The financial barrier to solar energy

The dynamism seen in the development of solar energy is raising hopes. The International Energy Agency (IEA) estimates that installed solar capacity on the African continent could reach 125 MW by 2030. But the sector faces a number of difficulties, not least a lack of funding. “Low investment is the main reason limiting the deployment of solar energy in Africa,” explains Mohamed Salah El Sobki, a lecturer and researcher in energy at Zewail City of Science, Technology and Innovation. According to this former director of the Egyptian Electricity Utilities Regulation and Consumer Protection Agency (EgyptERA), photovoltaic production requires massive investment.

In its report entitled “Solar energy in Africa: a bright future”, the Institut Montaigne highlights the paradox of financing solar energy through public development aid. According to this French-based think-tank, this method of financing distorts competition and discourages private investors from pursuing their efforts.

The Institut Montaigne suggests that these public funds should be allocated to building network infrastructure, reforming regulatory frameworks conducive to investment, and putting in place guarantee tools to cover certain risks, particularly political risks, in order to attract more private capital. This is all the more true given that the age and lack of electricity transmission infrastructure are among the obstacles to the development of solar energy.

Added to this is the fact that solar energy is developed through small-scale projects. While this approach seems better suited to local demand and grid capacity, it does have its drawbacks, particularly when it comes to financing. After all, “the projects are too small to bear the disproportionate cost of mobilising the tools provided by the development banks and replenished by the countless commitments made at successive COPs. These tools urgently need to be rethought and adapted to solar projects”, argues the Institut Montaigne.