Bridging Africa’s renewable energy and climate finance gap: A case study of the GERD financing model

Africa’s renewable energy future is full of promise but unlocking it has remained one of the continent’s most significant developmental challenges. From sunlit plains to mighty rivers and windy corridors, Africa is naturally endowed with clean energy resources, but developing these resources has proven to be a Sisyphean task.

According to the International Energy Agency, though 20% of the world’s population resides in Africa, only about 3% of global energy investment flows into the region.  Consequently, around 600 million Africans, approximately 43% of the continent’s population, lack access to electricity. This represents 80% of the global energy access gap. 

Efforts to bridge this wide access gap are further exacerbated by the high cost of energy infrastructure development in Africa. The capital expenditure (CAPEX) for deploying mini grids in Sub-Saharan Africa is more than double the global average. As of 2024, CAPEX in Africa was $6,824 per kWp, compared to the global benchmark of $3,000 per kWp.  What this invariably signals is simple: energy development is capital-intensive, especially for renewable energy.

For years, Africa’s progress in renewable energy has been held back by limited access to concessional financing and a heavy reliance on external partners whose priorities often differ from the continent’s. The Grand Ethiopian Renaissance Dam (GERD) breaks that mould. This landmark, home‑grown hydroelectric project shows what is possible when a nation leverages its own resources, mobilises public will, and taps into diaspora support to close the financing gap and strengthen climate sovereignty.

What is GERD?

The GERD, built on the Blue Nile in Ethiopia’s Benishangul‑Gumuz region, is now the largest hydroelectric power plant in Africa. With a capacity of over 5,000 megawatts (≈5.15 GW), the dam has already begun producing electricity since 2022 and is expected to eventually double Ethiopia’s power output. Its total cost is estimated at about US$5 billion, a substantial investment, representing over 3% of Ethiopia’s 2023 GDP. However, beyond producing electricity, the dam is a statement of national ambition and energy independence.

Sustainability and GERD

Outside its technical scale, the GERD’s sustainability approach reflects a mix of progress and persistent challenges across social, economic, and environmental dimensions. To manage the social impacts of the project, Ethiopia implemented resettlement programmes, stakeholder engagement platforms, and grievance mechanisms. Its environmental management measures include watershed and sediment management to maintain reservoir capacity.

These steps have strengthened energy security and improved the dam's economic prospects; however, concerns remain about transboundary water governance and equitable resource allocation. Limited consensus on operational rules and data-sharing around the dam’s operations also continues to strain trust among the riparian states . This underscores the need for large-scale renewable projects to navigate complex trade-offs among infrastructure ambitions, inclusive development, and ecological integrity.

GERD Financing Model

The GERD financing model emerged from bold, unconventional thinking in response to the complex diplomatic and geopolitical challenges surrounding the dam’s construction. Unlike many similar projects in Africa, which rely heavily on external debt or foreign aid, GERD was financed almost entirely through domestic financing. Key components included the following:

1. Government and public sector finance: The Commercial Bank of Ethiopia (CBE) provided a considerable part of the funding, approximately about 91% of the financing.

2. Bonds-issued to citizens: Ethiopians bought “Renaissance Bonds”, including both interest‑bearing and non‑interest‑bearing versions.

3. Civil service contributions: Civil servants contributed a fixed portion of their monthly salary to the project.

4. Diaspora contributions: Ethiopians abroad bought bonds, gave gifts, and invested via formal bond sales. The Commercial Bank of Ethiopia introduced the ItsMyDam mobile app and the MyGERD app by the Ethiopian Electric Power (EEP), in collaboration with private-sector partners, as digital platforms to mobilise international financial support for the GERD, especially from the Ethiopian diaspora.

5. Volunteer donations: Volunteer donations and grassroots fundraising played a major role in creating public ownership of the project. To raise money, herders voluntarily sold their livestock, and schoolchildren even dropped spare coins. These small acts added up to significant sums. In the 2024/25 Ethiopian fiscal year alone, public contributions reached 1.7 billion birr (about $30 million) and surpassed the annual fundraising target by 7%.

Implications & lessons for renewable energy and climate finance

The GERD financing model offers several lessons on bridging Africa’s climate finance gap:

1. National ownership builds legitimacy: Essentially, when a country takes the initiative to fund and lead its own renewable energy project, as Ethiopia did with GERD, it strengthens public trust, political support, and national pride. These are strong indicators that can attract complementary capital and mobilise blended finance. 

2. Diversified domestic financing reduces risk: Multiple internal sources can spread financial risk and reduce dependency on volatile foreign aid or loans. In 2025, the U.S. government dismantled USAID, a move that cut off up to 90% of foreign aid contracts and froze billions in funding, putting the development projects of aid-dependent African countries under pressure.

3. Diaspora as a financial and advocacy powerhouse: Ethiopians living abroad not only contributed financially but also championed the project on the global stage; proof that diaspora communities can be strategic assets when effectively engaged. Across the continent, this potential is enormous: an estimated 200 million people of African descent live outside Africa, forming a sizeable and financially mobile demographic. In 2025 alone, the African diaspora sent over $100 billion in remittances, surpassing foreign direct investment (FDI) and official development assistance (ODA) in many countries.  This underscores the diaspora’s capacity to help bridge Africa’s climate finance gap.

4. Scale of public participation matters: The GERD project mobilised millions of Ethiopians, civil servants, farmers and even schoolchildren, which created a sense of collective ownership. The camaraderie this generated granted it the social license to operate, enhanced accountability, and deepened resilience over the 14 years it took to complete the project.

5. Transparency and credible institutions are key: Ethiopia’s approach to mobilising domestic climate finance for GERD relied heavily on public confidence in government commitment and in institutions such as the Commercial Bank of Ethiopia (CBE) and Ethiopian Electric Power (EEP). These entities played a central role in managing the funds and signalling accountability.

An illustrative moment occurred in March 2024, when a technical glitch at CBE allowed customers to withdraw amounts exceeding their account balances. Remarkably, over 15,000 Ethiopians returned approximately $14 million, around 80% of the funds involved.  While this does not erase broader governance and capacity challenges, it highlights a level of public trust and civic responsibility that enabled Ethiopia to raise domestic resources for GERD.

Conclusion

The Grand Ethiopian Renaissance Dam shows what is possible when a country mobilises its own resources, engages its people, and adopts innovative financing. Ethiopia’s experience is not without challenges, but it shifts the conversation and affirms that Africa can take a leading role in financing its green transition.

To make this a reality at scale, countries will need transparent governance, strong institutions, and inclusive financing models, supported by global partnerships to close the gaps.

Forvis Mazars helps organisations navigate complex sustainability challenges with solutions that go beyond compliance. We provide integrated services in environmental and social risk management, climate finance advisory, ESG strategy, and sustainability reporting.

Author 

Isaac Emmanuel, Senior Consultant, Sustainability Services and Elizabeth Ocheibi, Partner, Sustainability Services