Driving rural economic development in Africa via renewable energy adoption

renewable energy - climateaction

Driving rural economic development in Africa via renewable energy adoption

The energy transition in many communities in Africa is ramping up, bringing the benefits of low-cost renewable energy to more and more places.

This presents opportunities for the fossil-fueled powered utilities in some of these rural communities especially in a country like South Africa, to replace their dying coal-powered plants with solar and wind projects. This can reduce electricity bills and drive rural economic development in areas that need it.

However, years of engagements with stakeholders in the energy sector have shown that they face distinctive and diverse limitations as well as motives when it comes to decarbonizing their generation mix.

Even though they continue to delay their utilities in phasing out their coal plants, a good number of them have made a series of announcements about emissions reduction targets and ditching coal for renewables. This shift has been attributed to a number of factors which include the rapidly falling costs for renewable energy and battery storage technologies, state climate policy, and member demand for carbon-free electricity.

Even with that, a number of them still operate old and uneconomic coal plants and they do not plan on phasing them out. This may be due to the nature of some of their financing structures as well as governance and regulatory models.

In addition, some of them are not-for-profit and this limits their ability to take advantage of existing tax credits for solar and wind development.

To speed up and smoothen the path for renewable energy transition, policy intervention is crucial and this can be achieved by ensuring that the energy sector phases out coal and adopts renewable energy alternatives. This will definitely lower electricity costs, drive cleantech asset ownership opportunities and rural economic development.

Policymakers can facilitate renewable energy transition in the sector by investing. This can be some support in form of funding and incentives per kW of coal that they replace with renewable energy. The support can also be extended to communities that are affected by coal plants and mining activities.

This transition to wind and solar energy has the potential to produce economic development benefits from the construction and operation of those projects, especially in rural communities. This is because they can offset any policy costs based on tax revenues, land lease payments, and wages that are generated by these projects, in addition to their low-cost electricity.

The energy sector is positioned to play a leading role in enabling rural communities in Africa to partake in the benefits of wind and solar development. With the right policy, investments, and incentives to support energy transition efforts and unlock this potential, the continent will receive huge returns on investment in form of revenue flow to the communities and jobs, while positioning the sector to be renewable energy leaders.

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