The biggest obstacle to Africa’s renewable energy expansion is no longer expensive technology but the high cost of financing projects, according to a new analysis. While solar panels have become significantly cheaper and Africa enjoys the world’s greatest solar potential, developers still face borrowing costs far higher than those in Europe because of sovereign, currency, political, and liquidity risks. Since renewable energy projects require substantial upfront investment, expensive capital dramatically raises electricity costs and undermines project viability. Experts argue that increasing climate finance alone will not solve the problem. Instead, governments and development partners should focus on guarantees, blended finance, stronger regulatory frameworks, and mechanisms that reduce investment risk and lower borrowing costs.
FT