| Work Detail |
Ije Ikoku Okeke is the Managing Director, Catalytic Climate Capital and Global South programme at RMI In our annual power and energy Prognosis & Predictions feature, Ije Ikoku Okeke, Managing Director, Catalytic Climate Capital and Global South programme at RMI, evaluates what happened in Africa’s energy sector in 2024 and what to look out for in 2025. In 2024, Africa’s DER sector demonstrated resilience amidst global economic headwinds. Progress was made in expanding energy access, yet there were still several stagnations. A key challenge to this day is relying on foreign currency-denominated debt. This exposed projects to exchange rate volatility and increasing the cost of capital. Even with innovative financing models emerging, such as pay-as-you-go (PAYG) and crowdfunding, their scale remains limited by access to local currency financing. A critical stagnation observed was the persistent gap in project preparation funding. Many promising DER projects failed to move beyond the concept stage due to a lack of dedicated financial resources for early-stage activities such as feasibility studies, technical assessments, and environmental and social impact assessments. This stalemate is exacerbated by a lack of clear ownership, with governments often expecting the private sector to lead, while the private sector contends, they lack the capacity or willingness to invest in high-risk, early-stage activities. However, a significant trend seen across the continent was the increasing adoption of BESS alongside DER. Falling battery prices and growing awareness of their crucial role in grid stability, reliability and energy access drove this trend. What lies ahead in in 2025 In 2025, we must shift our focus twofold: unlock local currency financing options to accelerate DER deployment across Africa and addressing the need for project preparation funding. While international capital remains important, its impact is diluted because of currency risks. Greater involvement of local banks, pension funds, and institutional investors is essential to create a more sustainable and resilient financing ecosystem. This will necessitate a concerted push to develop deeper and more liquid local currency debt markets, establish standardised project finance structures, and implement effective risk mitigation instruments to attract local capital. Crucially, addressing the project preparation funding gap is paramount. Without early-stage funding, even the most promising projects are unlikely to reach financial close. Innovative solutions are urgently needed, such as grants and other early-stage financing instruments, public-private partnerships (PPPs) with clear risk-sharing mechanisms, and increased philanthropic support to bridge this gap. This requires moving beyond the current stalemate and establishing a shared responsibility model where governments, development finance institutions, the private sector, and philanthropic organisations work together to unlock the critical capital required to build pipelines of bankable, high-impact projects. |
