Why renewables drive grid infrastructure investments

From the newsletter

Grid infrastructure dominates investments in Africa's energy sector yet again. In June, $3.4 billion in funding went to the sector, accounting for over half of the total, extending its lead to a third consecutive month. This consistent focus reflects a continent-wide drive to strengthen and modernise electricity networks for the long overdue integration of renewables.

• Grid infrastructure has been a major constraint in ensuring generated power is consumed, with some projects being completed ahead of schedule but lying idle due to a lack of transmission capacity.

• With increased cross-country power interests and renewables adoption, building the necessary supporting infrastructure is crucial. For instance, DR Congo wants to tap into Angola's power surplus by constructing a 1,150 km interconnector costing $1.5 billion.

More details

• African countries are making great progress in renewable energy investments. Since the beginning of 2025, we have tracked projects totalling at least 30,000 MW under development. This includes 8,821 MW in the announced phase, 13,318 MW currently in pre-construction phases, and 7,980 MW actively under construction. In addition, about  5,532 MW has already been completed, with some fully injecting power into the grid.

• While solar power generation projects are more numerous, hydropower remains the dominant force in African power generation due to the significant scale of individual projects. Last month, hydropower secured the second-highest funding commitments with a single $760 million deal for the tripartite Ruzizi III Hydropower Project. This major undertaking is set to be funded by the US energy company Anzana Electric and private players.

• Solar, though leading in project count, typically involves smaller-scale initiatives. It ranked third in overall funding last month, securing approximately $545 million. Its largest individual funding commitment was $184 million from the AfDB to support Africa's largest solar project in Egypt. New funds are also entering the solar market, including the $300 million Zafiri fund, which is scheduled for launch this month, and the $60 million Octopus Energy Power Africa Fund, Octopus Energy's first Africa-focused fund.

• Green Tech initiatives secured $469 million, highlighting a broader commitment to sustainable innovation beyond just power generation. This category encompasses diverse projects like energy-efficient appliances, digital energy management solutions, and sustainable agricultural technologies, all contributing to a holistic green transition.

• Hybrid solar projects, combining solar with Battery Energy Storage Systems (BESS), attracted $240 million. These integrated solutions are becoming more common in renewable energy adoption, as they effectively address the intermittency challenges of solar power.

• The solar manufacturing sector also garnered $200 million, specifically for establishing a solar plant in Egypt that will produce both solar cells and panels. This aligns with an ongoing trend across several African countries that are attracting Asian investors to set up manufacturing facilities. For instance, Nigeria is developing an 800 MW panel manufacturing facility, set to be Africa's largest upon completion. South Africa has also commenced operations at its expanded Art Solar plant through a partnership with JA Solar. Ethiopia is currently producing 2,000 MW of solar cells and plans to double this capacity before the end of the year.

• While smaller in scale compared to solar or hydropower in this dataset, wind energy secured $127 million, with Wind combined with BESS adding another $21 million. This indicates a growing diversification of Africa's renewable energy mix, leveraging various natural resources for power generation. Wind energy, particularly in regions with strong wind resources, offers another pathway to clean and sustainable electricity.

Our take

• There's a clear need for diversified technology investments in Africa's energy sector. Specifically, hydropower and battery energy storage should be integrated with other renewable energy technologies to ensure reliable baseload power generation.

• Africa's substantial annual solar imports from China highlight a significant market opportunity. Last year alone, the continent imported over 12,000 MW of panels, with South Africa, Morocco, Nigeria, and Egypt each bringing in over 1,000 MW. This shows there is a huge demand that local manufacturing could readily meet, creating greater benefits across the African supply chain compared to continued reliance on imports.

• The emergence of specialised funds will boost competition in lending rates, potentially accelerating development. However, institutions like the World Bank and other development finance institutions ought to step in to offer low-cost loans to de-risk such investments for major funds.