Guide highlights opportunities for hydropower investment in Africa

Africa investment guide

An estimated 578 million Africans have no ready access to electricity. While hydropower is the main provider of renewable electricity in Africa with over 38 GW of installed capacity, the continent has the highest untapped potential in the world, with only 11% utilized, according to the International Hydropower Association.

Addleshaw Goddard, with assistance from IHA, has released “An Investor’s Guide to Hydropower in Africa” to provide investors with essential information to support the sustainable development of hydropower projects.

“In order to develop hydropower resources in Africa, significant investment will be required particularly from the private sector,” said Rory Connor, partner, infrastructure projects and energy at Addleshaw Goddard and principal author of the guide. “Very little privately funded hydropower investment has taken place compared to power sector investment in Europe, North America and Asia however. This is in part because of the perceived difficulty of investing in African electricity markets due to a range of legal and commercial risks related to customary land rights, resettlement and market structures.”

According to the World Bank, around US$100 billion of infrastructure investment is needed in the region. However, of the more than $8 billion invested in infrastructure in 2017, less than 3% came from the private sector.

The guide will help host governments, private investors, funding parties and in-country procuring entities understand the legal bankability issues, legal systems and law relevant to the hydropower sector of the 11 countries featured.

“Hydropower remains the main renewable resource in Africa, accounting for over 70 per cent of renewable electricity in the region and about 16 per cent of the total electricity share,” said Alex Campbell, head of policy and research at IHA. “With ongoing efforts towards universal electricity access and the low carbon energy transition, there is considerable room for sustainable growth in new hydropower capacity. We expect hydropower to increase to more than 23 per cent of the total electricity share by 2040.

“To ensure that new capacity is developed in accordance with international good practice, it is important for investors to be aware of the sustainability tools now available for assessing new projects. These are the Hydropower Sustainability ESG Gap Analysis Tool (HESG) and the Greenhouse Gas Reservoir (G-res) Tool. The HESG provides a way to identify any gaps in environmental and social performance, while the G-res Tool enables the estimation and reporting of net greenhouse gas emissions from a reservoir.”

A webinar held by IHA on May 19, 2021, on the topic of hydropower investment in Africa discussed the report and the Nigerian electricity market, as well as broader investment opportunities and risks. 

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