Africa’s utility companies are feeling the renewable energy heat

Africa’s energy landscape is undergoing a seismic shift. The rise of renewable energy is forcing traditional utility companies, many of which have struggled with inefficiency and financial instability, to rethink their business models. As solar and wind power installations surge, bolstered by private investment and declining technology costs, legacy power providers face increasing pressure. The question is: Can Africa’s utilities adapt to this new reality, or will they crumble under the weight of their own inefficiencies?

A continent split between connection and exclusion

For millions of Africans, the power grid is both a lifeline and a frustration. About two-thirds of the continent’s population lives in areas where grid power is available, yet only 57% of households are actually connected. In places like Tunisia and Morocco, nearly universal electricity access contrasts starkly with sub-Saharan Africa, where 600 million people remain unconnected. Even for those fortunate enough to have grid access, reliability is a major issue. Only 44% of connected Africans enjoy a stable electricity supply, with the situation particularly dire in countries such as Malawi and Sierra Leone, where fewer than one in ten households can depend on consistent power.

Africa’s beleaguered utility sector

Decades of mismanagement, underinvestment, and financial strain have left many of Africa’s utility companies struggling. South Africa’s Eskom, the largest power producer on the continent, is a prime example. Burdened by aging infrastructure and staggering debt—estimated at around $25 billion—the utility is forced to implement rolling blackouts, sometimes for up to ten hours a day. Kenya Power, meanwhile, has seen industrial tariffs skyrocket by over 35% in five years, placing additional strain on businesses reliant on its supply. Many utilities can barely cover their operational costs, let alone finance much-needed infrastructure upgrades. The result is a sector unable to meet the growing energy demands of an industrializing continent.

The costs of a failing grid

The unreliability of Africa’s power grids has profound economic consequences. Businesses across sub-Saharan Africa report an average of eight power outages per month, each lasting over five hours. These disruptions cost the region’s economies up to 2% of their annual GDP. To cope, 52% of manufacturers rely on costly diesel generators, pushing up production costs and diminishing competitiveness. In South Africa, Eskom’s stage 7 load shedding in 2023 drained R899 million (approximately $49 million) from the economy every single day. The burden falls heaviest on ordinary consumers, who face skyrocketing tariffs and deteriorating service quality. Perhaps nowhere is the suffering greater than in Nigeria. 

The renewable energy revolution

Amidst this crisis, renewable energy is emerging as a powerful disruptor. Africa’s installed renewable energy capacity has doubled in the past decade. In 2024 alone, solar power accounted for 72% of new capacity additions, up from 32% the previous year. The continent boasts 60% of the world’s best solar resources but has historically hosted only 1% of global solar PV installations. That is changing rapidly. South Africa led the charge in 2023, adding nearly half of the 5.5 GW of solar capacity installed across the continent.

Hydropower, too, plays a vital role, with 39 GW of installed capacity led by Ethiopia, Angola, and the Democratic Republic of the Congo. Hydropower has recently seen renewed interest, with major projects in Cameroon (500 MW) and Malawi (361 MW) as well smaller projects in Uganda, Burundi and Eswatini. 

Kenya’s Lake Turkana Wind Power Project, with a capacity of 310 MW, and its geothermal powerhouse at Olkaria, generating over 700 MW, illustrate the continent’s growing shift toward sustainable alternatives.

The rise of private energy players

The inefficiencies of public utilities have created fertile ground for private sector innovation. Energy startups raised hundreds of millions of dollars in the first half of 2022, with private investment in wind and solar projects surpassing $135 billion. Pay-as-you-go solar solutions, pioneered by companies like KYA in Togo, have expanded energy access at unprecedented rates. The startup Daystar Power has successfully scaled its off-grid solar operations across Nigeria and beyond, attracting $38 million in fresh investment. By 2040, Africa’s renewable energy potential is projected to exceed its demand by a factor of 1,000.

Major investments fueling the transition

Investors are taking notice. In 2023 alone, over $10 billion poured into renewable projects in Egypt, South Africa, and Zimbabwe. Solar and wind accounted for nearly a quarter of Africa’s private energy finance between 2021 and 2022. Mauritania’s $34 billion green hydrogen initiative stands as one of the continent’s most ambitious renewable investments to date. By 2030, private renewable energy investments are expected to reach $190 billion, further accelerating the transition away from fossil fuels. Key investments coming up include Egypt building a 2 GW wind plant, the largest in Africa.

Off-grid solutions reshaping the market

The rise of distributed energy solutions is reshaping how Africans access power. More than 60 million people now benefit from off-grid solar and mini-grid systems. In Tanzania, renewable energy has boosted agricultural productivity by 185%, replacing unreliable diesel-powered irrigation. Fishing communities in Ghana, construction firms in Kenya, and safari lodges across East Africa are turning to off-grid solar for dependable electricity. Mining companies, too, are embracing solar to cut costs and hedge against unreliable grid power.

This decentralization of energy production has had an unexpected benefit: reducing pressure on national grids, improving reliability for those still reliant on them. As solar PV costs have plummeted—down 82% between 2010 and 2019—renewable energy is becoming the cheaper, more sustainable alternative.

Are utility companies adapting?

Despite their struggles, some African utility companies are making strides in renewable energy integration. Under an ECOWAS-led initiative, West African utilities are expanding regional renewable power grids. In 2019, Malawi’s national grid shifted its focus from coal to hydro and solar. Nigeria is piloting hybrid grid-solar solutions in partnership with organizations such as the Rocky Mountain Institute (RMI). Rwanda’s government-backed off-grid strategy has significantly increased electricity access in rural areas. Even Eskom, under its Just Energy Transition plan, aims to phase out coal by 2050.

For Africa’s utility companies, survival depends on radical transformation. Senegal’s ASER 300 project, which electrified over 300 villages through solar mini-grids, offers a blueprint. The African Development Bank has secured $50 billion toward its goal of connecting 300 million people to electricity by 2030 through a mix of grid expansion and off-grid renewables. Regional energy integration efforts, such as linking Tanzania and Zambia’s grids, could enhance energy security.

Yet, financial sustainability remains a key challenge. To compete with private renewables, utilities must overhaul outdated pricing models, modernize infrastructure, and attract private sector partnerships. Governments must also enact policy reforms to encourage efficiency and transparency, curbing the corruption that has plagued national utilities for decades.

The momentum behind renewable energy is undeniable. Africa is on the cusp of an energy revolution, driven by plunging solar costs, expanding private investment, and increasing off-grid solutions. For traditional utility companies, the challenge is clear: Adapt or be left behind. If they cannot embrace the transition, the very relevance of state-run power providers may soon be in question. What is saving them for now are the challenges inherent in renewables and the way that state capitalism tends to defend itself. Taxation often remains less than friendly to renewables, protectionism is rife, and the output variability of some renewables sources such as solar makes integrating into grids harder.