-SaharanAfricaFinancialmechanism:InvestmentpreparationadvisorysupportOverviewGET.investmobilisesinvestmentincleanenergyindevelopingcountries,firstbysupportingenergyprojectsandcompaniestowardsbankability,andthenbyconnectingthemwithfinanciers.GET.investissupportedbytheEuropeanUnion,Germany,Sweden,theNetherlands,andAustria,andsince2022ithasactedasaOneStopShopfortheAfrica-EUGreenEnergyInitiative–aflagshipprogrammefromtheEUandEuropeangovernments.KeyelementsGET.investprovidesadvisoryandtransactionsupportservicesonareassuchasinvestmentstrategy,businesscasestructuring,financialmodellingandaccessingmatchingfinance.Thisiscomplementedbyworkwithdomesticfinanciersformobilisinglocalcurrencyfundingandco-operationwithindustryassociationsthrougheventsandtrainings.GET.investseekstoimproveaccesstoinvestment-relatedinformationviatoolssuchasadatabaseoffinancialinstrumentsandanewdataplatformthatprovidesreal-timedataandanalyticsonenergysystemsandportfolioperformance.AsofJuly2023,GET.investhassupportedover400clients,ofwhich154(about38%)wereacceptedbyfinancierswithatotalinvestmentvolumeofalmostUSD2billion.Eighty-twoprojectsrepresentingUSD420millionhavereachedfinancialclose.Thereisnospecificfocusonticketsize:22%ofprojectsrangeaboveUSD22million,27%betweenUSD22and5.5million,39%betweenUSD5.5millionand550k,andtheremaining12%belowUSD550k.TableA.10⊳BarriersaddressedormitigatedBarrierDetailLimitedaccesstoappropriatefinanceThelandscapeoffinancinginstrumentsavailableforcleanenergyprojectsinAfricaiscomplex.Tonavigatethis,GET.investdevelopedacomprehensiveLackofearly-stagedatabaseoffinancingsolutions,allowingadviserstoidentifytherightfinancingdevelopmentfinanceinstrumentstosupportthetransactionadvisoryprocess.DifficultlyinfinancingThelackofearly-stagefinancingcanpreventthecreationofprojectsthatsmallticketsizesinvestorsfindbankable.GET.investprovidesupporttocompaniestoimprovetheirinvestmentproposals,structurebusinesscases,anddevelopfinancialmodels.Theyalsocarryoutindependentfinancialmodellingtoconfirmprojectviability,andholdmatchmakingsessionstobringstakeholderstogether.Smallerprojectscanbemorecomplicatedtofinancebecauseofperceivedhigherrisksandtransactioncosts.GET.investsupportscompaniesandprojectdevelopersbymobilisingcatalyticfinance,bybundlingmulti-siteprojects,andbyprovidingadvisorysupportascompaniesscale.114InternationalEnergyAgencyFinancingCleanEnergyinAfricaGlobalElectricMobilityProgramme,GEF–targetingthenexusofe-mobilityandrenewablepowerintegrationSector:Energyaccess,transport,energyefficiencyACountries:27countriesacross4continents.InAfrica:Burundi,Madagascar,Mauritius,Seychelles,SouthAfricaandTogoFinancialmechanism:Climatefinance(theGlobalEnvironmentFacility[GEF])OverviewGEF’sGlobalElectricMobilityProgrammeisamultiagencyprogrammeoperationalatnational,regionalandgloballevels.Theaimoftheprogrammeistosupportlow-andmiddle-incomecountrieswiththeshifttoelectricmobilitybyfocusingonelectricbuses,electrictwo-andthree-wheelers,andelectriclight-dutyvehicles.Theprogrammefundsawarenesscampaigns,capacitybuildingandthedevelopmentofstructurestosupportelectricmobility.KeyelementsLow-andmiddle-incomecountriesgenerallyhaveaverysparseEVcharginginfrastructure,iftheyhaveoneatall,andcanhaveanunreliablepowersupply.ThisenforcestheviewthatEVsmaynotbepractical,particularlyforlongertrips,andhasmadeithardtoattractfinancetoe-mobility.GEF’sprogrammepromotesinvestmentandtechnologytransferthrough:FourGlobalThematicWorkingGroups(establishedwiththeIEA)thatprovidepolicyadviceandpromotethesustainableaccelerationofe-mobility.FourSupportandInvestmentPlatformstocreatecommunitiesofpracticeandprovideinvestment.Trackingprogress,EVmarketmonitoringandresultsdisseminationtopromotethewideruptakeofe-mobility.GEF’scontributionofaUSD50.1milliongranttotheprogrammewillleverageUSD651.8millioninco-financingfromtheUnitedNationsEnvironmentProgramme(UNEP).TableA.11⊳BarriersaddressedormitigatedBarrierDetailHighupfrontinvestmentcostsSmallerprojectscanbecomplicatedtofinancebecauseofperceivedhigherrisksandtransactioncosts.Theprogramme’suseof(sub)regionalplatformstoUnclearpoliciesandbringcountries,cities,technologyprovidersandfinancialinstitutionstogetherregulationspromotesinvestment,allowingforinnovativefinancingmodelsthatspreadthefinancialriskamongparties.IEA.CCBY4.0Manylow-andmiddle-incomecountrieshavenodedicatedregulatorypoliciestoincentivisetheuptakeofEVs;manyinfacthavedisadvantageousfiscalpoliciesthatcomplicateEVimports.Developingpoliciestofostertheuptakeofe-mobilityoftenincludesstakeholdersfromvariousministriesandrequiresthoroughanalysisandunderstandingofthenationaltransportsector.DecisionmakersneedtechnicalsupportduringallstagesofEVpolicydevelopment.AnnexesCasestudies115GuarantCo–usinglocalcurrencyguaranteestomobiliseprivatecapitalforinfrastructureprojectsSector:RenewableenergyCountries:MadagascarFinancialmechanism:LocalcurrencyguaranteeOverviewGuarantCowasestablishedin2005toprovidelocalcurrencycreditsolutionsthatsupportthemobilisationofprivatecapitalforinfrastructureprojectsacrossAfricaandAsia.ItisfundedbytheUnitedKingdom,Switzerland,AustraliaandSwedenthroughthePIDGTrust,bytheNetherlandsthroughFMOandthePIDGTrust,FranceandGlobalAffairsCanada.KeyelementsGuarantCousesblendedfinancetoprovidearangeofcreditsolutions,includingpartialcreditguaranteesandliquidityextensionguarantees,focusingonlocalcurrencytostimulatedomesticcapitalmarketsandmitigatecurrencyrisk.Withaleverageratioofuptothree,GuarantCohelpsmobiliseprivatecapitalintoinfrastructureprojectsinthecontinent.AsuccessfulexampleofGuarantCo’sinterventionisthetwo-phasedsupportprovidedtotheGreenYellowprojectinMadagascar.The40MWsolarPVplantwillbethecountry’sfirstgrid-connectedsolarprojectandwillalsoincludea5MW/MWhbatterysystem.Giventhatitissuchanascentmarket,GuarantCoprovidedanMGA60.6billion(Malagasyariary)(USD14.6million)50%partialcreditguaranteeswithanine-yeartenorinordertode-risktheprojectandraisecapital.TableA.12⊳BarriersaddressedormitigatedBarrierDetailLimitedlong-termlocalcurrencyfinanceCleanenergyprojectsgenerallyrequireaffordablelong-termcapitalinlocalavailablecurrency,whichisunavailablefrommajorproviderssuchasDFIs(generallyhardcurrency)andcommercialbanks(shortertenors).ThrougharangeofDevelopinglocalcreditsolutions,GuarantCoprovidesguaranteesthatextendthematurityofcapitalmarketslocalcurrencyloans,makinglonger-termlocalcurrencydebtavailable.Institutionalinvestorstypicallyhaveminimumcreditratingthresholdsforinvestment,whichbondissuesbycompaniesinnascentmarketsoftendonotmeet.GuarantCo’screditsolutionssupportcompaniestoaccessthesecapitalmarketsbyimprovingthecreditratingoftheissuedbonds,wideningtherangeofpotentialinvestorsandstimulatingthedevelopmentoflocalcapitalmarkets.116InternationalEnergyAgencyFinancingCleanEnergyinAfricaInfraCredit–usinglocalcurrencyguaranteestoattractdomesticinstitutionalinvestorsSector:Renewableenergy,energyaccessACountries:NigeriaFinancialmechanism:LocalcurrencyguaranteeOverviewInfraCreditprovidesguaranteesinNigeriannaira(NGN)toencourageinstitutionalinvestors–primarilypensionfunds–toinvestinmoreinfrastructureassets.InfraCreditwasestablishedin2017bytheNigerianSovereignInvestmentAuthority,incollaborationwithGuarantCo,andhasissued16guaranteestomobiliseNGN159billion(USD206million),mainlyinlong-termdebt,into10infrastructureprojects.Morethan19localpensionfundshaveinvested,demonstratingappetitefromthedomesticmarket.KeyelementsInfraCreditusesitsowncapitalbasetoprovideguarantees,whichcanbeusedtode-risktraditionalgreenbonds.ElectricityproducerNorthSouthPower(NSP)issuedanNGN8.5billiongreenbondfor15-yearsin2019tosupportoperationsofitshydrodams,whichwassupportedbyanInfraCreditguarantee.Twoyearslater,NSPissuedasecondbondwithouttheneedofaguarantee,demonstratingincreasedconfidencefromthemarket.Recently,InfraCreditannouncedaninnovativeblendedguaranteetosupportanaggregatedportfolioofmini-gridprojectsbylocalfirmDarwayCoast–aspacethatpensionfundsgenerallyconsidertoosmallandrisky.TheUK-fundedClimateFinanceBlendingFacilityprovidedsubordinateddebt,whichcombinedwithInfraCredit’sguarantee,wasabletomobiliseNGN800million(USD1million)fromlocalinstitutionalinvestors.TableA.13⊳BarriersaddressedormitigatedBarrierDetailLimitedlong-termlocalcurrencyfinanceCleanenergyprojectsgenerallyrequireaffordablelong-termcapitalinlocalcurrency,whichcanbeprovidedbylocalinstitutionalinvestors.InfraCredit’sDifficultlyinfinancingmodelhasshownthatguaranteescaneffectivelymobilisetheseinvestors.smallticketsizesEnergyaccessprojects,includingmini-grids,areoftenconsideredtoosmallandLackofcatalyticriskyforinstitutionalinvestors.InfraCredithaveprovenareplicablemodeltoconcessionalcapitalsecurityinvestmentusingaggregation.DevelopinglocalThepoolofconcessionalcapitalavailabletosupportenergyprojectsinAfricaiscapitalmarketslimited.Ensuringthiscapitalistrulycataylicisvital.InfraCredit’smodelhasdemonstratedthecatalyticimpactoffirst-losscapital,bybeingabletoleveragetheirownequitybaseuptothree-foldforguarantees.IEA.CCBY4.0InfrastructureassetsmakeupasmallshareofmanyAfricaninstitutionalinvestors’portfolios.Throughtheirknowledgedevelopmentwork,InfraCredithelpsdriveanoveralldeepeningoflocalcapitalmarkets.AnnexesCasestudies117KinguéléAval–enhancingthebankabilityofanIPPprojectthroughinnovativesecuritisationSector:RenewableenergyCountries:GabonFinancialmechanism:Creditenhancement,securitisationOverviewKinguéléAval,a35MWhydropowerproject,isthefirstindependentpowerproducer(IPP)inGabon.Investorswereconcernedaboutthepotentialfordelayedpaymentsfromtheofftaker,thestateutility.TheythereforedevelopedaninnovativemechanismtosecuritisepaymentsfromtheofftakertotheIPPthroughreceivablesfromAirtel,thetelecomoperator,whichcollectselectricitybillsfrommostendusers.KeyelementsWithatotalcostestimatedatEUR178million,theprojectwasfinancedthroughloansfromtheInternationalFinanceCorporation,theAfricanDevelopmentBank,theEmergingAfricaInfrastructureFundandtheDevelopmentBankofSouthernAfrica,aswellaswithequityfromthesponsorsMeridiamandFondGabonaisd'InvestissementsStrategiques.Thespecialpurposevehiclesetupforthisproject,AsohnaEnergie,willalsooperatetheKinguéléAvalproject,whichwillsellcleanpowertotheGaboneseofftaker.Theinnovativesecuritisationmechanismprovidedaneffectivecreditenhancementthatcontributedtothebankabilityoftheproject.TableA.14⊳BarriersaddressedormitigatedBarrierDetailCreditworthinessofCleanpowerprojectsrequirethepurchaseofpowerproduced,whichispublicofftakertypicallydonebypublicorsemi-publicutilities(offtakers).Mostareinpoorfinancialhealthandtheirlackofcreditworthinessposestheriskthatpurchaseswillnotbepaidontimeorinfull.ByprovidingasecuritisationmechanismwherebyreceivablesfromAirtel,thetelecomoperator,coverthisrisk,theprojectwasabletosecurefinancingwithoutothercreditenhancements.118InternationalEnergyAgencyFinancingCleanEnergyinAfricaLeveragingEnergyAccessFinance(LEAF)Framework–addressingfinancialbarrierstodeliverdistributedpowerSector:Grids,energyaccess,renewableenergyACountries:Ethiopia,Ghana,Guinea,Kenya,Nigeria,TunisiaFinancialmechanism:Climatefinance(GreenClimateFund[GCF])OverviewTheLeveringEnergyAccessFinance(LEAF)Framework3isaUSD959.9millionprogrammewhichaimstoaddressfinancialandinvestmentbarrierstowarddeliveringdistributedrenewableenergy(DRE),suchasmini-grids,solarhomesystemsandcommercialandindustrialsolarsolutions.Theframeworkfocusesonusingguaranteesandconcessionalsubordinatedandseniordebttomobilisecommercial,localcurrencydebt.KeyelementsLEAFwilloffertechnicalassistancebysupportingfinancialinstitutionstoengagewithandinvestinDRE,facilitatepolicydevelopment,anddevelopinnovativefinancingstructurestomakemini-gridscommerciallyviable.LEAFwillde-risk,unlockaccesstofinanceandscaleinvestmentsinDREbytheprivatesectorthroughconcessionalguarantees,concessionalsubordinateddebt,andseniordebt.LEAFaimstoresultin386MWofadditionalcapacity,increaseaccesstoelectricitytoover5.9millionpeopleandavoid28.9MtCO2-eq.LEAFbenefitsfromconcessionalfinancefromGCF(USD170.9million)andAfDB(USD164million);thisaimstoleverageUSD315millioninprivatesectorfundingandUSD310millioninequitycontribution.GCF’scontributioniscomposedofloans(USD80million),guarantees(USD80million)andgrants(USD10.9million).TableA.15⊳BarriersaddressedormitigatedBarrierDetailLimitedlong-termlocalcurrencyfinanceCommercialbanksonlyofferloanstoDREprojectsonlyonprohibitivetermsbecauseofalackoffamiliarityandhigh-riskperception.LEAFaddressesDifficultlyinfinancingfinancialbarriersthroughcreditenhancementinstrumentsandnewfinancialsmallticketsizesproductstocrowdinlocalcurrencydebtandcommercialcapital.UnclearpoliciesandPerceivedhigherrisksandtransactioncostsmakesmallprojectsmoreregulationscomplicatedtofinance.LEAFreducesoverallcostofcapital,providesliquidity,andprovidesflexiblestructureswithtenorupto12years.AlackofclearinstitutionalrolesamongagenciesandlowplanningcapacityhampertheimplementationofDREprojects.LEAFwillprovidetechnicalassistanceandsupportgovernments’policydevelopmentnecessitatingharmonisation.3LEAFispartoftheAfDB’sbroaderoff-gridstrategyundertheNewDealonEnergyforAfricaandcomplementsIEA.CCBY4.0existinginitiativessuchastheSustainableEnergyFundforAfricawhichprovidesfinancetounlockprivateinvestmentsinrenewableenergyandenergyefficiency.AnnexesCasestudies119Moon–publicprivatepartnershiptoprovideelectricityasaserviceforlast-mileruralhouseholdsSector:EnergyaccessCountries:Senegal,TogoFinancialmechanism:PublicprivatepartnershipsOverviewMoonwasdevelopedin2015andspunoffin2019fromSunna,acompanythatdesignsandmanufacturessmartsolarstreetlightingsolutionswith100000productsinstalled.Moonfinances,installsandoperateselectricitysystemsforhard-to-reachruralcommunitiesinsub-SaharanAfrica,primarilySenegalandTogo.Alongsideleasingarrangementsforsolarhomesystems(SHS)withhouseholds,Moonisabletoofferauniqueenergy-as-a-servicemodelthatreducestheoverallcostsforend-users.KeyelementsUnderMoon’smodel,enduserspayasmallfeefortheuseoftheSHS–similartohowtheywouldpayforelectricityiftheyhadaccesstothegrid.ThisfeecoversmaintenanceandreplacementoftheSHS,asnecessary.HouseholdsdonotcoverthecapexoftheSHS,whichisprovidedbypublicinfrastructurefundsand/orconcessionalfinance.Thisapproachenablestheoperatortoactasaserviceprovider,offeringelectricitywithSHStodaybutwiththeoptiontoswitchtoanothertechnologysuchasamini-gridordistributionutilityconcessioninthefutureifthatprovestobeamorefittingsolutionforthecommunity.Revenuescollectedfromcustomerscoverthemaintenanceandoperationcosts,butfinanceisstillrequiredforinfrastructure,developmentandoverheadcosts.Toraisethiscapital,Mooncreatesaspecialpurposevehicletoattractequityfrominfrastructurefundsandtoraiselong-termdebt,includingfromconcessionalfinanceproviders.Thegovernmentalsoprovidessupport,eitherthroughsubsidisingthetarifftofacilitatepaymentsbyend-usersorbycreatingotherfinancialsupportschemestoallowhouseholdstopurchaseSHS.TableA.16⊳BarriersaddressedormitigatedBarrierDetailAffordabilityconstraintsLow-incomeruralhouseholdscannotaffordacquiringamodernsolarstand-alonesystem,butareabletopayfortheelectricityconsumed,asgrid-Limitedaccesstocustomersdo.Theelectricity-as-aserviceapproachadoptedbyMoonreducesappropriatefinancethecostsforhouseholdsandmaintainstheoptiontodeveloplargersystemssuchasmini-gridsordistributionnetworksasdemandgrows.Ruralenergyaccessprojectsareparticularlyhardtoraisecapitalforduetothelowerincomelevelsofendusersandthelowerenergydemand.ThankstothecreationofanSPV,Moonisabletoraisebothequityandaffordabledebt,whilealsoguaranteeinggovernmentsupportviaapublic-privatepartnership.120InternationalEnergyAgencyFinancingCleanEnergyinAfricaMUNYAXECO–supportingwomen’sempowermentalongsideenergyaccessSector:Renewableenergy,energyefficiencyACountries:Rwanda,BurundiandDRCFinancialmechanism:GrantsanddebtfinanceOverviewMUNYAXECOisacompanyfromRwandaworkinginthesolarenergyandenergyefficiencysectors.Foundedin2013byFrancineMunyaneza–oneofthetenfinalistsforthe2022Africa’sBusinessHeroesAwards–this100%women-ownedandledcompanyprovidesandinstallsenvironmentallyfriendlyandhigh-qualitysolarequipmentataffordableprices.Thecompanyupholdsagender-focusedrecruitmentandsalesstrategyandprovidestrainingtothelocalyouthandwomen.IdentifyingwaterheatingasamajorenergyconsumerinAfricanhouseholds,MUNYAXECOstartedbysupplyingandinstallingsolarwaterheaterstoend-usersinurbanandruralRwanda,andprogressivelyexpandingitsserviceswithsolarhomesystems,solarLEDstreetlighting,andsolarsystemsforcommercial,industrial,andproductiveuse.KeyelementsSince2020,MUNYAXECOhasembarkedonasustainedgrowthpathwithsupportfromGET.invest.Startingfromtherevisionofitsbusinessstrategyandfinancialmodel,fundingopportunitieswereidentifiedandadataroomwassetuptoaddressfinanciers’andinvestors’informationneeds.Afteranintroductiontopotentialfinanciers,MUNYAXECOsuccessfullynegotiatedanequityraise.Asaresult,severaltransactionsarenowatfinancialclosewithtotalprojectedinvestmentvolumeofUSD3.6million,expectedtoprovidecleanenergytohalfamillionpeople.WithfinancialadvisoryservicesfromGET.invest,thecompanynowfocusesonattractingexternalequityandexpandingitsbusinesstoneighbouringcountries.TableA.17⊳BarriersaddressedormitigatedBarrierDetailLackofearly-stagedevelopmentfinanceLocallyownedstart-upscanstruggletoattractfinanceastheyhavelimitedaccesstointernationalfinancialmarketsandlocalcommercialbankscannotGenderimbalanceprovideloansonviableterms.Manyofthesebusinessesalsoneedsupporttowithintheenergycreateabankableinvestmentproposal,buttheylackcapitaltofundthesesectoractivities.GET.invest’ssupportserviceshelpedhoneMUNYAXECO’sbusinessmodelandfacilitatedaccesstofinance.IEA.CCBY4.0Womenareoftenunder-representedintheenergysector,butaredisproportionallynegativelyaffectedbylackofaccesstoelectricityandcleancooking.Asafemale-ledbusinesswithanemphasisongender-focussedrecruitment,MUNYAXECOhelpsgrowthefemaleworkforceintheenergysector,whilealsoprovidingenergyaccesstohouseholds.AnnexesCasestudies121NationalCleanEnergyAccessProgramme(NCEP)Ghana–usingcarbonmarketstodriveenergyaccessSector:Energyaccess,renewableenergyCountries:GhanaFinancialmechanism:Article6oftheParisAgreementOverviewTheNationalCleanEnergyAccessProgramme(NCEP)4isaprogrammerunbyGhana’sEnvironmentalProtectionAgencytoimprovecleanandaffordableenergyaccess.Theprogrammeislinkedtothecountry’sNationallyDeterminedContributions(NDC),whichhasallowedittobenefitfrommechanismsunderArticle6oftheParisAgreement.FollowingabilateralagreementbetweenGhanaandSwitzerlandin2020,SwisscompaniescannowfundprojectsundertheNCEPinreturnforinternationallytransferredmitigationoutcomesunderArticle6.2.Switzerland’sKliKFoundation,whichfulfilstheSwissmotorfuelindustry'sobligationtopartiallyoffsetthecarbonemissionsfromthecountry'stransportationsector,isthefirsttotakeadvantageofthis.KeyelementsNCEPsupportshouseholdsandsmallandmedium-sizedenterprisesbymakinginvestmentsinsolarPVinstallationsfinanciallyviable.Thisincludestheuseofresults-basedfinancing.NCEPconsistoutoftwocomponents:(1)adigitalmeasurement,reporting,andverification(MRV)platformthattrackssolarPVgenerationandresultingemissionreductions;and(2)AsolarPVrooftopprogramme,withacapacityofupto1MWmonitoredbythedigitalMRVplatform.Between2021and2030,theNCEPaimstodirectlyavoid350000tCO2-eq.TableA.18⊳BarriersaddressedormitigatedBarrierDetailLimitedaccesstoappropriatefinanceAmajorbarrierliesintheperceivedriskofrenewableenergyprojectsandresultingunattractivelendingconditionswhichleadtoalackin(upfront)Lackofearly-stagefinancing.NCEPwilladdressthisbarrierthroughperformance-basedpaymentsdevelopmentfinanceforemissionsreductionsandsecuritisedloansatconcessionalconditions.LackofawarenessandByde-riskinglocalbanks,projectsparticipatinginNCEPgainaccesstocapacityaffordableloans.Withthisapproach,investmentsbecomefinanciallyviableandoffersustainedbenefitsfromcleanandaffordableenergy.Consumers,policymakersandinvestorsarenotfullyawareoftheenvironmentalandeconomicbenefitsrelatedtocleanenergy.Thisknowledgegapispartlycausedbythelackoforfragmentedandinadequatemonitoringofcleanenergyrevenuesandreturnoninvestment.4ThetechnicalandlegalownershipoftheprogrammelieswithKliK.122InternationalEnergyAgencyFinancingCleanEnergyinAfricaProMiniGrids,Uganda–improvingenablingenvironmentformini-gridsinruralareasSector:Energyaccess,renewableenergyACountries:UgandaFinancialmechanism:DFIsupportforenablingenvironmentOverviewThePromotionofMini-GridsforRuralElectrificationproject(ProMiniGrids)wasdevelopedtode-risktheenablingenvironmentformini-gridinvestmentinUganda.GIZthroughtheGlobalEnergyTransformationprogramme(GET.transform)workedwiththeUgandangovernmenttointroduceanewregulatoryframework,includingatenderingprocess.Thefirsttenderfor40mini-grids,wonbyWinchEnergy(nowrepresentedasNEoTOffgridAfrica),marksthecountry’sfirstpublic-privatepartnership(PPP)formini-grids.GIZestimatesthat20000peoplewillgainaccesstoelectricityviathesenewmini-grids.KeyelementsTheProMiniGridsprogrammesupportedUganda’sElectricityRegulatoryAuthoritytodevelopmini-gridtechnicalstandardsforareassuchasEngineering,ProcurementandConstructioncontractsandgridinterconnectionguidelines,aimingtoreducetheoverallcostofserviceformini-grids.ThePPPmodelutilisedisalsoaninnovativeapproach,whichensuresgovernmentbuy-inbutreliesonprivatesectorfinancingandexpertise.Theprogrammealsofundscapacitybuilding,bothfortherelevantgovernmentbodiesandtheprivatesector,aswellasaccesstofinanceforsmallandmedium-sizedenterprises,farmersandhouseholds.TableA.19⊳BarriersaddressedormitigatedBarrierDetailUnclearpoliciesandregulationsIncompletepolicyandregulatoryframeworksforoffgridprojectscanhinderinvestment.ByworkingwiththegovernmenttodeveloptheregulatoryLimitedaccesstoenvironment,createatenderingprocess,andproducestandardisedsectorappropriatefinanceguidelines,ProMiniGridscontributedtoremovingaregulatorybarrier.Mini-gridcommercialMini-gridprojectscanstruggletoattractconcessionalfinance,includingiftheyviabilityaretoosmallorifthereisariskthattheywillbereplacedbygridconnectionsinthenearfuture.ThePPPapproachadoptedbyProMiniGridsbundlesprojectstogether,increasingthescaleoftheproposalfordevelopers,andtheIEA.CCBY4.0locationsareselectedwithbuy-infrompoliticalstakeholdersreducingtheriskofoverlapwithgridextensions.Mini-girdprojectsoftenneedtobeanchoredonviableproductiveusesofenergytoguaranteesustainablecashflowsandavoidpushingupthetariffstosociallyuntenablelevels.TheProMiniGridprogrammeworkswithtargetareasformini-gridstostimulateeconomicactivity,particularlyvalueadditioninagriculture,todrivegreaterenergydemandformini-grids.AnnexesCasestudies123ProgrammeforEnergyEfficiencyinBuildings(PEEB)Cool–dualfundsprovidingfinanceandtechnicalsupportSector:Energyefficiency,renewableenergyCountries:11countriesacross4continents.InAfrica:Djibouti,Nigeria,Morocco,TunisiaFinancialmechanism:Climatefinance(GreenClimateFund[GCF])OverviewTheProgrammeforEnergyEfficiencyinBuildings(PEEB)Coolprogrammeaimsattransformingthebuildingssectortoazeroemissionsandresilientsectorthroughfinancing,policyandcapacitybuilding.Theprogrammeaddressescrosscuttingmitigationandadaptationchallengestostimulateinvestmentingreenbuildings,whichhavemultiplepositiveimpacts.Alongsideimprovedresilienceofthemostvulnerablecommunities,theprogrammealsoaimstomitigate1.56MtCO2-eqwith1.2milliondirectbeneficiaries;itwillalsofacilitatethecreationof47000jobs.KeyelementsPEEBCooliscomposedoftwofacilities:onethatprovidesinvestmentandanotherthatfocusesontheenablingenvironment.TheInvestmentFacilityisimplementedbytheAgenceFrançaisedeDéveloppement(AFD)anddevelopslarge-scalegreenbuildingprojectsthroughfinancing(concessionalloansandgrants),aswellasexpertsupportthroughoutallstagesoftheprojectcycletopublicandprivateprojects.TheEnablingFacilityisimplementedbyDeutscheGesellschaftfürInternationaleZusammenarbeit(GIZ,theGermandevelopmentagency)andthroughcapacitybuildingandprovidingaccesstointernationalnetworksandbestpractices,supportsstakeholdersinunderstandingrelevantpolicies(e.g.nationalcoolingstrategiesforbuildings,buildingcodedevelopmentandenforcement).Italsoimprovesstrategiesandregulationsforresilientandefficientbuildingsthroughpolicyadvice,capacitybuildingandinternationalawareness.GCFcontributedUSD233.8millioninloans(80%)andgrants(20%)totheInvestmentFacilityinordertoleverageafurtherUSD1.2billionfromAFD.TableA.20⊳BarriersaddressedormitigatedBarrierDetailLackofearly-stagedevelopmentfinanceManyprojectsinenergyefficiencystruggletoreachbankabilityduetoalackofearly-stagefinancing.PEEBCoolprovidestechnicalassistancetoownersontheLackofawarenessandfeasibility,designandconstructionofenergy-efficientlow-carbonandresilientcapacitybuildings(InvestmentFacility)andthroughcapacitybuilding(EnablingFacility).GreenbuildingsrepresentarelativelynewinvestmentprospectinmostAfricancountriesoutsideofSouthAfrica.PEEBCool’sdualfacilityapproachmeansthatprojectownerscanaccessconcessionalloans,butalsothatgovernmentscanreceivesupporttodevelopsectoralframeworksanddrivefurthermobilisationofinvestments.124InternationalEnergyAgencyFinancingCleanEnergyinAfricaRoom2Run,AfDB–freeingupconcessionalcapitaltoreinvestSector:AllACountries:AllFinancialmechanism:SyntheticsecuritisationtransactionOverviewAfDB’sRoom2RunSyntheticSecuritisationTransaction(SST)wasarisktransferagreementsignedin2018wherebythebanktransferredaportionofriskfromaUSD1billionportfoliotoinstitutionalandpublicsectorinvestors:MarinerInvestmentGroup,Africa50andtheEU-backedEuropeanFundforSustainableDevelopment(EFSD).Byreducingriskonthebalancesheet,thedealfreedupanestimatedUSD650millioninadditionallendingcapacity.KeyelementsRoom2Runfocusedonaportfolioof45privatesectorloans,whichwasthendividedintofourtranches:equity,mezzanine,seniormezzanine,andsenior(inorderofdescendingrisk).TheAfDBretainedtheequityandseniortranches.Theriskonthetwomezzaninetranches–totallingUSD152.5millionandUSD100millionrespectively–wasthensoldtoinvestors.Thedealisasyntheticsecuritisation,meaningtheAfDBremainsthelenderofrecordbutpaysinvestorsacreditprotectionpremium(similartoaninsurancepolicy)inexchangeforapaymentofthemezzaninetrancheincaseofdefault.TheseniormezzaninetrancheisguaranteedbyEFSD.Thisreducestheriskassignedtotheloansfeaturedintheunderlyingportfolio,therebyfreeingupriskcapitalforreinvestment.Asafirstofitskindtransaction,theSSTtooktwoyearstostructure.Challengesincludedunderstandinghowcreditratingsagencies,inthiscaseS&P,wouldmeasuretheimpactofthetransactiononthebank’sprudentialratios,andensuringthatinvestorshadenoughfamiliaritywiththeloansintheportfolio.Havingpilotedtheapproach,Room2RunSSTcannowbereplicatedbyotherMDBs.Forexample,inApril2023,theInter-AmericanDevelopmentBankannouncedtheywereplanningasimilartransaction.TableA.21⊳BarriersaddressedormitigatedBarrierDetailLimitedpoolofMDBcapitalMDBresourcesarelimitedandtheyneedtomaintainastrongcapitalbaseinordertoactatthescalerequired.Room2RunwasabletofreeupcapitalforPrivatesectorunablefurtherlendingwithoutfurthercontributionsfromshareholdersandwithouttoaccessprojectsaffectingthebank’screditrating.ManyinstitutionalinvestorsthatarenotfamiliarwithAfricanmarketsareIEA.CCBY4.0morecomfortablepartneringwithanMDBduetoitsstrongduediligenceprocessesandhighcreditrating.BykeepingAfDBasthelenderofrecord,Room2RunSSTensuredthebankretainsanincentivetopreventtheloansfromdefaulting,addingadditionalprotectiontoinvestors.AnnexesCasestudies125SustainableEnergyFundforAfrica(SEFA)–providingcatalyticfinancetounlockprivate-sectorinvestmentSector:Renewableenergy,energyaccess,energyefficiencyCountries:AllFinancialmechanism:Concessionalfinance,results-basedfinance,technicalassistanceOverviewTheSustainableEnergyFundforAfrica(SEFA)isamulti-donorspecialfund,managedbytheAfricanDevelopmentBankGroup.Itisaflexiblemechanismthatprovidestechnicalassistancetoimproveenablingenvironments,projectpreparationsupportandcatalyticfinancetounlockprivatecapitalinvestmentinrenewableenergyandenergyefficiency.KeyelementsSEFAofferstechnicalassistanceandconcessionalfinanceinstrumentstoaddressmarketbarriers,buildamorerobustpipelineofprojectsandimprovetherisk-returnprofileofindividualinvestments.Itprovidesacombinationofpuregrants,reimbursablegrants,concessionalloansandfirst-lossequitytobridgetheviabilitygapandcatalyseprivatecapitalintocleanenergyprojects.Whilethefocushashistoricallybeentowardscountrieswithtraditionallyscarceprivatesectorinvestmentornotrackrecordofrenewableenergydevelopment,withtheadventofjustenergytransitioninitiatives,SEFA'sfootprintisgraduallyextendingtocovercountriesfacedwiththechallengeofscalingupdecarbonisationprogrammes.ThisdualapproachalignswithSEFA’soverarchingpurposetohelpachieveuniversalaccesstoaffordable,reliable,sustainableandmodernenergyservicesforallinAfrica.TableA.22⊳BarriersaddressedormitigatedBarrierDetailLackofcatalyticconcessionalcapitalThepoolofconcessionalcapitalavailabletosupportenergyprojectsinAfricaislimited.SEFAprovidesprojectpreparationgrants,viabilitygapfunding,Lackofpipelineofconcessionalloansandfirst-losscapitaltode-riskprojectsandcatalysemorebankableprojectssignificantamountsofprivatesectorcapitaltofinanceutility-scalerenewableenergygeneration,mini-gridsandenergyefficiencyprojects.Manycleanenergyprojectsstruggletoreachbankabilityduetoalackofearly-stagefinance.Thisfinanceisvitaltohelpcompaniesdevelopinvestablepropositions.SEFA’sbroadrangeofinstruments,includinggrantsandviabilitygapfunding,allowthefundtofillthisgap,especiallyincountriesthathavetraditionallyreceivedscarceprivateinvestment.Ithasdevelopedprogrammaticapproachestosupportthescale-upofrenewableenergyandenergyefficiencyinvestments,suchastheAfricaGreenMini-GridAccelerationProgramme,theEnergyEfficiencyMarketDevelopmentProgram,andrecently,theAfricaEnergyTransitionCatalystProgramme.126InternationalEnergyAgencyFinancingCleanEnergyinAfricaSpark+Africa–dedicatedcleancookinginvestmentfundSector:Cleancooking,energyaccessACountries:Portfoliocompaniesactiveinsub-SaharanAfricaFinancialmechanism:Growthcapitalandtechnicalassistanceforearly-stagecompaniesOverviewSpark+AfricaFundwasestablishedin2022bystakeholdersfromthecleancookingandimpactinvestmentecosystems.ThefundhasraisedUSD64millionfromover16investors,includingtheAfricanDevelopmentBankGroupandotherDFIs,aswellasfoundations,familyoffices,andpensionfunds.ItaimstoaddressthecleancookinggapinAfrica,supportingcompaniesthatofferdistributedcookingenergysolutionstothemassmarket,primarilyfocusingondomesticusersbutalsotargetinginstitutionssuchasschoolsandhospitals.Targetedcompaniesincludedesigners,manufacturers,distributors,andretailersofcookingsolutions,aswellasmicrofinanceinstitutionsandoff-gridelectricityaccessoperators.KeyelementsSpark+AfricaFundinvestsinearly-stagecompanieswhosetechnologyandsolutionshavedemonstratedmarketfitandareactiveinthevaluechainsofvariouscookingfuelsincludingefficientbiomassstoves,LPG,biofuelssuchasethanolandpelletsandelectricappliances.Thesecompaniesoftenstruggletoaccessaffordablecapitalonviableterms,sincetheytendtobesmall-scaleandreliantoneitherlocalcommercialbanksorinternationalprivateequityandventurecapital.ThefundinvestsincompaniesrangingfromUSD0.5milliontoUSD7millionviaalargeandflexibletoolkitthatincludesdebt,mezzanine,andinselectedcases,equitycapital.Tocomplementthecapitalinvested,thefundalsoprovidestechnicalassistanceandsupporttomanagementteams,leveragingexpertisewithintheinvestmentteamecosystemandpartnerssuchastheCleanCookingAlliance.InMay2022Spark+AfricaFundmadeitsfirstinvestmentofUSD6million,viaalong-termquasi-equityinstrument,inBurnManufacturing,aglobalverticallyintegratedleaderinthedesignandmanufacturingofcookingsolutions.TableA.23⊳BarriersaddressedormitigatedBarrierDetailDifficultlyinfinancingsmallticketsizesCookingprojectsaregenerallyconsideredtoosmallandriskyformanyinvestors,particularlystart-upswhichgenerallycannotaccesscommercialUnprovenbusinessbankcapital.Thankstoitsimpactinvestmentfocus,Spark+isabletoinvestinmodelsearly-stagestart-upsthathavealreadystartedgeneratingrevenues.Businessmodelsaddressingthecookinggaparestillpioneer,withlimitedtrackrecordofsuccessfulexitsforinvestors.Impactinvestmentapproachescanaccompanystart-upstoscale-upbyofferingtechnicalassistance,customisedsupporttomanagement,aswellasacombinationofsourcesoffinance.AnnexesCasestudies127IEA.CCBY4.0TranscoCLSG–financinggridswitharegionalapproachSector:TransmissioninfrastructureCountries:Côted’Ivoire,Liberia,SierraLeoneandGuineaFinancialmechanism:PoolingofDFIfinancingOverviewTranscoCLSG(Transco)isamultinationalinvestmentoperationdevelopedbytheWestAfricanPowerPool(WAPP)toaccelerateregionalinterconnectionamongthestatesofCôted’Ivoire,Liberia,SierraLeoneandGuinea(CLSG).Theoverallgoalistoensurethetransitoflow-costelectricitysupplyintheCLSGcountriesthroughestablishingajointmarketforsellersandbuyersandbysupportingappropriateinfrastructure.KeyelementsThekeymissionofTranscoistofinance,construct,operate,maintain,ownanddevelopatransmissionlinetoconnecttheCLSGcountries.FinancedbytheWorldBank,theEuropeanInvestmentBank,KfWandtheAfricanDevelopmentBankGroup,withfinancialcontributionsbytheCLSGcountries,theprojectmobilisedUSD531millionintotal.BypoolingresourcesfromDFIsandmanagingthefulllifecycleoftheprojectthroughacentralisedmechanism,Transcosuccessfullyprovedtheeffectivenessofamodelthroughwhichatransnationalcompanyleadsthedeploymentofregionaltransmissioninfrastructure.The225kVtransmissionlinestretchesover1303kilometresthroughthefourcountries,whichhadthepotentialtocausemultipledelays.Aclearlegalbasisandstrongpoliticalsupportunderpinnedthesuccessoftheproject,notjustatnationalandmunicipallevelbutalsoamonglocalcommunitiesledbyrespectedeldersandwomen’sgroups.TableA.24⊳BarriersaddressedormitigatedBarrierDetailLimitedaccesstoappropriatefinanceRegionaltransmissioninfrastructurecanbedifficulttofinanceandoftenfaceslimitedstakeholdercoordination.SettingupamultinationalentitytopoolCommunitycapitalandcentraliseprocurement,constructionandoperationoftheassetoppositionprovedtobeasuccessfulwaytomitigatethesedifficulties.RiskofdelaysduetoLarge-scaleenergyinfrastructureprojectscanbehinderedbycommunitymultiplestakeholdersopposition,particularlyinlightofsensitiveresettlementplans.Strongpoliticalsupportatalllevelsensuredbuy-inandpositiveoutcomes.Countriesparticipatinginregionalprojectscandevelopinterconnectorsatdifferentspeeds.Thisraisestheriskofassetsremainingidleifnotalltheinterconnectorsarecompletedatthesametime.Thecoordinatedapproachthroughamultinationalentitymitigatesthis,withoneentityhavingoversightoftheprocurementprocessesandtheimplementationoftheoverallproject.128InternationalEnergyAgencyFinancingCleanEnergyinAfricaUpEnergyImprovedCookstoveProgramme–voluntarycarbonmarketssupportingefficientcookstovesSector:Energyaccess,renewableenergy,energyefficiencyACountries:UgandaFinancialmechanism:Voluntarycarbonmarket(VCM)OverviewUpEnergy–aUganda-basedcompanyfocusedonemissionsreduction–operatesanumberofprojectsincleancooking,safewater,andafforestation.TheemissionsreductionsfromtheseprojectsgenerateUN-certifiedcarboncreditsandVerifiedEmissionReductionsthatbuyerscanaccessthroughtheCleanDevelopmentMechanism(CDM)andvoluntarymarkets.TheiraccesstothesemarketsisenhancedbytheircertificationbyGoldStandard,avoluntarycarbonoffsetschemethatprovidesalabeltoverifiedcarboncreditsgeneratedbyprojectsforcarbonoffsettingpurposes.Projectsunderbothvoluntarymarketsandcompliancemarkets,suchastheCDM,areeligiblefortheGoldStandardlabel.KeyelementsClimateactioninitiatives,suchascleancookstoves,thatwouldnototherwisebeabletogetoffthegroundarefundedbythecarboncreditstoreceiveprivateinvestment.ThepurposeoftheUpEnergyImprovedCookstoveProgrammeistofacilitatethetransitionawayfrominefficienttraditionalnon-renewablebiomass-firedstoves,byprovidinghigh-efficientbiomass-firedimprovedcookstoves(ICS).Theenergy-savingcookstoveshelpuserssaveanaverageof16%oftheirannualincome.5Firewoodandcharcoal(oftengeneratedunsustainablyandinefficiently)leadtodeforestationandtheircombustionemitsGHGs.Theprogrammetargetsurbanandperi-urbanareaswherecharcoalistheprimaryfuelusedforcookingontraditionalbiomassstoves.TableA.25⊳BarriersaddressedormitigatedBarrierDetailAffordabilityconstraintsCleancookingprojectsoftenstruggletoaccessfinanceastheymaynotalwaysbecommerciallyviableduetohighcostsandaffordabilityconstraintsoftheLackofawarenessandendusers.Throughresearchanddevelopment,productionandtransportationcapacityactivitiespartiallyfundedbyCDM,UpEnergymanagedtobringtheupfrontinvestmentcostofICSdown,makingthemaffordabletohouseholdsPeopleareoftenunawareofthenegativeeffectstraditionalcookstoveshaveontheirhealthandtheenvironment.Moreover,traditionalcookstovescanbecostlytousewhenthereisnonaturalfuelaround.Theprogrammeactivelyseekslocalpartnershipstoenablecommunitiestoaccessnewtechnologiesandcontributestothescale-upoflocalbusinessesandorganisations.5Thisisanestimatebasedonfuelsavings(measured)andaveragefuelcost.IEA.CCBY4.0AnnexesCasestudies129AnnexBDefinitionsThisannexprovidesgeneralinformationonterminologyusedthroughoutthisreportincluding:units;definitionsoffuels,processesandsectors;regionalandcountrygroupings;andabbreviationsandacronyms.UnitsDistancekmkilometreEmissionsMtCO2milliontonnesofcarbondioxideGtCO2gigatonnesofcarbon-dioxideEnergyGJgigajoule(1joulex109)MWhmegawatt-hourTWhterawatt-hourGasbcmbillioncubicmetresMasskgkilogramme(1000kg=1tonne)milliontonnes(1tonnex106)Mtgigatonnes(1tonnex109)GtMonetaryEURmillion1eurox106EURbillion1eurox109KESmillion1Kenyanshillingx106KESbillion1Kenyanshillingx109NGNmillion1Nigeriannairax106NGNbillion1Nigeriannairax109USDmillion1USdollarx106USDbillion1USdollarx109USDtrillion1USdollarx1012PowerWpwattpeakMWmegawatt(1wattx106)GWgigawatt(1wattx109)AnnexesDefinitions131IEA.CCBY4.0Exchangerate(Allasof31May2023).1AngolanKwanza(AOA)=USD0.001711BotswananPula(BWP)=USD0.072461EgyptianPound(EGP)=USD0.032411EthiopianBirr(ETB)=USD0.018331GambianDalasi(GMD)=USD0.016381GhanaianCedi(GHS)=USD0.090291KenyanShilling(KES)=USD0.007221MalawianKwacha(MWK)=USD0.000981MoroccanDirham(MAD)=USD0.098171MozambicanMetical(MZN)=USD0.015651NigerianNaira(NGN)=USD0.002171SierraLeoneanLeone(SLL)=USD0.0000442661SouthAfricanRand(ZAR)=USD0.05071TanzanianShilling(TZS)=USD0.000421UgandanShilling(UGX)=USD0.000271ZambianKwacha(ZMW)=USD0.05124132InternationalEnergyAgencyFinancingCleanEnergyinAfricaDefinitionsAgriculture:Includesallenergyusedonfarms,inforestryandforfishing.Ammonia(NH3):Isacompoundofnitrogenandhydrogen.ItcanbeuseddirectlyasafuelinBdirectcombustionprocesses,aswellasinfuelcellsorasahydrogencarrier.Tobealowemissionsfuel,ammoniamustbeproducedfromlow-carbonhydrogen,thenitrogenseparatedviatheHaberprocesswithelectricitygeneratedfromlow-carbonsources.Aviation:Thistransportmodeincludesbothdomesticandinternationalflightsandtheiruseofaviationfuels.Domesticaviationcoversflightsthatdepartandlandinthesamecountry;flightsformilitarypurposesareincluded.Internationalaviationincludesflightsthatlandinacountryotherthanthedeparturelocation.Back-upgenerationcapacity:Householdsandbusinessesconnectedtoamainpowergridmayalsohavesomeformofback-uppowergenerationcapacitythat,intheeventofdisruption,canprovideelectricity.Back-upgeneratorsaretypicallyfuelledwithdieselorgasoline.Capacitycanbeaslittleasafewkilowatts.Suchcapacityisdistinctfrommini-gridandoff-gridsystemsthatarenotconnectedtoamainpowergrid.Balancesheetfinance:Involvestheexplicitfinancingofassetsonacompany’sbalancesheetusingretainedearningsfrombusinessactivities,includingthosewithregulatedrevenues,aswellascorporatedebtandequityissuanceincapitalmarkets.Tosomeextent,itmeasuresthedegreetowhichacompanyself-financesitsassets,thoughbalancesheetsalsoserveasintermediariesforraisingcapitalfromexternalsources.Thisreportalsorefersto“corporatefinance”whendescribingbalancesheetfinancing.Batterystorage:Energystoragetechnologythatusesreversiblechemicalreactionstoabsorbandreleaseelectricityondemand.Biogas:Amixtureofmethane,carbondioxideandsmallquantitiesofothergasesproducedbyanaerobicdigestionoforganicmatterinanoxygen-freeenvironment.Blendedfinance:Abroadcategoryofdevelopmentfinancearrangementsthatblendrelativelysmallamountsofconcessionaldonorfundsintoinvestmentsinordertomitigatespecificinvestmentrisks.Thiscancatalyseimportantinvestmentsthatwouldotherwisebeunabletoproceedunderconventionalcommercialterms.Thesearrangementscanbestructuredasdebt,equity,risk-sharingorguaranteeproducts.Specifictermsofthearrangements,suchasinterestrates,tenor,securityorrank,canvaryacrossscenarios.Bond:Afinancinginstrumentthatrepresentsaloanmadebyaninvestortoaborrower,whichcanbeacorporateoragovernment.Abondistypicallyissuedwithanenddatebywhichtheprincipaloftheloanisduetobepaidbacktothecreditor(seebondmaturity).Otherthanrepaymentoftheprincipal,abondalsoincludesvariableorfixedinterestpaymentspayablebytheborrowerorbondissuertothecreditororbondholder.Bondmaturity:ThedateinwhichtheborrowerisduetopaybacktothecreditorallamountsIEA.CCBY4.0detailedinthebondinstrument,includingprincipalandanyoutstandinginterestpayments.AnnexesDefinitions133Bondyield:Thereturnaninvestororbondholderexpectstoreceiveoverthelifetimeofthebond.Buildings:Thebuildingssectorincludesenergyusedinresidential,commercialandinstitutionalbuildingsandnon-specifiedother.Buildingenergyuseincludesspaceheatingandcooling,waterheating,lighting,appliancesandcookingequipment.Carboncapture,utilisationandstorage(CCUS):Theprocessofcapturingcarbondioxide(CO2)emissionsfromfuelcombustion,industrialprocessesordirectlyfromtheatmosphere.CapturedCO2emissionscanbestoredinundergroundgeologicalformations,onshoreoroffshoreorusedasaninputorfeedstockinmanufacturing.Carbondioxide(CO2):Isagasconsistingofonepartcarbonandtwopartsoxygen.Itisanimportantgreenhouse(heat-tapping)gas.Cleanenergy:Inpower,cleanenergyincludes:generationfromrenewablesources,nuclearandfossilfuelsfittedwithCCUS;batterystorage;andelectricitygrids.Inefficiency,cleanenergyincludesenergyefficiencyinbuildings,industryandtransport,excludingaviationbunkersanddomesticnavigation.Inend-useapplications,cleanenergyincludes:directuseofrenewables;electricvehicles;electrificationinbuildings,industryandinternationalmarinetransport;useofhydrogenandhydrogen-basedfuels;CCUSinindustryanddirectaircapture.Infuelsupply,cleanenergyincludeslowemissionfuels,liquidbiofuelsandbiogases,low-carbonhydrogenandhydrogen-basedfuels.Cleancookingsystems:Cookingsolutionsthatreleaselessharmfulpollutants,aremoreefficientandenvironmentallysustainablethantraditionalcookingoptionsthatmakeuseofsolidbiomass(suchasathree-stonefire),coalorkerosene.Thisrefersprimarilytoimprovedsolidbiomasscookstoves,biogas/biodigestersystems,electricstoves,liquefiedpetroleumgas,naturalgasorethanolstoves.Coal:Includesbothprimarycoal(i.e.lignite,cokingandsteamcoal)andderivedfuels(e.g.patentfuel,brown-coalbriquettes,coke-ovencoke,gascoke,gasworksgas,coke-ovengas,blastfurnacegasandoxygensteelfurnacegas).Peatisalsoincluded.Concentratingsolarpower(CSP):Solarthermalpowergenerationtechnologythatcollectsandconcentratessunlighttoproducehightemperatureheattogenerateelectricity.Concessionalfinance:Resourcesextendedattermsmorefavourablethanthoseavailableinthemarket.Thiscanbeachievedthroughoneoracombinationoffactors:interestratesbelowthoseavailableonthemarket;maturity,graceperiod,security,rankorback-weightedrepaymentprofilethatwouldnotbeaccepted/extendedbyacommercialfinancialinstitution;and/orbyprovidingfinancingtotherecipientotherwisenotservedbycommercialfinancing.Creditrating:Anindependentassessmentofagovernment'screditworthinessingeneraltermsorwithrespecttoaparticulardebtorfinancialobligation,whichisdonebyspecialisedcreditratingagencies.134InternationalEnergyAgencyFinancingCleanEnergyinAfricaCriticalminerals:Awiderangeofmineralsandmetalsusedincleanenergytechnologies.Theyincludechromium,copper,batterymetals(lithium,nickel,cobalt,manganeseandgraphite),molybdenum,platinumgroupmetals,zinc,rareearthelementsandotherBcommodities,aslistedintheAnnexoftheIEAspecialreportontheRoleofCriticalMineralsinCleanEnergyTransitionsavailableat:https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitionsDebt:Bondsorloansissuedortakenoutbyacompanytofinanceitsgrowthandoperations.Debtissuance:Afinancialobligationthatallowstheissuertoraisecapitalbyagreeingtopaybackthelenderwithinagiventimeperiodaccruingafixedorvariableinterestrate.Bondsareamongthemostcommonformsofdebtissuancebygovernments.Debtservice:Thecapitalrequiredtopaybacktheprincipalandmakeinterestpaymentsonoutstandingloansforaparticularperiodoftime.Dispatchablegeneration:Referstotechnologiesforwhichpoweroutputcanbereadilycontrolled,i.e.increasedtomaximumratedcapacityordecreasedtozero,inordertomatchsupplywithdemand.Electricitydemand:Definedastotalgrosselectricitygenerationlessownusegeneration,plusnettrade(importslessexports),lesstransmissionanddistributionlosses.Electricitygeneration:Definedasthetotalamountofelectricitygeneratedbypoweronlyorcombinedheatandpowerplantsincludinggenerationrequiredforownuse.Thisisalsoreferredtoasgrossgeneration.End-usesectors:Includeindustry(i.e.manufacturing,mining,chemicalproduction,blastfurnacesandcokeovens),transport,buildings(i.e.residentialandservices)andother(i.e.agricultureandothernon-energyuse).Energy-relatedandindustrialprocessCO2emissions:Carbondioxideemissionsfromfuelcombustionandfromindustrialprocesses.Notethatthisdoesnotincludefugitiveemissionsfromfuels,flaringorCO2fromtransportandstorage.Unlessotherwisestated,CO2emissionsinFinancingCleanEnergyinAfricarefertoenergy-relatedandindustrialprocessCO2emissions.Energysectorgreenhousegas(GHG)emissions:Energy-relatedandindustrialprocessCO2emissionsplusfugitiveandventedmethane(CH4)andnitrousoxide(N2O)emissionsfromtheenergyandindustrysectors.Energyservices:Seeusefulenergy.Equity:Theamongofmoneythatwouldbereturnedtoacompany’sshareholdersifalltheassetswereliquidatedandallofthecompany’sdebtwaspaidoff.Anequityinvestmentismoneythatisinvestedinacompanybypurchasingsharesofthatcompany,eitheronthestockmarketforpubliccompaniesorviaprivateequitydealsfornon-listedcompanies.AnnexesDefinitions135IEA.CCBY4.0Ethanol:Referstobio-ethanolonly.Ethanolisproducedfromfermentinganybiomasshighincarbohydrates.Currently,ethanolismadefromstarchesandsugars,butsecondgenerationtechnologieswillallowittobemadefromcelluloseandhemicellulose,thefibrousmaterialthatmakesupthebulkofmostplantmatter.Fossilfuels:Includecoal,naturalgas,oilandpeat.Geothermal:Geothermalenergyisheatderivedfromthesub-surfaceoftheearth.Waterand/orsteamcarrythegeothermalenergytothesurface.Dependingonitscharacteristics,geothermalenergycanbeusedforheatingandcoolingpurposesorbeharnessedtogeneratecleanelectricityifthetemperatureisadequate.Grant:Resourcesallocatedbydevelopmentfinanceinstitutionsordonorstorecipientcountrieswhichdonotearninterestanddonotneedtobepaidback.Grantsaregenerallyprovidedtosupportspecifieddevelopmentobjectives.Greenbank:Referstoapublic,quasi-publicornon-profitentityestablishedspecificallytofacilitateprivateinvestmentforlow-carbon,climate-resilientinfrastructure.Greenbond:Referstoabondthatisatypeoffixed-incomeinstrumentcreatedtofundprojectsthathavepositiveenvironmentaland/orclimatebenefits.Greenium:Thenotionthatgreen,social,sustainableandsustainability-linked(GSSS)debtinstrumentsoftenattractaloweryieldthantheirvanillacounterparts.Guarantee:Anagreementthatsecurestherepaymentofadebttoalenderbyathird-partyiftheborrowerdefaults.Thethird-partyactsasaguarantorandassumesresponsibilityfortherepaymentofthedebtiftheoriginaldebtordefaults.Heat(end-use):Canbeobtainedfromthecombustionoffossilorrenewablefuels,directgeothermalorsolarheatsystems,exothermicchemicalprocessesandelectricity(throughresistanceheatingorheatpumpswhichcanextractitfromambientairandliquids).Thiscategoryreferstothewiderangeofend-uses,includingspaceandwaterheatingandcookinginbuildings,desalinationandprocessapplicationsinindustry.Itdoesnotincludecoolingapplications.Heat(supply):Obtainedfromthecombustionoffuels,nuclearreactors,geothermalresourcesandthecaptureofsunlight.Itmaybeusedforheatingorcooling,orconvertedintomechanicalenergyfortransportorelectricitygeneration.Commercialheatsoldisreportedundertotalfinalconsumptionwiththefuelinputsallocatedunderpowergeneration.Loan:Afinancialinstrumentwherebyapartyborrowsmoneyfromanotherparty,undertakingtorepaythenominalamountborrowed(principal)andinterestwithinagiventimeperiod.Low-emissionsfuels:Includemodernbioenergy,low-emissionshydrogenandlow-emissionshydrogen-basedfuels(e.g.,ammoniamadefromlow-emissionshydrogen).136InternationalEnergyAgencyFinancingCleanEnergyinAfricaLow-emissionshydrogen:Hydrogenthatisproducedfromwaterusingelectricitygeneratedbyrenewablesornuclear,fromfossilfuelswithminimalassociatedmethaneemissionsandprocessedinfacilitiesequippedtoavoidCO2emissions,e.g.viaCCUSwithahighcaptureBrate,orderivedfrombioenergy.Hydropower:Theenergycontentoftheelectricityproducedinhydropowerplants,assuming100%efficiency.Itexcludesoutputfrompumpedstorageandmarine(tideandwave)plants.Improvedcookstoves(ICS):Intermediateandadvancedimprovedbiomasscookstoves(ISOtier≥1).Itexcludesbasicimprovedstoves(ISOtier0-1).Industry:Thesectorincludesfuelusedwithinthemanufacturingandconstructionindustries.Keyindustrybranchesincludeironandsteel,chemicalandpetrochemical,cement,aluminium,andpulpandpaper.Usebyindustriesforthetransformationofenergyintoanotherformorfortheproductionoffuelsisexcludedandreportedseparatelyunderotherenergysector.Thereisanexceptionforfueltransformationinblastfurnacesandcokeovens,whicharereportedwithinironandsteel.Consumptionoffuelsforthetransportofgoodsisreportedaspartofthetransportsector,whileconsumptionbyoff-roadvehiclesisreportedunderindustry.Informalemployment:Comprisesworkerswhosemainorsecondaryjobsareassociatedwithinformalsectorenterprises,workerswhoseproductionisexclusivelyforfinalusebytheirownhousehold,andworkerswhoseemploymentrelationshipisnotsubjecttonationallabourlegislation,socialprotection,incometaxationand/oremploymentbenefits.Investment:Investmentismeasuredastheongoingcapitalspendinginenergysupplycapacity,energyinfrastructureandenergyend-useandefficiency.Allinvestmentdataandprojectionsreflectspendingacrossthelifecycleofaproject,i.e.thecapitalspentisassignedtotheyearwhenitisincurred.Fuelsupplyinvestmentsincludeproduction,transformationandtransportationforoil,gas,coalandlowemissionsfuels.Powersectorinvestmentsincludenewbuildsandrefurbishmentsofgeneration,electricitygrids(transmission,distributionandpublicelectricvehiclechargers)andbatterystorage.Energyefficiencyinvestmentsincludethosemadeinbuildings,industryandtransport.Otherend-useinvestmentsincludedirectuseofrenewables;electricvehicles;electrificationinbuildings,industryandinternationalmarinetransport;useofhydrogenandhydrogen-basedfuels;fossilfuel-basedindustrialfacilities;CCUSinindustryanddirectaircapture.Investmentdataarepresentedinrealtermsinyear-2020USdollarsunlessotherwisestated.Mini-grids:Smallelectricgridsystemscomprisedofgenerationunit(s)anddistributionlines,notconnectedtomainelectricitynetworksthatlinkanumberofhouseholdsand/orotherconsumers.Mini-gridscanbeeventuallyconnectedtoamaingrid.Modernenergyaccess:Includeshouseholdaccesstoaminimumlevelofelectricity(initiallyequivalentto250kWhannualdemandforaruralhouseholdand500kWhforanurbanhousehold);householdaccesstolessharmfulandmoresustainablecookingandheatingAnnexesDefinitions137IEA.CCBY4.0fuels,andimproved/advancedstoves;accessthatenablesproductiveeconomicactivity;andaccessforpublicservices.Mezzaninefinance:Aformofsubordinatedebtfinancingthatallowslenderstoconverttheirdebttoequityinthecaseofdefault.Theincreasedriskassociatedwithbeingsubordinatetosecuredlendersistypicallycompensatedbyhigherinterestratesandtheoptiontoreceiveequityinsteadofinterestincome.Naturalgas:Comprisesgasesoccurringindeposits,whetherliquefiedorgaseous,consistingmainlyofmethane.Itincludesbothnon-associatedgasoriginatingfromfieldsproducinghydrocarbonsonlyingaseousform,andassociatedgasproducedinassociationwithcrudeoilaswellasmethanerecoveredfromcoalmines(collierygas).Naturalgasliquids,manufacturedgas(producedfrommunicipalorindustrialwaste,orsewage)andquantitiesventedorflaredarenotincluded.Gasdataincubicmetresareexpressedonagrosscalorificvaluebasisandaremeasuredat15°Candat760mmHg(StandardConditions).Gasdataexpressedintonnesofoilequivalent,mainlyforcomparisonreasonswithotherfuels,areonanetcalorificbasis.Thedifferencebetweenthenetandthegrosscalorificvalueisthelatentheatofvaporisationofthewatervapourproducedduringcombustionofthefuel(forgasthenetcalorificvalueis10%lowerthanthegrosscalorificvalue).Nominal(terms):Nominal(valueorterms)isafinancialandeconomictermthatindicatesthestatisticinquestionismeasuredinactualpricesthatexistatthetime.Nominalvalueofanyeconomicstatisticmeansthestatisticismeasuredintermsofactualpricesthatexistatthetime.Off-gridsystems:Mini-gridsandstand-alonesystemsforindividualhouseholdsorgroupsofconsumersnotconnectedtoamaingrid.Oil:Includesbothconventionalandunconventionaloilproduction.Petroleumproductsincluderefinerygas,ethane,liquidpetroleumgas,aviationgasoline,motorgasoline,jetfuels,kerosene,gas/dieseloil,heavyfueloil,naphtha,whitespirits,lubricants,bitumen,paraffin,waxesandpetroleumcoke.Powergeneration:Referstofueluseinelectricityplants,heatplantsandcombinedheatandpowerplants.Bothmainactivityproducerplantsandsmallplantsthatproducefuelfortheirownuse(auto-producers)areincluded.Projectfinance:Involvesexternallenders,suchascommercialbanks,developmentbanksandinfrastructurefunds,sharingriskswiththesponsoroftheproject.Itcanalsoinvolvefundraisingfromdebtcapitalmarketswithasset-backedprojectbonds.Theyofteninvolvenon-recourseorlimitedrecourseloanswherelendersprovidefundingonaproject’sfuturecashflowandhavenoorlimitedrecoursetoliabilityoftheprojectparentcompanies.Productiveuses:Energyusedtowardsaneconomicpurpose:agriculture,industry,servicesandnon-energyuse.Someenergydemandfromthetransportsector(e.g.freight)couldbeconsideredasproductive,butistreatedseparately.138InternationalEnergyAgencyFinancingCleanEnergyinAfricaRenewables:Includesbioenergy,geothermal,hydropower,solarphotovoltaics(PV),concentratingsolarpower(CSP),windandmarine(tideandwave)energyforelectricityandheatgeneration.BRoadtransport:Includesallroadvehicletypes(passengercars,two/three-wheelers,lightcommercialvehicles,busesandmediumandheavyfreighttrucks).Securitisation:Financialinstrumentwherebyassetsarepooledintoaspecialpurposevehicletocreateatradableasset-backedsecurity.Solar:Includessolarphotovoltaicsandconcentratingsolarpower.Solarhomesystems(SHS):Small-scalephotovoltaicandbatterystand-alonesystems(withcapacityhigherthan10wattpeak[Wp])supplyingelectricityforsinglehouseholdsorsmallbusiness.Theyaremostoftenusedoff-gridbutalsowheregridsupplyisnotreliable.AccesstoelectricityintheIEA’sdefinitionconsiderssolarhomesystemsfrom25Wpinruralareasand50Wpinurbanareas.Itexcludessmallersolarlightingsystems,forexamplesolarlanterns)oflessthan11Wp.Solarphotovoltaics(PV):Electricityproducedfromsolarphotovoltaiccells.Sovereigndebt:Debtissuedbyagovernmentasaformofraisingcapital,typicallybyissuingbonds,bills,debtsecurities,orcontractingloansfromothercountries,multilateralorganisationsanddevelopmentfinanceinstitutions.Stand-alonesystems:Small-scaleautonomouselectricitysupplyforhouseholdsorsmallbusinesses.Theyaregenerallyusedoff-gridbutalsowheregridsupplyisnotreliable.Stand-alonesystemsincludesolarhomesystems,smallwindorhydrogenerators,dieselorgasolinegenerators,etc.Thedifferencecomparedwithmini-gridsisinscaleandthatstand-alonesystemsdonothaveadistributionnetworkservingmultiplecostumers.Seniordebt:Debtwiththefirstorderofprecedenceforrepaymentintheeventofdefaultbytheborrower,thereforecarryingthelowestdownsideriskforthelender.Subordinateddebt:Unsecureddebt,whichintheeventofdefaultbytheborrowerisonlyrepaidtothelenderaftermoreseniorloansorsecuritiesarepaid.Syntheticsecuritisation:Allowsthetransferofriskfromonepartytoanotherwithouttransferringownershipoftheunderlyingloans.Itallowstheissuertofreeupcapitalanddiversifyitsportfoliobytransferringpartofitsloanbooktoaspecialpurposevehiclethatisthensoldtootherinvestors.Traditionaluseofbiomass:Referstotheuseofsolidbiomasswithbasictechnologies,suchasathree-stonefireorbasicimprovedcookstoves(ISOtier0-1),oftenwithnoorpoorlyoperatingchimneys.Transportsector:FuelsandelectricityusedinthetransportofgoodsorpeoplewithintheIEA.CCBY4.0nationalterritoryirrespectiveoftheeconomicsectorwithinwhichtheactivityoccurs.Thisincludesfuelandelectricitydeliveredtovehiclesusingpublicroadsorforuseinrailvehicles;AnnexesDefinitions139fueldeliveredtovesselsfordomesticnavigation;fueldeliveredtoaircraftfordomesticaviation;andenergyconsumedinthedeliveryoffuelsthroughpipelines.Unabatedfossilfuels:ConsumptionoffossilfuelsinfacilitieswithoutCCUS.Usefulenergy:Referstotheenergythatisavailabletoend-userstosatisfytheirneeds.Thisisalsoreferredtoasenergyservicesdemand.Asresultoftransformationlossesatthepointofuse,theamountofusefulenergyislowerthanthecorrespondingfinalenergydemandformosttechnologies.Equipmentusingelectricityoftenhashigherconversionefficiencythanequipmentusingotherfuels,meaningthatforaunitofenergyconsumed,electricitycanprovidemoreenergyservices.Variablerenewableenergy(VRE):Referstotechnologieswhosemaximumoutputatanytimedependsontheavailabilityoffluctuatingrenewableenergyresources.VREincludesabroadarrayoftechnologiessuchaswindpower,solarPV,run-of-riverhydro,concentratingsolarpower(wherenothermalstorageisincluded)andmarine(tidalandwave).Viabilitygapfunding:Capitalneededtomakeagivenprojectfinanciallyviable,particularlyfordemonstrationprojectsorprojectsthatwouldotherwisestruggletobeprofitable.Weightedaveragecostofcapital(WACC):Theweightedaveragecostofcapitalisexpressedinnominaltermsandmeasuresacompany’srequiredreturnonequityandtheafter-taxcostofdebtissuance,weightedaccordingtoitscapitalstructure.140InternationalEnergyAgencyFinancingCleanEnergyinAfricaRegionalandcountrygroupingsFigureC.1⊳MaincountrygroupingsBNote:Thismapiswithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Advancedeconomies:OECDregionalgroupingandBulgaria,Croatia,Cyprus1,2,MaltaandIEA.CCBY4.0Romania.Africa:NorthAfricaandsub-SaharanAfricaregionalgroupings.AsiaPacific:SoutheastAsiaregionalgroupingandAustralia,Bangladesh,DemocraticPeople’sRepublicofKorea(NorthKorea),India,Japan,Korea,Mongolia,Nepal,NewZealand,Pakistan,People’sRepublicofChina(China),SriLanka,ChineseTaipei,andotherAsiaPacificcountriesandterritories.3Caspian:Armenia,Azerbaijan,Georgia,Kazakhstan,Kyrgyzstan,Tajikistan,TurkmenistanandUzbekistan.CentralAfrica:Cameroon,CentralAfricanRepublic,Chad,Congo,DemocraticRepublicoftheCongo(DRC),EquatorialGuineaandGabon.CentralandSouthAmerica:Argentina,PlurinationalStateofBolivia(Bolivia),Brazil,Chile,Colombia,CostaRica,Cuba,Curaçao,DominicanRepublic,Ecuador,ElSalvador,Guatemala,Haiti,Honduras,Jamaica,Nicaragua,Panama,Paraguay,Peru,Suriname,TrinidadandTobago,Uruguay,BolivarianRepublicofVenezuela(Venezuela),andotherCentralandSouthAmericancountriesandterritories.4China:Includesthe(People'sRepublicof)ChinaandHongKong,China.Countrieseligibleforconcessionalfinance:Countrieswithlowerper-capitaincomethattheAfDBclassifiesashavingaccesstoconcessionalresourcesfromtheAfricanDevelopmentAnnexesDefinitions141Fund.CountriesincludedinthisgroupingincludeCôteIvoire,Djibouti,Ghana,Lesotho,Mauritania,SãoToméandPríncipe,Benin,BurkinaFaso,Burundi,CentralAfricanRepublic,Chad,Comoros,DemocraticRepublicofCongo,Eritrea,Ethiopia,Gambia,Guinea,Guinea-Bissau,Liberia,Madagascar,Malawi,Mali,Mozambique,Niger,Rwanda,SierraLeone,Somalia,SouthSudan,Sudan,Tanzania,Togo,UgandaandZimbabwe.Countrieswithaccesstocommercialfinance:Countrieswithhigherper-capitaincomeandcreditworthinesstosustainnon-concessionalfinancing,whichaccordingtoAfDB’sclassificationhaveaccesstonon-concessionalresourcesoracombinationofbothconcessionalandnon-concessionalresources.CountriesincludedinthisgroupingincludeAlgeria,Angola,Botswana,CaboVerde,Cameroon,Egypt,EquatorialGuinea,Eswatini,Gabon,Kenya,Libya,Mauritius,Morocco,Namibia,Nigeria,RepublicofCongo,Senegal,Seychelles,SouthAfrica,TunisiaandZambia.DevelopingAsia:AsiaPacificregionalgroupingexcludingAustralia,Japan,KoreaandNewZealand.EasternAfrica:Burundi,Comoros,Djibouti,Eritrea,Ethiopia,Kenya,Madagascar,Malawi,Mauritius,Mozambique,Rwanda,Seychelles,Somalia,SouthSudan,Uganda,UnitedRepublicofTanzania,ZambiaandZimbabwe.EastAfricaCommunity:Burundi,Kenya,Rwanda,SouthSudan,TanzaniaandUganda.EconomicCommunityofWestAfricanStates(ECOWAS):MemberstatesincludeBenin,BurkinaFaso,CaboVerde,Côted’Ivoire,TheGambia,Ghana,Guinea,Guinea-Bissau,Liberia,Mali,Niger,Nigeria,Senegal,SierraLeoneandTogo.Emergingmarketanddevelopingeconomies:Allothercountriesnotincludedintheadvancedeconomiesregionalgrouping.Eurasia:CaspianregionalgroupingandtheRussianFederation(Russia).Europe:EuropeanUnionregionalgroupingandAlbania,Belarus,BosniaandHerzegovina,NorthMacedonia,Gibraltar,Iceland,Israel5,Kosovo,Montenegro,Norway,Serbia,Switzerland,RepublicofMoldova,Turkey,UkraineandUnitedKingdom.EuropeanUnion:MemberstatesincludeAustria,Belgium,Bulgaria,Croatia,Cyprus1,2,CzechRepublic,Denmark,Estonia,Finland,France,Germany,Greece,Hungary,Ireland,Italy,Latvia,Lithuania,Luxembourg,Malta,Netherlands,Poland,Portugal,Romania,SlovakRepublic,Slovenia,SpainandSweden.IEA(InternationalEnergyAgency):OECDregionalgroupingexcludingChile,Iceland,Israel,Latvia,LithuaniaandSlovenia.LatinAmerica:CentralandSouthAmericaregionalgroupingandMexico.MiddleEast:Bahrain,IslamicRepublicofIran(Iran),Iraq,Jordan,Kuwait,Lebanon,Oman,Qatar,SaudiArabia,SyrianArabRepublic(Syria),UnitedArabEmiratesandYemen.142InternationalEnergyAgencyFinancingCleanEnergyinAfricaNon-OECD:AllothercountriesnotincludedintheOECDregionalgrouping.NorthAfrica:Algeria,Egypt,Libya,MoroccoandTunisia.NorthAmerica:Canada,MexicoandUnitedStates.BOECD(OrganisationforEconomicCo-operationandDevelopment):MemberstatesincludeAustralia,Austria,Belgium,Canada,Chile,CzechRepublic,Colombia,Denmark,Estonia,Finland,France,Germany,Greece,Hungary,Iceland,Ireland,Israel,Italy,Japan,Korea,Latvia,Lithuania,Luxembourg,Mexico,Netherlands,NewZealand,Norway,Poland,Portugal,SlovakRepublic,Slovenia,Spain,Sweden,Switzerland,Turkey,UnitedKingdomandUnitedStates.CostaRicabecameamemberoftheOECDinMay2021;itsmembershipisnotyetreflectedintheAfricaEnergyOutlookprojectionsfortheOECDgrouping.OPEC(OrganisationofthePetroleumExportingCountries):Algeria,Angola,RepublicoftheCongo(Congo),EquatorialGuinea,Gabon,theIslamicRepublicofIran(Iran),Iraq,Kuwait,Libya,Nigeria,SaudiArabia,UnitedArabEmiratesandBolivarianRepublicofVenezuela(Venezuela).Sahel:BurkinaFaso,Chad,Mali,Mauritania,NigerandSenegal.SouthernAfrica:Botswana,Eswatini,Lesotho,NamibiaandSouthAfrica.SoutheastAsia:BruneiDarussalam,Cambodia,Indonesia,LaoPeople’sDemocraticRepublic(LaoPDR),Malaysia,Myanmar,Philippines,Singapore,ThailandandVietNam.ThesecountriesareallmembersoftheAssociationofSoutheastAsianNations(ASEAN).SouthernAfricanDevelopmentCommunity:Angola,Botswana,Comoros,DemocraticRepublicoftheCongo,Eswatini,Lesotho,Madagascar,Malawi,Mauritius,Mozambique,Namibia,Seychelles,SouthAfrica,UnitedRepublicofTanzania,ZambiaandZimbabwe.Sub-SaharanAfrica:Angola,Benin,Botswana,Cameroon,RepublicoftheCongo(Congo),Côted’Ivoire,DemocraticRepublicoftheCongo,Eritrea,Ethiopia,Gabon,Ghana,Kenya,Mauritius,Mozambique,Namibia,Niger,Nigeria,Senegal,SouthSudan,Sudan,UnitedRepublicofTanzania(Tanzania),Togo,Zambia,ZimbabweandotherAfricancountriesandterritories.6Forthepurposesofthisreport,SouthAfricaispresentedseparatelyfromsub-SaharanAfricaasitsenergydemandtrendsandenergycompositiondifferssubstantiallyfromtherestofsub-SaharanAfrica,andcanmasktrendsintheregionWesternAfrica:Benin,BurkinaFaso,CaboVerde,Côted’Ivoire,Gambia,Ghana,Guinea,Guinea-Bissau,Liberia,Mali,Mauritania,Niger,Nigeria,Senegal,SierraLeoneandTogo.Countrynotes1NotebyTürkiye:Theinformationinthisdocumentwithreferenceto“Cyprus”relatestothesouthernpartoftheisland.ThereisnosingleauthorityrepresentingbothTurkishandGreekCypriotpeopleontheisland.TürkiyerecognisestheTurkishRepublicofNorthernCyprus(TRNC).UntilalastingandequitablesolutionisfoundwithinthecontextoftheUnitedNations,Turkeyshallpreserveitspositionconcerningthe“Cyprusissue”.AnnexesDefinitions143IEA.CCBY4.02NotebyalltheEuropeanUnionMemberStatesoftheOECDandtheEuropeanUnion:TheRepublicofCyprusisrecognisedbyallmembersoftheUnitedNationswiththeexceptionofTurkey.TheinformationinthisdocumentrelatestotheareaundertheeffectivecontroloftheGovernmentoftheRepublicofCyprus.3Individualdataarenotavailableandareestimatedinaggregatefor:Afghanistan,Bhutan,CookIslands,Fiji,FrenchPolynesia,Kiribati,Macau(China),Maldives,NewCaledonia,Palau,PapuaNewGuinea,Samoa,SolomonIslands,Timor-LesteandTongaandVanuatu.4Individualdataarenotavailableandareestimatedinaggregatefor:Anguilla,AntiguaandBarbuda,Aruba,Bahamas,Barbados,Belize,Bermuda,Bonaire,BritishVirginIslands,CaymanIslands,Dominica,FalklandIslands(Malvinas),FrenchGuiana,Grenada,Guadeloupe,Guyana,Martinique,Montserrat,Saba,SaintEustatius,SaintKittsandNevis,SaintLucia,SaintPierreandMiquelon,SaintVincentandGrenadines,SaintMaarten,TurksandCaicosIslands.5ThestatisticaldataforIsraelaresuppliedbyandundertheresponsibilityoftherelevantIsraeliauthorities.TheuseofsuchdatabytheOECDand/ortheIEAiswithoutprejudicetothestatusoftheGolanHeights,EastJerusalemandIsraelisettlementsintheWestBankunderthetermsofinternationallaw.6Individualdataarenotavailableandareestimatedinaggregatefor:BurkinaFaso,Burundi,CaboVerde,CentralAfricanRepublic,Chad,Comoros,Djibouti,KingdomofEswatini,Gambia,Guinea,Guinea-Bissau,Lesotho,Liberia,Madagascar,Malawi,Mali,Mauritania,Réunion,Rwanda,SãoToméandPríncipe,Seychelles,SierraLeone,SomaliaandUganda.144InternationalEnergyAgencyFinancingCleanEnergyinAfricaAbbreviationsandacronymsAfDBAfricanDevelopmentBankGroupBIEA.CCBY4.0CDMCleanDevelopmentMechanismCFFClimateFinanceFacility145CLSGCôted’Ivoire,Liberia,SierraLeone,GuineaCO2carbondioxideCOPConferenceofParties(UNFCCC)DFIdevelopmentfinanceinstitutionDRCDemocraticRepublicoftheCongoDtPDeserttoPowerEMDEemergingmarketanddevelopingeconomyESCOenergyservicecompanyESGenvironmental,socialandgovernanceESIenergysavingsinsuranceEUEuropeanUnionFDIforeigndirectinvestmentFIDfinalinvestmentdecisionGCFGreenClimateFundGDPgrossdomesticproductGEFGlobalEnvironmentFacilityGHGgreenhousegasesGIZDeutscheGesellschaftfürInternationaleZusammenarbeitGmbHGSSSgreen,social,sustainableandsustainability-linkedICSimprovedcookstoveIEAInternationalEnergyAgencyIPPindependentpowerproducerITMOInternationallyTransferredMitigationOutcomeJETPJustEnergyTransitionPartnershipKfWKreditanstaltfürWiederaufbauLCOElevelisedcostofelectricityLPGliquefiedpetroleumgasMDBmultilateraldevelopmentbankMEPSminimumenergyperformancestandardsMoUmemorandumofunderstandingNDCnationallydeterminedcontributionN2OnitrousoxideOECDOrganisationforEconomicCo-operationandDevelopmentPPApowerpurchaseagreementPPPpublic-privatepartnershipPVphotovoltaicSAPPSouthernAfricaPowerPoolSASSustainableAfricaScenarioSHSsolarhomesystemsAnnexesDefinitionsSMEsmallandmedium-sizedenterpriseSOEstate-ownedenterpriseSTEPSStatedPoliciesScenarioTCXTheCurrencyExchangeUNDPUnitedNationsDevelopmentProgrammeUNFCCCUnitedNationsFrameworkConventiononClimateChangeVCventurecapitalVCMvoluntarycarbonmarketWAPPWestAfricaPowerPool146InternationalEnergyAgencyFinancingCleanEnergyinAfricaAnnexCReferencesChapter1:CleanenergyinvestmentlandscapeAfDB(AfricanDevelopmentBank)(2023),AbouttheTransitionSupportFacility,https://www.afdb.org/en/topics-and-sectors/topics/fragility-resilience.AfDB(2022),ElectricityRegulatoryIndex,AfDB,Abidjan.AfDB(2021),ElectricityRegulatoryIndex,AfDB,Abidjan.AVCA(AfricanPrivateEquityandVentureCapitalAssociation)(2022),CurrencyRiskManagementPracticesinAfricanPrivateEquityandVentureCapital,AVCA,London.B&FT(Business&FinancialTimes)(2022),Ghana’seurobondyieldshit10-yrhigh,https://thebftonline.com/2022/03/08/ghanas-eurobond-yields-hit-10-yr-high/.BBC(BritishBroadcastingCorporation)(2023),GhanaIMFloan:Will$3bnsolvetheeconomiccrisis?,https://www.bbc.com/news/world-africa-65622715.Enerdata(2023),Senegalwillremoveenergysectorsubsidiesby2025,https://www.enerdata.net/publications/daily-energy-news/senegal-will-remove-energy-sector-subsidies-2025.html.ESMAP(EnergySectorManagementAssistanceProgram)(2021),UtilityPerformanceandBehaviorinAfricaToday,ESMAP,WashingtonDC.Fofack,H.(2021),TheruinouspriceforAfricaofpernicious‘perceptionpremiums’,https://www.brookings.edu/articles/the-ruinous-price-for-africa-of-pernicious-perception-premiums/.IEA(InternationalEnergyAgency)(2023),CostofCapitalObservatory,IEA,Paris.IEA(2022),AfricaEnergyOutlook2022,IEA,Paris.IEAandIFC(InternationalFinanceCorporation)(2023),ScalingupPrivateFinanceforCleanEnergyinEmergingandDevelopingEconomies,https://iea.blob.core.windows.net/assets/a48fd497-d479-4d21-8d76-10619ce0a982/ScalingupPrivateFinanceforCleanEnergyinEmergingandDevelopingEconomies.pdf.IMF(InternationalMonetaryFund)(2023a),Sub-SaharanAfricaRegionalEconomicOutlook:TheBigFundingSqueeze,IMF,WashingtonDC.IMF(2023b),ManagingExchangeRatePressuresinSub-SaharanAfrica—AdaptingtoNewRealities,IMF,WashingtonDC.AnnexesReferences147IEA.CCBY4.0Res4AfricaFoundation(2021),AnewanalysisbyRES4AfricaunveilshowSouthAfricacansupportcommercial&industrialactorspursuingcost-effective,sustainableandreliableenergy,https://static1.squarespace.com/static/609a53264723031eccc12e99/t/610258b08e7c3856610b4b7f/1627543729002/Press+Release_C%26I+Study.pdf.Reuters(2023a),ZambiasealsUSD6.3billiondebtrestructuringdeal,https://www.reuters.com/world/africa/zambia-seals-63-billion-debt-restructuring-deal-2023-06-22/.Reuters(2023b),Nigeria'sfuelsubsidyremovalwillboostsovereignwealthfundcash,chiefinvestmentofficersays,https://www.reuters.com/world/africa/nigerias-fuel-subsidy-removal-will-boost-sovereign-wealth-fund-cash-cio-2023-05-31/.TradingEconomics(2023),GhanaCreditRating.UNECA(UnitedNationsEconomicCommissionforAfrica)(2021),InnovativeFinancingforAfrica:DebtforClimateandNature,UNECA,AddisAbaba.Chapter2:DesigningfinancesolutionsforcleanenergyAfricaEnergyPortal(2022),Empowersecures$74mtoprovidesolarpowertobusinesses,https://africa-energy-portal.org/news/africa-empower-secures-74m-provide-solar-power-businesses.BASE(2022),EnergySavingsInsurance(ESI)inMorocco:AcceleratingEnergyEfficiencyinSmallandMedium-SizedEnterprises,https://energy-base.org/projects/energy-savings-insurance-esi-in-morocco/.Bloomberg(2022),ShellacquiresNigeriansolarfirminfirstAfricapowerbuy,https://www.bloomberg.com/news/articles/2022-09-28/shell-acquires-nigerian-solar-firm-in-first-africa-power-buy.CleanTechnica(2022),StarsightEnergy&SolarAfricamergetocreateoneofthelargestC&IsolardevelopmentcompaniesinAfrica,https://cleantechnica.com/2022/09/23/starsight-energy-solarafrica-merge-to-create-one-of-the-largest-ci-solar-development-companies-in-africa/.GET.transform(2021),Nigeria:FinancingInstrumentsfortheMini-GridMarket,https://www.get-transform.eu/wp-content/uploads/2021/08/Success-in-Rural-Electrification-Case-Study_Nigeria.pdf.GOGLA(GlobalOff-GridLightingAssociation)(2023),GlobalOff-GridSolarMarketReports,https://www.gogla.org/reports/global-off-grid-solar-market-report/.Grids4Africa(2021),PrivateSectorParticipationinAfricanGridDevelopment,https://sun-connect.org/wpcont/uploads/PrivateSectorParticipation-.pdf.148InternationalEnergyAgencyFinancingCleanEnergyinAfricaIEA(InternationalEnergyAgency)(2023a),AVisionforCleanCookingAccessforAll,IEA,Paris.IEA(2023b),GuidebookforImprovedElectricityAccessStatistics,IEA,Paris.CIEA(2023c),UnlockingSmartGridOpportunitiesinEmergingMarketsandDevelopingEconomies,IEA,Paris.IEA(2023d),RenewableHydrogenfromOman,IEA,Paris.IEA(2022),AfricaEnergyOutlook2022,IEA,Paris.IEA(2019),AfricaEnergyOutlook2019,IEA,Paris.OECD(OrganisationforEconomicCo-operationandDevelopment)(2022),OECDBlendedFinanceGuidanceforCleanEnergy,OECD,Paris.PowerAfrica(2021),IncreasingProductiveUseofElectricityonUganda'sBugalaIsland,https://2017-2020.usaid.gov/sites/default/files/documents/PowerAfrica_casestudy_KIS_002.pdf.RenewablesNow(2022),SolariseAfricasecuresUSD33.4mdebtforC&IsolarinAfrica,https://renewablesnow.com/news/solarise-africa-secures-usd-334m-debt-for-ci-solar-in-africa-806016/.SE4AllandClimatePolicyInitiative(2021),EnergizingFinance:UnderstandingtheLandscape,https://www.seforall.org/system/files/2021-10/EF-2021-UL-SEforALL.pdf.TheRockefellerFoundation(2023),ElectrifyingEconomies,https://www.electrifyingeconomies.org/.UNCTAD(UnitedNationsConferenceonTradeandDevelopment)(2022),UNCTADstat,https://unctadstat.unctad.org/EN/Index.html.WorldBank(2023),PovertyandInequalityPlatform,https://pip.worldbank.org/home.Chapter3:MobilisingcapitalforasustainablefutureACMI(AfricaCarbonMarketsInitiative)(2022),RoadmapReport,https://www.seforall.org/system/files/2022-11/acmi_roadmap_report_2022.pdf.AfDB(AfricanDevelopmentBank)(2023),Benin,Côted’IvoiretopremierAfricanDevelopmentBank’sAfricanGreenBankfacilities,https://www.afdb.org/en/news-and-events/benin-cote-divoire-premier-african-development-banks-african-green-bank-facilities-61092.AfDB(2022),GaugingAppetiteofAfricaInstitutionalInvestorsforNewAssetClasses,AfDB,Abidjan.AnnexesReferences149IEA.CCBY4.0AfDB(2020),ExploringtheRoleofGuaranteeProductsinSupportingLocalCurrencyFinancingofSustainableOff-GridEnergyProjectsinAfrica,AfDB,Abidjan.Bloomberg(2023a),Zimbabwetotakeovercarboncredittrade,voidpastdeals,https://www.bloomberg.com/news/articles/2023-05-16/zimbabwe-plans-takeover-of-carbon-credit-trade-voids-past-deals.Bloomberg(2023b),Africancountriesseekcommonrulestotapcarbonmarket,https://www.bloomberg.com/news/articles/2023-07-06/african-countries-seek-common-rules-for-tapping-carbon-market.Bloomberg(2023c),Environmental,Social&Governance(ESG),https://www.bloomberg.com/professional/solution/sustainable-finance/.Bonini,S.,andS.Alkan(2012),ThePoliticalandLegalDeterminantsofVentureCapitalInvestmentsaroundtheWorld,SmallBusinessEconomics,https://doi.org/10.1007/s11187-011-9323-x.Brautigam,D.,etal.(2020),ChineseLoanstoAfricaDatabase,https://www.bu.edu/gdp/chinese‐loans‐to‐africa‐database/.CalyxGlobal(2023),Cookingupquality:Carboncreditsfromefficientcookstoveprojectsfaceintegrityissuesworthfixing,https://calyxglobal.com/blog-post/?q=18.CarbonCreditQualityInitiative(2023),CookingupQuality:Carboncreditsfromefficientcookstoveprojectsfaceintegrityissuesworthfixing,https://www.linkedin.com/pulse/cooking-up-quality-carbon-credits-from/.ClimateActionPlatformAfrica(2023),Introductiontocarbonmarkets-AUBusinessForum2023,https://www.uneca.org/eca-events/sites/default/files/resources/documents/abf2023/230219-africa-business-forum_background-reading-on-carbon-markets.pdf.Convergence(2022),StateofBlendedFinance2022,https://www.convergence.finance/resource/state-of-blended-finance-2022/view.EuropeanInvestmentBank(2022),FinanceinAfrica:NavigatingtheFinancialLandscapeinTurbulentTimes,https://www.eib.org/en/publications/finance-in-africa-navigating-the-financial-landscape-in-turbulent-times.G7(2023),G7CleanEnergyEconomyActionPlan,https://www.mofa.go.jp/files/100506817.pdf.GCF(GreenClimateFund)(2023a),OpenDataLibraryGreenClimateFund,https://data.greenclimate.fund/public/data/projects.GCF(2023b),ProjectPortfolio,https://www.greenclimate.fund/projects.GEF(GlobalEnvironmentFacility)(2023),GEFProjectDatabase,https://www.thegef.org/projects-operations/database.150InternationalEnergyAgencyFinancingCleanEnergyinAfricaGOGLA(GlobalOff-GridLightingAssociation)(2023),InvestmentData,https://www.gogla.org/what-we-do/market-insights/data-portal/investment-data/.Hunzai,T.,andN.Krämer(2021),Article6readinessinWestAfrica,WestAfricanAllianceConCarbonMarketsandClimateFinance,https://www.carbon-mechanisms.de/fileadmin/media/dokumente/__Scoping_Study_-_Final_Version.pdf.Hynes,D.,M.Hall,andD.Machnik(2023),ImplementingArticle6–AnOverviewofPreparationsinSelectedCountries,GoldStandardandadelphi,https://www.goldstandard.org/sites/default/files/implementing_article_6-an_overview_of_preparations_in_selected_countries.pdf.IEA(InternationalEnergyAgency)(2023a),EnergyTechnologyPerspectives2023,IEA,Paris.IEA(2023b),WorldEnergyInvestment2023,IEA,Paris.IEA.(2023c),GlobalHydrogenReview2023,https://www.iea.org/reports/global-hydrogen-review-2023.IEA(2022),HowGovernmentsSupportCleanEnergyStart-ups,https://www.iea.org/reports/how-governments-support-clean-energy-start-ups.IEA(2021),FinancingCleanEnergyTransitionsinEmergingandDevelopingEconomies,IEA,Paris.IEA(2020),TrackingCleanEnergyInnovation,IEA,Paris.ILO(InternationalLabourOrganization)(2022),WorldSocialProtectionReport2020-2022:RegionalCompanionReportforAfrica,ILO,Geneva.ILO(2018),WomenandMenintheInformalEconomy:AStatisticalPicture,ILO,Geneva.IMF(InternationalMonetaryFund)(2021),Africa'sHard-WonMarketAccess,IMF,WashingtonDC.IndependentEvaluationUnit(2023),SecondPerformanceReviewoftheGreenClimateFund,https://ieu.greenclimate.fund/sites/default/files/document/230331-spr-final-report-top-web-isbn.pdf.MOBILIST(2021),TheExit-MobilisationOpportunityinAfrica,https://www.mobilistglobal.com/research-data/mobilist-the-exit-mobilisation-opportunity-in-africa/.Mubisa,K.,etal.(2022),ThechallengesoftheGreenClimateFund'smulti-countryprojectsandprogrammes,LessonsfromAfrica,https://www.germanwatch.org/sites/default/files/germanwatch_challenges_of_the_gcfs_multi-country_projects_and_programmes.pdf.NTVKenya(2023),PresidentRuto’sfulladdressonclimatechangeatCOP27,IEA.CCBY4.0https://ntvkenya.co.ke/news/president-rutos-full-address-on-climate-change-at-cop27/.AnnexesReferences151OECD(OrganisationforEconomicCo-operationandDevelopment)(2022a),DevelopmentFinanceData,https://www.oecd.org/dac/financing-sustainable-development/development-finance-data/.OECD(2022b),ClimateFinanceProvidedandMobilisedbyDevelopedCountriesin2016-2020:InsightsfromDisaggregatedAnalysis,https://www.oecd-ilibrary.org/finance-and-investment/climate-finance-provided-and-mobilised-by-developed-countries-in-2016-2020_286dae5d-en.TheEastAfrican(2022),Africahasleastdefaultrateoninfrastructureprojects,sayleaders,https://www.theeastafrican.co.ke/tea/business/africa-has-least-projects-default-rate-say-leaders-4006294.UNDP(UnitedNationsDevelopmentProgramme)(2023a),SwitzerlandandGhanasignhistoricagreementforClimateAction,https://www.undp.org/press-releases/switzerland-and-ghana-sign-historic-agreement-climate-action.UNDP(2023b),SwitzerlandandUNDPtodeploy$42milliontoboostprivateclimateinvestmentsindevelopingcountries,https://www.undp.org/geneva/press-releases/switzerland-and-undp-deploy-42-million-boost-private-climate-investments-developing-countries.UNDP(2022),LinkingGlobalFinancetoSmall-ScaleCleanEnergy,UNDP,NewYorkCity.UNFCCC(UnitedNationsFrameworkConventiononClimateChange)(2023),IntroductiontoClimateFinance,https://unfccc.int/topics/introduction-to-climate-finance.UniversityofCalifornia,Berkeley(2023),VoluntaryRegistryOffsetsDatabase,https://gspp.berkeley.edu/research-and-impact/centers/cepp/projects/berkeley-carbon-trading-project/offsets-database.USEmbassyKenya(2020),USannouncesnewKenyaPensionConsortiumtomobiliseinvestmentinlarge-scaleinfrastructureprojects,https://ke.usembassy.gov/united-states-announces-new-kenyan-pension-consortium-to-mobilize-investment-in-large-scale-infrastructure-projects/.Yu,S.,etal.(2021).ThePotentialRoleofArticle6CompatibleCarbonMarketsinReachingNet-Zero,https://www.ieta.org/resources/Resources/Net-Zero/Final_Net-zero_A6_working_paper.pdf.152InternationalEnergyAgencyFinancingCleanEnergyinAfricaInternationalEnergyAgency(IEA)ThisworkreflectstheviewsoftheIEASecretariatbutdoesnotnecessarilyreflectthoseoftheIEA’sindividualMembercountriesorofanyparticularfunderorcollaborator.Theworkdoesnotconstituteprofessionaladviceonanyspecificissueorsituation.TheIEAmakesnorepresentationorwarranty,expressorimplied,inrespectofthework’scontents(includingitscompletenessoraccuracy)andshallnotberesponsibleforanyuseof,orrelianceon,thework.SubjecttotheIEA’sNoticeforCC-licencedContent,thisworkislicencedunderaCreativeCommonsAttribution4.0InternationalLicence.Thisdocumentandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Unlessotherwiseindicated,allmaterialpresentedinfiguresandtablesisderivedfromIEAdataandanalysis.IEAPublicationsInternationalEnergyAgencyWebsite:www.iea.orgContactinformation:www.iea.org/contactTypesetinFrancebyIEA-September2023Coverdesign:IEAPhotocredits:©ShutterstockFinancingCleanEnergyinAfricaWorldEnergyOutlookSpecialReportAlthoughAfricaaccountsforone-fifthoftheglobalpopulation,theregioncurrentlyattractsonly3%ofglobalenergyinvestment.By2030,energyinvestmentneedstodoubletooverUSD200billionperyear,inorderforAfricancountriestoachievealltheirenergy-relateddevelopmentgoals,includinguniversalaccesstomodernenergy,whilemeetingintimeandinfulltheirnationallydeterminedcontributions.FinancingCleanEnergyinAfrica,aWorldEnergyOutlookSpecialReport,buildsonthekeyfindingsfromtheAfricaEnergyOutlook2022,whichintroducedtheSustainableAfricaScenario(SAS),andchartsinnovativeinvestmentsolutionsacrossthecontinentthatarecriticaltoscaleupenergyinvestment.Itdevelopsatheoryofchangebasedonthepositivespillovereffectsofincreasingtheavailabilityofaffordablecapitalforcleanenergyprojects.Currently,thecostofcapitalforenergyprojectsinAfricancountriesisatleast2-3xhigherthaninadvancedeconomiesandChina,whichhindersinvestmentbyraisingprojectcosts.TheInternationalEnergyAgency(IEA)andtheAfricanDevelopmentBankGrouphavejoinedforcestoproducethisnewanalysis,whichbenefittedfromthereviewofover85casestudiesandover40stakeholderinterviews.Thereportfocusesonarangeoftopics,spanningtechnologiesandfinancingproviders,includinglocalinstitutions,andlooksatwhattypesofcapitalaremostsuitedforthespecificitiesofeachsectorortechnology.Theanalysispayscloseattentiontohowtoscaleupprivateinvestment,includingtheroleofde-riskingsupportfromdevelopmentfinanceinstitutions(DFIs)anddonors:by2030,USD28billionofconcessionalcapitalwillbenecessarytomobilisetherequiredUSD90billioninprivateinvestmentincleanenergy.IncreasingtheroleoftheprivatesectorallowsDFIsanddonorstoalsoscaleupsupporttonon-commercialareas,suchasenablingenvironments,unproventechnologiesandfragileandconflict-afflictedstates,unproventechnologies.

1、当您付费下载文档后，您只拥有了使用权限，并不意味着购买了版权，文档只能用于自身使用，不得用于其他商业用途（如 [转卖]进行直接盈利或[编辑后售卖]进行间接盈利）。
2、本站所有内容均由合作方或网友上传，本站不对文档的完整性、权威性及其观点立场正确性做任何保证或承诺！文档内容仅供研究参考，付费前请自行鉴别。
3、如文档内容存在违规，或者侵犯商业秘密、侵犯著作权等，请点击“违规举报”。

碎片内容

碳中和的最新文档