More than 20 African heads of state and government and 20,000 delegates from around the world, including UN Secretary General Antonio Guterres have confirmed their participation in the forthcoming Africa Climate Summit in Nairobi, Kenya. The Summit will take place alongside the Africa Climate Week from September 4 – 8 and aims to position Africa in solidarity with the rest of the world for Global Climate Action.
The summit is happening on the back of an unprecedented climate crisis. Recent data show that the international community is falling far short of the Paris goals, with no clear pathway to achieving 1.5°C in place. The World Meteorological Organization has warned that the coming years will be the hottest ever, saying that there is a 66% chance the world will exceed the 1.5°C threshold in at least one of the next five years.
As the planet heats up, the impact on people and livelihoods is disastrous. Extreme events such as droughts, floods and storms are becoming more common and more severe, causing many places to be less habitable and destroying arable lands used for economic activities. Africa is already facing more severe impacts of climate change which are bringing misery and pain to millions of people across the continent. The negative impacts are contributing to food insecurity, population displacement and stress on water resources consequently threatening sustainable development.
As such, the Summit comes at a critical moment in the battle against the escalating climate crisis to provide a platform to deliberate on apposite issues around climate change. At the heart of the Summit will be an ambitious Nairobi Declaration by African leaders on green growth and climate finance solutions, and a call to action for African Union member states and partners to support its delivery.
Unlocking investment in clean energy
As world leaders assemble in Nairobi, affordable clean energy for all Africans should be an absolute priority. A green energy transition in Africa can enable sustainable livelihoods, build resilience to severe impacts of climate change, and set the continent on course for a low carbon future. But only if there is adequate investment that allows the provision of affordable clean energy at scale.
Despite the continent having an abundance of renewable energy sources, much more remains to be done to tap this potential. Increasingly, those involved in finding solutions to the escalating climate crisis are calling for a significant increase in investments towards green energy solutions for Africa to reach climate goals by 2030.
Shortfalls in clean energy investments are the largest in emerging and developing economies, a worrying trend given their huge demand for energy. UNCTAD’s World Investment Report 2023 reveals a widening annual investment deficit in developing countries as they work to achieve the Sustainable Development Goals (SDGs).
The report shows that global foreign direct investment dropped in 2022 and analyzes how investment policy and capital market trends impact investment in the SDGs, particularly in clean energy. It calls for urgent support to developing countries to enable them to attract more investment for their green transition.
The Africa Climate Summit is a key milestone towards a new approach to investing in Africa’s potential. African leaders should seize the moment and take an opportunity-driven lens to reimagine the continent’s investment landscape, including deploying critical enabling policy & regulation to open the market for investments.
The essential qualities of policy and regulation are transparency, consistency, and fairness. Good policy and regulation strike a seamless balance among these three to increase predictability; the sense that investors can predict with reasonable certainty how investments will be treated at all stages of the investment lifecycle. Ultimately, predictability is one of the biggest factors in shaping market activities which impact significantly on the confidence that investors have in the quality of the market.
A good regulatory framework should be able to support private sector investment and promote good service delivery at the lowest cost by making it easier to do business. The regulatory framework should be predictable but flexible enough to evolve as the market does.
Policy and regulation which combine the essential qualities of transparency, consistency, and fairness motivate investors to enter a market and provide long-term capital, and donors to provide concessional finance. Shortfalls in clean energy investments in developing economies are partly due to regulatory hurdles. This is evidenced by the large disparity between committed funding and actual disbursement for the minigrid sector.
According to the Minigrids Funders Group, only 13% of the total committed capital of USD 2.07 billion had been disbursed by 2020. Donor finance disbursements are being held up because projects can’t get through red tape. In Africa for instance, the average total time to attain all licenses and approvals for a single minigrid site is 58 weeks, representing the actual calendar weeks from start to finish and accounting for regulatory processes that can be done concurrently.
Embracing an agile regulatory framework will contribute to securing a substantive level of investment capital. The World Bank projects that reaching 160,000 minigrids in Africa by 2030 will require an investment of USD 91 billion. If investors are not provided with an optimal regulatory framework, no investment will occur, and the funding deficit towards clean energy will remain large.
Building resilience to climate change
Green energy is the anchor to sustainable socio-economic development and climate resilience. Minigrids and decentralized renewable energy solutions can provide the necessary agility to respond to the negative impacts of climate change and provide long term resilience to communities in rural areas. Connecting more people to green energy will improve the economic prospects of people living on the continent while helping preserve its environment for future generations.
Across Africa decentralized off-grid energy systems are seeing a surge in interest as a less expensive, cleaner, and more reliable rural electrification approach. We are already seeing mine sites, farms, and manufacturing plants partially solarizing their production lines through commercial and industrial renewable energy solutions as opposed to using pollutive diesel gensets. To meet critical climate goals, expanding rural infrastructure that leverages renewable minigrids is the next logical expansion to this structure.
Finding Africa’s voice
While delegates gather in Nairobi for the Africa Climate Summit, there has never been a greater need for African voices to be heard. As the voice of decentralized utility companies and minigrid developers across Africa, the Africa Minigrid Developers Association (AMDA) will continue to work with all stakeholders to support the global community to meet critical climate goals through advocating for catalytic funding for the minigrid sector, work with governments in promoting an enabling environment to attract investments and improve overall coordination of the sector through data and standards. Ultimately, we expect that the Summit will strengthen the continent’s voice and send a unified message ahead of the COP28 climate conference in Dubai later this year.
Authored by Africa Minigrid Developers Association (AMDA)