Well-designed Results-Based Financing (RBF) for mini-grids will accelerate access to electricity for 600 million people in Africa, and unlock significant private capital, according to a group of investors during the Africa Energy Forum.
The energy and impact investors with over $2.0 billion under management voiced confidence in renewable energy mini-grids as a key solution to ending energy poverty in Africa.
The investors have more than 100 mini-grids built or under development.
They urged governments and multilateral and bilateral donors to create a unified RBF mechanism to immediately mobilise private capital, both debt and equity.
“We believe mini-grids have a role to play in achieving universal electrification, and we have the types of capital needed for mini-grid financing alongside well-designed RBFs,” said the investors.
“We stand ready to work with donors and governments to help design effective RBF programmes that will unlock our capital.
“We therefore strongly encourage donors and governments to support effective RBF programmes that subsidise rural connections.”
The news follows a statement issued by the International Energy Agency (IEA) stating that mini-grids and other decentralised renewable solutions are the lowest-cost option for bringing electricity to three-quarters of the global population living without energy access.
IEA estimates that up to 200,000 mini-grids are needed, with the potential to meet the energy needs of 450 million people, most of them in Africa.
The notion was supported by the findings of a report by McKinsey which highlighted that the benchmark cost for rural grid connections is $2,300 per connection, whereas rural mini-grids serving 100+ connections are typically around $1,000.
“We believe those subsidies will decline over time as the business model and technology continues to improve with scale, just as they did for wind and solar.
“Adding that achieving universal electrification today is going to require less subsidy than at any time previously” because new technology and business models emerging from private sector companies are improving the economics.”
The investors are Acumen, Blue Haven Initiative, Ceniarth, CrossBoundary Energy Access, DOB Equity, ENGIE Powercorner, Hoegh Capital Partners, KawiSafi Ventures, Renewable Energy Performance Platform (REPP), responsAbility, SunFunder and Triodos Investment Management .