Africa’s clean energy challenge is often framed as a problem of insufficient capital. While the continent faces an annual energy investment gap of hundreds of billions of dollars, venture capital (VC) plays only a marginal role in closing it.
Most renewable energy investment in Africa today comes from development finance institutions (DFIs), infrastructure funds, and blended finance vehicles. Venture capital, by contrast, remains largely on the sidelines. This is because much of Africa’s energy sector is structurally misaligned with the VC model.
Having spent a decade working across renewable energy projects in countries including Nigeria, Kenya, Sudan, Tanzania, the Democratic Republic of Congo, etc., I rarely found myself pitching energy projects to VCs. The reason is simple: grid-scale solar plants, hydropower projects, minigrids, and commercial solar installations are capital-intensive, slow to develop, and designed for long-term returns – not the rapid scaling, high margins, and clear exit pathways VCs typically seek. Understanding this distinction is essential if venture capital is to play a meaningful role in Africa’s energy transition.
Infrastructure Capital vs Venture Capital
When investors hear “renewable energy in Africa”, they often conflate two fundamentally different investment categories: infrastructure and venture.
Infrastructure capital – typically provided by DFIs, pension funds, and sovereign-backed vehicles – prioritises stable, long-term cash flows. These investors are comfortable with large upfront capital expenditure, 15–25-year power purchase agreements and returns in the range of 6–12%. Risk is mitigated through guarantees, political risk insurance, and concessional finance. Speed is not the goal; certainty is.
Venture capital, on the other hand, is designed to fund businesses capable of exponential growth. VCs look for asset-light models, strong margins, digital leverage, and credible exit routes through acquisitions or public markets – often within 5-7 years. Businesses that resemble technology platforms, rather than physical infrastructure, tend to fit this profile best.
What is not VC-backable
Much of Africa’s clean energy buildout falls firmly into the “not VC-able” category.
Utility-scale Solar, wind, and hydropower projects are essential for decarbonising national grids, but they are slow to develop and heavily dependent on state utilities. Projects require billions in financing and take years, sometimes more than a decade, to reach operation. These timelines alone place them outside the venture capital playbook.
Minigrids, often promoted as the solution for Africa’s 600 million people without electricity access, are socially transformative but economically challenging. Typical projects rely heavily on grants and concessional funding to achieve modest returns. In practice, many minigrids I have worked on only made sense financially because public funding absorbed a significant share of the capital cost.
Commercial and industrial (C&I) solar – powering factories, mines, malls, and hotels – is growing rapidly as businesses seek relief from unreliable grids and expensive diesel. Yet these projects are still structured as long-term infrastructure plays, with predictable but limited upside. They are attractive to private equity and infrastructure funds, not venture capital.
Even residential rooftop solar systems, increasingly common among middle-class households in countries like Nigeria and South Africa, offer little appeal to VCs. The market is fragmented, labour-intensive, and driven by one-off installations rather than recurring revenue.
None of this diminishes the importance of these sectors. They are critical to Africa’s energy future. But mistaking them for venture opportunities leads to misplaced capital and unmet expectations.
Where the real VC opportunity lies
Despite these constraints, Africa’s energy transition does offer genuine venture-scale opportunities if investors know where to look.
Pay-as-you-go (PAYGo) solar is a standout example. Companies such as M-KOPA and Sun King have combined mobile payments, IoT-enabled devices, and data-driven credit scoring to reach millions of low-income households. These businesses scale rapidly, generate recurring revenue, and leverage customer data to expand into smartphones, insurance, and microloans. They look far more like fintech platforms than power companies – and VCs have responded accordingly.
Energy software and data platforms represent another promising frontier. African power systems lose more than 20% of electricity through inefficiencies and poor billing. Startups offering smart metering, grid analytics, and performance monitoring can address these losses with high-margin, software-led solutions that scale across borders.
Finally, electric mobility platforms are also gaining traction. Companies deploying electric motorcycles, buses, and battery-swapping networks across cities from Kigali to Lagos have demonstrated how hardware-heavy businesses can still achieve venture-style growth when paired with platform economics and subscription revenue.
A clear playbook for investors
The lesson is not that venture capital has no role in Africa’s clean energy future. It is that its role is specific. VC will not build Africa’s power plants or transmission lines. But it can transform how energy is financed, accessed, optimised, and paid for. The winning models will be asset-light, digital-first, consumer- or data-centric, and capable of scaling across markets.
Africa needs investors who understand where venture models truly exist and who deploy capital with the discipline to match.
Dami Aluko works at the intersection of clean energy, data, investment & technology. Primarily based in the United Kingdom, he helps organisations design smarter grids, scale distributed energy, and unlock climate-tech opportunities. His 10-year energy industry background spans C&I solar, demand-side response innovation, minigrid systems, technical–commercial modelling, smart grid strategy, energy data analytics and project finance for clean energy infrastructure.
