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New Energy World
New Energy World embraces the whole energy industry as it connects and converges to address the decarbonisation challenge. It covers progress being made across the industry, from the dynamics under way to reduce emissions in oil and gas, through improvements to the efficiency of energy conversion and use, to cutting-edge initiatives in renewable and low carbon technologies.
COP28 President-Designate, His Excellency Dr Sultan Al Jaber, has announced a $4.5bn United Arab Emirates (UAE) finance initiative that aims to help unlock Africa’s clean energy potential. Meanwhile, a new report calls for urgent action to boost access to capital in order to double energy investment in Africa.
The new UAE investment initiative, announced during Al Jaber's keynote address at the inaugural African Climate Summit in Nairobi, brings together public, private and development capital from the Abu Dhabi Fund for Development (ADFD), Etihad Credit Insurance (ECI), Masdar and AMEA Power, as well as Africa50 (an investment platform established by African governments) and the Africa Development Bank (AfDB).
Al Jabar also called on Africa’s leaders to set out clear long-term transition and investment plans, along with policy and regulatory frameworks to unlock commercial finance for clean and renewable energy projects.
The new finance initiative aligns with the COP28 Presidency’s call for global tripling of renewable energy by 2030.
In sub-Saharan Africa alone, 600 million people live without access to electricity. Delivering greater access to clean energy will drive social and economic development, but currently investment in African renewables represents only 2% of the global total, and less than a quarter of the $60bn/y the continent needs by 2030. The initiative seeks to correct this imbalance by bringing key stakeholders together to accelerate development and delivery of infrastructure, generation and distribution solutions.
The finance initiative will sit under umbrella of Etihad 7, a development platform launched in 2022 that aims to provide 100 million people across the African continent with clean electricity by 2035.
Commenting on the announcement, Al Jaber said: ‘This initiative will prioritise investments in countries across Africa with clear transition strategies, enhanced regulatory frameworks and a master plan for developing grid infrastructure that integrates supply and demand. In short, this initiative is designed to work with Africa, for Africa. It aims to clearly demonstrate the commercial case for clean investment across this continent. And it will act as a scalable model that can be replicated to help put Africa on a superhighway to low-carbon growth.’
At the upcoming COP28, African states have indicated that they plan to push for the expansion of ‘special drawing rights’ at the International Monetary Fund (IMF), which could unlock $500bn worth of climate finance and could be leveraged up to five times.
Call for action on African renewables
Meanwhile, a new report from the International Energy Agency (IEA) and AfDB says ‘urgent action’ will be required to bring down financing costs and boost access to capital in order to double energy investment in Africa.
Even though the continent accounts for almost 20% of the world’s population and has ample resources, it is the destination for around just 2% of global clean energy spending. Overall energy investment on the continent has struggled in recent years, while to meet African development ambitions, as well as international energy access and climate goals, it needs to more than double by 2030, with nearly two-thirds going to clean energy, notes the report.
A range of real and perceived risks affecting projects in Africa, as well as higher borrowing costs following the COVID-19 pandemic and Russia’s war in Ukraine, mean there is a limited pool of affordable capital that energy developers in Africa can tap, it warns. According to the report, the cost of capital for utility-scale clean energy projects on the continent is at least two to three times higher than in advanced economies. This prevents developers from pursuing commercially viable projects that can deliver affordable energy solutions.
The report explores innovative ways to address this challenge, including the provision of more early-stage financing and greater use of tools that can reduce perceived investment risks in order to attract private capital. ‘This will require strong engagement from both the public and private sectors, as well the support of foreign and domestic institutions,’ it says.
Delivering modern energy to all Africans will require nearly $25bn/y in spending to 2030, the report finds – equivalent to the investment needed to build one new LNG terminal a year. But it requires a very different type of finance, given the need for small-scale projects, often in rural areas and for consumers with limited ability to pay.
The international community has a major role to play in scaling up clean energy investment in Africa. Concessional finance – or funding from development finance institutions and donors – can serve as a crucial catalyst, suggests the report. It finds that concessional capital of around $28bn/y is needed to mobilise $90bn of private sector investment by 2030, a more than tenfold increase from today.
The report also highlights the vital role of local financial institutions for sustainable development in Africa over the long term.
Kenya spearheads new renewable energy initiative
In other African news, the International Renewable Energy Agency (IRENA), in collaboration with Kenya, Denmark, Germany, and the UAE, has founded a new partnership pledging to boost renewable energy in Africa.
Kenya’s President William Ruto, who is also head of the Committee of African Heads of State and Government on Climate Change (CAHOSCC), launched the Accelerated Partnership for Renewables in Africa (APRA) at the first Africa Climate Summit in Nairobi.
At the launch event, President Ruto outlined Kenya’s ambition to achieve 100% renewable power by 2030 and to fuel the green industries of the future by 2040. He said: ‘Our ambition is not in question – it’s how we make this ambition a reality. This journey demands a united front. As leaders across Africa, our strategies must be woven together, tailored to find African solutions to African challenges.’
In addition to Kenya, APRA includes Ethiopia, Namibia, Rwanda, Sierra Leone and Zimbabwe. The partnership focuses on three key areas – mobilising finance, providing technical assistance and capacity building, and engaging the private sector.