risk of investing in clean energy
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RES4Africa and PwC Italy have released the results of a survey assessing the perception of risk of investing in renewable energy in six African countries.

Private investment continue to be heralded as the master path to support Africa’s sustainable energy transition. Nonetheless, the financial flows directed towards sub-Saharan African countries is negligible. The reasons for this are presented by RES4Africa, together with PwC Italy, in the Investor Survey Sub Saharan Africa, the third publication of the Investor Survey series.

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The report is based on research conducted between April and July 2021 with 116 stakeholders active in 6 sub-Saharan African countries (Côte d’Ivoire, Ethiopia, Kenya, Ghana, Mozambique and Senegal) including representatives of independent power producers, technology providers, financial institutions and the public sector.

Respondents were asked to express the level of perceived risk associated with the environmental, social and legal frameworks of each country, as well as financial costs, risks affecting revenues and construction and operation risks of investing in renewable energy in Africa. The survey aimed to identify and compare viewpoints from different stakeholders along the RE value chain, while identifying perceived barriers to investments and laying the foundations for a more fruitful business-to-government (B2G) dialogue.

According to the results, Côte d’Ivoire, Senegal and Kenya are perceived as the lowest-risk markets in the group, while Ghana, Ethiopia and Mozambique are deemed to need further policy measures to make the investment environment safer.

The factors constraining RE investments are multiple: political risk is considered to be the most acute one, with Ethiopia and Mozambique described as the most unstable countries. Further identified hazards stem from a lack of adequate market mechanisms, with a remarkable divergence of views between the private and the public sector, as well as procurement uncertainties, financing availability (problematic in all six countries), non-cost-reflective tariff structures and curtailment risk.

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The survey identifies some key steps to create a better environment for private investments: B2G dialogue should be encouraged in the form of structured consultative processes and actively seeking inputs from the investor community on policy design and technical know-how. Further desirable measures are the draft of credible sector plans, to be regularly updated and enforced, supported by meaningful community engagement and local consultations, creating shared value and stabilising socio-political contexts.