Dubai, United Arab Emirates, 6 December 2023 (ECA) - Supportive policies and robust regulations will boost private investment in the energy sector in Africa, one of the least electrified regions in the world, experts said.
Despite vast opportunities in the development of the electricity sector in Africa, there is low private sector investment in energy infrastructure and service delivery on the continent. A reform change in the policy and regulatory frameworks to ensure adequate openness, attractiveness, will ready the African market for private investments, energy experts agree.
Speaking at a side event at the Italian Pavilion during COP28, Yohannes Hailu, an energy policy expert at the Private Sector Development and Finance Division, (PSDFD) of ECA, said there are three areas of electricity market regulation to advance private investment in the sector.
More than 600 million Africans do not have access to electricity. Africa generates only 4% of the global energy despite its abundant renewable energy resources, including 40% of the world’s solar irradiation potential. Besides, Africa is also rich in cobalt, manganese, platinum, lithium, and copper – critical minerals for producing batteries and other green transition products.
Experts argue that the socio-economic transformation of African countries will depend upon the ability to accelerate infrastructural development and industrialisation, enabled by access to modern, reliable and affordable energy within an energy transition system. This requires substantial investment, including a robust role from the private sector. Policy and regulatory frameworks play a crucial role in the building of an enabling business environment.
Based on assessment in 16 countries undertaken by the ECA and RES4Africa Foundation, Mr. Hailu said key areas for improvement related to market openness such as policies and plans, sector regulation, market organization, private sector participation models and procurement models. In addition, there is a need for attractiveness through contracts and economic regulation, incentives and credit enhancement. Readiness such as the presence of permits and authorization administration, technical codes and grid access is also important to fast-track private investment through a better enabling environment.
In this regard, Mr. Hailu indicated that the Continental Regulatory Framework to Crowd-in Private Investment in Africa’s Electricity Markets developed by African Union Commission and the ECA offers support to member States in planning regulatory enhancements. In addition the regulatory planning tool, ROAR, developed by ECA and RES4Africa offers the means to strengthen institutional capacity to plan and execute reforms.
Roberto Vigotti, Secretary General of RES4Africa Foundation, Alberto Bianardi, Head of International Affairs at GSE, Antonio Nodari, Head of Central and South Europe Region of AFRY Management Consulting, Luciano Martini, Director of Distribution and Transmission Technologies at RSE and Daniel Schroth, Director for Renewable Energy and Energy Efficiency at AfDB shared a similar perspective on supporting regulatory improvement in Africa to fast-track private investment in the sector to meet SDG7 and accelerate just energy transition.
Roberta Ronzitti, Director of International Environmental Cooperation in the Ministry of Environment and Energy Security in Italy indicated that energy challenges take 2% from potential GDP growth on the continent.
“The future stability and prosperity of the continent depends on development of energy infrastructure,” Mr. Ronzitti said.
The Italian government has extended 17.5 million Euros to finance 15 projects in Africa. Furthermore, the Italian Climate Fund has pledged 804 million Euros per year for climate mitigation and adaptation projects, primarily in Africa.
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