Financing of biofuel projects in Africa

Abstract

The development of biofuel ventures offers significant opportunities for Africa to improve the low yield subsistence farming-dominated agricultural sector, mostly with regards to energy, environmental and socio-economic aspects. Taking into account a number of specific characteristics (i.e. reliance on feedstock, food versus fuel debate, strong dependence on related policy frameworks and high risk profiles), barriers related to policies, financing, trade, and other non-technical issues are particularly relevant to the development of biofuel ventures in Africa. Strategies to overcome these barriers include measures such as the removal of regulatory risk through government policy support, creation of financial incentives for biofuels, access to financing, improved trading regulations and infrastructure and the development of related markets. Financing options for biofuel ventures are influenced by the mode of service of the venture. Project-based fuel supply businesses generally require project-based finance options whereas energy service company (ESCO) approaches can attract a wider range of finance options and access carbon finance or green certificate revenue by virtue of scale opportunities.