Finance for Energy Access
Globally 1.2 billion people currently lack access to electricity and 800 million people lack access to reliable power. Clean energy access is crucial in supporting key development goals associated with income generation, health, education, gender equality, and environmental protection among others (Walters et al. 2015).In order to provide global, universal energy access by 2030—a key goal of the UN Sustainable Energy for All Initiative (SE4ALL)—new and additional financial investment is needed. The IEA estimates that a 400% increase from current annual investment levels is required to support universal access by 2030. Further, the IEA highlights the critical need for private sources to support this increased investment, as public sources are unlikely to fill the gap (IEA 2011). Therefore, designing and implementing effective finance mobilization policies, approaches and mechanisms is critical to supporting improved energy access (Desjardins et al. 2014).
Off-grid distributed generation frequently provides the most cost-effective option to scale up energy access, as many populations without power are located in rural areas far from the national grid. Common distributed generation technologies include household energy systems and mini-grids, which may or may not be connected to the central electricity grid (CEM 2015). Mini-grids can provide energy access to communities and small groups of residential and commercial end users and can be powered by a variety of renewable energy sources including solar, wind, hydropower, biomass and conventional sources such as diesel. Responding to energy demand from customers with lower levels of energy consumption is often best achieved with distributed generation supported by battery storage systems (Franz et al. 2014, Walters et al. 2015).
Ensure an Effective Enabling Policy Environment to Support Expanded Investment for Energy Access
The public sector can lay the groundwork for investment in energy access through implementing various foundational policies. Key policies and actions can be organized around high level planning and coordination, regulation, and enabling the business environment.
- Planning and Coordination: Effective planning and coordination is essential in providing a foundation for strong policy design and includes: development of strong and clear electrification plans including both grid-extension and off-grid strategies, coordination across key sectoral entities (energy, finance, development, environment, water, etc.), and alignment with national development goals.
- Regulation: Regulations should be designed to enable private investment and can include: effective tariff structures, strong and clear interconnection policies, and streamlined permitting and licensing processes, among others.
- Business-enabling Policies and Actions: Finally the public sector can facilitate energy access by enabling private sector interventions through supportive policies towards large and small to medium sized enterprises and domestic financial institutions (e.g., savings and credit cooperatives and micro-finance institutions); permitting and designing effective business-enabling mechanisms such as power purchase agreements, concession contracts and schemes, grants and subsidies, concessional loans and risk mitigation instruments, and by facilitating reliable access to mobile services and business model flexibility to support , pay as you go services, lease schemes, and community partnerships, etc. (Franz et al. 2014; Walters et al. 2015).
Build Capacity to Support Sustainable Energy Access Markets
Strengthening the capacity of various energy access stakeholders is often essential in supporting successful outcomes. Key capacity building activities may include training various entities such as: domestic financial institutions to lessen risk perception associated with distributed generation technologies and unlock finance for them, entrepreneurs in designing viable business models and proposals, communities in supporting mini-grid systems, technicians in operating and maintaining energy systems, and the public more broadly on the benefits and basics of energy access technologies (Franz et al. 2014; Walters et al. 2015).
- Walters, Terri, Neha Rai, Sean Esterly, Sadie Cox, and Tim Reber. 2015. AMADER Competitive Bidding Process for Mini-grid Development in “Policies to Spur Energy Access.” Golden, CO: National Renewable Energy Laboratory.
- Community-based Support for Hybrid Wind-PV-diesel Mini-grids (Adapted from EUEI Partnership Dialogue Facility 2014).
- Biomass-PV Mini-grid Support (Adapted from EUEI Partnership Dialogue Facility 2014).
Technical Assistance Examples
Clean Energy Ministerial. 2015. “Pathways for Clean Energy Access.”
Desjardins, Simon, Richard Gomes, Pradeep Pursnani, and Chris West. 2014. “Accelerating Access to Energy: Lessons Learned from Efforts to Build Inclusive Energy Markets in Developing Countries.” The Shell Foundation.
Franz, Michael, Nico Peterschmidt, Michael Rohrer, and Bozhil Kodev. 2014. “Minigrid Policy Toolkit: Policy and Business Frameworks for Successful Minigrid Roll-outs.” Africa-EU Renewable Energy Cooperation Programme (RECP) and the European Union Energy Initiative Partnership Dialogue Facility (EUEI PDF). Eschborn, Germany.
IEA (International Energy Agency). 2011. “Energy for All: Financing Access for the Poor.” Special early excerpt of the World Energy Outlook 2011.
Walters, Terri, Sean Esterly, Sadie Cox, Tim Reber, and Neha Rai. 2015. “Policies to Spur Energy Access.” Golden, CO: National Renewable Energy Laboratory.”
Guay, Justin, Carl Pope, Jigar Shah, and Stewart Craine. 2014. “Expanding Energy Access beyond the Grid: Five Principles for Designing Off-Grid and Minigrid Policy.” San Francisco: Sierra Club.
Hande, Harish, and Surabhi Rajagopal. 2015. “Effective Leapfrogging to Decentralised Energy Access.” Global Energy Affairs.
Wilson, Emma, Neha Rai, and Sara Best. 2014. “Sharing the Load: Public and Private Sector Roles in Financing Pro-Poor Energy Access.” London: International Institute for Environment and Development.