Skip navigation
A house in Nazret, Ethiopia with wind turbines in the background.
Feature

Knowledge-sharing and reflection with Sida and Norad: increasing private investment in Africa’s energy sector

Start reading
Feature

Knowledge-sharing and reflection with Sida and Norad: increasing private investment in Africa’s energy sector

SEI recently hosted a workshop with the energy teams of Sida and Norad, focusing on the challenges and opportunities in increasing private investment in Africa’s energy sector. This workshop was a platform for knowledge-sharing and reflection on Sida and Norad’s energy work in Africa, including their approaches, instruments, processes and potential for collaboration.

The discussion also covered the necessity of creating conducive environments and the future role of development finance institutions (DFI’s). SEI’s Daniel Duma, Carly Evaeus, Fiona Lambe, Björn Nykvist and Janet Vähämäki contributed with their expertise.

Published on 21 December 2023

The workshop convened energy experts from the Swedish International Development Cooperation Agency (Sida), the Norwegian Agency for Development Cooperation (Norad) and private energy businesses, fostering a rich exchange of insights for engaging private sector actors in Africa’s energy development. Participants shared their experience with energy-related projects, enriching the discourse with diverse perspectives. 

SEI presented preliminary findings from its multi-year research project on risk mitigation for utility scale renewable energy investments in Sub-Saharan Africa. Now that many countries have had their first solar PV plant commissioned, there seem to be workable project models that can be successfully replicated. At the same time, there are severe constraints to developing significant numbers of projects and access to finance is far from being the major bottleneck. Regulation, administrative capacity, utility governance and management, transmission and system operation, land rights, low demand, and many others are immediate limiting factors. As Daniel Duma, SEI Research Fellow and Director of the Finance for Sustainable Development programme (FSD) stated during the workshop: “Getting to a stage where we are in need of finance is an accomplishment in itself”. 

Overcoming barriers and debating scale

A significant topic at the workshop was the debate over whether to prioritize small-scale (off-grid) or large-scale energy projects. Participants agreed on the importance of avoiding a false dichotomy that pits these two options against each other. Emphasizing the scale and nature of energy needs in Africa and the imperative to achieve Sustainable Development Goal 7, a dual approach was recommended, focusing on both enhancing energy access for the poorest and the provision of power needed for large-scale industrial development.

Sida underscored that underserved and impoverished populations have the right to modern energy services. While programmes that lead to such results like establishing mini-grids have immediate life-changing impacts, long-term engagement to support realization of larger energy infrastructure is vital for industrialization and economic development. The poverty-reduction impacts of such projects, although less direct and harder to measure, are crucial for long-term economic growth and job creation. 

The workshop also explored the future role of DFI’s. It underscored the importance of public support, particularly in contexts characterized by complicated social and economic challenges and persistent market failures. This support is deemed essential for the realization of renewable energy projects in Africa, both currently and in the foreseeable future. Daniel Duma emphasized the dynamic nature of this support, stating, “The key is adapting that support as the market evolves – carefully shifting risks between the public and private according to their capabilities.“ 

Navigating the complexity of failure and setting measurable goals 

Another prominent theme in the workshop discussions was the fear of failure and the role of quantifiable targets. The dialogue highlighted a distinct challenge in handling failures in projects funded by public money compared to those backed by private investments. In the private sector, failure is often seen as a natural step towards discovering effective solutions. However, when public funds are involved, failure is hastily categorized as corruption or incompetence. To progress, there needs to be a shift towards a more receptive attitude towards experimentation, flexibility and innovation in the realm of public financing. 

One key takeaway for Sida was the importance of strategically combining different instruments contributions to address both immediate and long-term energy and poverty challenges. The workshop reaffirmed Sida’s commitment to a dual approach that aims to address immediate needs alongside long-term energy challenges. 

The workshop discussions also underscored the value of cross-sector dialogue and the important role of research in informing policy-makers and decision-making processes.

Daniel Duma
Daniel Duma

Research Fellow

SEI Headquarters

Carly Evaeus
Carly Evaeus

Fellow

SEI Headquarters

Fiona Lambe
Fiona Lambe

Research Fellow

SEI Headquarters

Bjorn Nyqvist
Björn Nykvist

Team Leader: Energy and Industry Transitions; Senior Research Fellow

SEI Headquarters

Janet Vähämäki
Janet Vähämäki

Team Leader: Development Policy and Finance

SEI Headquarters

Design and development by Soapbox.