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, 26(3), pp. 319-336. ISSN 1366-4387
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.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | economic development; Ghana; project finance; renewable energy; sub-Saharan Africa; sustainability |
| Index terms: | factor analysis, questionnaire, renewable energy, severity index, project finance, payback, methodology, financing, Sub-Saharan Africa, Ghana, economic development, investor, energy requirement |
| Subjects: | data collection methods, environmental hazards, research methods, economic development, sociology, Geography, economic analysis, statistical analysis, physical geography and landforms, financial management, energy systems |
| Topics: | Research Practice, Stakeholder Management, Sustainability, Cost Management, Geographical Context, Business Strategy |
| Descriptive scope: | 4 PCTA |
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