Bridging the gap: how inclusive finance boosts access to off-grid energy

Feb 26, 2019

Source/author : International Institute for Environment and Development & Hivos

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Off-grid solutions can be designed to provide affordable electricity to poor communities in hard-to-reach areas but receive only a fraction of annual global investment in energy provision. Governments hoping to harness these technologies to achieve Sustainable Development Goal 7 — universal access to energy by 2030 — must therefore find new ways to attract more finance. Drawing on research in Nepal and Bangladesh, this briefing shows how policymakers, financiers, civil society and the private sector can leverage ‘inclusive’ financing models to unlock the private investment needed to provide off-grid systems to marginalised communities and bridge the energy access gap.

Technologies that provide people with energy without being connected to a main electricity grid are known as ‘off-grid energy’ solutions. Examples include solar home systems (SHS), local mini-grids and solar irrigation pumps. Such systems could play a big role in helping to achieve Sustainable Development Goal 7 (SDG7): sustainable energy for all by 2030.

There are encouraging signs: in the five years to 2016, the number of people served by off-grid renewable energy increased six-fold to 133 million, mostly via solar lighting and SHS. But even this rapid growth is not increasing quickly enough to meet SDG7. The main problem is a lack of financing. One promising response would be to make much more widespread use of a range of ‘inclusive’ financial instruments. These mechanisms are designed to bring off-grid energy to the kinds of poorer and most remote communities that tend to be excluded by traditional financing arrangements.

Tracking financial flows to off-grid electrification

Recent data helps to put the rapid pace — and limitations — of the growth of off-grid energy into context. Financial commitments for off-grid electrification solutions, including mini-grid technologies, rose to US$380 million from US$210 million in the two years to 2016 in 20 high-impact countries monitored by Sustainable Energy for All (SEforALL). Nevertheless, these flows still only accounted for 1.3% of total tracked financing for electricity. They are clearly nowhere near enough to achieve SDG7: the International Energy Agency projects that meeting that goal will require an annual investment of about US$52 billion from 2017–2030 — with about a quarter going to off-grid solutions such as SHS, and just over 40% to mini-grids.

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