Financing remains one of the biggest roadblocks to Africa’s transition towards reliable and sustainable energy, plus associated climate goals, with an estimated $200bn needed annually until 2030 to meet these policy objectives, according to the International Energy Agency (IEA). In 2025, Africa received only 2% of the world’s clean energy investment, despite having 20% of its population.

Financial challenges include political instability, regulatory uncertainty, foreign exchange risks, lack of the necessary liquidity among local banks, underdeveloped transmission networks and power purchase agreement (PPA) risks, points out South Africa-based law firm CLG Global.

IEA Energy Investment Analyst Andrew Ward told New Energy World that financial models should be implemented based on renewable technologies and circumstances. For instance, the fact that most people without electricity in Africa ‘have very constrained budgets’ has led to the creation of models such as ‘pay-as-you-go’, that allows consumers to pay smaller manageable instalments (daily, weekly or monthly) instead of a large upfront capital cost to purchase solar home systems.

Pay-as-you-go is particularly suitable for off-grid energy in remote villages where households typically have a lower income, allowing them ‘to spread the cost [of accessing the service] over a longer time period’, he says, giving the example of PEG Africa, which is the largest off-grid solar company in Ghana and a major driver of pay-as-you-go solar in West Africa, allowing customers to pay in instalments using a mobile phone. However, he suggests that ‘larger scale renewables, such as utility-scale solar or wind, would be better suited to financing structures that allow them to access low-cost debt'.

Ward also says: ‘A successful way to bring in more private finance is through the “independent power producer” model which allows private entities to build, own and operate power generation facilities and sell the power to utilities (or sometimes directly to consumers) via PPAs (power purchase agreements).’ However, he adds: ‘Real and perceived risks are still high in African energy investments, making interest rates often prohibitively expensive. Meaning more concessional types of financing (typically from a development finance institution), must be blended with private financing.’

He explains that: ‘Governments can attract private investment in electricity via independent transmission projects (ITP) for their grid transmission infrastructure (which can still be unreliable in Africa) to scale up access to electricity.’

In terms of blended finance, Ward highlights the example of Nigerian solar energy company Darway Coast, which established a fund blending concessional capital from the UK government, a guarantee from Lagos-based credit guarantee institution InfraCredit, and finance from Nigerian pension funds – which currently do not invest a lot in electricity access projects due to their small size and risk level, to develop mini-grid electrification projects.

‘This structure is designed to be scalable for future off-grid energy projects across Nigeria and a model for other countries in Africa to adopt, especially in accessing financing from pension funds,' he says.

‘Financing remains one of the biggest roadblocks to Africa’s transition towards reliable and sustainable energy, plus associated climate goals, with an estimated $200bn needed annually until 2030 to meet these policy objectives.’ – International Energy Agency 

Off-grid expansion in Nigeria  
A good example of effective financing in the continent is major African off-grid solar energy company Sun King, based in Nairobi, Kenya, which is expanding access to affordable clean energy in Nigeria, helping small businesses stay open despite frequent power outages.

Backed by a Nigerian Naira 123.5bn ($80mn) loan from the World Bank’s International Finance Corporation and Stanbic IBTC Bank, Sun King’s pay-as-you-go financing model is breaking down cost barriers in Africa’s most populous country where 86 million people (out of 230 million in total) lack access to electricity, according to the latest IEA Energy Progress Report tracking SDG7.

Despite Nigeria having 13,000 MW of installed generation capacity, just under 6,000 MW is transmitted to the grid daily due to ageing infrastructure and unreliable gas supplies, according to data from Nigeria’s regulatory agencies and power companies, including the Transmission Company of Nigeria.

The result is that many businesses install stand-alone solar generation units. ‘Basically, this is why we install solar. Because of low and very intermittent power supply in this area,’ explains Ifeanyi Chukwu Francis, Assistant Manager at a wine store just outside Nigeria’s capital Abuja. In the past, his business purchased fuel-based generators, which are expensive to run: ‘So, to reduce the consumption of fuel for those generators, our manager decided to switch to solar power.’ The solar system includes three panels powering essential equipment: two refrigerators, an air conditioner, desktop computers and lighting – which makes the store look attractive at night, where previously it was dark.

‘What’s really exciting about this is that it’s a local-currency facility,’ says Anish Thakkar, Co-founder of Sun King. ‘It eliminates foreign-exchange risk and allows us to offer more affordable financing to our customers.’

Sun King intends to deliver solar power to four million additional households across Nigeria, doubling its existing footprint. In 2021, the company secured a similar $75mn deal in Kenya, focused on off-grid energy expansion, highlighting the potential in replicating this model across Africa.

Sun King’s model is part of a larger shift in Nigeria’s energy landscape, where innovative financing, such as pay-as-you-go is helping businesses and individuals overcome the sometimes daunting upfront costs of going green.

‘We [Nigeria] can generate about 400,000 MW of solar energy if we put resources in place for that kind of infrastructure. The business opportunity is huge,’ notes Abuja-based solar installer Femi Delson Olasimoju.

Cameroon – leasing contract  
Solar power financing innovation has also helped Cameroon’s energy sector, notably in three northern regions (the far north, north and Adamawa region) which hitherto have suffered severe power droughts. They are now enjoying a relatively stable energy supply following the construction of solar energy plants in Maroua, in the far north region, and Guider, in the north region. The solar plants were inaugurated in September 2023 and are being expanded following a leasing contract signed in June 2024 between Cameroonian electricity utility company ENEO and Release, a subsidiary of Norway’s Scatec, backed by Cameroon’s government to bolster renewable energy supplies. The expansion of the solar power plants in Maroua and Guider is supported with a financial guarantee of Central African Francs XAF 6bn ($10.6mn).

The first phases of the Maroua and Guider solar plants have already contributed about 104 GWh of electricity to Cameroon’s North Interconnected Network (RIN) grid, saving more than $72.5mn compared to the cost of using diesel-powered thermal plants.

Release CEO Hans Olav Kvalvaag says the leasing model used in Cameroon offers a shorter contract, with fewer obligations and commitments for ENEO and the government. ‘If it was normal financing, we would ask for a 25-year contract, which would entail a big commitment from ENEO. Since it is a leasing contract, it lowers the barrier for entry,’ he explains.

The leasing financing model is very scalable, and Release says it is under discussion for use in other African countries such as Liberia, Sierra Leone and Zambia, helping them adopt solar and battery power as a flexible and practical option with no prior financing required.  

The Cameroon project has had a significant impact: ‘There were a lot of load-shedding and blackouts before, but that is now in the past. The power pressure has reduced and ENEO is saving about $20mn a year on fuel,’ says Kvalvaag.

• Further reading: ‘Inspiring clean energy initiatives in the Global South’, Finalists in the 2025 Ashden Awards give a unique insight into what is being done to cut emissions and tackle climate threats across the world. Read about outstanding initiatives, mostly in the Global South, by innovators from the public, private and non-profit sectors, and the lessons that can be learned by their example.
• Find out more about Nigeria’s road to net zero.