Renewable energy: new power for Africa’s economy and insurance markets (Expertise Publication)

Mitigating climate risk and advancing the energy transition (icon) Building societal resilience (icon)
Solar panel farm in Africa (photo)

As part of our efforts to advance sustainable energy sources, Swiss Re Institute launched an expertise publication looking at the current state and prospects of the renewables sector in Africa. With projections for strong economic growth in the longer term, increasing populations and urbanisation, demand for power is expected to grow substantially in future.

Africa has a vast renewable energy potential, and hydropower forms an important part of the power mix today. However, the more environmentally friendly, modern renewable energy technologies, such as solar or wind, have the lowest penetration of any region globally.

This report argues that renewable energy technologies (RETs) will experience a huge boost in the future, for three reasons: global efforts to decarbonise the economy, digitisation enabling decentralised business models and the competitive costs of production of RETs, which will likely fall further. Based on predictions by the International Energy Agency, we estimate total investment in RETs in Africa to reach between USD 250 billion and USD 1 trillion in the next 20 years.

Meeting this demand for investment will require a much stronger involvement of the private sector. There still remain some important challenges to this, such as political uncertainties and unstable or insufficient regulatory policy frameworks, which need to be addressed.

For their part, re/insurers can play an important role in de-risking private investments against financial and physical risks. This includes traditional risk transfer solutions (property, engineering, marine, liability) as well as non-traditional ones, which provide hedges against volatile production levels or price swings. It will be important for local insurance sectors to build up the necessary skills.

Publication: Empowering Africa