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Investing in renewable energy in East Africa

East Africa is facing growing energy demand alongside rising levels of fossil fuel consumption. Together with growing urban populations and deforestation, greenhouse gas emissions are also sharply increasing, which is why there is a great need for renewable energies in the area.

Forecasts indicate that in Kenya, the biggest economy in the region, the percentage of fossil fuels in total energy needs will increase to 29 % by 2015. Other countries, such as Uganda and Tanzania, rely largely on biomass fuel, such as charcoal and wood. Given that these energy sources depend on the area’s depleting natural resources, costs are set to increase significantly.

East African countries therefore need to embark on a transition towards renewable energy sources. This is currently underway thanks to a project providing environmental credit lines to local banks in Kenya, Uganda and Tanzania. The Agence Française de Développement (AFD) is extending this credit to these countries in order to finance renewable energy and related investments. They should ease the transition towards more renewable energies and help diversify energy sources in East Africa.

The AFD supports projects through investments of a maximum € 10 million in the areas of hydroelectricity, biomass, biogas, and solar and wind power. Projects promoting energy efficiency, predominantly in the field of agribusiness, can also be funded.

Together with the credit lines, the AFD has set up a Regional Technical Assistance Programme in Nairobi to assist investors and banks in the three countries concerned. The programme aims at transferring skills to locals and helping develop energy projects in the area.

The EU-Africa Infrastructure Trust Fund (ITF) has provided a technical assistance grant for the Regional Technical Assistance Programme and renewable energy projects, with a focus on projects related to electricity distribution grids in Kenya, Uganda and Tanzania. It allocated € 2 million in April 2010, out of a grand total of € 208.9 million for grant operations approved for the 2007-10 period.