Addressing the challenge of access to energy in Africa
By Philippe Dubois, Head of Corporate for International Retail Banking, Africa, Mediterranean Basin & Overseas (AFMO).
In Africa, the focus is not as much on greening energy production as on providing access to energy in order to ensure growth and development.
Today, more than 40% of the African population is without access to electricity. And yet, the population of sub-Saharan Africa will double by 2050 to 2.1 billion inhabitants, with a 60% concentration in cities. Energy needs will therefore increase significantly, twice as fast as the global average by 2040 (according to the International Energy Agency - IEA).
Much has already been done to accelerate access to energy: West Africa’s electrification rate has increased from 34% in 2000 to 53% in 2019, and the countries in the region are organising around interconnection projects to facilitate the pooling of resources and reduce the costs of access to electricity.
But the needs of the continent are massive. According to the IEA’s Sustainable Africa Scenario (SAS), achieving the goal of universal access to electricity by 2030 in Africa will only be possible through massive investments. Investments between 2026 and 2030 would have to be tripled compared to 2016-2020, i.e. USD 40 billion in low-carbon production and USD 45 billion per year in electricity grids.
Africa’s renewable energy potential
Gas is an essential transitional energy for Africa to replace coal and oil, as a continent that has significant reserves that can be exploited for its own needs.
In addition, the continent has significant potential for renewable energy (hydro, solar, wind). It owns 40% of the world’s solar resources, which are still largely untapped. While their cost is falling, renewable energies are becoming highly accessible and could represent 80% of new capacity by 2030 (SAS).
Adapted decentralised solutions based on solar could thus cover nearly 60% of energy access needs by 2030(SAS) with the development of individual solar systems (Solar Home System for individuals, C&I solutions for companies) and mini grids independent of public networks to cover villages or neighbourhoods. These solutions are being developed with appropriate regulations allowing for public-private partnerships in particular.
How do we finance these needs?
Financing needs are very high but cannot be fully covered by development banks, currently the main financial players in this sector. The use of the private sector is therefore essential.
Moreover, decentralised solutions are by nature difficult to finance (only 10% of projects are ultimately financed), they are not yet standardised and are based on new business models on which we lack perspective.
Financing solutions therefore require cooperation between commercial banks and development banks in order to maximise their resources. But they also involve cooperation with international or regional public bodies, which can provide their guarantee, in particular to cover political, liquidity or loss risks. Lastly, cooperation between banks and private sector players specialised in these new models (investment funds, debt funds, advisory structure, etc.) is essential.
Societe Generale, a major financial player in the continent, has rolled out the “Grow with Africa” programme, which aims to double its production of impact loans by 2025, particularly in renewable energies (nearly EUR 1 billion in new loans in 2025). Societe Generale combines local expertise (around sixty experts) with the Group’s global expertise to support large projects making a positive impact on the continent. It is partnering with major development banks, investment funds and international expert firms to expand and deploy its offering, particularly in terms of decentralised solutions.