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Unlocking public finance for decentralised energy access
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Unlocking public finance for decentralised energy access 1 Sarah Best 2016 Unlocking public finance for decentralised energy access Sarah Best, Senior Researcher, IIED 7 December 2016, IIED Finance Forum
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Transcript of Unlocking public finance for decentralised energy access
Unlocking public finance for decentralised energy access 1
Sarah Best2016
Unlocking public finance for decentralised energy access
Sarah Best, Senior Researcher, IIED7 December 2016, IIED Finance Forum
Unlocking public finance for decentralised energy access 2
Sarah Best2016Outline
1. Who needs finance and for what?
2. International climate finance & decentralised energy
3. Key barriers & solutions
4. Tanzania: Government and development finance for decentralised energy
5. Final thoughts
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Sarah Best2016
1. Who needs finance and for what?
• Energy userse.g. to pay for products, equipment, maintenance
• Energy providerse.g. R&D, feasibility analysis, piloting, buying
inventory, business growth• Financial institutions
e.g. concessional finance to channel to providers, risk guarantees• Governments
e.g. policy, regulatory and market development, capacity-building
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2. International public climate finance for decentralised energy access
Note: Climate finance figures are based analysis of the Climate Funds Update (CFU) database, which covers public finance for all major international climate funds
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Decentralised energy access: climate finance provides 0.2% of additional investment needed
The estimate of USD 23 billion is from World Energy Outlook, IEA 2011
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Sarah Best2016Use of 5.6 bn climate finance for energy – mainly
middle-income countries and utility-scale projects
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Funding instrument: Preference for loans (to utility-scale projects in MICs)
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Sarah Best20163. Key barriers to flow of finance to
decentralised energy access
General barriers (for all finance)• High risks (perceived, actual)• Investor returns and short-termism• Investment size and transaction
costs• Policy and regulatory environment• Shortage of business models or
quality plans• Political preference for large-scale
Climate finance barriersPreference for loans versus grants
Approaches of financial intermediaries
Priorities of funds’ results frameworks
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Sarah Best2016Possible solutions to help channel finance
1. Improve targeting of Climate Funds • Earmark funds for decentralized energy
• Adjust design features — eg risk appetite, results framework
• Get the right balance of loan and grant funding
2. Strengthen national enabling environment• Use public finance to support policy and regulatory reforms
• Strengthen institutions managing climate & energy finance in LICs
3. Channel finance through “aggregators” • Mechanisms to overcome inefficiencies of project-by-project funding, eg
intermediary to pool funds (IDCOL) or aggregate consumers/projects (big data)
• Can provide holistic market-building or business support services
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Sarah Best20164. Tanzania: Gov’t and development
finance for decentralised energy
Current status:~ 15-20% electrification~ 4% access to non-solid fuels for cooking
Government target is to achieve 75 per cent electrification by 2035
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Sarah Best2016Limited Tanzania government funding for
decentralised energy relative to utility-scale
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Sarah Best2016
Development partner energy funding in Tanzania also skewed to large-scale
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Biggest funders of decentralised energy in Tanzania: DfID, AfD, EU and WB
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What’s the decentralised energy access financing gap in Tanzania?
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5. Final thoughts: key public finance priorities for leveraging private sector – or filling gaps
• Reaching domestic providers (companies, NGOs and social enterprises)
• Engaging domestic financing sources (banks, MFIs, savings groups, consumer assets)
• Reaching the poorest people
Mobisol: 80W panel + 3 lights = $46 downpayment + $14/month
Poverty line in TZ = spending < US$17/month
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Sarah Best2016Contacts
Sarah Best, IIED [email protected]
Ben Garside, [email protected]
References
Rai, N, Best, S and Soanes, M (2016) Unlocking climate finance for decentralised energy access. IIED, London.http://pubs.iied.org/16621IIED/
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Sarah Best2016Discussion
1. What are examples and opportunities for ‘aggregation’ to channel finance into lots of small enterprises and projects?
2. How can we address risks associated with financing SMEs, especially domestic SMEs?
3. How can climate finance (international, national, local-level) address finance and other barriers to investing in energy access?
