EU steps up renewables funding as US retreats

From the newsletter

In March, the European Union dominated funding activities, providing over $5 billion. Remarkably, South Africa received more than 99% of these funds. This came after the US cut its financial support for several African initiatives, leaving a void. The EU stepped up its efforts to fill the growing funding gap across the continent.

• The March funding picture differs from February, which saw more funding originate from banks. The World Bank and the African Development Bank (AfDB) committed over $1 billion in funding, with Lesotho receiving $331 million from the AfDB for its energy sector investments.

• The Emerging Africa & Asia Infrastructure Fund (EAAIF), a blended infrastructure fund, made its first commercial and industrial (C&I) investment in Africa with a $45 million investment in CrossBoundary Energy. It plans to deploy over $1 billion in debt capital to climate-positive infrastructure in Africa and Asia by 2028.

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• The European Union, World Bank, and the AfDB have been some of the most consistent funders. Last month, the European Union provided $521 million to Malawi for its hydropower plant. This month, they funded various governments, including grants for Uganda ($10.8 million) and Eswatini ($0.9 million), and a significant $5 billion loan to South Africa.

• The World Bank provided over $830 million in funding, with a large portion going to support Nigeria's Distributed Access through Renewable Energy Scale-up (DARES) program. This initiative aims to expand electricity access through decentralised renewable energy solutions, particularly in rural and underserved areas. Mauritania received approximately $83 million, which will be used to establish the country's first battery energy storage plant and support the hydrogen sector.   

• The AfDB provided grants to Congo and Eritrea totalling $21 million. Congo funding is directed towards hydropower while eritrea towards building solar minigrids. It also gave a $331 million loan to Lesotho, which marked its biggest funding to the country.

• The Ghanaian government was one of the countries to have energy funding approved in its budget allocation by parliament as it moves to revive its ailing energy sector. The country is also planning to privatise its national utility power provider to curb its losses.

Our take

• The renewables funding space continues to warm up, even despite the US withdrawal of funding. In fact, this exit might prove to be a blessing in disguise for Africa, which can now negotiate deals with interested countries on better terms. It is likely to open up even more opportunities for European countries that previously faced competition from the US.

• Although company raises were lower than in February, this is expected to increase, especially with the commitments from commercial banks and multilateral lending institutions. Once this funding is received by the specified countries, companies will benefit through public-private partnerships, which are now common in approximately 15 African countries.

• To ensure investor confidence, clear and consistent policies are essential. Nigeria's recent announcement of a proposed ban on solar panel imports has created uncertainty among investors and could likely lead to a reduction in investment within the sector.