Why Africa’s Just Energy Transition Should Start from the Regulatory Framework
Africa is a fully-fledged promised land. The continent could outrank all the other ones in terms of energy generation, distribution and access: this milestone could be achieved relying solely on renewable energy solutions, showing the rest of the world the way towards a global energy revolution. Unfortunately, the current situation if far from being rosy: out of the $ 1.9 trillion worldwide energy investments, only a tiny fraction (around 2%) was deployed in Africa. Much has been written about the financial, technical and humanitarian obstacles hampering the full development of renewables in Africa. However, there is a given that cannot be denied and, on the contrary, it must be fully addressed: renewable energy cannot be effectively deployed without private investments, and investors are currently not keen to allocate their resources in the African continent.
Any new strategy, goal or path pursuing to widening the energy access in the continent should start from there. In order to make a first step, we need to ask ourselves: what are the factors discouraging major players to undertake projects in Africa? The majority of the issues can be traced back to the regulatory framework. As the SDG7 Tracking Progress Report highlights, “[…] Legislative and regulatory barriers remain a major challenge to effective private sector investment participation.”
We find ourselves dealing with a grotesque situation, where legislation, meant to make investments safe and welcome is, actually, one of the main hindrances. According to what emerges from RES4Africa’s Missing Link Methodology Report, there are three key dimensions against which the regulatory framework of a country should be evaluated.
The first one is the market attractiveness. This dimension assesses policies and regulations that ensure the economic viability of electricity infrastructure investments, as well as fair competition among market operators. In many African countries, the REs investment environment is far from being attractive: contract and economic regulations are not sufficient (or not well-structured), hence making major REs investments risky and unsafe. Moreover, the lack of incentives, coupled by inadequate credit enhancement practices, creates an aura of unattractiveness around the renewable energy market in Africa.
The secondo one is the openness. It covers laws and regulations meant to define energy policy and strategy priorities, market-entry dynamics and sector governance. The lack of clear, enlightened long-term renewable policies produces a chain effect, making it hard for investors to identify profitable REs markets and countries. Moreover, fair market competition is not always guaranteed, as there is not a clear and reliable procurement regulation. This set of factors makes private sector participation hard, and creates the perception of closed, hostile markets.
The last parameter is the readiness. It assesses the technical regulations designed to ensure the implementation, integration and management of projects within the national electricity systems. Authorisations and permits are frequently not enforced or difficult to obtain; in addition, lack of proper system planning, quality and security standards and limited access to data make the integration of private renewable energy projects difficult and inefficient.
We are, basically, running in circles. The solution to the empasse dwells in transnational and multi-stakeholder programmes. In order to create a real impact on national African energy policies, a structured institutional dialogue is needed, matched by solid de-risking mechanisms and initiatives able to improve the preparedness of legislative frameworks. This aspiration finds a concrete answer in ground-breaking programmes such as the Missing Link and renewAfrica, pride and flagship of RES4Africa Foundation.
We firmly believe that Africa, in the future, will be the global leader of the just energy transition and that it will be able to provide its citizens with access to reliable, sustainable and safe energy. Intervening on the regulatory framework means laying the foundations for all the other changes we wish to see in the continent.