Examining the role of risk mitigation and transfer for renewable energy investments: case studies in East Africa

The report examines the role of risk mitigation and transfer (RMT) instruments in supporting utility-scale wind and solar projects in East Africa. Through six case studies, it finds that while RMT tools—such as political risk insurance, guarantees, and blended finance—are essential for reaching financial close, risks remain high due to macroeconomic instability, currency volatility, and utility financial strain. The analysis highlights a 'start-stop cycle' in countries like Kenya, where rapid deployment led to overcapacity and subsequent government moratoriums on new contracts. Conversely, the GET FiT program in Uganda is presented as a successful model of systematic de-risking through transparent procurement and institutional support.

• Risk mitigation and transfer (RMT) instruments are essential for moving utility-scale renewable energy projects from development to financial close in East Africa, particularly where national utilities face financial strain and projects encounter political uncertainty or grid constraints.
• Kenya has experienced a 'start-stop cycle' where a rapid increase in capacity, driven by a generous Feed-in Tariff (FiT) scheme, eventually exceeded consumption growth. This led the government to impose a moratorium on new Power Purchase Agreements (PPAs) and forcefully renegotiate existing 'take-or-pay' clauses to 'take-and-pay' terms, which increased risk perception and stalled investments.
• The GET FiT Uganda program demonstrates that a systematic approach to risk mitigation—combining competitive procurement, transparent tendering, and institutional support—can successfully attract international developers and lenders.
• Currency risk remains one of the most difficult challenges in East Africa because projects are typically financed in hard currency while revenues are generated in local currency, often leading to higher costs for utilities when local currencies depreciate.
• In countries with limited experience in renewable energy, such as Burundi and Djibouti, projects require a higher intensity of RMT instruments and DFI involvement to be viable. For example, Djibouti's Red Sea Power project used an 'all-equity construction bridge' model backed by MIGA political risk insurance.
• Despite growing regional experience, investment risks remain high. Many projects experience significant payment delays because utilities struggle to source foreign currency, though these issues are often managed 'softly' to avoid officially triggering insurance or guarantee products and damaging relationships.
• The involvement of Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) provides a 'halo effect' or 'umbrella of deterrence' that makes private investors more comfortable entering new markets, even without specific RMT instruments being triggered.

APA

Duma, D., Cabré, M. M., Adwera, A., & Otterstedt, M. (2025). Examining the role of risk mitigation and transfer for renewable energy investments: case studies in East Africa. Stockholm Environment Institute. https://www.sei.org/wp-content/uploads/2025/12/risk-mitigation-transfer-renewable-energy-investments-east-africa-sei2025-061.pdf

Chicago

Duma, Daniel, Miquel Muñoz Cabré, Andrew Adwera, and Maja Otterstedt. Examining the role of risk mitigation and transfer for renewable energy investments: case studies in East Africa. Stockholm Environment Institute, 2025. https://www.sei.org/wp-content/uploads/2025/12/risk-mitigation-transfer-renewable-energy-investments-east-africa-sei2025-061.pdf.

Wikipedia

{{cite report |last1=Duma |first1=Daniel |last2=Cabré |first2=Miquel Muñoz |last3=Adwera |first3=Andrew |last4=Otterstedt |first4=Maja |title=Examining the role of risk mitigation and transfer for renewable energy investments: case studies in East Africa |publisher=Stockholm Environment Institute |date=December 2025 |url=https://www.sei.org/wp-content/uploads/2025/12/risk-mitigation-transfer-renewable-energy-investments-east-africa-sei2025-061.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{duma2025examining, author = {Duma, Daniel and Cabré, Miquel Muñoz and Adwera, Andrew and Otterstedt, Maja}, title = {{Examining the role of risk mitigation and transfer for renewable energy investments: case studies in East Africa}}, institution = {Stockholm Environment Institute}, year = {2025}, month = dec, url = {https://www.sei.org/wp-content/uploads/2025/12/risk-mitigation-transfer-renewable-energy-investments-east-africa-sei2025-061.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }