IDEAS home Printed from https://ideas.repec.org/a/bla/wireae/v11y2022i1ne416.html
   My bibliography  Save this article

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

Author

Listed:
  • Ogundiran Soumonni
  • Kalu Ojah

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. This article is categorized under: Energy Research & Innovation > Economics and Policy Energy and Development > Economics and Policy Energy and Climate > Economics and Policy

Suggested Citation

  • Ogundiran Soumonni & Kalu Ojah, 2022. "Innovative and mission‐oriented financing of renewable energy in Sub‐Saharan Africa: A review and conceptual framework," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 11(1), January.
    • Handle: RePEc:bla:wireae:v:11:y:2022:i:1:n:e416
    DOI: 10.1002/wene.416
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/wene.416
    Download Restriction: no
    File URL: https://libkey.io/10.1002/wene.416?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Samantha Ölz & Lawrence Agbemabiese, 2012. "Innovative energy policy in a developing country context: experiences from UNEP's PROSOL initiative," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 1(1), pages 69-80, July.
    2. Chirambo, Dumisani, 2018. "Towards the achievement of SDG 7 in sub-Saharan Africa: Creating synergies between Power Africa, Sustainable Energy for All and climate finance in-order to achieve universal energy access before 2030," Renewable and Sustainable Energy Reviews, Elsevier, vol. 94(C), pages 600-608.
    3. Monga, Celestin & Lin, Justin Yifu (ed.), 2015. "The Oxford Handbook of Africa and Economics: Volume 2: Policies and Practices," OUP Catalogue, Oxford University Press, number 9780199687107.
    4. Mazzucato, Mariana & Semieniuk, Gregor, 2018. "Financing renewable energy: Who is financing what and why it matters," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 8-22.
    5. Zhiheng Wu & Guisheng Hou & Baogui Xin, 2020. "The Causality between Participation in GVCs, Renewable Energy Consumption and CO 2 Emissions," Sustainability, MDPI, vol. 12(3), pages 1-26, February.
    6. Myojo, Satoshi & Ohashi, Hiroshi, 2018. "Effects of consumer subsidies for renewable energy on industry growth and social welfare: The case of solar photovoltaic systems in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 48(C), pages 55-67.
    7. Pineau, Pierre-Olivier, 2008. "Electricity sector integration in West Africa," Energy Policy, Elsevier, vol. 36(1), pages 210-223, January.
    8. Kamp, Linda M. & Smits, Ruud E. H. M. & Andriesse, Cornelis D., 2004. "Notions on learning applied to wind turbine development in the Netherlands and Denmark," Energy Policy, Elsevier, vol. 32(14), pages 1625-1637, September.
    9. Viktor Slavtchev & Simon Wiederhold, 2016. "Does the Technological Content of Government Demand Matter for Private R&D? Evidence from US States," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(2), pages 45-84, April.
    10. Michael A. Opam & John K. Turkson, 2000. "Power Sector Restructuring in Ghana: Reforms to Promote Competition and Private Sector Participation," Palgrave Macmillan Books, in: John K. Turkson (ed.), Power Sector Reform in SubSaharan Africa, chapter 4, pages 50-82, Palgrave Macmillan.
    11. Manzoor Ahmad & Shoukat Iqbal Khattak, 2020. "Is Aggregate Domestic Consumption Spending (ADCS) Per Capita Determining CO2 Emissions in South Africa? A New Perspective," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 75(3), pages 529-552, March.
    12. Gujba, Haruna & Thorne, Steve & Mulugetta, Yacob & Rai, Kavita & Sokona, Youba, 2012. "Financing low carbon energy access in Africa," Energy Policy, Elsevier, vol. 47(S1), pages 71-78.
    13. Almeshqab, Fatema & Ustun, Taha Selim, 2019. "Lessons learned from rural electrification initiatives in developing countries: Insights for technical, social, financial and public policy aspects," Renewable and Sustainable Energy Reviews, Elsevier, vol. 102(C), pages 35-53.
    14. Liu, Hengwei & Liang, Dapeng, 2013. "A review of clean energy innovation and technology transfer in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 18(C), pages 486-498.
    15. Haselip, James & Desgain, Denis & Mackenzie, Gordon, 2014. "Financing energy SMEs in Ghana and Senegal: Outcomes, barriers and prospects," Energy Policy, Elsevier, vol. 65(C), pages 369-376.
    16. Agbemabiese, Lawrence & Nkomo, Jabavu & Sokona, Youba, 2012. "Enabling innovations in energy access: An African perspective," Energy Policy, Elsevier, vol. 47(S1), pages 38-47.
    17. Tigabu, Aschalew D. & Berkhout, Frans & van Beukering, Pieter, 2015. "Technology innovation systems and technology diffusion: Adoption of bio-digestion in an emerging innovation system in Rwanda," Technological Forecasting and Social Change, Elsevier, vol. 90(PA), pages 318-330.
    18. Zubi, Ghassan & Fracastoro, Gian Vincenzo & Lujano-Rojas, Juan M. & El Bakari, Khalil & Andrews, David, 2019. "The unlocked potential of solar home systems; an effective way to overcome domestic energy poverty in developing regions," Renewable Energy, Elsevier, vol. 132(C), pages 1425-1435.
    19. G. M.P. Swann, 2009. "The Economics of Innovation," Books, Edward Elgar Publishing, number 13211.
    20. David Ockwell & Joanes Atela & Kennedy Mbeva & Victoria Chengo & Rob Byrne & Rachael Durrant & Victoria Kasprowicz & Adrian Ely, 2019. "Can Pay-As-You-Go, Digitally Enabled Business Models Support Sustainability Transformations in Developing Countries? Outstanding Questions and a Theoretical Basis for Future Research," Sustainability, MDPI, vol. 11(7), pages 1-21, April.
    21. Monyei, C.G. & Jenkins, K. & Serestina, V. & Adewumi, A.O., 2018. "Examining energy sufficiency and energy mobility in the global south through the energy justice framework," Energy Policy, Elsevier, vol. 119(C), pages 68-76.
    22. Budzianowski, Wojciech M. & Nantongo, Irene & Bamutura, Cleus & Rwema, Michel & Lyambai, Martin & Abimana, Colette & Akumu, Eric O. & Alokore, Yunus & Babalola, Samuel O. & Gachuri, Amon K.K. & Hefney, 2018. "Business models and innovativeness of potential renewable energy projects in Africa," Renewable Energy, Elsevier, vol. 123(C), pages 162-190.
    23. Kalu Ojah & Thabang Mokoaleli-Mokoteli, 2010. "Possible Effective Fanancing Models for Entrepreneurship in South Africa: Guides from Microfinance and Venture Capital Finance," The African Finance Journal, Africagrowth Institute, vol. 12(1), pages 1-26.
    24. George Adwek & Shen Boxiong & Paul O. Ndolo & Zachary O. Siagi & Chebet Chepsaigutt & Cicilia M. Kemunto & Moses Arowo & John Shimmon & Patrobers Simiyu & Abel C. Yabo, 2020. "The solar energy access in Kenya: a review focusing on Pay-As-You-Go solar home system," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(5), pages 3897-3938, June.
    25. Blumsack, Seth A. & Apt, Jay & Lave, Lester B., 2006. "Lessons from the Failure of U.S. Electricity Restructuring," The Electricity Journal, Elsevier, vol. 19(2), pages 15-32, March.
    26. Friebe, Christian A. & Flotow, Paschen von & Täube, Florian A., 2013. "Exploring the link between products and services in low-income markets—Evidence from solar home systems," Energy Policy, Elsevier, vol. 52(C), pages 760-769.
    27. Borrás, Susana & Edquist, Charles, 2013. "The choice of innovation policy instruments," Technological Forecasting and Social Change, Elsevier, vol. 80(8), pages 1513-1522.
    28. Nicoletta Corrocher & Lucia Cusmano & Andrea Morrison, 2009. "Modes of innovation in knowledge-intensive business services evidence from Lombardy," Journal of Evolutionary Economics, Springer, vol. 19(2), pages 173-196, April.
    29. Unknown, 2016. "Energy for Sustainable Development," Conference Proceedings 253270, Guru Arjan Dev Institute of Development Studies (IDSAsr).
    30. John P. Holdren, 2006. "The Energy Innovation Imperative: Addressing Oil Dependence, Climate Change, and Other 21-super-st Century Energy Challenges," Innovations: Technology, Governance, Globalization, MIT Press, vol. 1(2), pages 3-23, April.
    31. Tim Cholibois, 2020. "Electrifying the ‘eighth continent’: exploring the role of climate finance and its impact on energy justice and equality in Madagascar’s planned energy transition," Climatic Change, Springer, vol. 161(2), pages 345-364, July.
    32. Richard R. Nelson & Paul M. Romer, 1996. "Science, Economic Growth, and Public Policy," Challenge, Taylor & Francis Journals, vol. 39(1), pages 9-21, January.
    33. John A. Mathews & Hao Tan, 2014. "Economics: Manufacture renewables to build energy security," Nature, Nature, vol. 513(7517), pages 166-168, September.
    34. Bekker, Bernard & Eberhard, Anton & Gaunt, Trevor & Marquard, Andrew, 2008. "South Africa's rapid electrification programme: Policy, institutional, planning, financing and technical innovations," Energy Policy, Elsevier, vol. 36(8), pages 3115-3127, August.
    35. Pineau, Pierre-Olivier, 2002. "Electricity sector reform in Cameroon: is privatization the solution?," Energy Policy, Elsevier, vol. 30(11-12), pages 999-1012, September.
    36. Kenfack, Joseph & Lewetchou K., J. & Bossou, Olivier Videme & Tchaptchet, E., 2017. "How can we promote renewable energy and energy efficiency in Central Africa? A Cameroon case study," Renewable and Sustainable Energy Reviews, Elsevier, vol. 75(C), pages 1217-1224.
    37. Edquist, Charles & Zabala-Iturriagagoitia, Jon Mikel, 2012. "Public Procurement for Innovation as mission-oriented innovation policy," Research Policy, Elsevier, vol. 41(10), pages 1757-1769.
    38. Kang, Jia-Ning & Wei, Yi-Ming & Liu, Lan-Cui & Han, Rong & Yu, Bi-Ying & Wang, Jin-Wei, 2020. "Energy systems for climate change mitigation: A systematic review," Applied Energy, Elsevier, vol. 263(C).
    39. Monica Singhania & Neha Saini, 2020. "Revisiting environmental degradation and economic growth nexus using autoregressive distributed lag approach," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 69(8), pages 1765-1796, August.
    40. Lema, Rasmus & Hanlin, Rebecca & Hansen, Ulrich Elmer & Nzila, Charles, 2018. "Renewable electrification and local capability formation: Linkages and interactive learning," Energy Policy, Elsevier, vol. 117(C), pages 326-339.
    41. J David Tàbara & Takeshi Takama & Manisha Mishra & Lauren Hermanus & Sean Khaya Andrew & Pacia Diaz & Gina Ziervogel & Louis Lemkow, 2020. "Micro-solutions to global problems: understanding social processes to eradicate energy poverty and build climate-resilient livelihoods," Climatic Change, Springer, vol. 160(4), pages 711-725, June.
    42. Freeman, Chris, 1995. "The 'National System of Innovation' in Historical Perspective," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 19(1), pages 5-24, February.
    43. Fan Yang & Ming Yang, 2018. "Rural electrification in sub-Saharan Africa with innovative energy policy and new financing models," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 23(6), pages 933-952, August.
    44. Shikhar Ghosh & Ramana Nanda, 2010. "Venture Capital Investment in the Clean Energy Sector," Harvard Business School Working Papers 11-020, Harvard Business School.
    45. Huang, Junbing & Chen, Xiang, 2020. "Domestic R&D activities, technology absorption ability, and energy intensity in China," Energy Policy, Elsevier, vol. 138(C).
    46. Francis Kemausuor & Emmanuel Ackom, 2017. "Toward universal electrification in Ghana," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 6(1), January.
    47. Marilyn A. Brown & Shan Zhou & Majid Ahmadi, 2018. "Smart grid governance: An international review of evolving policy issues and innovations," Wiley Interdisciplinary Reviews: Energy and Environment, Wiley Blackwell, vol. 7(5), September.
    48. Sebitosi, A.B. & Pillay, P., 2008. "Grappling with a half-hearted policy: The case of renewable energy and the environment in South Africa," Energy Policy, Elsevier, vol. 36(7), pages 2513-2516, July.
    49. Shyam Saran, 2010. "Irresistible forces and immovable objects: a debate on contemporary climate politics," Climate Policy, Taylor & Francis Journals, vol. 10(6), pages 678-683, November.
    50. Linda Manon Kamp & Patrick A. Van der Duin, 2011. "Analysing the wind turbine innovation systems in The Netherlands and Denmark using the cyclic innovation model," International Journal of Engineering Management and Economics, Inderscience Enterprises Ltd, vol. 2(1), pages 39-59.
    51. Paul M. Romer, 1994. "The Origins of Endogenous Growth," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 3-22, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Deleidi, Matteo & Mazzucato, Mariana, 2021. "Directed innovation policies and the supermultiplier: An empirical assessment of mission-oriented policies in the US economy," Research Policy, Elsevier, vol. 50(2).
    2. Liotard, Isabelle & Revest, Valérie, 2018. "Contests as innovation policy instruments: Lessons from the US federal agencies' experience," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 57-69.
    3. Morgan Bazilian & Patrick Nussbaumer & Hans-Holger Rogner & Abeeku Brew-Hammond & Vivien Foster & Shonali Pachauri & Eric Williams & Mark Howells & Philippe Niyongabo & Lawrence Musaba & Brian Ó Galla, 2011. "Energy Access Scenarios to 2030 for the Power Sector in Sub-Saharan Africa," Working Papers 2011.68, Fondazione Eni Enrico Mattei.
    4. Gregory, Julian & Sovacool, Benjamin K., 2019. "The financial risks and barriers to electricity infrastructure in Kenya, Tanzania, and Mozambique: A critical and systematic review of the academic literature," Energy Policy, Elsevier, vol. 125(C), pages 145-153.
    5. Trotter, Philipp A. & McManus, Marcelle C. & Maconachie, Roy, 2017. "Electricity planning and implementation in sub-Saharan Africa: A systematic review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 74(C), pages 1189-1209.
    6. Serenella Caravella & Francesco Crespi, 2021. "The role of public procurement as innovation lever: evidence from Italian manufacturing firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 30(7), pages 663-684, October.
    7. Markus Grillitsch & Josephine V Rekers, 2016. "How does multi-scalar institutional change affect localized learning processes? A case study of the med-tech sector in Southern Sweden," Environment and Planning A, , vol. 48(1), pages 154-171, January.
    8. Juan Carlos Salazar-Elena & M. Paloma Sánchez & F. Javier Otamendi, 2016. "A Non-Parametric Delphi Approach to Foster Innovation Policy Debate in Spain," Sustainability, MDPI, vol. 8(5), pages 1-26, May.
    9. Shayegh, Soheil & Sanchez, Daniel L., 2021. "Impact of market design on cost-effectiveness of renewable portfolio standards," Renewable and Sustainable Energy Reviews, Elsevier, vol. 136(C).
    10. Tigabu, Aschalew & Berkhout, Frans & van Beukering, Pieter, 2017. "Development aid and the diffusion of technology: Improved cookstoves in Kenya and Rwanda," Energy Policy, Elsevier, vol. 102(C), pages 593-601.
    11. Datta, Surja & Saad, Mohammed & Sarpong, David, 2019. "National systems of innovation, innovation niches, and diversity in university systems," Technological Forecasting and Social Change, Elsevier, vol. 143(C), pages 27-36.
    12. Heinemann, G. & Banzer, F. & Dumitrescu, R. & Hirschhausen, C.v. & Neuhoff, M.E. & Ogechi Nwadiaru, V., 2022. "Transforming electricity access by replacing back-up generators with solar systems: Recent trends and evidence from Nigeria," Renewable and Sustainable Energy Reviews, Elsevier, vol. 157(C).
    13. Alhassan Abdul-Wakeel Karakara & Evans Osabuohien, 2020. "ICT adoption, competition and innovation of informal firms in West Africa: a comparative study of Ghana and Nigeria," Journal of Enterprising Communities: People and Places in the Global Economy, Emerald Group Publishing Limited, vol. 14(3), pages 397-414, June.
    14. Richard Green & Yacob Mulugetta & Zhong Xiang Zhang, 2014. "Sustainable energy policy," Chapters, in: Giles Atkinson & Simon Dietz & Eric Neumayer & Matthew Agarwala (ed.), Handbook of Sustainable Development, chapter 33, pages 532-550, Edward Elgar Publishing.
    15. Reis, Anabela & Heitor, Manuel & Amaral, Miguel & Mendonça, Joana, 2016. "Revisiting industrial policy: Lessons learned from the establishment of an automotive OEM in Portugal," Technological Forecasting and Social Change, Elsevier, vol. 113(PB), pages 195-205.
    16. Lorafe Lozano & Evelyn B. Taboada, 2021. "The Power of Electricity: How Effective Is It in Promoting Sustainable Development in Rural Off-Grid Islands in the Philippines?," Energies, MDPI, vol. 14(9), pages 1-17, May.
    17. Nils Karlson & Christian Sandström & Karl Wennberg, 2021. "Bureaucrats or Markets in Innovation Policy? – a critique of the entrepreneurial state," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 34(1), pages 81-95, March.
    18. Mario Cimoli & Gabriel Porcile, 2010. "Specialization, Wage Bargaining And Technology In A Multigoods Growth Model," Metroeconomica, Wiley Blackwell, vol. 61(1), pages 219-238, February.
    19. Antonelli Cristiano & Gehringer Agnieszka, 2013. "Demand pull and technological flows within innovation systems: the intra-European evidence," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201303, University of Turin.
    20. Islam, Md. Shafiqul & Al-Amin, Abul Quasem & Sarkar, Md. Sujahangir Kabir, 2021. "Energy crisis in Bangladesh: Challenges, progress, and prospects for alternative energy resources," Utilities Policy, Elsevier, vol. 71(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:wireae:v:11:y:2022:i:1:n:e416. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=2041-8396 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.