The race to clean energy: High initial cost, lack of access to funds remain major hurdles

Despite the craze for renewable energy or clean energy worldwide, fuelled by considerable reduction in cost and its numerous benefits to the environment, high initial cost and lack of access to funds are impeding efforts to increase its adoption in the country.

Renewables, particularly solar and wind energy, have experienced a significant reduction in prices over the last decade owing to advancement in technology.

For instance, unsubsidised utility scale solar and wind power plants, according to Lazard, a global advisory firm, can generate electricity between 3.6 and 4.4 cents per kilowatt-hour (¢/kWh) and 2.8 and 5.4 cents per Kwh respectively, far cheaper than nuclear which is between 11.8 and 19.2 ¢/kWh and other conventional energy sources.

Notwithstanding this, the rate of renewable energy adoption in the country, particularly among Small and Medium Scale Enterprises (SMEs), still remains low, says a study by the Africa Centre for Energy Policy (ACEP), which revealed that only one percent of SMEs use renewables as an option for self generation of electricity.

Titled: Renewable energy adoption by SMEs in Ghana: barriers and opportunities, it said foremost demotivating factor to the adoption of renewable energy by SMEs is high cost, noting that: “The perceived high capital investment is further worsened by the lack of access to funds that enable SMEs invest in renewable energy.”

While some SMEs are willing to adopt renewable energy technologies, it said the lack of access to the needed funds and funding options are barriers to its adoption.

It also found that businesses, especially SMEs, are hesitant to approach financial institutions for renewable energy financing needs due to perceived high-interest charges and the short-term nature of loans offered.

“From the perspective of renewable technologies suppliers, majority of their consumers self-finance all costs incurred in the installation and maintenance of the technologies. Some financial institutions have indicated their willingness to provide financial support for SMEs to invest in renewable energy products, although this is predicated on the availability of the requisite collateral and evidence of sustainable cash flow.

The data from our survey show that the reducing cost of renewable technologies installation, reliability of power supply from renewable energy plants, and reduced cost of power are some incentives for renewable energy adoption.

However, information on such cost-saving advantages is not readily available to consumers. There is, therefore, the need to provide such information in readily accessible formats and engage stakeholders, especially small businesses on renewable energy adoption,” it added.

Financing options for renewable

Speaking during a virtual stakeholder dialogue on the best options in providing financial support for renewable energy investment and adoption by SMEs in the country, organised by ACEP in partnership with the German Development Cooperation (GIZ), Abraham Dsane of the Corporate Relations Department of CalBank, said there exists many funding opportunities for businesses to tap into if they want to go green.

Among funding options available to businesses, he said there is an US$11.4 million Africa Climate Change Fund and Africa Green Fund administered by the African Development Bank and the Sustainable Use of Natural Resources and Energy Fund which he said US$20 million has been made available to CalBank for onward lending to companies and individuals that want to invest in renewable energy.

Others include the Nordic Development Fund, the Global Environment Facility of which the country has received over US$100 million, and the Green Climate Fund, among others.

“Renewable energy is important in our world today because of the advantages it comes with, so financial institutions in the country are increasingly committing more resources and efforts to support businesses and individuals that want to invest in renewables,” he added.

Themed ‘Financing options for renewable energy adoption by SMEs in Ghana,’ the stakeholder dialogue forms part of efforts to enhance affordable renewable energy through interventions that will explore opportunities for renewable energy adoption by SMEs.