Africa renewable energy paradox: Rich in resources, poor in power

The same sun, the same solar technology, but radically different financing costs: renewable energy capital costs are about three times higher in Africa than in Europe, making clean energy more expensive before a single panel is installed.

Africa faces a profound energy paradox. It has vast untapped renewable potential, from geothermal resources to abundant solar radiation, yet accounts for only 4 percent of global energy consumption. About 570 million people still live without electricity, while 923 million lack access to affordable clean cooking technologies.

Clean energy is increasingly becoming the cheaper option as technology costs fall. Between 2010 and 2024, the levelised cost of electricity fell by about 90 percent for solar photovoltaic and 93 percent for battery storage.

Yet Africa, home to 20 percent of the world’s population and its youngest population, receives only 2 percent of global renewable energy investment. In 2022, clean energy spending was about $25 billion, far below what is needed to achieve universal energy access and global climate goals.

The problem is largely financial. Renewable energy projects in Africa face financing costs two to four times higher than similar projects in Europe or North America.

Kenya, for example, receives far more solar radiation than Germany, giving it a natural advantage in solar generation. Yet Germany has attracted significantly more renewable energy investment.

The weighted average cost of capital for renewable energy projects averages about 12 percent in Africa, compared with 3.8 percent in Europe. Investors demand higher returns to compensate for perceived continental risk. Consequently, the cost of money often outweighs the cost of technology.

The irony is stark. Africa possesses about 80 percent of the world’s platinum reserves, 50 percent of cobalt and 40 percent of manganese—minerals essential to the clean-energy transition—yet pays a premium for renewable technologies.