Examining the role of risk mitigation and transfer for renewable energy investments

The report examines how risk mitigation and transfer (RMT) instruments, such as political risk insurance and guarantees from development finance institutions (DFIs), help utility-scale renewable energy projects reach financial close in West and Central Africa. While these tools are critical for addressing offtaker and political risks, the authors argue they are insufficient to overcome structural macroeconomic barriers, including high sovereign debt and insolvent state-owned utilities. The report highlights innovative models, such as the re-deployable modular solar solution in Cameroon and the use of viable businesses as anchor loads in Ghana, as potential pathways for deployment in high-debt contexts.

• Risk mitigation and transfer (RMT) instruments are considered essential for new renewable energy projects in West and Central Africa, as investors generally view the risks as too high to commit long-term capital without credit enhancements.
• Sovereign debt crises and IMF interventions have made it more difficult or impossible to secure traditional sovereign guarantees for termination payments in concession agreements.
• The 'Release by Scatec' model in Cameroon uses pre-assembled, re-deployable modular solar PV under a lease agreement to circumvent traditional IPP barriers, reducing installation risk and eliminating the need for long-term sovereign guarantees.
• The World Bank's Scaling Solar program successfully implemented utility-scale solar projects in Senegal (Kahone and Touba) by providing a package of technical assistance, concessional finance, and risk guarantees.
• In Ghana, the energy sector is characterized by significant overcapacity relative to peak demand, yet it suffers from chronic instability and high arrears, with sector arrears amounting to 3.1% of GDP at the end of 2022.
• The Bui Power PV project in Ghana demonstrates the use of integrated economic development and non-traditional collateral, such as using future cocoa revenues and PPAs with gold mining operators to secure financing.
• Currency stability provided by the peg to the euro in the West African Economic and Monetary Union and the Economic and Monetary Community of Central Africa offers a comparative advantage for renewable energy investments by reducing depreciation risks.
• The report concludes that the primary barrier to scaling renewable energy is not a lack of finance, but rather the lack of enabling conditions, specifically the financial insolvency of national utilities and the inability of customers to pay bills.

APA

Duma, D., & Cabré, M. M. (2024). Examining the role of risk mitigation and transfer for renewable energy investments. Stockholm Environment Institute. https://www.sei.org/wp-content/uploads/2024/12/examining-the-role-of-risk-mitigation-and-transfer-for-renewable-energy-investments-case-studies-in-west-and-central-africa.pdf

Chicago

Duma, Daniel, and Miquel Muñoz Cabré. Examining the role of risk mitigation and transfer for renewable energy investments. Stockholm Environment Institute, 2024. https://www.sei.org/wp-content/uploads/2024/12/examining-the-role-of-risk-mitigation-and-transfer-for-renewable-energy-investments-case-studies-in-west-and-central-africa.pdf.

Wikipedia

{{cite report |last1=Duma |first1=Daniel |last2=Cabré |first2=Miquel Muñoz |title=Examining the role of risk mitigation and transfer for renewable energy investments |publisher=Stockholm Environment Institute |date=December 2024 |url=https://www.sei.org/wp-content/uploads/2024/12/examining-the-role-of-risk-mitigation-and-transfer-for-renewable-energy-investments-case-studies-in-west-and-central-africa.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{duma2024examining, author = {Duma, Daniel and Cabré, Miquel Muñoz}, title = {{Examining the role of risk mitigation and transfer for renewable energy investments}}, institution = {Stockholm Environment Institute}, year = {2024}, month = dec, url = {https://www.sei.org/wp-content/uploads/2024/12/examining-the-role-of-risk-mitigation-and-transfer-for-renewable-energy-investments-case-studies-in-west-and-central-africa.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }