When drought cuts hydropower generation, who pays the price – and how can we protect them before the next shock?
Across Eastern and Southern Africa, hydropower supports economies and essential services. Yet many utilities lack financial protection against climate-driven revenue losses. When generation falls, the consequences reach far beyond the power station: higher electricity costs, pressure on public budgets, and disruption for businesses and households.
At the CDRFI Africa Forum, the Agence Française de Développement (AFD) launched a new paper through their Integrated Disaster Risk Management Alliance (IDRIMA) with the Insurance Development Forum (IDF). This Brief for Action sets out how parametric insurance can provide rapid liquidity when pre-agreed climate or hydrological thresholds are reached, helping utilities manage revenue shortfalls and reducing pressure on public finances and electricity tariffs.
The paper explores:
- How revenue protection can complement investment in resilient infrastructure and energy diversification.
- The potential for regional risk pooling to expand access to protection.
- Practical steps for utilities, ministries, regulators and development banks to move from risk awareness to insurance readiness.
Through risk assessment, solution design and placement, IDRIMA brings development finance and insurance expertise together to help public institutions put protection in place. The report presents case studies and invites Ministries of Finance in Africa and beyond, to integrate parametric energy risk transfer into national disaster risk financing strategies, and to consider pre-arranged cover for critical infrastructure alongside reserves and contingent credit.
