CBPM 2025 · Vol. 2025, Issue 1

Critical Review of the Challenges of Financing Renewable Energy Development in Sub-Saharan Africa

Sam Wamuziri

Keywords: Finance, Renewable Energy Development, Risk Management

Abstract

There is an acute shortage of electricity supply in Sub-Saharan Africa (SSA), and electricity blackouts are a common occurrence. Climate change and carbon dioxide gas emissions from conventional power-generating systems are also of great concern. Africa has vast renewable energy resources, including hydropower, solar, wind, biomass and geothermal, which are relatively unexploited. Based on a literature review, this study aims to identify the factors that hinder investment in renewable energy development in SSA. The review finds that barriers to renewable energy development include fragmented electricity markets, utilities with poor balance sheets and low credit ratings, high energy transmission losses, political risks, high initial capital costs, poorly directed subsidies, insufficiently developed money markets, and a poor regulatory framework, The study also finds that the global utility-scale levelized costs of electricity from renewable energy resources compare favourably with that of conventional sources. Countries in SSA need to draw up a clear policy framework with legally binding targets for the contribution of renewable energy to the energy supply portfolio. In addition, subsidies currently enjoyed by conventional energy generators need to be restructured to target low-income groups. SSA countries should identify pipelines of suitable renewable energy projects, complete feasibility studies and invite potential developers. Risks faced by international investors in renewable energy projects, including political, commercial and financial risks, are insurable. An important consequence of this work is that it is possible to accelerate innovative financing solutions to ramp up investment to deliver energy for all.