25 Replies Latest reply: Aug 22, 2014 11:39 AM by sossougadoss RSS

    E-Discussion #3 - Innovative financing for rural electrification: where to find money?

    1231309 C4D Extraordinaire

      This discussion will serve as a platform to share new ideas for financing off-grid energy projects. The specific schedule and questions for each week are as following:


      Week 1: Innovative financing for rural energy projects: Do you have any examples of rural energy projects (or are you aware of any cases) which have used an innovative financing method? Please share them here.


      Week 2: Crowd-funding for renewable / rural energy projects: Can crowd-funding play a role in financing renewable/rural energy? If yes, please share your thoughts/experiences on the potential business models for such projects?


      Week 3: Crowd-funding for Telecom-Energy business models for off-grid electrification : barriers and solutions: What are the potential challenges that Telecom -Energy Business models could face in using crowdsourcing? How to address these challenges in practice?

        • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
          C4D Enthusiast

          Dear all,

          Welcome to the e-discussion on innovative financing for rural electrification. Following our London conference, this e-discussion will continue the journey of sharing.

          During week 1, you are encouraged to share your knowledge/good practices/ lessons/ and other insights on innovative financing for rural energy projects. During week two, we will focus specifically on one innovative financing mechanism: crowd-funding and its potential for RE/EA.  Within RE/EA, we are expected to hear stories of  how crowd-funding has/ could potentially being employed for different project types. During week 3, based on the discussions from the first 2 weeks, we will map the potential of crowd-funding for telecom-energy business model (ABC model) and discuss the potential collaborations among members in this forum.

          We are looking forward to hearing all your stories and insights soon.

          Enjoy

          Xiaochen

          • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
            C4D Enthusiast

            Yann,

            given the lack of discussion on this topic, can I suggest you broaden your question? The London conference showed us the scale of the problem in financing rural power and demonstrated how little financing is available. We are all aware that only Private financing has the scale sufficient to actually meet the goals of Sustainable Energy for All. But with a very few small exceptions, private equity sees this sector as having essentially no track record, and it also comes with a high perceived country risk. Rural power to date has been seen as a charitable "gift"and investors are as yet skeptical of the new business models being put forward (and tested) by a few entrepreneurial companies, many of which were highlighted at the conference.

             

            I would suggest that the first stream of discussion should be:

            Does any one know of any sources for finance (open today or in the near future) which will consider investing or funding projects in our space? What has the IFC got available, Rockefeller Institute, EU, UN, AfDB, Bill and Melinda Gates Foundation, Government aid organisations (DfID (UK) USAid in America, Giz in Germany etc)...? Who attended the closed session on investment in London and what are their criteria for investment? It surely doesn't matter whether the funding is innovative or conventional. Just what is available and how does one apply? Surely our moderators could each start with a list of known funding bodies and confirm on the web-sites which of the funding mechanisms could have a role to play for the telecom-energy initiative  The discussion group will then chip in with the one's we have missed!!

             

            The second strand should be:

            What are the minimum requirements for private sector investors to invest? Minimum length of track record. Minimum length of time in operation for the company and/or number of profitable quarters, years? min/max size of the company (assets/income?) and min/max size of investment available...What is the minimum return over how many years needed to cover their perceived risks?

             

            The third strand can then be:

            Given what is available, and the targets necessary to bring in the private equity, what funding is necessary to close the gap? be specific: Size of funding, interest rates we can support; pay-back times, need for repayment/interest payment holidays, etc. Also any supporting financial structures: insurance, currency exchange guarantees, loan guarantees, etc. these should be valued. i.e. how much can one afford for currency exchange guarantees (0.5%, 1%, 2%, 5%, 10%?)

             

            Hopefully this will determine, what is available; what is needed by the investors and the project developers and identify any gaps. Once we have understood the gaps, perhaps new funding models will come forward....

             

            It seems to me you have chosen your solution (crowd-funding) without determining whether that is indeed the solution, whether it is available and whether it will meet the needs. Broaden your scope, since the responses are rather thin on the ground. Yes I appreciate it is the Spring / Easter holiday season....So happy holidays to all....

             

            Alastair Livesey

            • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
              C4D Enthusiast

              Listening in to some of the discussions at the London conference many voiced the concern of not having enough high quality projects to support. This is the same discussion that took place during my four years in southern africa working in the RE/access/rural electrification space. As mentioned by amongst others Ajay Narayanan (IFC) and Gail Warrander (DFID) in their closing remarks finance exist but we haven't managed to match existing finance with high quality sustainable businesses. Making big nimble and bridging the pioneer gap is something we haven't really figured out yet. In that perspective the discussion around new financing mechanisms and business models to scale up sustainable energy for all is very important.

               

              Ajay Narayanan, Head, Global Financial Markets, IFC

               

              Gail Warrander Private Sector Development Adviser, Climate Change Finance, DFID, UK

               

              • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
                C4D Enthusiast

                Hello everyone,

                 

                Financing is a large topic and as pointed out above there is both a lack of financing (that can be accessed quickly) and high quality business models (that can absorb the higher level of capital and meet the risk profiles of more conventional investors).

                 

                I would like to hear the moderators/experts view on the "Pioneer Gap" identified in the Acumen/Monitor report "from Blueprint to Scale" and also the different funding requirements identified in the IFC's "from Gap to Opportunity"?

                 

                We will be launching our (small) challenge fund at the beginning of June with the intention to spur innovation and help to accelerate the number of trials in the sector. With the support of the UK Government ESCOs and MNOs will be able to access up to £350k per grant (total fund size of £2.4M) as part of our new Mobile Enabled Community Services programme. 

                  • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
                    C4D Explorer

                    Hello Mary

                     

                    Thanks very much for calling attention to the Acumen/Monitor Report “From Blueprint to Scale”, which states that philanthropy, particularly “Enterprise
                    Philanthropy”, is required to create more impact investing opportunities for energy and other sectors.  The report indicates that Enterprise Philanthropy is needed to deal with the “Pioneer Gap”, which limits the creation of new enterprises that could benefit the Base of the Pyramid.  The Pioneer Gap results from financing requirements during the four stages of pioneer firm development identified by the report including: Blueprint, Validate, Prepare and Scale.  Such financing requirements are typically not met by private sector capital, including impact capital, especially during the Blueprint and Validate stages, due to high perceived risk.

                     

                    The report makes very valid arguments to which I generally agree.  It further notes that venture capital cannot be counted on to meet the Pioneer Gap, since prospective financial returns would not be acceptable to such investors and, as such, Enterprise Philanthropy is required.

                     

                    There may be another source of capital for the Pioneer Gap, as well.  Forms of supply-chain financing could be used to help enterprises during this period.  Companies that manufacture energy products for the Base of the Pyramid could provide resources to help start-up local distributors: a) create capacity, b) grow market demand and c) prove business models that allow more traditonal capital, including impact capital to be sourced.  I believe this is covered in the IFC Report “From Gap to Opportunity”.  It would be helpful if someone close to that report could help expand on this financing alternative.

                     

                    Best

                    Tim Hassett

                     

                      • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
                        C4D Enthusiast

                        Hi Tim,

                         

                        thanks for the response. I am wondering who can actually fill the Pioneer Gap and how quickly can the venture philanthropy dollars be raised?  What can the bank do to support this effort?

                          • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
                            ceibssinger C4D Enthusiast

                            Good day all, and I am pleased to be one of the moderators to this E-discussion. 

                             

                            I just returned from a week in Uganda and while quite pleased to learn of the numerous funding vehicles in the market for energy access, much of it focused on small scale project preparation (both on and off grid), I am still as frustrated as Karin Anna Maria Lerner and Mary Roach on the fact that we
                            continue to hear the complaint on the “lack of high quality projects”  and the absence of “bankable” enterprises.   

                             

                            With the large amounts of public capital, primarily ODA, and philanthrophy that is stated to be committed to the energy access space, how come it’s not finding its way to fill the Pioneer Gap?  And why is there still such an absence of bankable renewable energy projects when there are a plethora of project prep facilities in the market?

                             

                            My response isn’t complicated: We are not connecting the dots and public/philanthropic capital is too risk averse. 

                             

                            On just one aspect…..there is a disconnect between the TA provided to entrepreneurs and first in, early stage capital to enable a roll out their business, to get the first solar home systems, lanterns, LPG cylinders or cookstoves into the market.  The innovation of E+Co way back in 1994 was to combine the enterprise development services and the start- up capital – not to work with an entrepreneur or project sponsor on a business and investment plan and then have to shop (or beg) for the first slug of capital.  E+Co's early years were funded by "enterprise philanthrophy" from innovators including the Rockefeller Foundation, the UN Foundation and the Lemelson Foundation, with concessional, high risk support from the MIF at IADB, and resulted in the launch of globally recognized energy enterprises including SELCO, Toyola and TecnoSol. 

                             

                            There are interesting models out there: the Shell Foundation partnered with OFID to establish a revolving working capital facility that would allow d.light, the pioneering solar lighting manufacturer, to extend credit and skills support to promising distributors in Kenya, Tanzania, and Nigeria. This model exceeded ambitious sales targets by over 130%.  A scaled up version of this approach -for multiple African solar lighting manufacturers and for cookstoves - is under consideration.   An early stage energy access equity fund for enterprises and projects is being promoted for East Africa that would have a TA/project prep
                            window and take higher risk, early stage positions. 

                             

                            My point is, there could be increased efficiency of public, higher risk funds if the TA/business development services and early stage monies were strategically and tactically linked, thereby accelerating the ability of these opportunities to be bankable, or said another way, to de-risk them for the private sector. 

                             

                            And then there are the local banks….even with donor funded lines of credit “in the bank,” the deals don’t close.  Yet we all know that universal
                            energy access can’t be funded if the domestic capital markets sit on the sidelines.  

                             

                            I invite discussants to share with us: What innovations are out there to incentivize local FIs to lend to energy SMEs (which to lenders are double trouble – they are that risky SME AND they are serving that high risk, lower income, often rural population).  How do we get local banks to offer longer tenors for mini-grids?  Can we design a Take Out facility for performing loans in year 5?  How can we develop project finance champions in local banks?  There are so many local
                            FI “capacity building programs” out there……which ones are working to institutionalize project finance within domestic capital markets (while not
                            energy specific, this is the focus of the UNCDF’s Local Finance Initiative).

                             

                            One of the hoped for outcomes of SE4All is the mapping of the multitude of programs in the opt-in countries, and a more efficient alignment across the finance continuum.  Let's hope for it.

                             

                             

                             

                              • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
                                C4D Enthusiast

                                Dear Anna, Tim, Mary,  Christine and all

                                The discussions have been really interesting. As many have pointed out, though the focus of this round of e-discussion is on financing, financing related challenges lie throughout the circle of value change.There is "lack of financing in general", there is "lack of business models", there is "lack of projects", there is "lack of bankability", there is "lack of risk-taking financing arrangements", there is "lack of engagement of local FIs" ... I am sure that many of the members will be able to add  many more items to this list.  Please feel free to do so.

                                Two months ago, I was in a Transatlantic Energy Governance Dialogues conference. The discussions were very interesting. Many of the issues that we have raised here were shared during the conference as well. It seems to me that we can take this conversation as a part of a broader diagnostic process which is ongoing globally. As some initial results have been included in this conversation, perhaps, this is a good time to share as a group "what to do and how to do it".

                                Allow me to share some of the practices which I am aware of which may shed lights to the discussion. However, it is you who should judge whether they are good/bad/useful/useless practices.

                                Project identification: This has everything to do with capabity building. Only when local institutions/individuls are able to participate/prepare projects idea notes/concept can a quality pool of projects be presented to the international community both public and private. Many organizations are offering such capacity building program. One examples is a program from Univerfsity of Twente's short course on CDM Proposal development. They have built capacity in more than hundreds of individuals from all continents for project development. UNCCLearning is also helping countries developing their national climate change learning strategy. Under such strategies, such capacity can be built with the help from international community. WBI is also making great efforts along this line. I am now in Malawi delivering a Leadership for Climate Change program. Such capacity demand was reconfirmed in the workshop. Last year, after we delivered Carbon Finance workshop in Malawi, many of the participants expressed that such efforts would greatly enhance their ability to convert business into concrete projects in the future. In addition, many donors/IOs have delivered energy related projects/programs in developing countries. However, these projects/programs are on a 3/5 or 7 years basis. After the projects/programs have completed, some piloted projects/ideas just stopped without being scaled up. If such assets can be picked up or reemployed/supported by other donors/IOs, it would dramatically reduce project identification costs for everyone who share the same mission in these countries.

                                Business models: WBG's incubation of the ABC model could be regarded as one of the efforts along this line. Of course, we need business models at all levels. During the conference, Allison shared with you of Earthspark's experience. In Malawi, a business model on engaging local FIs for project co-financing is on-going. Some results might be shared in the future. One IADB's initiative is particular interesting in this regard. This initiative is applying regional proposal competition to incubate business models. Some initial results have been very positive. Since I am in Malawi, I am not able to access the documents kindly shared by the IADB colleague. But if they see this post, I am sure they will be happy to share more in details.

                                Local FIs Engagement: Internet here is really not reliable. I lost several paragraphs for this session. Now I just make it short. For local FLs engagement, I would like to share three practices which might be interesting for the members of this group.  Engaging Large FIs: IFC China Utility Based Energy Efficiency Finance Program (several local banks are incentivized to financing EE through this program); Engaging Micro-finance institutions: Kiva has great story to tell. I will leave this to the Kiva experts; Engaging SME and connect them with local FLs: IFC has several initiatives in this regard. I will leave this to IFC colleagues.

                                Best

                                Xiaochen

                                  • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
                                    C4D Explorer

                                    Thanks Xiaochen,

                                     

                                    In addition to reiewing potential supply-chain financing alternatives, noted in my last comment, crowdfunding may be another way to help fill the pioneer gap, especially for renewable energy projects designed for the Base of the Pyramid.  Below, I am sharing a note offered during a "Striking Poverty" discussion on a similar topic.

                                     

                                    Organizations such as Kiva, MyC4 and Babyloan have shown the viability of crowdfunding in support of financial inclusion. These organizations and others like them allow individuals to participate for small amounts in loans to borrowers for many different purposes. A paper prepared for the 2011 Microcredit Summit entitled Indirect P2P Platforms provides an overview of the sector.

                                     

                                    Household renewable energy products, including solar lighting kits and biodigesters, are becoming more important in microfinance, since loans can often be repaid by the borrower’s avoided cost of alternative energy such as kerosene. Crowdsourcing funds for such microfinance loans can provide numerous advantages, including cost and risk tolerance.

                                     

                                    Certain crowdsourcing sites do not charge interest to their local microfinance field partners, who source and vet borrowers and handle loan processing. Crowdsourcing sites may, in certain cases, link the repayment of loans to the actual repayment by the local borrower, thereby providing a form of credit insurance to their field partners. The cost advantage and risk tolerance provided by certain crowdsourcing platforms can allow for greater innovation by microfinance field partners who seek to expand their relationship with borrowers through new products such as renewable energy applications.

                                     

                                    While the actual crowdsourced capital is a clear benefit to renewable energy access, an even more significant impact could be that this form of capital is used to demonstrate the effectiveness and credit profile for these products so that more traditional forms of capital are applied to scale renewable energy access.

                                     

                                     

                                     

                                     

                                      • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
                                        C4D Enthusiast

                                        Crowdfunding certainly offers interesting opportunities to expand the financing available in very early stage of devleopment (pioneer gap). It desaggregates the risk in that it spreads the risk over a number of investors - and aggregates available small pots of finance that in a traditional case would have posed too high transaction costs to process. The concept of crowdfunding has existed for many years but with the rise of social media and interconnectedness it offers a completely new opportunity.

                                         

                                        IDB is working with Massolutions to finalize a market assessment report for CF in the Latin American & Caribbean region. InfoDev of the WB is completing a similar assessment but global in its geographic coverage together with Crowdfunding Capital Advisors. Both reports are expected to be released in May/June.

                                         

                                        I've uploaded a workshop report summarizing discussions we've had at the bank regarding the applications of CF in WB projects. World Bank - Crowdfunding Workshop Summary LR - Reboot.pdf I'd be interested to hear from project developers how you see the potential of CF if you've already moved beyond the need for 'smaller' pots of risk taking capital that traditional CF offers (Kiva.org, GlobalGiving, Crowdfunder, Idea.me., etc). Investment CF along the lines of Solar Mosaic is a story in itself I guess. Your reactions are much appreciated.

                                         


                                          • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
                                            C4D Explorer

                                            Hi Karin et al.,

                                             

                                            It's hard to add meaningfully to this very rich discussion.

                                             

                                            EarthSpark is walking down the funding path on two levels, both for social enterprise models expanding energy access in Haiti. Our small-scale PV and efficient cookstove retail work started in 2009, and we have been able to expand with a blend of institutional (UNEP,) philanthropic (corporate, foundations, and individual,) social/soft debt (Deutsche Bank Americas Foundation,) and most recently small-scale crowdfunded debt through Kiva.org. (You can see our clean energy entrepreneur Kiva loans here.)

                                             

                                            With a multi-year track record, established relationships, and a near-term path to financial self-sufficiency, the retail side of our work is scaling.

                                             

                                            The more recent addition to our portfolio, microgrid development, has the potential to bring higher levels of energy access to rural Haiti, but funding is more complicated. We started working in earnest on microgrid development in 2011. Thanks to good luck, good timing, a good reputation, extensive application writing, a generous and collaborative telco, and some generous individuals within funding organizations, we were able to get seed funding (from UNEP and National Geographic) for a tiny demonstration prepay microgrid which we turned on in Nov 2012.

                                             

                                            EarthSpark has done extensive market research, technical development, community engagement, grid modeling, and financial projections for microgrid development in Haiti. Sure, we could use some capacity building, but right now the biggest help would be clarity – on what the regulatory environment is and will be (we are working with various high-level actors in the government already. The World Bank could play a very helpful supporting role based on best practice knowledge from other countries, funding for local government staff) and clarity on what hoops we need to jump through to secure institutional financing. We have engaged with multiple private sector investors who have appeared quite interested, but the reality is that they perceive a new business model in a rural BOP market under changing political/regulatory circumstances as too risky for their money. Here too we could use help from big organizations designing signposts and clear pathways to getting into an energy access funding pipeline.

                                             

                                            The reality of running a social enterprise to serve BOP markets is challenging. The reality of funding it is crazy.

                                             

                                            On the crowdfunding side, I see enormous opportunity, and I’m anxious to figure out how to do microgrid project finance through online platforms (as has been mentioned above – existing elements of Kiva, prosper.com, Solar Mosaic, Sun Funder, kickstarter and others.)

                                             

                                            There is also a risk to this space in crowdfunding. Bad projects with good hype that get funded at best waste money and at worst spoil the brand of Sustainable Energy for All. Much as Lighting Africa (and it’s follow-on orgs) created clarity in the space of off-grid PV lighting, there could be a role for the Bank or another development organization to vet (or created principles of vetting) energy access projects that are to be posted on crowdfunding sites.

                                             

                                            I look forward to the continued discussion. Thank you for hosting!

                                            Allison

                                             

                                          • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
                                            C4D Explorer

                                            Crowdfunding can fill a gap for startup entrepreneurs who need $20,000 - $50,000 for their first inventory.  Unfortunately, for many enterprises there will still be a gap of $100,000 - $200,000 for working capital for the first and second year of operations.    We see a need for a crowd-funding mechanism at the $100,000 - $200,000 level as well.   And, we see a need for DFIs, impact investors and local banks to accept more risk and embrace the investment opportunity that exists with these clean energy entrepreneurs and their businesses. 


                                            I’m just joined the Collaboration for Development so I’m late to this thought-provoking discussion.  I agree with all the comments regarding connecting the dots.   We find there isn’t a shortage of entrepreneurial capacity; there are thousands of successful small businesses all over the world.  There is a lack of clean energy businesses. 

                                            I’m a co-founder of Embark Energy;  we have a holistic business model  to alleviate energy poverty: (1) training and coaching clean energy entrepreneurs, (2) connecting them to finance and (3) providing them with a vetted network of product suppliers.   We are working with our first group of clean energy entrepreneurs in Tanzania. 

                                            We work with entrepreneurs who want to expand their product choices to include clean energy products and we work with entrepreneurs who want to start new clean energy businesses.  To accelerate clean energy business development, we believe an intermediary is needed to assist entrepreneurs in developing business models and business plans for presentation to investors.  They need coaching on how to translate their business idea, vision and passion to a bankable business plan.  A coach or facilitator is needed to connect the entrepreneur (and his/her plan) with the investor.   

                                            I hope we can continue the “connect the dots” discussion.   

                                             

                                             

                                        • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
                                          C4D Enthusiast

                                          Hi Christine - I fully agree with the need for equity funds from capital sources with a sustainable development mandate for seed and early growth phase businesses entering into the rural electrification segment. 

                                           

                                          Following on a succesful EUR 600k early stage "development equity" round (entirely from private capital sources), my company, Redavia, just starting to raise 3-5 Mln USD "asset equity" for rental solar power plant infrastructure deployments in Africa and Mongolia. (Pls let me know if you know of potentially interested investors we should talk to!)

                                           

                                          Generally, my sense is that there are many small-scale "donor type" programs (foundation, NGOs, etc. up to a few mln USD per grant, often very specific area of application) and quite a few large-scale project debt providers (IDBs, etc.). That made a lot of sense when distributed generation was a tiny segment and large, centralized power plants were the only economic solution. But today, neither of these financing pools no longer match the project market, because the "donor type" financing can't scale up with the (now economic and growing) renewables, and large scale project finance is not well suited to distributed energy generation model (small projects, riskier offtakers). Hence, (in my view) the twin complaints of "no bankable projects" and "no available finance".

                                           

                                          The solution, in my view, is more flexibility, both operationally and financially. Operationally, my company mitigates off-taker risk, by using it's redeployable solar farms and by pooling many offtakers,. Financially, Redavia would benefit from a deeper developing country equity market, more mezzanine financing, and more speed in coming to funding decisions. The traditional $100mln+, doubly guaranteed, widely-syndicated project finance package that was used for huge IPP coal-fired power plants doesn't fit with most renewables rural electrification projects. With the smaller sizes of these projects, businesses need to find smaller equity chunks more often and more quickly (for example, in a programmatic way) for the project development business model to make sense.

                                           

                                          I know of several recent funding initiatives fit this new capital need, but I also think it's an ongoing process which should be accelerated. Any ideas welcome.

                                           

                                          In any case, I'll keep you posted on our success in raising our USD 3-5 mln for remote rental solar farms:-)!

                                          • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
                                            C4D Explorer

                                            Greetings all,

                                             

                                            I wanted to share an idea that I think addresses some of Christine's comments on strategically and tactically linking early stage financing with business development services, as well as other comments throughout this discussion on connecting the dots, speeding up financing decisions, strengthening business models, and bringing on more local and private sector investors.

                                             

                                            My idea is a network of energy innovation incubators in regions where rural and off-grid electrification solutions are needed. The idea is perhaps grandiose, but it could start small -- i.e., one incubator in one region -- and scale up. The concept combines A) entrepreneurs and project developers, B) experts providing business advisory services, and C) local and external financiers. Entrepreneurs benefit from their proximity to other project developers as well as the guidance of the business advisory services. Entrepreneurs and project developers at the incubator could also provide strategies and advice to each other, following a model similar to Village Capital. Financiers benefit by having an aggregated source of less risky, more bankable energy companies that have "graduated" from the incubator with solid business models and operations plans. The incubators themselves could be financed initially through grants and "patient capital," but could also retain an equity stake in any company that graduates from their program. The "network" component would simply entail virtually linking together the incubators in a particular region, through a "collaboration" platform (like this World Bank C4D).

                                             

                                            Startup incubators in developing countries exist already (see, for example: "10 African Innovation Incubators to Watch") and offer models that could serve as examples. The energy innovation incubators could even collocate within these and other existing incubators to reduce initial capital costs.

                                             

                                            It's just an idea, and admittedly a bit "hand-wavy," but the general concept addresses many of the points raised in this excellent discussion.

                                             

                                            My apologies for posting this so late - I attended the London Investor's Conference in March, but am just now toggling back to this discussion as I participate in this group's A-B-C Business Model Discussion #4.

                                    • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
                                      C4D Enthusiast

                                      Interesting discussion indeed.

                                       

                                      While I agree on the continuous capacity building need and the urgency to get local commercial banks to get involved I can't help to think that we've said the same for over 10 years now. I arrived in Mozambique the first time in 2004 and was involved in capacity building courses for local commercial finance institutions to help them better understand the risk and financial structure of renewable energy loans. I then spent 4 years in a cookstove project working to secure PoA for the voluntary carbon market and have attended numerous training for cookstove / RE entrepreneurs, policy makers, investors related to carbon finance, carbon project development and registration. This is not to say we shouldn't do this anymore, but as Christine Eibs Singer points out - the dots are not connected.

                                       

                                      On reason for the weak performance of recent years capacity building programs and awareness raising around bankability of RE projects can be that the ones choosing the participants for the training are not always using the right criteria. Secondly, this majority of the organizations offering this type of support/TA is very risk averse - and often have more targets and criteria that they will be evaluated on than "successful scale up of business ideas amongst training participants". Without throwing stones in a glass-house I believe multilateral/bilateral donors have to think about our selection processes. If we would operate more like business incubators/accelerators in our search and due diligence perhaps the successful scale-up rate would be higher (not to say we should provide incubation/acceleration TA/activities, that is still best done by the actual incubators/accelerators).

                                       

                                      I've been looking a bit at crowdfunding lately. SunFunder is deploying an interesting concept using crowdfunding (free money in a sense) to provide cheap financing to solar developers in off-grid remote areas. This way of financing decentralized energy systems is attractive since its agile, fairly cheap (I believe they are still only a handful people working in the start-up and operating a online crowdfunding platform requires a lot less physical investments and overheads as operating a traditional 'non-for-profit'/NGO. How could crowdfunding scale up renewable energy finance? Could it bridge the pioneer gap? Perhaps in combination with more risk-avers philanthropy financing or multilaterals?

                                       

                                        • Re: E-Discussion #3 - Innovative financing for rural electrification: where to find money?
                                          C4D Connoisseur

                                          Folks, I've read all the postings, and I wonder if I'm missing any discussion on the concept of Universal Service Fund so brilliantly used in the US to achieve 100% telephony penetration in the early part of the 20th century. It involved cross subsidizing rural telephony penetration - inherently uneconomical because you have to string cable to low population densities - by charging a small fee for urban customers toward making it happen.

                                           

                                          Rural electrification has the same challenge, .... except that this is no longer the case, thanks to emerging off-grid solutions. Just like wireless revolutionized telephony, "off-grid" has revolutionized electricity.

                                           

                                          Two corollaries follow: 1. We need public policy focus on rural electrification that is not the mere extension of transmission and distribution (as unfortunately India is doing), and 2. We need microgrids that are commercially viable for given population clusters, and such population clusters need to be rank ordered. Business plans can be based on such demographics.

                                           

                                          Unfortunately, microgrids are not as basic as solar panels with dc powered light bulbs, cell phone chargers, and batteries, as is mostly in the news and quasi-government reports. Microgrids are multiple generation sources combined optimally - solar, microwind, micro hydro, biogas, diesel generators, batteries, whatever is available locally - to deliver robust, reliable power. Not all communities will qualify for such systems in the beginning, but such systems are the principal need. Lawrence Berkeley Labs, National Renewable Energy Labs, KEMA ... have designed such micro grids and some have been deployed for campus applications, though not for rural areas. 

                                           

                                          Both these require upfront, policy-supported investment, and yes, that means the state's involvement. If I were the Indian prime minister, I would focus on this and scrap the absurd Rajiv Gandhi Vidyutikaran Yogana that essentially expands the reach of a loss, theft, and political gift-giving prone transmission and distribution network. A better organizational form to accomplish rural electrification is to encourage cooperatives such as Amul - involved in milk- and expand their scope to include electricity.

                                           

                                          My conclusion is this: With off grid solutions, we have 100% electrification, reliable and robust, within our grasp, except that the political will and vision is missing. This is not a financing challenge, it is a political challenge. It might also be an administrative challenge - the people with the right techno-managerial profile probably don't exist in government administrative structures.