⚡ ENERGY INEQUITY Archives • The Impact

The Power of Not-For-Profits to Drive Solar Deployments in Africa

Brian Corn — Mon, 21 Feb 2022 05:01:12 +0000

It’s become clear that the road to energy equity and carbon emissions reduction for sub-Saharan Africa runs through broad scale deployment of resilient, off-grid solar systems. We have looked at the ability of international investment via debt financing to cover some of the distance of this journey.

Not-for-profits (industry associations) represent another vehicle tracking significant mileage within the distributed solar space.

Enter GOGLA and AMDA:

GOGLA (Global Off-Grid Lighting Association) is an association focused on off-grid solar products. We spoke with Koen Peters (Executive Director) to better understand GOGLA’s story and impact.

AMDA (Africa Minigrid Developers Association) is a trade association representing minigrid developers in the sub-Saharan Africa region. Joan Chahenza (Director of Energy Access and Financial Advisory) and Emmanuella Ngororano (Communications Associate) provided us with more details regarding AMDA and its impact.

How do associations play a part in African solar?

While international investment plays a critical part in the deployment of distributed solar in sub-Saharan Africa, financial resources are only part of the need. The off-grid market would also profit from policy change, advocacy and other services to improve the overall business climate for these products and help educate market participants. Trade associations focused on the off-grid industry can play this role.

Koen explained that GOGLA’s goal, as “The Voice of the Off-Grid Solar Energy Industry,” is to create a sustainable off-grid solar products market where companies can cultivate self-sufficiency via their own profits and efforts. While he believes in philanthropy, Koen is concerned that such funds, if focused on giving away products rather than building a sustainable market, can dilute the efforts of companies acting responsibly to solve common hurdles in the sector. GOGLA seeks to provide services to complement existing financial resources and thus augment their impact.

GOGLA serves its 200+ members mostly in East Africa and Southeast Asia. Members within the sub-Saharan Africa region are selling 7-8 million products annually. While GOGLA members include some of the biggest players in the sector (d.light, Bboxx, and Greenlight Planet, to name a few), most of their members are significantly smaller in terms of annual revenue. About 85% of industry members report annual revenues less than $5M with 70% reporting annual revenues less than $1M.

Examples of current products promoted by the association are 20 to 50-watt solar panels (compared to traditionally larger panels which are around 300-watt), as well as shoe-box sized and larger batteries to provide storage for night-time energy use. Innovations by members include the integration of mobile devices and IoT-enabled solar panels. This allows for effective and inexpensive payments to be made via mobile banking by customers with little to no prior credit history. This tight integration creates incentives for timely payments, as solar panels can also be turned off via the IoT component, and aligns well with GOGLA’s goal to develop the self-sufficiency of its members.

By comparison, AMDA was founded on a simple, yet bold idea: to unify the private sector, to be able to quickly electrify rural and peri-urban communities using decentralized renewable energy systems. This notion is what brings private sector minigrid developers together. AMDA brings this idea to life through a vision of “universal energy access by 2030 using least cost, fastest technologies.” The organization supports the businesses implementing rural electrification in Sub-Saharan Africa, effectively the operators, who in turn provide reliable electricity to more than 500,000 households and MSMEs in rural and peri-urban communities. Joan characterizes the organization as more of a think tank than a traditional trade association, solving problems on the ground unique to each country. AMDA represents the voice of the minigrid industry, promoting growth and sustainable development of the sector, as well as policies that help scale.

Joan noted that the minigrid space is nascent compared to larger C&I (commercial and industrial) and even home solar systems, and thus requires a legal and financial landscape that enables scale. AMDA’s 39 private minigrid developers across 17 countries are faced with many of the same challenges as solar products companies – lack of regulatory and policy frameworks, lack of flow of concessional financing, and lack of clarity on tariffs.

What are the services offered by these associations?

Koen noted that GOGLA hosts the Global Off-Grid Solar Forum and Exhibition, the premier event for the industry in sub-Saharan Africa. This presents an opportunity for off-grid solar product companies to show off their products, network with potential investors, and learn from others in the industry. This event demonstrates the strong advocacy arm at GOGLA which also works to ensure appropriate, responsible (not heavy handed) regulations are implemented to address product quality standards, performance, and labor protections.

GOGLA also works with funders and investors within the industry to grow commercial finance separate and distinct from impact investment. He noted that the industry is not yet seeing the consistent profits to encourage commercial investment. However, Koen believes his organization’s advocacy efforts, coupled with competent results from smaller members, will turn the tides. This also involves working with governments to understand the correct level of subsidies required to help product companies serve customers.

Joan described the three arms of AMDA – financing; policy and regulation; and data analytics – as the value proposition to its members. On the finance front, AMDA envisions an environment in which long term debt can flow into the minigrid developers space with appropriate de-risking in place. In partnership with other organizations such as the World Bank, the African Development Bank, and several DFIs, AMDA works to promote the flow of concessionary capital which will unlock private capital and enable the minigrid market to scale.

Regarding policy and regulatory impact, Joan described advocating for optimal policies that benefit the minigrid industry and those served by it. Chief among activities here includes AMDA’s efforts to ensure additional subsidies are made available to the minigrid market, as the rural electrification across the globe has always relied on some form of subsidies.

Through deep data analytics, AMDA provides a platform for transparency of data to help highlight and address barriers to minigrid sector growth. For example, AMDA provides an annual benchmarking report which breaks out country-level operation cost differences between utility grid and minigrid. This information helps to educate donors and policy makers on the nuances within the minigrid market.

What are the outcomes of these associations?

Koen noted that the most impactful activity for smaller GOGLA members is the organizing of events for the industry. By comparison, larger members benefit from GOGLA’s advocacy that seeks to ensure proper regulation seeks to ensure proper government regulation.

As GOGLA members can pay as much as $15K per year, Koen sees the number of membership renewals as evidence of the value proposition for the organization to its industry. This represents skin in the game that acts to move the ball forward for all off-grid solar players.

A specific example of an advocacy win was GOGLA’s success, jointly with other market stakeholders, in convincing the Kenyan government to reinstate VAT exemption on renewable energy products to help lower the cost of these products to consumers. Koen also pointed to GOGLA’s efforts during the COVID-19 pandemic to designate off-grid solar as an essential service such that sales agents could service customers as necessary.

Joan noted that AMDA currently serves as the chair of the Mini-Grids Partnership group. AMDA was part of the team supporting and providing responses for the Energy Access Relief Fund to provide the renewable energy sector support during COVID-19. AMDA has also been instrumental in establishing the Universal Energy Facility, managed by Sustainable Energy For All (SEForALL), a results-based finance fund accessible by minigrid deployers across sub-Saharan Africa.

AMDA also joined GOGLA and other organizations in advocating for the same removal of VAT tax on solar products noted previously in this article. In her official statement, Joan said “the VAT exemptions in the 2021 Finance bill will catalyze investments in the renewable energy sector and scale up the solar Minigrid market in the country. These initiatives will contribute to the acceleration of Kenya’s SDG 7, energy access objectives, through the deployment of least cost Minigrid technology.” This reversal also represents an upstream cost reduction for AMDA’s members.

From a big picture perspective, Joan sees AMDA supporting its members’ communities by linking minigrids to productive use which in turn serves to transform socioeconomic status. In particular, she notes how allowing women to earn a livelihood through the access to reliable solar power and products is driving this transformation.

What is next for GOGLA?

Koen noted that the next bi-annual Global Off-Grid Solar Forum and Exhibition is a main focus for GOGLA in the immediate future. This event is of particular importance as the previous event was somewhat interrupted due to COVID-19. The current iteration will take place in Kigali, Rwanda in October 2022.

GOGLA will be issuing its Global Off-Grid Solar Market Report later this year to present sales and impact information for the industry.

Koen pointed to the recent launch of and continued effort to support the Power 1 Billion Lives Compact with its goal of providing clean, reliable energy for 1 billion people by 2030. This initiative supports the SDG 7 goal of “access to affordable, reliable, sustainable and modern energy for all.”

What is next for AMDA?

Joan mentioned that the next benchmarking report for the minigrid developers industry should be available in the next month or so. This report aims to describe the current state of the sector, its opportunities, and challenges to growth, and how it has responded to the global disruptions resulting from the COVID-19 pandemic. It also offers insights for all stakeholders, from minigrid developers to policy makers, that provide guidance on the issues still hindering the sector’s growth, such as consumption, financing, licensing, and support given to new inexperienced developers.

In addition AMDA continues to work with donors and financiers to ensure that there is an increase in the flow of concessionary financing within the mini grid market; per the Mini-Grid Funders Group as of March 2020, only 13% of over $2B allocated to the minigrid market has been disbursed. The flow of concessionary financing is crucial in ensuring scale and in catalyzing and unlocking of private capital within the minigrid market.

AMDA is working closely with governments to ensure regulatory and policy frameworks that embrace portfolio applications which enable a reduction in the amount of time it takes to achieve regulatory compliance.

Finally, AMDA continues to work with financiers and donors to ensure that Viability Gap Funds and results-based financing programs are structured in an optimal manner and are reflective of the realities of minigrid developers in Sub Saharan Africa.

Up Next…

The next article in this series will focus on local companies addressing the long tail of the distributed solar industry in sub-Saharan Africa and how they are making an impact to reduce carbon emissions and improve the state of energy inequity.

About The Author

Brian Corn

Contributor @ The Impact

Brian most recently served as the CTO / CPO for PlanIT Impact, a SaaS platform focused on maximizing building resource (energy, water and stormwater) to cost performance for architects, engineers, and construction professionals (AEC) as well as building owners / operators. A life long advocate for climate change and environmentalism, his journey began most profoundly with the publishing of Al Gore’s “An Inconvenient Truth” and its subsequent activity culminating in the Live Earth concert. Since that pivotal event, Brian has followed climate change research closely with a particular interesting in environmental impacts, such as rising sea levels, shrinking biodiversity and deforestation. Currently, he is very interested in US-based efforts to drive consumer electrification, and the policy changes that need to occur to affect both supply and demand of renewables. Brian holds a BS in Computer Science from Trinity University and an MBA from University of Missouri-Kansas City Bloch School of Business.

The post The Power of Not-For-Profits to Drive Solar Deployments in Africa appeared first on The Impact.

Debt Financing Via International Investment

Brian Corn — Mon, 31 Jan 2022 04:07:07 +0000

For Africa to truly decarbonize and elevate their energy poverty, there must be significant international investment to develop resilient, off-grid solar systems. Financing projects in sub-Saharan Africa – where these resilient, off-grid solar systems can have the greatest impact – is a complex topic.

One of the most popular mechanisms for financing and enabling these solar projects to go live in Africa is debt financing.

Enter Trine & SunFunder:

Trine is a Swedish-based financing company whose mission is to “give people a triple return on investment – earn a profit while making a social and environmental impact.” Trine has been focused on driving impact in sub-Saharan Africa since 2015. We spoke to Cristoffer Falsen (Founder & Head of Investment) and Emma Andersson (Communications Manager) from Trine.

SunFunder is a financing company with offices in Kenya, the UK, and France “dedicated to solving climate change and energy access.” SunFunder has been hard at work on these goals since 2012 and focused on the sub-Saharan Africa region. We spoke to Nico Tyabji (Head of Strategic Partnerships) from SunFunder.

Why international investment in African solar?

After the investment bust of Cleantech 1.0 – where nearly $25B was plowed into cleantech startups from 2006-2011 – there were still organizations that believed in the promise of cleantech solutions. These organizations needed a better way to model the returns they would see on their investments.

This seems to be the genesis of the debt financing approach – perhaps less risky than equity to the impact investors, and easier to navigate from a financial perspective in local sub-Saharan Africa economies.

Cristoffer and his fellow founders at Trine were working on the premise that “alternative” investing at the intersection of solar and sustainability would be key to success. They looked at regions with the greatest need that were best suited for unique financing.

Ultimately, Trine determined that East Africa, with its openness to foreign investment paired with its early adoption of residential distributed solar systems, was a perfect market.

This represented a different level of scale, far below that of utilities (typically 20+ MW), and certainly underserved. Debt financing could play a role in servicing micro-loans to meet the need.

SunFunder, being a mission-driven organization, realized early on that 1.2B people in Africa were living off-grid, with that number increasing.

While there were some early solar startups in play, they had minimal access to equity or debt financing. They were too small for international banks, and their potential customers were unable to acquire loans from local banks to purchase their products.

Nico spoke about how the “efficiency revolution” complemented the fall in solar and storage costs a decade ago. The early off-grid solar pioneers built distribution models around these technology drivers, but struggled to find debt financing to scale up their businesses. This drove SunFunder’s founders to develop its crowdfunding financing solution in 2013, the first platform for off-grid solar. The “efficiency revolution”, as per Nico, is where reduced solar costs, reduced storage costs, and increased efficiency of small, solar-powered devices are being advanced due to the demand for smaller system footprints driven by the lower purchasing power of the people of sub-Saharan Africa.

To these ends, the initial model for SunFunder was focused on providing loans for solar home systems (SHS) via crowdfunded investments, but then soon moved onto launching larger fund investment opportunities as those companies needed more capital.

What is the investment and project mix today?

Trine still has about 80% of its solar portfolio in sub-Saharan Africa. However, they are beginning to shift to more productive use – typically in the commercial and industrial sectors – where greater climate and social impact is expected.

About three years ago, Trine decided to begin shifting into larger-scale projects to increase their impact and speed up the energy transition.

Consider that Nigeria, which has the highest GDP in Africa, still obtains 50% of its energy from diesel. Christoffer explained that while Trine’s previous investment mix sought to replace candles, flashlights, and perpetual darkness with solar, they now seek to replace diesel gensets with solar. This shift enriches local communities by moving more people further up the energy ladder.

SunFunder continues to focus on residential systems, but is now seeing some early traction with products like solar irrigation pumps.

In addition, Nico noted that the company has launched a new fund, the Gigaton Fund, with a goal of making more than 130 clean energy investments. By tapping into the power of development financial institutions (DFIs), such as DFC, SunFunder is setting itself up for handling private institutions providing for larger sized projects.

They are approaching the tipping point at which larger institutions are willing to consider these investments due to positive track records, better risk mitigation through organizations such as SIDA, and more attractive, bigger ticket projects.

What are the outcomes of these investments?

A unique quality of solar systems is the inherent data collection capability. This allowed Trine to develop their own technology infrastructure to collect this information in real-time to track actual outcomes (usage, consumption, payment data, etc.) and thus measure impact.

To make the successful shift into larger-scale projects, Trine is working to update this data collection infrastructure. The investment in sub-Saharan Africa has created somewhat of a virtuous circle for Trine with the following outcomes as of this writing:

Over 549K tons of CO2E avoided
Nearly 2.6 million people with new electricity
Over €63M invested
Nearly €33M repaid
Over 12K investors

SunFunder has experienced similar successes:

Over 750K tons of CO2E are avoided annually
Nearly 10 million people impacted through investments
Over $162M closed
Over 50 investors from institutional and impact
57 investees

In addition, Nico also spoke to the promising shift happening amongst the poorest of the poor in these regions newly touched by solar. Instead of spending money on the worst fuels, they are putting money down to fund micro-payments against solar systems.

This shift effectively attacks climate change, energy inequity and inadequate personal financial profiles all at the same time. He sees local banks benefiting from the international investment and building their own competencies in financing some of these projects. SunFunder has subsequently launched an advisory consultancy to help scale up these companies.

What is next for Trine?

Trine has set a goal of achieving €1B under management through the shift into the commercial and industrial sectors. They hope to continue to build upon their track record by demonstrating the long-term stability of their debt financing model and its success as a high-impact investment.

What is next for SunFunder?

With the previously noted Gigaton Fund, SunFunder aims “to catalyze over a gigaton of GHG reductions, help vulnerable communities avoid and adapt to the worst effects of climate change, and impact over 100 million people with improved access to energy”. Nico also believes that eMobility may prove to be one of the next verticals for SunFunder investments in sub-Saharan Africa.

Up Next…

The next article in this series will contrast this deep dive into the world of debt financing via international investment with not-for-profits seeking to address these same climate change and energy inequity challenges via distributed solar deployments.

About The Author

Brian Corn

Contributor @ The Impact

The post Debt Financing Via International Investment appeared first on The Impact.

How African Solar Addresses Energy Inequity

Brian Corn — Mon, 20 Dec 2021 16:53:04 +0000

Community solar may not seem like an energy source with enough ground shaking force to make an impactful dent in the goal to reach net zero emissions. However, with scale comes strength. As of the end of Q2 2021, there was an estimated 3.4GW of community solar installed and available in the US. While this only represents roughly 0.77% of America’s energy consumption in 2020, that’s enough stand-alone power to supply 600,000 homes.

For those unfamiliar, the U.S. Department of Energy defines community solar as “any solar project or purchasing program, within a geographic area, in which the benefits of a solar project flow to multiple customers such as individuals, businesses, nonprofits, and other groups. In most cases, customers are benefitting from energy generated by solar panels at an off-site array.”

Essentially, having the wrong type of roof, a suboptimal azimuth, or a hundred-year-old oak tree shading the bulk of one’s roof no longer prevents homeowners – or renters who have no home to benefit from local solar – from leveraging solar energy to offset coal and other carbon-intense fuel sources for electricity.

Talking with Sanjiv Sanghavi, former Chief Product Officer with Arcadia, regarding the current state of community solar, he believes the technology obstacles have been largely overcome for this form of renewables.

Sanghavi sees the current challenge as one of “dispersion” or distribution of these technologies. This requires successfully navigating a combination of policy shift, consumer education, financial infrastructure acumen, and regional differences. Community solar providers have largely broken down these barriers for the domestic market through utility bill credits, behind the scenes handling of billing integration, and pre-selling in appropriate markets. As a result, the drive to build sufficient community solar to power five million homes in the US by 2025 will address over 3% of current housing stock or 6% of homes ineligible for local solar.

What about the global impact of and need for community solar? What are the unique hurdles and what are the potential rewards? In this first article of this series, we’re going to begin a deep dive into sub-Saharan Africa and the impact of community and off-grid solar. This is a part of the world in which current energy demands (350 kWh per person) are roughly one-tenth those of the worldwide average.

The Need to Address Energy Inequity

In sub-Saharan Africa, two-thirds of people persist without access to grid electricity. This represents more than half of the population of Africa and approximately 9% of the global population. Lack of grid access impacts quality of life, health, education and economic activities. Access to more reliable home refrigeration via off-grid solar products maintains the quality of medicines and over-the-counter health care items. Similar products can be used to provide extended lighting into the evening to allow children and adults to study and further their education and potential. Keep in mind that in those homes without grid access, the fuel comes from kerosene, candles, torches and even dung. This leads to additional health risks and contributes to GHG emissions. So, finding ways to provide increasingly clean and reliable energy has a holistic impact on the people in this region.

3 Key Off-Grid / Microgrid Solar Approaches

Unlike community solar in the US, which requires a grid connection to bestow its benefits, sub-Saharan Africa requires solutions that are independent of their highly unreliable electric grid. Community/microgrid solar and off-grid solar can help these countries most in need. It provides a pathway to true social justice in climate change as it helps to elevate both the quality of life and economic outcomes for these communities.

As it relates to dispersion tactics, there are three basic approaches in play that we will discuss in this series:

Foreign investment in African off-grid solar start-ups to support scale.
Not-for-profits creating clearinghouses for off-grid solar products for direct marketing to consumers.
Private African companies working to provide off-grid solar products directly to consumers within a specific country.

There is a more complex fourth option that involves foreign companies installing, owning and operating large-scale solar plants on behalf of utilities. Unfortunately, this option requires stable grid access, so it does not address the two-thirds of sub-Saharan Africa considered here.

For Africa to truly decarbonize their electric grid, it’s going to require a rebuild with resilient, off-grid solar systems. Because their grid is still developing, we’re currently in a unique time frame where there’s enough of an open canvas left for foreign investments to leave a bright mark.

About The Author

Brian Corn

Contributor @ The Impact

The post How African Solar Addresses Energy Inequity appeared first on The Impact.