I have spent more than two decades financing renewable energy projects and providing blended finance to agri-SMEs in Africa.
I have watched as power generation projects increasingly became plain vanilla, providing the stable and predictable cash flows favored by debt providers. At the same time, agriculture financing attracted greater scrutiny due to unpredictable crop yields, climate variability, limited irrigation, uncertain off-take arrangements, small ticket sizes and the practical challenges associated with underwriting smallholder farmer risk.
Even when I structured financing specifically targeting portfolio companies operating at the food-energy-water nexus, they were typically either addressing clean energy access or agricultural yields, not both.
Yet blended finance to develop agrivoltaics — solar panels installed on active farmland — could address four challenges at once: increasing access to clean, reliable and affordable energy for the roughly600 million people across Africa who lack it; boosting agricultural yields to strengthen food security for a region where an estimated300 million people face hunger; optimizing scarce water re-term climate resilience
While agrivoltaics is a promising sector, a real financing gap sits on the agricultural layer underneath the panels. Concessional capital should target crop trials, farmer aggregation and off-take arrangements, not solar assets themselves. If we get that allocation right, Africa will not have to choose between food and energy.
Agrivoltaic projects are financeable today, but the deals must be structured so scarce concessional dollars go where the risk actually sits.
The energy layer no longer needs subsidy
Both grid-connected and off-grid commercial solar in African markets have matured well beyond the pilot stage. Developers have a workable playbook for permitting, procurement and power purchase agreements, and commercial lenders and development finance institutions have financed enough solar capacity on the continent to price risk with reasonable confidence. Layering concessional capital onto the panel itself, at this point, mostly subsidizes a risk that the market already knows how to underwrite. That is capital that could be doing harder work elsewhere in the same deal.
Where the real risk sits
In Kenya and Tanzania, pilot systems place elevated solar panels above active farmland while crops such as maize, Swiss chard and beans continue to grow underneath. The panels feed power to the farm, the grid, mini-grids or commercial buyers.
The harder underwriting questions are agronomic and commercial, not electrical. They include which crop varieties tolerate partial shade in a given microclimate, how yields hold up over a full growing cycle, whether smallholders can be aggregated into a bankable off-take arrangement, and who absorbs the cost of the agronomic trials needed to answer those questions before a lender will commit. That is the layer where a grant or a guarantee does the most good, because it is the layer without an existing track record to price against.
Researchers use the land equivalent ratio, or LER, to describe the combined output of a shared hectare, comparing crop and power yield together against using that land for only one purpose. Published studies on agrivoltaic systems consistently put the LER above 1, several in the range of roughly 1.3 to 1.9, meaning a shared hectare can approach double the value of a single-use hectare. That efficiency case is well established in field trials in Europe and the United States. What is missing in most African markets is site-specific data showing which crops and configurations deliver it locally. That data gap, not the solar engineering, is what will keep lenders on the sidelines.
Structuring the capital stack accordingly
The practical implication for blended finance practitioners is a change in sequencing. Grant funding and technical assistance should go first toward agronomic trials, extension support and farmer aggregation, the work that produces the local yield and revenue data a commercial lender needs to underwrite the agricultural side of the deal. Guarantees can then de-risk the first cohort of loans to local developers and farmer groups. Commercial debt — and increasingly, commercial equity — can follow for the solar component once a project has a credible farming plan attached to it, largely on standard project finance terms.
This is the logic behind the African Agrivoltaics Platform Initiative, launched in April by the C4SAFoundation, the OECD Development Centre, Akademiya2063 and the UN Joint SDG Fund. The initiative’s three working groups, covering evidence and capacity building, project finance and agri-solar business development, point in the same direction: Build the pipeline of bankable projects by fixing the data and capacity gaps on the agricultural side, and let the energy financing follow the pattern the market already trusts.
The call to action
Development finance institutions and foundations sitting on concessional capital earmarked for climate, energy and agriculture projects should ask a specific question before committing to a deal: Is this dollar de-risking the solar generation, or the farming underneath it? If it is the former, that capital is probably better redeployed. The agricultural layer is where a small amount of catalytic capital, spent on trials, aggregation and extension work, can unlock a much larger pool of commercial debt for the energy side.
I suspect this reframing will be useful to other blended finance and development finance professionals who, like me, spent years treating energy and agriculture underwriting as separate disciplines. The opportunity in agrivoltaics is not a new asset class to learn from scratch. It is an old lesson in capital allocation: Put the subsidy where the market cannot yet price the risk on its own, and let commercial capital do the rest.
Ladé A. Araba is Managing Director of Acacia Climate Partners Limited, a specialist advisory firm based in Nairobi, Kenya.
(Disclosure: The author co-chairs the finance working group of the African Agrivoltaics Platform Initiative.)
Guest posts on ImpactAlpha represent the opinions of their authors and do not necessarily reflect the views of ImpactAlpha.
