Sub-Saharan Africa holds $193bn renewables investment opportunity, high ROI, study shows

Sub-Saharan Africa offers opportunity for a $193-billion investment in renewable energy sector by 2031, including utility-scale wind, solar, storage and transmission projects, which may yield an internal rate of return of 15% to 21%, much higher than with similar projects in Europe and the United States, according to a new study.

“Africa represents a significantly underserved market,” states the new research from Wood Mackenzie, a global consultancy firm. “Renewable-energy assets across the region also tend to be at earlier stages of development, offering growth upside.” But although these projects across a number of African countries may yield an internal rate of return significantly above returns of a little more than 5% in the developed economies, the research cautions that realizing this potential will require access to innovative funding models and a robust secondary finance market to recycle and widen the available capital pool.

While Africa accounts for almost 20% of the world’s population, almost 600-million people in the region, or about half the population, have no access to electricity, the study shows, noting that the continent currently attracts just 3% of global energy investment.

Sub-Saharan Africa, where massive underinvestment in electricity infrastructure has created a persistent lack of electricity access, is in urgent need of the implementation of large-scale renewable energy projects. The study has also showed that while South Africa, Nigeria and Kenya offer the largest solar-power markets, Uganda offers the best returns on renewable-energy projects, though capital costs are still far higher than those in Europe and the US.