Innovative and mission‐oriented financing of renewable energy in Sub‐Saharan Africa: A review and conceptual framework

Abstract

Notwithstanding the high levels of renewable energy resources across Sub‐Saharan Africa (SSA), modern energy use based on these abundant natural resources remains negligible. Furthermore, the current electrification rates and reliability of available power supply in the region have consistently remained significantly lower than the global average over the last three decades. And of the reasons advanced for this state of affairs, the lack of appropriate financing is said to be a crucial one. Therefore, focusing on a comparative overview of the dominant approaches to financing electrification, we characterize the persistence of this regional gap as a reflection of relative “policy stasis.” We then problematize this condition of stasis by employing the theoretical perspectives of mission‐oriented finance in conjunction with those of innovative finance and renewable energy innovation. In addition, we review relevant peer‐reviewed articles over the same period, and find evidence that indicates an underappreciation of financing models that stimulate endogenous technological innovation in renewable energy in SSA. Our analysis suggests that the types of innovation, associated configurations of financial actors, levels of capital intensity, and perceived risks in relation to beneficiaries, diverge from those accounted for in the dominant financing models. Consequently, we propose a novel, historically path‐dependent conceptual framework that emerges from the intersection among the concepts of mission‐oriented finance, endogenous innovation, and innovative financing, which we term “endogenous innovative financing.” This framework ultimately guides our recommendations for more promising financing mechanisms for resolving the interwoven challenges of sustainable universal electrification and renewable energy innovation in SSA.