What is needed to electrify 300m Africans by 2030?

From the newsletter
From today until tomorrow, African heads of state will gather with private sector leaders, development partners, and civil society for the Mission 300 Africa Energy Summit in Tanzania.  The goal is to chart a course on how to electrify 300 million people in Africa. But what are the key things that should be addressed?

• Mission 300 is an initiative led by the World Bank and the African Development Bank which have made $40 billion in funds available to electrify 300 million people in Africa by 2030. The energy summit in Darees Salam Tanzania is to culminate in the signing of the Dar es Salaam Energy Declaration committing African countries to accelerate electricity access.

• About 600 million people in Africa lack access to electricity–roughly half the population of Africa. The majority live in rural areas far from the grid lines. Extending the grid to such areas is more expensive than off-grid options. African countries have adopted a hybrid electrification model – using both grid and off-grid solutions – to ensure appropriate and targeted solutions and reduce electrification costs.

More details

• Electrifying rural populations has often presented challenges for governments and private investors. However, it remains the largest untapped market for energy access. Governments and development institutions, such as the World Bank and the African Development Bank, have been working to create a thriving market for energy investors, but significant challenges persist.

• Financing, at both the company and consumer level, is a major obstacle. Energy companies often secure loans in foreign currencies, passing on increased costs to consumers when local currencies depreciate. This has been particularly problematic in Africa, where most currencies have weakened against the US dollar.

• Mission 300 should prioritise currency hedging to protect against foreign exchange devaluation. This will help stabilise costs for both companies and consumers, encouraging investment and accelerating progress towards universal energy access.

• The summit should ensure that beneficiary countries of World Bank funds formulate clear energy plans and roadmaps that include both off-grid and on-grid solutions, integrated into national energy strategies. These solutions are vital for reaching underserved communities and should be positioned to contribute significantly towards achieving energy access targets.

• Policy harmonisation across borders is also crucial. Simplifying and standardising regional energy regulations will facilitate cross-border investments and operations. Unified policies will reduce transaction costs, attract international funding, and enable the scalability of decentralised energy solutions.

• Finally, to unlock greater investment in off-grid solutions, risk-sharing models need to be revised. Currently, off-grid companies bear the majority of the risk. Increased risk sharing by national governments will create a more attractive environment for private sector investment.

Our take

• The summit holds promise. African leaders should align and focus on the objective – moving the masses out of energy poverty. Of course, the decisions made shouldn't be universal across all countries but should be tailored to local contexts.

• The private sector's influence on Africa's energy future is far greater than it may seem. They are, quite literally, the key to unlocking the continent's energy potential. Many African governments are financially constrained and cannot afford to electrify their entire populations. They are often stuck in debt cycles and need support from the private sector.

• However, the private sector needs more than just opportunities–they need capital. While some companies have access to capital, what they need most are clear policies that not only facilitate their entry but also protect them, especially from currency inflation issues.