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Investment interest in African energy sector grows

Michelle Davies, partner and head of clean energy and sustainability at global law firm Eversheds, says that Africa presents a fantastic opportunity because of the amount of infrastructure work and the investment needed. She says that Africa is one of the few parts of the world that hosts superb natural resources such as wind, biomass, solar and water.

Eversheds’ presence is growing in Africa partially due to many of its clients moving to Africa to take up investment opportunities. Major drivers of this move can be accredited to South Africa’s renewable energy development. Davies explains that this move by the government has instilled a sense of belief in Africa and what can be achieved there.

Cheaper solar panels have made it easier to invest in Africa too. This makes it slightly easier for developers to focus on jurisdictions which may have been difficult in the past to bear the cost involved in establishing a presence in some of the more challenging countries. “There is a real sense that Africa is moving forward. Political risk is definitely decreasing which is a major obstacle to development. Therefore, companies and investors can no longer sit back on the side line and not be active in what they see as a massive growth market.”

Improving energy security is at the top of Africa’s list. There is a huge gap between demand and supply and renewable energy can fill some of this gap. Investors overseas have recognised this growing need for capacity and capital is moving to the continent in response.

The huge financial crisis in Europe has seen many investors leave to finance projects in Africa as subsidies are not viewed as an issue in Africa, Davies says.

Due to the financial crisis, European governments have found it difficult to support renewable technologies which were seen to be increasing electricity bills. Therefore, no company wanted to be seen supporting the new technologies. Energy has therefore become a politicised issue in Europe, she says. As a result, there is a great deal of regulatory uncertainty in the region.

Most countries in that region will be reaching their renewable energy targets soon. This doesn’t leave much room for growth in Europe so investors are now searching for new investment opportunities so that they can grow their businesses in the market.

Off-grid distributed renewable energy is becoming a huge trend in Africa and it is something that the company sees itself and its investors focusing on. Residential communities, as well as large industrials and commercials want a more reliable source of power and off-grid distributed renewable energy is being looked at as a solution. Big power users such as the mining industry are already setting up their own supply of renewable power to strengthen reliability.

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