Africa Doubles New Hydropower Capacity as Funding Risks Remain

Africa significantly boosted its new hydropower capacity last year, adding 4.5 gigawatts, effectively doubling its generation from the technology. This surge was primarily driven by major projects such as Tanzania’s 2,115-megawatt Julius Nyerere Hydropower Project and Ethiopia’s 1,200-megawatt Grand Ethiopian Renaissance Dam. Despite this substantial growth, persistent funding challenges continue to limit the sector's potential for even faster expansion.

Analysis

Africa's new hydropower capacity doubled in the last year with the addition of 4.5 gigawatts, signaling a significant acceleration in the continent's renewable energy infrastructure build-out. This growth was anchored by two very large-scale projects: Tanzania’s Julius Nyerere Hydropower Project, which added 2,115 megawatts and was outranked in size only by new facilities in China, and Ethiopia's Grand Ethiopian Renaissance Dam, which contributed 1,200 megawatts. Despite this substantial progress, a report from the International Hydropower Association highlights that persistent funding challenges remain a critical bottleneck, limiting the potential for even faster expansion. This creates a dichotomy for the sector, showcasing strong momentum in project execution on one hand, while underscoring the high dependency on securing stable, long-term financing for future growth on the other.

Key Decisions for Investors

• Investors focused on emerging markets and ESG themes should monitor an uptick in opportunities related to African infrastructure, but must critically assess the financing structures and sovereign risks of future large-scale hydropower projects.
• Given that funding is the primary constraint, attention should be paid to multilateral development banks, green bond issuance, and private equity firms specializing in de-risking and financing African infrastructure.
• Consider ancillary investment opportunities in energy transmission, distribution, and industrial sectors within Tanzania and Ethiopia, which are poised to benefit from the substantial increase in power generation capacity.