Evaluating Regional Prefeasibility Facilities: Expanding Renewable Energy and Energy Access in the SADC Region

The Southern African Development Community (SADC) has one of the highest solar irradiation and great wind energy potential in sub-Saharan Africa. The falling costs of both solar photovoltaic (PV) and wind energy technologies and the discovery of transition minerals essential for the shift to low carbon economies in several SADC countries makes the region a favorable destination for renewable energy project developers. However, so far, only 1 percent of solar and wind energy potential has been tapped.

Structures and policies to promote investment in renewable energy in the SADC region already exist. Why then, is the total contribution of solar and wind energy still low in most SADC countries, despite the abundant renewable energy sources and supporting structural frameworks?

A new report by the Boston University Global Development Policy Center, the Southern African Development Community Development Finance Resource Centre and the SADC Centre for Renewable Energy and Energy Efficiency highlights the inadequacy of regional and global prefeasibility facilities for expanding renewable energy and energy access in the SADC region. The report considers the challenges faced by developers implementing renewable energy projects in the region, analyzes existing prefeasibility or early-stage project preparation funds in the region and globally to assess if they adequately, effectively and efficiently support project developers and provides recommendations on how to improve and scale up these facilities.

In conducting this research, the authors completed a desktop analysis to understand what prefeasibility funds currently exist in the SADC region, interviewed and conducted research surveys with SADC DFI Network members and other global financial institutions, as well as active developers in the renewable energy sector. They find that the prefeasibility facilities could play a key role in unlocking the 52.8GW required to achieve universal energy access and 53 percent of renewables in the SADC energy mix by 2040.

Key findings: 

• Existing SADC and internationally focused prefeasibility facilities are inadequate and not structured in a way that adequately supports project developers during the early stages of project development. 
• Seven SADC DFIs provide early-stage project preparation facilities supporting local project developers in the SADC region. 
• Only three project preparation facilities in the region have cross border mandates – the Development Bank of Southern Africa’s (DBSA) Project Preparation Facility, the DBSA managed SADC Project Preparation Development Facility (SADC PPDF) and the Southern African Power Pool’s Project Advisory Unit (SAPP PAU) managed Project Preparation Fund. 
• The SADC region does not have dedicated renewable energy project preparation facilities. 
• The approval processes are prohibitively long and the terms and conditions for accessing prefeasibility facilities are not standardized across the seven SADC DFIs, not even between the two South African DFIs (DBSA and the Industrial Development Corporation of South Africa), despite their common shareholding. 
• Local developers lack the capacity, skills and know-how to deliver the 52.8GW by 2040 and need support in the early stages of project development. 

Based on these key findings, the authors make the following policy recommendations to address the structural limitations in existing project preparation facilities, and the challenges that developers are facing in trying to meet the SADC region’s 2040 energy goals.

Policy recommendations: 

• The existing facilities need to be restructured to maximize support and reduce access barriers. 
• SADC member states need to scale-up existing funds, including the SADC Project Preparation Development Facility and international partnerships and ring-fence a portion of the funding for renewable energy prefeasibility activities, as existing facilities are inadequate to support the growth in the region’s renewable energy generation capacity. 
• SADC member states should consider exploring new prefeasibility facilities to generate project pipelines across all member states for the SADC Regional Development Facility (RDF), as it relates to the recently launched Regional Transmission Infrastructure Financing Facility (RTIFF), potentially with international funding partnerships. 
• More regional technical assistance facilities are needed to support SADC DFIs and new entrants into the market (particularly small- and medium-size developers).

This report comes at an opportune moment, as the Chinese government is expected to officially launch the Green Investment and Finance Partnership (GIFP) at the Forum on China-Africa Cooperation (FOCAC) in September 2024. Although it is still to be fully designed, the GIFP promises to be a new platform to assist the Belt and Road Initiative (BRI) partner countries in developing green projects. The 2024 FOCAC also presents SADC member states an opportunity to explore new partnerships with Chinese financial institutions to co-fund early-stage project development.

Additionally, the Group of 20 (G20) Summit will take place in South Africa in 2025. The 2023 G20 Summit held in India committed to triple renewable energy capacity by 2030. As host, South Africa is expected to make similar strides at next year’s summit. A scaling up of investment in renewable energy requires a significant pipeline of well-developed projects. International financial institutions from G20 countries and philanthropic funds have expressed interest in providing prefeasibility funding in support of these initiatives.

Adequate, affordable and easily accessible prefeasibility facilities and improved technical skills will go a long way towards meeting the SADC region’s 2040 target of universal energy access and 53 percent renewables in the energy mix.