< Back to insights hub

Article

Betting on battery storage: Africa’s growing BESS market 15 June 2026

This article was co-written with Caroline Still (Head of South Africa at Aurora Energy Research). Contributions were also provided by WFW London Trainee Vanessa Tsao.

A current key discussion point in the renewable energy market is the potential for battery energy storage systems (“BESS projects”) across the globe. One area of particular interest in this conversation is the potential for BESS assets in Africa.

Currently, Africa has 28 BESS projects over 50 MWh. The growth of installed capacity of BESS in Africa could be as high as 700% between 2025 and 2030 according to market intelligence firm Rho Motion’s BESS Forecast. South Africa is leading the way here not only by the number of projects (both operational and in the pipeline) but by the capacity of those projects as well.

The drivers for this growth include:

  • increasing access to electricity;
  • BESS as a natural complement to intermittent renewable energy assets;
  • the growing need for grid stability services in Africa as renewable penetration rises and as aging synchronous thermal generation decommissions in some regions;
  • the short timeframes and limited construction risk required to build a BESS project;
  • reducing prices of BESS supply contracts (particularly from the Chinese market);
  • the value of off-grid or mini-grid solutions in supplying electricity in localised areas, or to mining sites, in Africa; and
  • the increasing appetite of certain governments across Africa to facilitate the BESS market through regulatory reform and energy market structures.

It is an area of significant interest to developers, investors and – indeed – BESS suppliers; and developers are projecting internal rate of returns in the low to mid-teens which makes it an attractive investment proposition.

"These African power market reforms will be critical for unlocking Africa’s renewable resource potential and attracting the scale of private capital needed to meet Africa’s growing demand and offset the aging (or lack of) thermal generation."

Trends and opportunities

Structuring African power markets

African power markets are following a broadly similar reform path, though at different speeds: from vertically integrated state utilities to unbundling and competitive IPP procurement, and eventually to launching energy exchanges, capacity markets and ancillary services. Regional pools like SAPP and EAPP are looking to facilitate cross-border trade which will then reduce the need for country-level reserve margins and improve system efficiency across the region. These African power market reforms will be critical for unlocking Africa’s renewable resource potential and attracting the scale of private capital needed to meet Africa’s growing demand and offset the aging (or lack of) thermal generation.

BESS has a crucial role to play at each stage of this market evolution, with the route to market shifting as Africa power markets develop.

  • for early-stage or off-grid projects BESS can be deployed as part of hybrid mini-grid solutions, supplying reliable electricity to communities or industrial users, particularly mines, that sit beyond the reach of the main grid;
  • as IPP frameworks mature, BESS can be co-located with renewable generation, either behind the generator’s meter or behind the offtaker’s meter, to firm output and maximise the value of hard-won grid connections;
  • in markets with maturing and independent system operators (“SO”), BESS assets can be contracted on fixed capacity payments (derisking developer deployment) and provide grid firming and balancing services or security of supply services. For these contracts, the BESS dispatch can be controlled by the SO or by the developer, depending on the market;
  • in the most developed market structures BESS can participate as a flexible asset in a liquid energy exchange, capturing energy arbitrage margins alongside capacity market revenues and ancillary service revenues, and directly supporting the integration of variable renewable generation.

< Back to insights hub

Key contacts

"The maturation of African energy markets is therefore not just a precondition for renewables deployment. It is the mechanism through which BESS can reach its full commercial potential on the continent."

The maturation of African energy markets is therefore not just a precondition for renewables deployment. It is the mechanism through which BESS can reach its full commercial potential on the continent.

Click on the image to view fullscreen. 

The need for BESS assets in Africa

African electricity demand is set to grow substantially over the next decades, buoyed by population and GDP growth as well as demand for critical minerals. Unlike Europe or the Middle East, most of sub-Saharan Africa has limited developed gas infrastructure and the economics and timelines of developing it are prohibitive relative to the urgency of the supply gap. Renewables are therefore the most credible route to closing the deficit.

The constraint of renewables, however, is intermittency. Pairing renewable generation with BESS substantially addresses this: storage can shift generation from peak production to peak demand, provide stability services and provide rampable (but duration limited) security of supply. Renewables-plus-storage gets materially closer to firm generation at a cost and timeline that gas cannot currently match across most African markets.

South Africa illustrates the point. With installed coal capacity scheduled to fall from approximately 40GW today to 26GW by 2035, and peak demand expected to rise from 30GW to 40GW over the same period, the country faces a firm supply deficit of up to 14GW by the mid-2030s. Gas-to-power ambitions (11GW of combined-cycle gas turbine (“CCGT”) capacity by 2035) remain largely unsecured and are constrained by domestic gas supply. The shortfall will therefore need to be met principally by renewables, firmed by BESS.

Chinese involvement

The highly competitive cost of both solar PV modules and batteries made in China is a key factor in the widespread solar-plus-battery installations. Most of Sub-Saharan Africa saw solar PV module prices drop by 66% between 2022-2024 due to the expansion of production capabilities in China. Solar panel imports also rose 60% in the 12 months preceding June 2025 to a record 15 GW. Accordingly, the Chinese supply chain is already at the heart of solar expansion in Africa and the same will be true for BESS expansion in Africa.

This is the same as we have seen in Europe; solar and BESS growth have been driven by the reducing cost, widespread availability, scalability and reliability of the Chinese supply chain to deliver for major renewable energy projects.

"As the BESS market in Africa matures, the routes to market available to developers are broadening."

Regularising offtake structures

As the BESS market in Africa matures, the routes to market available to developers are broadening. At present, the most common structures are off-grid or behind the meter solutions. But as markets liberalise, we expect to see increased merchant exposure alongside a blend of contracted capacity market and ancillary revenues.

To support project financing in markets where diversified revenue stacks are available, the industry has developed contractual structures that reallocate merchant risk between developer and offtaker. Three structures are commonly seen:

  • fixed price tolling agreements: the offtaker pays the developer a pre-determined contract price in return for full dispatch rights over the asset, capturing all arbitrage and ancillary revenue. The developer’s revenue is fully fixed; the offtaker takes the market risk;
  • floor agreements (with profit sharing or cap and floor): the developer receives a pre-determined floor price plus a share of market revenues above it, with the upside potentially capped. The offtaker retains dispatch rights and the residual market revenue. Risk is shared; and
  • financial hedges (top/bottom spread swaps or day-ahead swaps): the developer keeps dispatch rights and receives a pre-determined contract price, with a floating payment based on realised spreads. The offtaker takes a financial position without operating the asset.

The availability of tolling and floor structures has been a key enabler of BESS project financing in Europe, APAC and the Americas, and the same logic applies in Africa: a credible contracted revenue floor is the prerequisite for commercial debt. As African energy markets develop and merchant revenue stacks deepen, the sophistication of these offtake instruments will follow.

Challenges

Regulatory complexities

Scaling BESS projects in Africa can be complex due to a lack of clear regulation.

Firstly, the absence of liquid spot markets means energy trading revenue is not yet available, limiting current routes to market to behind-the-meter solutions and government-contracted capacity. Secondly, in several African markets BESS assets are treated as both ‘demand’ and ‘supply’ for the purposes of grid charging, attracting network charges at both the import and export ends of their operation and eroding the business case (a common artifact in many power markets globally). Both will need to be addressed for BESS to reach scale.

However, certain jurisdictions are implementing more favourable frameworks.

South Africa

  • South Africa is established in this field with its Battery Energy Storage Independent Power Producer Procurement Programme (“BESIPPPP”) which procures BESS capacity from independent power producers (“IPPs”). Three rounds of bidding have occurred to date, each with specific parameters laid out to guide project development such as: capacity targets, site requirements, technical specifications, contract structure, operational parameters and requirements for ‘local content’ (domestic manufacturing and construction participation). The structured approach ensures clarity for investors and developers, with streamlined permitting processes and tax incentives for renewables investors, thus attracting many private developers to bid each time.

Morocco

  • Meanwhile, Morocco has gradually shifted its regulatory framework to encourage investment in BESS projects over the past two decades. Morocco opened the market to private-sector participation in renewable energy production, fine-tuned laws and regulations to provide further clarity, and most recently established a framework for self-consumption/BTM projects which allow individuals and entities to generate their own renewable power on-site. By outlining rules for grid access and the sale of any electricity back to the grid, Morocco is creating an investor-friendly climate for renewable and BESS projects.

Engaging with the demands of the BESS market is a trend we are seeing by regulators across Africa as this asset class gains more traction and engagement by investors, banks, and governments as a key solution in the Africa energy mix. Such regulatory certainty will be critical to BESS expansion across Africa.

"Our view is that BESS assets in Africa are only likely to become more and more bankable as an asset class."

Financing

Financing remains a top challenge for energy projects in Africa. Power projects in Africa still generally face higher financing costs than other regions. Low credit ratings, higher risk perceptions of investing in emerging markets like macro-volatility of currencies and geopolitical instability are all contributing factors.

Our view is that BESS assets in Africa are only likely to become more and more bankable as an asset class. Europe is leading the way in structuring a bankable model for BESS assets that banks can understand and analyse.

The key themes to create a bankable BESS asset include:

  • contracting a portion of your offtake through Tolling Agreements (comparable to a Power Purchase Agreement (“PPA”)) or Floor Agreements, or – if available – a government-backed capacity contract, such that banks can lend on the premise of guaranteed revenue streams;
  • a multi-contract construction model for BESS assets, now widely accepted, whereby the BESS supplier and balance of plant contractor(s) can be managed and interfaced by the developer. This means a full wrap EPC is not essential, which helps drive down cost from a procurement perspective; and
  • a suite of solutions for over-cycling/degradation risk and protection of the BESS warranties including through cash sweeps, covenants, information undertakings and protections in the offtake arrangements;

•  this addresses the differing incentives between a developer and lender with respect to a BESS asset. Developers will want to maximise short term upside even if this has the potential to reduce the longer-term lifespan of the BESS asset. (For example, developers can accept reducing the BESS asset life by a few months if the benefit is doubling revenues in the first year.) But lenders want stable revenue streams to repay their debt and need the BESS asset to retain its life in line with its full warranted protections. This divergence of incentives is always a crucial bankability issue on any BESS financing, but there are now plenty of solutions.

Although there will always be specific challenges in relation to each African jurisdiction, this rapid increase in BESS financings in Europe will facilitate the process in Africa as banks and their advisors (including us) will have seen and addressed many of the typical challenges on previous transactions.

Geopolitical pressures and supply chain issues

As noted, the supply chain in the BESS market is becoming increasingly robust. However, global pressures, including the conflict in the Middle East, are currently driving two trends: (i) higher prices for BESS raw materials (e.g. lithium); and (ii) requirements by the supply chain to mitigate geopolitical risk through their contractual terms.

This means the market is seeing the supply chain insist on reopeners in their contracts to accommodate for volatile lithium pricing and increased costs due to geopolitical events. There will also be pricing reopeners for material regulatory changes, which – in an African context – creates additional political risk.

There are solutions to all these issues of potential pricing reopeners, and the market is aware of these risks. Typical fixes include hedging, insurance products (including, in an African context, guarantees to backstop political risk) and risk sharing arrangements that ensure the suppliers and developer take an appropriate portion of risk. But these geopolitical and pricing pressures will always be key negotiation points for developers, investors, banks and contractors to carefully analyse in their approach to BESS projects.

Conclusion

The case for BESS in Africa is structural: growing demand, limited gas, ageing baseload, abundant solar and wind. The question is pace rather than direction. Falling technology costs, a deep Chinese supply chain, growing lender familiarity with BESS as an asset class, and structured procurement frameworks in leading markets are all in place. The jurisdictions that move first to create supportive regulatory and market conditions will attract disproportionate capital, and the opportunity for developers, investors and their advisors is to position now for a market that is moving quickly from emerging to established.

< Back to insights hub

Key contacts

Follow us on