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Mechanisms and challenges in financing renewable energy projects in sub-Saharan Africa: a Ghanaian perspective

Mechanisms and challenges in financing renewable energy projects in sub-Saharan Africa: a... Ghana has set an objective of achieving 10% of its energy requirements through renewable sources, by 2020. However, to date, the renewable energy (RE) sector has attracted only marginal investor interest. This paper aims to identify the challenges faced in financing RE in Ghana.Design/methodology/approachA comprehensive review of literature in renewable energy finance was conducted and 12 financing challenges were identified. From this list, a questionnaire was developed asking to rank barriers. This was distributed to experts within financial institutions and 32 were returned. A factor analysis and severity index analysis were performed to identify a ranking of challenges impeding RE project financing in Ghana.FindingsThe challenges to RE financing fall into the three broad categories, namely, “economic, commercial and regulatory” challenges. Within these broad constraints, “long payback periods,” “limited track record” and “high upfront cost” are the most severe impediments to obtaining financing for RE.Practical implicationsIdentifying the specific conditions that make an investment in RE unattractive, give policymakers set on achieving the 10% RE goal, a way forward in developing a targeted policy that would mitigate identified investor disincentives.Originality/valueThe broad range of potential barriers to investment are known. However, this study combines a specific governmental ambition – encouraging the financing of RE – with a specific set of identified barriers inhibiting that ambition. In this regard, this study identifies exactly where the government needs to act if it is to facilitate investment in RE, as is required for Ghana to reach its 10% RE target. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Management of Property and Construction Emerald Publishing

Mechanisms and challenges in financing renewable energy projects in sub-Saharan Africa: a Ghanaian perspective

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1366-4387
DOI
10.1108/jfmpc-03-2020-0014
Publisher site
See Article on Publisher Site

Abstract

Ghana has set an objective of achieving 10% of its energy requirements through renewable sources, by 2020. However, to date, the renewable energy (RE) sector has attracted only marginal investor interest. This paper aims to identify the challenges faced in financing RE in Ghana.Design/methodology/approachA comprehensive review of literature in renewable energy finance was conducted and 12 financing challenges were identified. From this list, a questionnaire was developed asking to rank barriers. This was distributed to experts within financial institutions and 32 were returned. A factor analysis and severity index analysis were performed to identify a ranking of challenges impeding RE project financing in Ghana.FindingsThe challenges to RE financing fall into the three broad categories, namely, “economic, commercial and regulatory” challenges. Within these broad constraints, “long payback periods,” “limited track record” and “high upfront cost” are the most severe impediments to obtaining financing for RE.Practical implicationsIdentifying the specific conditions that make an investment in RE unattractive, give policymakers set on achieving the 10% RE goal, a way forward in developing a targeted policy that would mitigate identified investor disincentives.Originality/valueThe broad range of potential barriers to investment are known. However, this study combines a specific governmental ambition – encouraging the financing of RE – with a specific set of identified barriers inhibiting that ambition. In this regard, this study identifies exactly where the government needs to act if it is to facilitate investment in RE, as is required for Ghana to reach its 10% RE target.

Journal

Journal of Financial Management of Property and ConstructionEmerald Publishing

Published: Nov 10, 2021

Keywords: Sustainability; Renewable energy; Ghana; Economic development; sub-Saharan Africa; Project finance

References