The African population of 1.3 billion is one of the fastest growing worldwide, yet only 62% has access to electricity. By 2040, Africa is projected to constitute 90% of the global population without access to electricity. Climate change poses a recurring issue, with accelerated desertification, loss of habitat, and changes in agricultural practices. Tackling rising temperatures and the lack of access to energy sources, particularly in Sub-Saharan Africa (SSA), is imperative. However, Africa has the potential to benefit from recent global advancements and cost reductions in renewable power generation technologies, allowing it to leapfrog fossil fuel-based systems and move directly to renewable-based systems. The decreasing prices of Solar Photovoltaic (SPV) systems and the high solar irradiation on the African continent make a strong case for developing Renewable Energy (RE), particularly SPV systems. Increased mobile phone penetration has further enabled pay-as-you-go payment systems that benefit off-grid home solutions.

African countries are raising their commitments to RE with significant innovations in tariffs, improving legislation to stimulate RE penetration, and decentralized off-grid solutions such as mini-grids and solar home systems (SHS). However, technical and financial barriers still hinder the expansion of decentralized renewable energy (DRE) technology solutions. These barriers include fossil-fuel subsidies, weak financial strength of utilities, outdated and unstable grids, and an unstable policy environment, all of which translate into high levels of risk for investors in the energy sector.

Several trends have been observed in recent years:
1. Blending of Off-Grid and On-Grid Market Segments: Current DRE companies are venturing into completely new off-grid energy projects with no prior experience in traditional energy.
2. Innovation in the SHS Sector: Driven by rapid innovation, the SHS sector has decoupled its development from macroeconomic and political risks, offering investment opportunities linked to the growing demand of a developing and inclusive population. However, it remains a nascent sector, requiring a portfolio venture capital risk approach.
3. ICT-Enabled PAYG Solar: PAYG solar has become the preferred market standard for end-user residential finance in Africa. The integrated PAYG model will need to adapt to cover solar distribution.
4. Investment in Distributed Solar Installations: There is increasing interest from investors in distributed solar installations for Commercial and Industrial (C&I) buildings.

To meet the growing energy demand in Africa and increase access to electricity, the massive deployment and dissemination of RE technologies, particularly solar, is essential. Decentralized power generation using small-scale renewables is proving to be a viable way to expand energy access.

The “Africa Renewable Energy Scale Up Facility" (ARESUF), established by the Agence Française de Développement (AFD) Group with a prominent role of its subsidiary, the Société de Promotion et de Participation pour la Coopération Economique (Proparco), with support from the European Union (EU), aims to address these challenges and foster RE projects in Africa. The Africa Investment Facility (AfIF), an EU regional blending facility, is providing the EU contribution to the ARESUF blending operation.