Models of financing renewable energy for sustainable development: an African perspective
Date
2016
Authors
Oji, Chijioke Kennedy
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Abstract
Africa is challenged by the lack of stable modern electricity which is essential for economic and social development. Many African communities, especially in rural and sub-urban areas, are not connected to the national grid and thus constrained from developing and their continued use of traditional sources of exhaustible energy cause environmental pollution. Distributed renewable energy technologies can help to address the problem of modern energy provision in many of Africa‘s communities.
Finance plays a critical role in the development of renewable energy within countries. It bridges the gap in the development of renewable energy projects (REPs). Governments‘ efforts towards developing REPs for scaled-up renewable energy to impact the energy access challenge measurably have been inadequate. Thus, this dissertation focuses on increasing the financial contribution of the private sector in developing REPs, especially within rural communities. Models of financing REPs within selected African countries are analysed, with focus on financiers‘ perspectives and governments‘ ultimate goal in financing REP development. A key objective is to bridge the gap between private sector financiers and policymakers in government in this REP financing effort.
The study uses the mixed methodology approach to develop a framework through which REP development is related to the perspectives of financiers and policymakers as to enable reliable and useful research findings. Broadly, the results show that while REP financiers are mainly focused on the profitability of their investments, policymakers are mainly focused on the prospects for sustainable economic development. This divergence presents a key obstacle to the development of renewable energy within African countries.
Further, results show that traditional financing methods have been largely ineffective in promoting development of REPs in African countries, hence the need for innovative financing channels to increase REP development in Africa. Also, financiers of REPs in Africa consider renewable energy to be highly risky even when supported by government policies. The fledgling capital markets in many African countries need to be further developed to provide appropriate hedging mechanisms while financing small and medium scale REPs. This study also proposes financing models that amalgamate financiers into a small ―financing consortiums‖ using project finance to fund localised renewable energy service companies (ESCOs) with expertise in finance and REP development; kind of models that spread risk among a number of investors, thereby reducing the potential risks of investments while delivering on the objective of sustainable economic development.
Description
Thesis (Ph.D.)--University of the Witwatersrand, Faculty of Commerce, Law and Management, School of Law, 2016.
Keywords
Renewable energy sources, Energy policy--Africa, Sustainable development--Africa