Mechanisms and challenges in financing renewable energy projects in sub-Saharan Africa: a Ghanaian perspective
Journal of Financial Management of Property and Construction
ISSN: 1366-4387
Article publication date: 15 February 2021
Issue publication date: 10 November 2021
Abstract
Purpose
Ghana has set an objective of achieving 10% of its energy requirements through renewable sources, by 2020. However, to date, the renewable energy (RE) sector has attracted only marginal investor interest. This paper aims to identify the challenges faced in financing RE in Ghana.
Design/methodology/approach
A comprehensive review of literature in renewable energy finance was conducted and 12 financing challenges were identified. From this list, a questionnaire was developed asking to rank barriers. This was distributed to experts within financial institutions and 32 were returned. A factor analysis and severity index analysis were performed to identify a ranking of challenges impeding RE project financing in Ghana.
Findings
The challenges to RE financing fall into the three broad categories, namely, “economic, commercial and regulatory” challenges. Within these broad constraints, “long payback periods,” “limited track record” and “high upfront cost” are the most severe impediments to obtaining financing for RE.
Practical implications
Identifying the specific conditions that make an investment in RE unattractive, give policymakers set on achieving the 10% RE goal, a way forward in developing a targeted policy that would mitigate identified investor disincentives.
Originality/value
The broad range of potential barriers to investment are known. However, this study combines a specific governmental ambition – encouraging the financing of RE – with a specific set of identified barriers inhibiting that ambition. In this regard, this study identifies exactly where the government needs to act if it is to facilitate investment in RE, as is required for Ghana to reach its 10% RE target.
Keywords
Acknowledgements
The authors thanks Mr Prince Antwi-Afari (PhD Student) of the University of Hong Kong for his insightful comments on earlier drafts of this paper. The authors also thank the anonymous reviewers for their constructive comments.
Funding: This research did not receive any specific grant from funding agencies in the public, commercial or not-for-profit sectors.
Citation
Owusu-Manu, D.-G., Mankata, L.M., Debrah, C., Edwards, D.J. and Martek, I. (2021), "Mechanisms and challenges in financing renewable energy projects in sub-Saharan Africa: a Ghanaian perspective", Journal of Financial Management of Property and Construction, Vol. 26 No. 3, pp. 319-336. https://doi.org/10.1108/JFMPC-03-2020-0014
Publisher
:Emerald Publishing Limited
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