Capital access for clean energy
businesses in Africa
LCEDN, London 24/25 June 2013
Large infrastructure is less critical to closing
the universal energy access gap
How the energy access gap will
be closed. Africa (IEA)
Offgrid
On-grid
Mini-grid
Conventional approach won’t solve most of the
energy access challenge
How the energy access gap will
be closed. Africa (IEA)
Asset types:
Domestic scale solar,
diesel, wind
Capital;
SME early stage equity,
growth capital, inventory /
working cap/consumer
credit finance,
Mostly private
Asset types:
Regional interconnectors,
50MW-1GW+ power
stations, grid extensions, etc
Offgrid
Capital;
On-grid
Mini-grid
Asset types:
50kW to 2MW hydro/solar/wind/AD/gasifier/biomass plus
local distribution
Capital;
Asset/project finance/SME & project development equity.
Mostly private, some public/NGO support
Public, national
governments, ODA, MDBs.
Not much private
Comparing LCOE of various electrification options
30km 3 per km
US$ per kWh
1.500
Diesel $1.50/l
1.000
1700 kWh /m2/yr
Diesel $1.50/l
$330 40Wp
Diesel $0.70/l
0.500
$260 40Wp
2600 kWh /m2/yr
1 Km 100 per km
High
Low
Grid
Solar PV
extension mini-grid
1.579
0.714
0.132
0.467
Diesel $0.70/l
PV/diesel
Solar
hybrid
home
Diesel
mini-grid system mini-grid
0.738
0.695
1.237
0.463
0.585
0.633
Source: NORPLAN 2012. Cost competitiveness of rural electrification solutions
There are as many different types of capital need in
RE as there are in any other sector
Capital need
Examples
Early stage project development
Cane-to-ethanol plus IPP in Belize needs to spend
$200k developing its $200m investment case
Project construction
$1-7m capex for a series of 0.3-3MW small hydro
facilities in Tanzania & Rwanda
Product / technology development
$400k for innovative concentrated solar PV
configuration component development, Kenya
Proof of concept trialling
$200k for trial establishment of a mingrid powered by
a 30kW maize cob gasifier in Haiti
Growth capital
$1m for a pay-as-you-go solar home systems rollout,
Rwanda
Working capital – inventory
$250k for a solar lantern distributor to replenish its
supply chain from Asia to rural Tanzania & Kenya
Working capital – consumer
$300k for credit to a portfolio of schools buying
improved cookstoves in Uganda
Public capital can support private participation
in most types of capital need
Capital need
Private capital – challenges
Public funding - role
Early stage project
development
• High risk – “a punt”
• Cost share, with or without
upside interest
Project construction
• Expected returns?
• Some risks hard to assess
• Capital grant or revenue subsidy
(FiT supplement)
Product /technology
development
• Very thin early stage equity/VC
markets
• Cost share, with or without
upside interest
Proof of concept
trialling
• Very thin early stage equity/VC
markets
• Cost share, with or without
upside interest
Growth capital
• Shallow equity market
• Debt mkt appetite for RE sme’s
• Seed/cornerstone , new funds
• Credit support for debt markets
Working capital –
inventory
• Debt mkt appetite for RE sme’s
• Credit support for debt markets
Working capital –
consumer
• Debt mkt appetite for RE sme’s
• Credit support for debt markets
Challenges for DFIs in small scale renewable
projects
• Aggregation
How to aggregate up the deal flow into something that is manageable?
• Integration
How to create an integrated approach that tackles all aspects of the
problem?
• Allocation
What process for deciding which business/project to allocate
capital/resources to?
• Risk
How to balance the financial objectives of the DFI and the “pioneering”
objective of the intervention?