Africa's solar potential and energy gap

Africa holds about 60 % of the world's solar potential, yet nearly 660 million people lack access to reliable electricity. Solar energy has become one of the cheapest options for electricity production, with technological costs falling by about 90 %.

Solar imports and installed capacity

Africa imported about 18.8 GW of solar panels in 2025, and cumulative installed capacity reached about 63.9 GW by 2026. The International Solar Alliance (ISA) and the Centre for Economic Transition Expertise (CETEx) at the London School of Economics and Political Science (LSE) highlight the need to transform this potential into profitable projects that attract private capital.

ISA's expansion targets

The Regional Committee of the ISA in Africa has outlined paths to reach 150 to 200 GW of solar capacity by 2030 and about 1,000 GW by 2050, increasing solar's share in the continent's electricity production from about 3 % to 40 %. With initiatives like « Mission 300 » and national energy pacts, mobilizing financing is central to this transition.

Africa's energy investment gap

However, Africa attracts only about 3 % of global energy investments, with 73 % concentrated in South Africa, Egypt, Nigeria, and Morocco. The main challenge is not the lack of capital, but its high cost. Financing for large-scale clean energy projects in Africa is two to three times higher than in developed economies.

Financing costs and risks

In Kenya and Senegal, average financing costs range from 8.5 to 9 %, while local companies may face rates exceeding 15 %. These higher costs reflect risks such as buyer solvency, currency risk, transaction costs, and the absence of instruments to address these challenges.

Loan recovery and borrowing costs

Data from development banks show a default rate of about 6 % for private sector loans in sub-Saharan Africa, with lenders recovering 78 % of the value, higher than the global average of 72.9 %. However, borrowers pay an additional 2.9 percentage points due to sovereign ratings that do not consider recovery performance.

Rising debt and currency risk

Borrowing costs have increased, with debt service costs twice as high as those allocated to clean energy investments. High equipment import costs, currency risk, and monetary fluctuations require high returns from investors. Credit rating issues and underdeveloped capital markets inflate premiums beyond actual market conditions.

Mitigating currency risk

Currency risk remains a significant challenge. Local currency financing, securitization, and hedging mechanisms can help mitigate this risk. In Kenya, Sun King's local currency securitization model, based on a «pay-as-you-go» (PAYGO) model, successfully raised capital from commercial banks and development financial institutions (DFIs).

Infrastructure guarantees and hedging

In Nigeria, the InfraCredit program guarantees local currency infrastructure bonds, allowing issuers to access longer maturities. Hedging mechanisms like TCX have enabled clients to raise over 10 billion dollars in local currency financing between 2017 and 2024.

Public sector arrears and repayment

Buyer solvency remains a major obstacle in large-scale projects. In Zambia, public sector arrears at the Itezhi Tezhi power plant reached 784 million dollars (2016-2022) before being resolved through arbitration and tariff renegotiation. In contrast, Ghana repaid about 1.47 billion dollars of energy-related debt in 2025.

Standardized agreements and frameworks

Ghana rebuilt its partial World Bank risk guarantee and adopted a « cash cascade » mechanism. Standardized power purchase agreements (PPAs) and the Egyptian Benban solar park, supported by MIGA insurance and BERD/IFC financing, demonstrate how standardized frameworks make projects financially viable.

Distributed networks and financing

For small distributed networks, outcome-based financing, project aggregation, and tailored working capital facilities for local currency receivables are more effective than traditional project financing. Aggregation connects small projects with institutional capital.

Bulk purchasing and access

The Nigerian « Demand Aggregation for Renewable Technologies » (DARES) program reduced investment costs by 5 to 20 % through bulk purchases. By June 2026, it enabled more than 5.2 million people to access electricity through the deployment of a million autonomous systems.

Commercial viability through use

Productive use applications ensure commercial viability by stimulating demand. In Uganda, the « Solar for Agriculture » program reduced the price of solar pumps by 40 %, increasing farmers' productivity by 193 %. In Nigeria, ColdHubs provides solar cold storage, reducing post-harvest losses by up to 80 %.

Revenue-based repayment models

Models that allow farmers and small businesses to repay equipment through generated revenues transform these connections into viable activities. These models require mixed financing that decreases as systems mature.

Financing instruments and leverage

Existing instruments, such as policy stability, higher leverage guarantees, local currency solutions, structured demand aggregation, and targeted end-user financing, can accelerate disbursements and attract private investments. In sub-Saharan Africa, each dollar of preferred terms mobilizes about 1.80 dollars of private capital.

Mission 300 funding targets

The IEA's pathway to carbon neutrality implies a leverage ratio of 9 to 13 dollars of private capital for every dollar of preferred terms. Countries participating in « Mission 300 » should mobilize 77 billion dollars by 2030. However, in the first quarter of 2026, Zimbabwe had mobilized only 688 million dollars out of a target of 4.42 billion, while Chad and Niger had declared no private capital.