The renewable energy market – high growth figures in the battle against climate change

Climate change is a regular topic in the media and nowadays often on our minds. It is a global threat that we are facing but difficult to solve as it requires global cooperation. A major challenge is the unequal impact of climate change on different countries. The countries expected to suffer the most include most of the Sub-Saharan countries that are unable to mitigate the impact of global warming or adapt to its effects. KPMG Finland is actively working on tackling this global challenge by supporting the development of renewable energy markets.

Since 2013 KPMG Finland has been managing EEP Africa (Energy and Environment Partnership), which is a multi-donor trust fund operating in 15 Southern and Eastern African countries, and currently hosted by the Nordic Development Fund. EEP Africa finances early-stage, innovative clean energy companies for project implementation, business development support and investment facilitation. KPMG’s International Development Assistance Services (IDAS) team, operating the EEP Africa, works globally as the companies involved originate from across the world. So far, EEP Africa has supported a portfolio of over 250 projects, and with a total leveraged finance of $168 million, it has provided access to clean energy to over 1 million households.

The renewable energy market has developed rapidly over the last 5 years, and not least in Eastern Africa. EEP Africa has been at the forefront of supporting the market development in Southern and Eastern Africa. One metric to demonstrate the growth is that the businesses operating in the EEP markets attracted $1.4 billion in early and growth stage investment during this period. The growth of the annual investment to the sector was 450 % from 2012 to 2017. Take for example Off Grid Electric (recently rebranded as ZOLA Energy), a solar-home-system distributor company, which was supported by EEP Africa during their early stages in Tanzania. In their latest series D financing round in 2018, Off Grid Electric attracted $55 million for further business scale-up.

Such high growth figures seem implausible in the Western markets that currently seem content with much more modest growth rates of 2–3 %. However, a lot of the companies operating in the challenging operating environments of Sub-Saharan Africa originate from Europe and the US (including Off Grid Electric). These companies are ready to take on the market risks because of the vast opportunities and potential upside. Unfortunately, we have not seen similar interest and willingness to take risks from Finnish companies although there are some exceptions to the rule.

The KPMG IDAS team has been fortunate to be right in the middle of this rapid market development while working on EEP Africa. Being locally present, with coordination offices in South Africa and Kenya, we understand the challenges these companies face day-to-day. This motivates us make every effort to help them. Even in the developed South Africa, where I currently work, load shedding (a South African term for controlled black outs) is almost a daily hindrance. But our reward is to see the companies we support grow, develop and make a meaningful impact in tackling climate change. The results are quite dramatic as many of our clients are directly transferring from unsustainable use of firewood to renewable energy sources. This provides a clear purpose for our work in confronting climate change.

Despite the rapid market development and growth there is a lot to do. KPMG and its IDAS team are committed to continue supporting the companies operating in these challenging environments.