By Kenneth Oboh

As the world accelerates toward a low-carbon future, Africa stands at a crossroads in its energy transition. With increasing investments in renewables, infrastructure financing, and policy shifts, the continent has an opportunity to leapfrog into a new era of sustainable energy. In this discussion, Ajibola Joshua Ajayi, an expert in energy finance and investment structuring, shares insights into the evolving landscape of energy financing and what it means for Africa’s future.

Energy access remains a critical challenge across Africa. What role does financial structuring play in solving this issue?

Energy projects, particularly in Africa, often struggle to secure financing due to perceived risks. Investors need assurance that their capital is protected, and this is where financial structuring becomes key. By designing investment frameworks that blend public and private capital, projects can be de-risked, attracting institutional investors who may otherwise hesitate.

Instruments like partial risk guarantees, concessional finance, and structured project funds are making energy investments more viable. At PwC Deals Advisory, I worked on structuring investments that unlocked funding for major renewable energy projects, demonstrating that with the right structuring, large-scale electrification is possible.

What financing models have shown the most promise in funding renewable energy projects in Africa?

Several models are proving successful in channeling capital into Africa’s energy transition. Blended finance, which combines development finance with private sector investments, has been particularly effective. Green bonds are gaining momentum, offering investors an avenue to fund projects with strong environmental benefits.

Another promising model is results-based financing (RBF), where funding is tied to actual energy access impact. Additionally, decentralized energy solutions, such as solar mini-grids, are benefiting from innovative lease-to-own models that reduce up-front costs for communities and businesses.

How do you see the role of development finance institutions (DFIs) evolving in energy financing?

DFIs have been instrumental in funding Africa’s energy transition, but their role must evolve from being primary financiers to catalysts for private sector investments. Instead of fully financing projects, DFIs should focus on de-risking mechanisms—such as currency hedging, credit enhancements, and first-loss capital—that attract private investment. The shift from grant-based funding to commercially viable investments is key to ensuring long-term sustainability.

I’ve seen firsthand how DFIs can unlock private capital when structured effectively, particularly in large-scale renewable energy transactions. During my time at PwC, I worked on structuring financing mechanisms that facilitated capital flow into clean energy projects, demonstrating how strategic financial frameworks can drive investment into Africa’s energy sector.

With the cost of renewable energy falling, what barriers still exist in scaling up adoption?

While technology costs are dropping, the high cost of capital remains a significant barrier. Many investors still view African energy projects as high-risk due to political instability, currency volatility, and policy uncertainty. Another challenge is grid infrastructure—even if we generate more renewable power, weak transmission and distribution networks can limit deployment. Addressing these barriers requires regulatory stability, investment in grid modernization, and policies that incentivize private participation in energy markets.

Energy storage remains a challenge in Africa—what solutions are currently viable for overcoming this limitation?

Energy storage is critical for stabilizing renewable power, but it remains an expensive investment. Lithium-ion batteries are improving in cost and efficiency, making them more viable for grid-scale applications. Other promising storage solutions include pumped hydro storage, which is well-suited for large-scale balancing of supply and demand.

Compressed air storage and thermal storage solutions are also emerging. From a financing perspective, we are seeing increased interest in performance-based contracts, where funding is tied to the storage system’s effectiveness in improving grid reliability.

How can Africa leverage carbon markets to drive renewable energy investments and emissions reductions?

Carbon markets are a powerful tool for incentivizing clean energy adoption. Many African countries are now looking to develop carbon credit programs that allow renewable energy projects to generate additional revenue. This makes projects more attractive to investors. However, Africa’s participation in global compliance markets remains limited due to underdeveloped regulatory frameworks. If governments create transparent carbon pricing mechanisms, it could unlock billions in climate finance for the region.

What should governments prioritize to attract more private capital into the energy sector?

Governments must focus on policy stability and creating a business environment where investors feel secure. This includes clear and consistent feed-in tariff structures, tax incentives for renewables, and transparent procurement processes.

Additionally, streamlining permit approvals and reducing bureaucratic delays can significantly improve investor confidence. One area often overlooked is creditworthy off-takers—ensuring that energy buyers, such as utilities, have the financial health to honor long-term power purchase agreements is crucial for investment security.

In 2020, what investment opportunities are beginning to emerge in Africa’s energy sector?

I see three major areas of opportunity:

1. Distributed renewable energy solutions – Mini-grids and off-grid solutions will dominate because they bypass transmission challenges and provide direct access to communities.
2. Industrial-scale solar and wind projects – As manufacturing and mining sectors seek cleaner energy sources, we will see more corporate-backed renewable investments.
3. Carbon trading and sustainable finance – As global climate commitments intensify, Africa can leverage its vast natural resources to attract funding through carbon credit programs and green finance instruments.

Conclusion

Africa’s energy transition requires a multi-faceted approach, where financial structuring, policy reforms, and investment innovations work together. As someone deeply involved in energy financing, investment advisory, and deal structuring, I believe that unlocking capital is the key to transforming Africa’s energy sector. Through blended finance, strategic energy partnerships, and policy-backed investments, the continent can build a sustainable, resilient energy future.