De-Risking The Energy Transition
The Financial and Uneven Outcomes of Renewable Energy in Senegal

Steffen Haag

Summary

Senegal has recently gained international attention as both a new hydrocarbon producer and a frontrunner in renewable energy finance in West Africa. The discovery and exploitation of offshore oil and gas resources coincide with growing commitments to renewable energy and the recent signing of a Just Energy Transition Partnership (JETP). Yet beneath the rhetoric of green growth lies a hierarchical financial and institutional architecture that unequally distributes the costs of transition finance. The way the energy transition is financed reveals not only the contours of Senegal’s energy sector but also how global financial power shapes national development trajectories.

This paper argues that the financing of Senegal’s energy transition exemplifies the Wall Street Consensus (WSC): a development model in which governments are reoriented to de-risk private investment and re-engineer their policy frameworks around the needs of global finance (Gabor 2021). De-risking logic as deployed in Senegal secures returns for investors while generating uneven social, fiscal, and political consequences for the state and society. At the same time, domestic actors – ministries, regulators, and state-owned enterprises – navigate this new architecture, sometimes reinforcing its logic, sometimes seeking to create developmental space.

Senegal’s energy transition cannot be understood in isolation. It is deeply embedded in a macro-financial regime marked by high external debt, the colonial currency of the CFA Franc, trade deficits, and reliance on foreign capital. These constraints are rooted in colonial patterns of resource extraction and financial subordination. In today’s energy sector, these constraints manifest themselves in a drive toward private energy production financed by foreign capital and regulatory reforms designed to reassure and protect global investors.

At the national level, the financing architecture of Senegal’s transition is shaped by an institutionalized “de-risking ecosystem.”

Investment flows are structured through fiscal guarantees, concessional finance, and purchase agreements, and regulatory de-risking, such as IPP (Independent Power Producer) tenders, national utility unbundling, and standardized contracts that institutionalize investor protection. This de-risking ecosystem has attracted non-resident investors, leading to the concentration of ownership and control in the hands of foreign capital. These de-risking mechanisms translate macro-financial constraints directly into project finance structures, aligning with what has been called the Wall Street Consensus. While elements of developmental planning remain present, such as state ownership stakes and regulatory interventions, they operate within limits imposed through financial subordination. In practice, the primacy of private-sector-oriented de-risking narrows the scope for sovereign decision-making and embeds external investor priorities in national energy policy. This occurs through concrete mechanisms: risks are shifted from investors to the state, profitability is secured through long-term contracts, fiscal discipline is reinforced by donor conditionalities, and budgetary exposure grows through guarantees and subsidies. The result is a system that secures profitability for foreign investors while generating fiscal liabilities, policy constraints, and uneven social outcomes – ranging from high tariffs and subsidy burdens to limited local employment and persistent inequalities in electricity access.

The paper explores strategies for rebalancing energy finance in ways that prioritize social justice and national development. At the international level, this includes restructuring the global financial architecture to deliver more unconditional public climate finance and reduce reliance on private capital. At the national level, Senegal can strengthen domestic resource mobilization, adopt local content rules, improve tax regulation, and promote revenue-sharing mechanisms that ensure that affected communities benefit. Strengthening state planning capacity is also crucial to move beyond reactive, donor-driven policies and toward coherent long-term strategies.

Senegal’s energy transition is at a crossroads. If the country continues along its current path, it risks entrenching financial dependency, external profit extraction, and social exclusion. A viable alternative path would involve financing strategies that explicitly address fiscal risks, inequality, and harms for communities, ensuring that marginalized groups are not left behind. A democratic and just energy transition in Senegal requires more than adding renewables to the grid. Such a transition demands a rethinking of the financial and institutional architecture that underpins the sector, and a shift away from market-driven risk elimination and toward public and community-centered approaches.

Climate Finance and Ghana’s Energy Policy
From Derisking to a Green Developmental State

Isaac Abotebuno Akolgo, PhD

Summary

Ghana, like many other African countries, is currently facing the consequences of a global climate crisis. Rising temperatures are producing unprecedented heat levels not only in the north but also in the historically cooler southern region and middle belt of Ghana. Rising sea levels are eroding coastal land in the Volta Region and unpredictable rain patterns have inhibited farming, particularly in the Northern, Upper East and Upper West Regions. Commendably, governments over the years have demonstrated commitment to the national, continental and global calls for action to halt and possibly reverse the climate catastrophe. As party to the United Nations Framework Convention on Climate Change (UNFCCC), Ghana’s 2021 national energy policy reaffirmed its commitment to help limit global warming to 1.5°C by 2050.

In light of these commitments for climate action, the Ghanaian government and multilateral development institutions have maintained that the overriding challenge to fighting climate change is financing. As the Ghanaian state cannot afford to finance all its energy needs, it has often been argued that government needs to create a conducive investment environment that can crowd-in private capital flows, mainly from foreign sources, to support the rollout of its energy policies.

This report demonstrates that such an arrangement reflects what has been conceptualised in critical macrofinance as a derisking agenda. This derisking logic, rather than supporting transformative climate action, is intended to turn public infrastructure and services into profitable ventures for institutional investors. Practically, this derisking logic to climate action has been pursued under the guise of Public Private Partnerships (PPPs). Specifically for the energy sector in Ghana, PPPs in the energy sector are often referred to as Power Purchase Agreements (PPAs). The report reviews Ghana’s energy policy documents and actions, and shows that there is a pervasive pattern of adopting derisked PPAs for energy infrastructure projects. Overall, Ghana has more than ten derisked PPAs that collectively generate over 2000MW of electric power annually.

This report draws its data on PPAs primarily from the Reviving Developmentalism for Climate and Social Justice (REDCAJU) project. As opposed to the dominant neoliberal policy paradigm, the REDCAJU project aims to promote research and advocacy that support progressive macrofinancial perspectives for a 21st Century Green Developmental States in Africa. The REDCAJU project will particularly map and compare derisking strategies in countries such as Ghana, Senegal, Nigeria, and South Africa. The case of Ghana analyses derisking in the energy sector PPAs. Between 2007 and 2016, the Government of Ghana, through the Electricity Company of Ghana (ECG), entered into several PPAs with Independent Power Producers (IPPs) to enhance national electricity supply.. All of those PPAs were take-or-pay contracts ranging between 20 to 25 years in duration, with derisked financial investments from China, the USA, Europe and South Africa.

A prime example of derisking in the context of Ghana’s energy policy is the Sankofa Gas Project. In this project, a World Bank-mediated investment and payment structure obliges a Ghanaian state-owned enterprise, Ghana National Petroleum Corporation (GNPC) to effectively absorb all the risks associated with the extraction of Non-Associated Gas off Ghana’s western coast, while investors such Italy’s Eni and the Netherlands’ Vitol enjoy guaranteed returns. Besides Sankofa, there is a broad and well established practice of derisked PPAs that allows an increasing number of institutional investors from across the world to profit from Ghana’s struggle for energy sufficiency.

Another example of this phenomenon is the Amandi Power (Twin City) project which is primarily owned by US-based Denham Capital and designed to supply 200MW of thermal power to ECG over a contract period of 25 years. Denham Capital, the majority owner, is a private equity fund which has supported USAID’s Power Africa initiative. It holds its equity through its subsidiary Endeavor Energy Partners. Another stakeholder, Anergi (formerly Aldwych) has received investments from the Netherlands’ FMO and the Shell Foundation, while South Africa-based Old Mutual maintains equity through African Infrastructure Investment Managers (AIIM). USAID helped broker the project, whose total project cost was USD 556M, according to AIIM, with USD 418M in debt funding and USD 138M in equity financing. Amandi’s other debt providers include two development finance institutions, British International Investments (BII) and the United States International Development Finance Corporation (DFC). The take-or-pay contract including in this supply deal imposes additional costs on ECG for unused power and related risks. In November 2024 for instance, Amandi joined several other IPPs in threatening to shut down operations at its plant due to unpaid debts receivable (3news, 2024).

Similarly, other PPAs such as the Karpower Project and AKSA Energy have multiple institutional investors who profit from their derisked investments while shifting cost burdens to Ghanaian power consumers. These cases of PPAs demonstrate how a derisking approach in the Ghanaian energy sector is largely supporting the interests of institutional investors motivated by profit as opposed to the aim of supporting a just and equitable transition to sustainable energy sources. This report contends, for policy action, that a green developmental state is essential to producing a climate secure and prosperous Ghana.

Climate Finance and Green Transitions in Africa
Nigeria Case Study Derisking and Macrofinance Perspectives

Ehireme Uddin

This study argues that Nigeria’s reliance on the dominant derisking paradigm promoted by the Wall Street Consensus is a policy failure. While intended to attract private capital for infrastructure, these mechanisms do not eliminate risk but primarily transfer fiscal and contingent liabilities from private investors to the Nigerian Government. This approach has failed to stabilise the power sector, instead locking Nigeria into unsustainable financial commitments and reinforcing dependencies that hinder a sovereign green transition.

Key Findings

This study identifies two distinct approaches to derisking that are prominent in Nigeria’s power sector, both of which have created severe fiscal burdens. The first, Transnational Concessional Derisking as used in the development of the Azura-Edo IPP, uses an additional layer of guarantees from Multilateral Development Banks (MDBs) to backstop a local Power Purchase Agreement (PPA), mitigating risks that foreign investors deem the sovereign alone cannot cover. The Azura-Edo IPP, Nigeria’s first project-financed IPP, used a World Bank Partial Risk Guarantee and a Put and Call Option Agreement (PCOA) to attract foreign capital. This approach imposed significant contingent liabilities on Nigeria, estimated at $1.2 billion, which are linked to its obligations under the PCOA. The “take-or-pay” clause obligates the state to pay for power in US dollars, even if it cannot be transmitted, creating a massive, long-term fiscal burden.

The second distinct approach is local derisking which can be seen in the PPA/NBET crisis. This approach relies on domestic state institutions, primarily the Nigerian Bulk Electricity Trading (NBET) company, to act as a creditworthy “bulk buyer” and absorb payment risk for private generators. This system established in 2010 has collapsed into a fiscal crisis. A structural currency mismatch with dollar-indexed invoices from some generators against fixed Naira revenue from distributors) has created a massive, unpayable gap. As of early 2025, the total debt owed by the NBET to Generation Companies (GenCos) had spiralled to over N4 trillion. This failure is compounded by the “hybrid public-private” ownership of Distribution Companies (DisCos), where misaligned subsidies (for example, Kaduna DisCo receiving ₦129B despite 36% payment efficiency) force the state to cover private-sector operational shortfalls.

Conclusion and Policy Recommendations

The derisking framework has, in many ways, failed to deliver structural transformation, and what it has done instead is reinforce Nigeria’s peripheral role and macrofinancial vulnerability. A genuine energy transition requires a fundamental shift to a “green developmental framework” centred on the following three aspects. (i) The reclamation of public ownership instead of propping up a failing privatised system, the state must reassert democratic control over critical infrastructure. (ii) Private capital needs to be governed by “sticks” such as binding mandates on local content, profit repatriation, etc. and not be solely incentivised by “carrots” such as public guarantees. (iii) Domestic finance must be mobilised to reduce external dependencies through the development of local currency bond markets and retooling public development banks to actively finance a green industrial strategy, not just facilitate private investment.