Building resilience for improved livelihoods and sustainable markets in Africa
Sustaining a response to effects of climate change demands for clean energy. The nexus between clean energy and climate change supports value chains for improved livelihoods. Globally, cleantech technologies have demonstrated ability to support development of rural communities with private sector playing a critical role in bringing new technologies into the market. Businesses, entrepreneurs and investors turn innovations into products and companies that create transformative impact.
Approximately 600 million people in sub – Saharan Africa have no access to electricity and will not get grid access in the foreseeable future, power generation is failing to keep pace with demand, limited power is available for rural areas due to high cost of grid extension to remoter areas of the continent. Lack of energy is a binding constraint for growth in many African countries – especially in rural areas, limiting the potential of agro value chains to scale beyond subsistence, create sustainable livelihoods and spur industrialisation.
Over the last decade, clean energy technologies have become more economical than conventional power generation for many applications, and the regulatory environment to facilitate their application has improved. However, risk and market failures restrict innovation and prevent the development and use of successful business models and technologies. The market is in its infancy with few proven business models, increasing their perceived risk and reducing their appetite to innovate.
Notably, most business models which have been devised to deliver renewable energy and climate smart solutions are still at infancy stages and therefore require integrated financing instruments to growth and demonstrate commercial viability. Though the private sector has had some success in developing business models and technologies to address these issues, high risk and market failures are limiting innovation and the scale up of successful business models and technologies.
Financing energy and climate technologies has increasingly faced dynamic context challenges. Currently, energy access financing is beginning to penetrate the hard to reach markets – in emerging, rural, transitioning and fragile markets, offsetting business risks and reducing costs of investments. Blended finance has provided a solution to energy access financing to businesses in such contexts, strengthening markets for continued delivery of cleantech solutions to customers in rural Africa.
Over the years, AECF has invested over US$ 200 million in renewable energy and climate smart agribusiness value chains in 26 countries in sub – Saharan Africa, contributing to improved livelihoods, business opportunities for SMEs and jobs for women and youths.
While AECF support focuses on de – risking early and growth stage private sector companies to enter rural markets, there is even an expanded need for more funding for such businesses to scale their reach and demonstrate commercial viability. and ensure sustainable and transformative impact. This has led to AECF forging partnership with UNIDO and PFAN to ensure there is follow on funding and capacity enhancement for private sector companies in the fields of renewable energy and climate change in East, West and Southern Africa.
By Victor Ndiege, Sector Team Lead, Renewable Energy and Climate Technologies