High costs have put off most investors from buying into the continent’s plentiful clean-energy reserves
3 min
Energy investment in Africa needs to more than double by the end of the decade if the continent is to meet its energy and climate goals. However, high costs are putting off much-needed investment in the region’s plentiful clean-energy resources and huge reserves of critical minerals, the International Energy Agency said.
“African countries have huge energy potential, including a spectacular range and quality of renewable-energy resources,” said Fatih Birol, executive director of the Paris-based agency in a report published jointly with the African Development Bank on Wednesday. “But these riches are largely untapped and they will remain so without greatly improved access to capital.”
Africa is home to more than half of the world’s best solar resources as well as possessing great potential for hydroelectric and wind-power projects, according to the IEA. It is also uniquely placed to contribute to industries behind the transition away from fossil fuels. It accounts for 80% of the world’s platinum reserves, half of all cobalt reserves, and 40% of manganese reserves, all of which are expected to be crucial to technologies such as autocatalysts and electric batteries, the agency said.
The report’s figures also pose a challenge for the West and the U.S. in particular, which is seeking to secure diverse sources of critical materials. In recent years, the West has lost clout in Africa as China has become the continent’s largest trading partner and fourth largest investor. Much of China’s investment in Africa goes toward energy projects and the nation’s lead in renewable technologies will likely see it grow as a funder of African renewable energy projects, the IEA said.
“Energy investment on our continent has fallen short,” wrote William Ruto, president of Kenya, in the report’s foreword. “It is imperative we take bold steps to more than double energy investment here in the next decade, with a primary focus on clean energy.”
From around $90 billion today, annual spending on Africa’s energy needs must more than double to $200 billion by 2030, two-thirds of which will need to go toward clean energy projects, the report said.
Despite the investment goal—which the IEA says will allow African nations to meet their agreed climate targets as laid out in the Paris Agreement and achieve universal access to modern energy systems—energy spending in Africa has been falling over the past five years as investment in fossil fuels has declined and spending on renewable energy projects has flatlined. The continent makes up just 3% of global energy spending.
The indebtedness of many African nations is holding back public spending on energy projects while private investors are reluctant to invest because of a prevalence of fragile states, absent regulations and perceptions of political or reputational risks.
All of these are pushing up the cost of capital which makes many African energy projects financially unviable despite ample local resources and proven technologies such as wind or solar power, the report said.
The cost of capital for a large-scale renewable energy project in Africa is up to three times higher than in advanced economies and China, the IEA said. For smaller projects, which will be crucial in rural areas, the costs are even higher.
Concessional financing—in which lenders such as international development banks offer developing nations more generous terms such as lower interest rates or longer repayment periods—will be crucial to overcoming those obstacles, the IEA said.
The IEA estimates that only half of electricity grid projects in Africa are commercially viable without such assistance, while most clean cooking projects would be unaffordable.
Despite accounting for 20% of the global population, investment in African energy projects is far too small, leaving much of the continent lacking basic access to electricity or clean cooking fuels, the IEA said.
Currently, 600 million people across Africa lack access to electricity and almost one billion have no access to clean cooking fuels.
$25 billion a year alone would be enough to provide basic access to electricity and clean cooking fuels to all Africans, equivalent to the cost of installing one LNG terminal, something European nations have done in record time following Russia’s invasion of Ukraine.
The report came as African leaders met in Nairobi for the third and final day of the Africa Climate Summit, which has seen calls for debt relief for African nations facing the effects of climate change and hundreds of millions of dollars pledged to Africa’s nascent carbon credits initiative.
African nations are seeking redress for the effects of climate change they experience despite contributing little to carbon emissions, the main driver of global warming. The continent accounts for around 2% to 3% of global carbon emissions but is particularly exposed to extreme weather.
Copyright 2020, Dow Jones & Company, Inc. All Rights Reserved Worldwide. LEARN MORE
What a quarter-million dollars gets you in the western capital.
Alexandre de Betak and his wife are focusing on their most personal project yet.
Report by the San Francisco Fed shows small increase in premiums for properties further away from the sites of recent fires
3 min
Wildfires in California have grown more frequent and more catastrophic in recent years, and that’s beginning to reflect in home values, according to a report by the San Francisco Fed released Monday.
The effect on home values has grown over time, and does not appear to be offset by access to insurance. However, “being farther from past fires is associated with a boost in home value of about 2% for homes of average value,” the report said.
In the decade between 2010 and 2020, wildfires lashed 715,000 acres per year on average in California, 81% more than the 1990s. At the same time, the fires destroyed more than 10 times as many structures, with over 4,000 per year damaged by fire in the 2010s, compared with 355 in the 1990s, according to data from the United States Department of Agriculture cited by the report.
That was due in part to a number of particularly large and destructive fires in 2017 and 2018, such as the Camp and Tubbs fires, as well the number of homes built in areas vulnerable to wildfires, per the USDA account.
The Camp fire in 2018 was the most damaging in California by a wide margin, destroying over 18,000 structures, though it wasn’t even in the top 20 of the state’s largest fires by acreage. The Mendocino Complex fire earlier that same year was the largest ever at the time, in terms of area, but has since been eclipsed by even larger fires in 2020 and 2021.
As the threat of wildfires becomes more prevalent, the downward effect on home values has increased. The study compared how wildfires impacted home values before and after 2017, and found that in the latter period studied—from 2018 and 2021—homes farther from a recent wildfire earned a premium of roughly $15,000 to $20,000 over similar homes, about $10,000 more than prior to 2017.
The effect was especially pronounced in the mountainous areas around Los Angeles and the Sierra Nevada mountains, since they were closer to where wildfires burned, per the report.
The study also checked whether insurance was enough to offset the hit to values, but found its effect negligible. That was true for both public and private insurance options, even though private options provide broader coverage than the state’s FAIR Plan, which acts as an insurer of last resort and provides coverage for the structure only, not its contents or other types of damages covered by typical homeowners insurance.
“While having insurance can help mitigate some of the costs associated with fire episodes, our results suggest that insurance does little to improve the adverse effects on property values,” the report said.
While wildfires affect homes across the spectrum of values, many luxury homes in California tend to be located in areas particularly vulnerable to the threat of fire.
“From my experience, the high-end homes tend to be up in the hills,” said Ari Weintrub, a real estate agent with Sotheby’s in Los Angeles. “It’s up and removed from down below.”
That puts them in exposed, vegetated areas where brush or forest fires are a hazard, he said.
While the effect of wildfire risk on home values is minimal for now, it could grow over time, the report warns. “This pattern may become stronger in years to come if residential construction continues to expand into areas with higher fire risk and if trends in wildfire severity continue.”
