Scaling Clean Energy Innovations in Sub-Saharan Africa: Perspectives from Leading Off-grid Solar Enterprises and Financiers

“To expand energy access and limit global warming, we urgently need to invest in pioneering enterprises that supply clean energy to the continent. To achieve the scale of funding [required], we need innovative financing vehicles that attract diverse investors and lenders with different risk appetites, return preferences, and timelines for investment. Structured finance provides one way to cater to these different preferences,” Lovemore Seveni, Off-grid Energy Specialist, Power Africa

In September 2021, Power Africa and SunFunder, a private sector partner, convened leading off-grid solar enterprises and financiers to discuss ways to accelerate climate investment in Africa, with a focus on using structured finance to scale clean energy innovations.

WATCH: Accelerating Climate Investment in Africa: Using Structured Finance to Scale Clean Energy Innovation

Distributed renewable energy as a climate solution

Lovemore Seveni, Power Africa’s Off-grid Energy Specialist, contextualized the discussion within the long-overdue global effort to slow down and manage the effects of climate change. According to IRENA, 85 percent of global power should be generated by renewables for humanity to avoid the worst effects of climate change.

What is structured finance?

One group of financial tools that can help to scale distributed renewable energy is broadly called “structured finance.”

  1. Based on predictable streams of cash flows from predetermined assets;
  2. Backed by assets that can be isolated and that are used to help repay the facility;
  3. Structured in a way that allocates risks to the entities that are best placed to manage them; and
  4. Designed in a way that is fit for purpose and minimizes the need for continuous fundraising.

Example 1: Using a borrowing base to scale up solar water pumping

Jemimah Kwakye-Fosu, Investment Officer from SunFunder, shared insights on the $11 million syndicated debt facility that SunFunder arranged and invested in for SunCulture, a leading solar water pump provider.

Josephine — a farmer in Kirinyaga County, Kenya.
Josephine is a farmer in Kirinyaga County, Kenya. She purchased a SunCulture solar water pump using the company’s Pay-As-You-Grow financing option. Josephine can now farm more crops and has even added fish to her farm. Learn more about Josephine’s story. Photo Credit: SunCulture

Example 2: Reducing the effort required for fundraising through structured finance for mini-grids

Mini-grids are another way to power productive use technology (e.g., agricultural equipment, cold storage, and power tools) and households.

What can we do together to scale these solutions?

Although the experiences with structured finance for distributed renewable energy have been promising, sub-Saharan Africa needs a broader base of companies and funders to reach its 2030 climate and energy-access goals.

Continuing the conversation

Much remains to be discussed about structured finance and increasing investment in the off-grid energy industry. To this end, Power Africa and SunFunder hosted a follow-up conversation in a Virtual Boardroom at the GOGLA Global Off-Grid Solar Finance Summit in December. We look forward to exploring ways to mobilize climate-related financing for distributed renewable energy while focusing on deploying funds effectively and promptly.

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Power Africa

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A U.S. Government-led partnership that seeks to add 30,000 MW and 60 million electricity connections in sub-Saharan Africa by 2030 > https://bit.ly/2yPx3lJ