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US$55bn needed to finance energy infrastructure in Africa

By: Ama Amankwah Baafi
Mr Ishmael Edjekumhene -  Executive Director of the Kumasi Institute of Technology, Energy and Environment
Mr Ishmael Edjekumhene - Executive Director of the Kumasi Institute of Technology, Energy and Environment

Africa will require about US$55 billion every year for the next 15 years to able to get the kind of energy infrastructure it needs.

The Executive Director of the Kumasi Institute of Technology, Energy and Environment (KITE), Mr Ishmael Edjekumhene, said the era of free money was over and so it was time for Ghana and other countries in the region to create the environment for private capital in the energy sector.

He said that financing the sector had been a problem for years such that historically, energy infrastructure was largely financed through grants and concessionary loans in many developing countries but has dwindled.

He said it was now moving more into private sector participation and it had become necessary for countries to look for alternatives, either by raising financing themselves or through private capital.

“Now a lot of private sector participation is taking place and that also changes the dynamics because the private sector is not here as a tourist. They expect good returns on their monies and that also brings into question whether there is a real market to be able to pay back what the private man if looking for,” he stated at a joint seminar on ‘Energy Strategies in Africa: Identifying the Challenges and Addressing the Priorities,’ in Accra.

The IMANI Centre for Policy and Education and the OCP Policy Centre organised the seminar that explored the potential of renewable energy to meet Africa’s energy supply, the opportunities and challenges in financing energy access in Africa.

Mr Edjekumhene said that having a bankable project and having a project that financiers will be interested in because they are guaranteed returns were important.

He said there was the need for the legislative and the policy regulatory framework to invite private sector participation either in generation (as has happened over the years with a lot of independent power producers), adding that the signal must be sent out there that there were opportunities for the private sector to come in, particularly in the off-grid sector.

Renewable energy versus financial returns
A Research Associate at the IMANI Centre for the Study of Energy and Natural Resources (CSNER), Ms Barbara Andoh, reiterated the need to achieve a balance in deploying renewable energy sources in the face of achieving economic returns.

She said that in as much as measures are put in place to improve Africa’s power utilities, provisions must be made to enable quick returns to improve her off-grid system.

“One thing that I think is very useful for us to think through has to do with the financial health of power utilities in Africa in general because most of the solutions that we are looking for with regards to renewable has to do with utility scale solar and utility scale wind,” she stated.

She noted that there was still capacity and efficiency challenges and, “if we are looking to put all that power we are generating from renewable energy onto the same grid, we will not be able to make the quick gains within the time frame we are looking at.”