Funding for Africa clean energy financing surges despite fewer project approvals

Africa’s Clean Energy Fund Set to Reach $2.5 Billion as Renewable Investment Surges

Africa’s flagship clean energy initiative is poised for significant expansion, with plans to more than double its financing capacity to $2.5 billion over the next two years amid growing momentum behind the continent’s energy transition.

The African Development Bank’s Sustainable Energy Fund for Africa (SEFA) has seen increasing contributions from international donors, particularly European nations, reflecting renewed investor confidence in African renewable energy projects. Last year, contributions to the fund jumped to $88 million, up from $54.3 million the previous year.

“SEFA is proving its catalytic value on the ground, with accelerated approvals and disbursements and growing impact,” said Kevin Kariuki, vice president for Power, Energy, Climate and Green Growth at the African Development Bank Group.

Since its establishment, SEFA has successfully mobilized approximately $1 billion in commercial capital alongside its own commitments, demonstrating its effectiveness in leveraging private investment. The fund’s leadership has ambitious growth targets moving forward.

“Based on our projects pipeline, we projected capital mobilization to climb to $2.5 billion,” said Joao Duarte Cunha, manager of the bank’s Renewable Energy Funds Division and SEFA. “By 2030, we expect our portfolio to yield over $10 billion in commercial capital mobilized.”

The fund approved 13 renewable energy projects last year valued at $97 million, comparable to the 14 projects worth $108 million approved the year before. This recent activity marks a significant acceleration compared to earlier years, with 27 projects approved over the past two years.

International support continues to strengthen SEFA’s financial position. Germany made a substantial commitment of $40.1 million at last year’s COP 30 global climate summit in Brazil, specifically targeting the fund’s universal energy access goals and green hydrogen program. Italy also announced a $5.9 million contribution to support ongoing initiatives.

Denmark leads the group of donor countries that have collectively contributed $577 million to the fund since its inception. These resources allow SEFA to provide low-cost loans and technical assistance aimed at expanding energy access and supporting sustainable development across Africa.

In 2024, SEFA approved 14 renewable energy projects across several African nations, including Kenya, Nigeria, Burkina Faso, Ethiopia, and Chad. These initiatives are expected to add approximately 840 megawatts of generating capacity and deliver 1.5 million new electricity connections. The majority of these projects were categorized as green baseload, which provides the minimum amount of energy required to meet a country’s energy demand.

Recent funding approvals include a $10 million loan to Hyphen Hydrogen Energy, a renewable energy firm producing hydrogen and ammonia in Namibia, highlighting the fund’s diversification beyond traditional renewable sources. SEFA also provided an $8.14 million guarantee for an Ivory Coast social currency bond designed to finance 400,000 new electricity connections by the end of this year.

The fund’s strategy has evolved beyond large-scale utility projects to include investments in decentralized energy solutions. These include mini-grid developers and private equity and debt funds focused on distributed energy systems, which generate electricity from small-scale sources closer to end users.

“We are actively testing new product lines for clean cooking and for financing through commercial banks. There is real and meaningful innovation happening in this space,” Cunha explained.

This expansion of SEFA’s portfolio comes at a critical time for Africa’s energy sector. The continent faces significant challenges in achieving universal energy access, with hundreds of millions of people still lacking reliable electricity. By focusing on renewable energy sources, the fund addresses both energy poverty and climate change concerns simultaneously.

The growing investment in African renewable energy also signals a shift in how international donors and private investors view the continent’s energy future, recognizing both the commercial opportunity and the developmental impact of sustainable energy systems in Africa’s rapidly growing economies.