Renewable Energy in Africa: Trending towards cost competitiveness with fossil fuels – Linklaters

Renewable Energy in Africa.

Trending towards cost competitiveness with fossil fuels

Renewable energy technologies are trending toward cost- competitiveness with fossil fuels and there is evidence to support parity in certain asset classes. Development and the deployment of renewable technology in Africa are now synergistic because of the movement towards cost parity.

As renewable energy becomes more affordable, there are signs that some markets in Sub-Saharan Africa may leapfrog fossil fuels technology and Africa’s economic development could actually be driven by renewable technology.

This development could have a positive impact on global climate change negotiations in Paris in December 2015, as it means that low carbon development in Africa is arguably approaching a level where the subsidy required for Africa’s clean power generation and resulting from a global climate agreement is becoming less significant and is expected to decrease. This ‘additional’ climate finance subsidy refers to an amount which is additional to existing and ongoing development assistance by developed countries.

It also means that historic concerns of the G77 negotiating bloc at climate negotiations including Africa that an international climate deal restricting global greenhouse emissions could impede the speed of African development through restrictions on the use or access to finance of fossil fuels should be at least partially mitigated.

An ambitious outcome in Paris which provides long-term price signals will also help create the ‘virtuous cycle’ of unlocking investment in renewables. Consequently, the outcome of COP 21 represents an opportunity to achieve development more rapidly than might otherwise have happened rather than a risk to economic development rapid deployment of fossil fuel technology.

Despite the forecast in decreasing costs of renewables, there are still numerous risks and barriers to investment in renewables in Africa which still need to be overcome, largely through domestic de-risking policies, to fully enable investment. Multilateral and regional banks and the Green Climate Fund will continue to play an important role in this respect.