ARE initiatives on Finance Access

1. ARE initiatives on Finance Access
21 Sep 2015, Milan
Source:FRES
David Lecoque, ARE Policy and Business Development Officer
Workshop: “Innovative
Finance for Access to Energy”

2. Agenda
2
1. Introduction to ARE
2. Rural Electrification Markets: Stabilizers and main challenges
3. OFID- ARE Cooperation: Risk mitigation crucial for upscaling
4. Conclusions

3. ARE: Who we are, what we do (1/2)
3
Please see www.ruralalec.org
• International business association representing the
decentralised energy sector working towards the
integration of renewables into rural electrification
markets in developing and emerging countries
• Enabling improved energy access through business
development support for more than 90 members
along the whole value chain for off-grid technologies
by targeted advocacy and facilitating access to
international and regional funding
• Global platform for sharing success stories and best
practices to provide for rapid implementation of
available RE technologies in order to effectively
advance access to energy and services
• Created in 2006 by companies and pioneers with
decades-long experiences

4. ARE: Members mainly from industry representing
the full value chain for enabling energy access (2/2)

5. • We partner with international and national organisations, projects and initiatives, the
media and other industry platforms
• ARE is the only business association partner of the UN Sustainable Energy for All
(SE4All) initiative
Rural Electrification Markets:
Stabilizers and main challenges (1/5)
Selected international organisations with which we have formalised cooperations
5

6. Rural Electrification Markets:
Stabilizers and main challenges (2/5)
Source: Global Tracking Framework 2015 Summary Report xii
Annual
investment
Universal
access to
modern
energy
services
Universal
access to
modern
energy
services
Doubling the
global rate of
improvement
in energy
efficiency
Doubling
the share of
renewable
energy in the
global mixa
Source Electrification Cooking Energy
efficiency
Renewable
energy
Total
Actual for 2012b 9 0.1 130 258 397
Required to
2030 c
45 4.4 560 442–650 1.051–
1.259
Gap 36 4.3 430 184–392 654–862
a. This is the range for significantly increasing the share of renewable energy in total final energy consumption.
b. The total assumes 2010 investment in access figures for 2012.
c. Estimates are derived from various sources: Energy access, electrification: SE4ALL Finance Committee Report, World Bank (2014); Energy
access, cooking: Energy for All Scenario, WEO (IEA, 2012); Energy efficiency: 450 scenario, WEO (IEA, 2014); Renewable energy lower bound:
WEO 450 (IEA, 2014), corresponds to a 29.4 percent renewable energy share in total final energy consumption by 2030; Renewable energy
upper bound: REmap 2030 (IRENA, 2014), corresponds to a 36 percent renewable energy share in total final energy consumption by 2030.

7. Rural Electrification Markets:
Stabilizers and main challenges (3/5)
7
0 10 20 30 40
Up to 1 Mio
Above 50 Mio
Total programme budget (EUR)
48%
25%
27%
Types of support offered
Technical assistance
Financial assistance / investment
Other
• Most programmes focus on
technical assistance (48%),
followed by other support
(27%) and financial
assistance/investment
(25%).
• A clear majority of support
programmes have a budget up to
10 Mio EUR, followed by budgets
above 50 Mio EUR and between
10 and 50 Mio EUR.
• Two-thirds of these programmes
are operational, one-third being
in the planning stages.

8. Rural Electrification Markets:
Stabilizers and main challenges (4/5)
8
• Half the programmes offer technical assistance, prioritising feasibility study support,
business plan development and technical, environmental and social assessment of
projects.
• Some also support financial modelling, market and risk assessment and the
marketing of projects to financiers and buyers, as well as e.g. GIS maps and
operator training.
• A quarter of the programmes propose financial assistance or investment. Results
show that grants are most commonly used (35%), followed at a distance by loans
(17%), equity (15%) and other financial mechanisms (33%) such as hybrid capital,
convertible grants, venture capital, guarantees and other types of credit
enhancement.
• These instruments are usable either individually or in combination, and may
require (co-)investment by a private project developer or third party.
• Find out more at http://www.se4all.org/minigridshio/minigridshiowebtool/

9. Rural Electrification Markets:
Stabilizers and main challenges (5/5)
9
• TOTAL financial assistance/investment: EUR 1.4 bn
• Public sector initiatives:
• 19 providers: EUR 1.2 bn
• 3 providers: unkown
• Private sector initiatives:
• 10 providers: EUR 155 mio
• 7 providers: unkown
• Nonprofit initiatives:
• 4 providers: EUR 70 mio
• 1 provider: unknown
Public sector
84%
Private sector
11%
Nonprofit
5%
Financial Assistance/Investment Per Source
(known amounts only)
Focus on the sources of financial assistance/investment (est. approx. figures)

10. OFID-ARE Cooperation: Risk mitigation crucial for upscaling
Decentralised clean energies is a highly promising market (1/2)
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• Absolute population living without electricity is 1.1 bn. The population to be
electrified by 2030 is today’s access deficit of 1.0 bn plus the projected population
growth between 2012 and 2030 of 1.5 bn. By region, the deficit remains
overwhelmingly concentrated in Sub-Saharan Africa and South Asia. (GTF 15 SR
p.2) Many more suffer from unreliable power supply.
• To achieve universal access to electricity, an average annual investment of USD
45 bn is required (compared to USD 9 bn estimated in 2012). More than 60% of
the incremental investment required would have to be made in Sub-Saharan
Africa and 36% in developing Asia (GTF 14 O p.42).
• Specifically for Sub-Saharan Africa, of the population gaining access in rural areas,
mini- and off-grid solutions account for 70% of new access-related demand over
the period to 2040 (IEA Africa Energy Outlook 2014).
• Key characteristics: small-medium scale (pico, SHS, mini-grids), any renewable
energy technologies and their intregation possible but depending on local
conditions; at present more focus on solar, mini-grids and energy storage, while
there is an increasing interest in small hydro, small wind and bioenergy and
sustainable business models.

11. 11
OFID- ARE Cooperation: Risk mitigation crucial for upscaling
Decentralised clean energies is a highly promising market (2/2)
• Objective: to identify / to implement up to 2-5 mini-
grid installation / hybridisation in the developing
world within 24 months
• OFID Support: Grant of appr. USD 1.0 Mio. to assist
in de-risking mechanism for business ventures
• ARE has implemented a ready-for-purpose working structure
Milestone Date Result
OFID – ARE Signature MoU 4 Nov 2014
ARE Publication of Call for Proposal 10 Febr 2015
Deadline for submission of applications 17 Apr 2015
ARE Administrative Assessment Report 29 Apr 2015
ARE Evaluation Report 08 Jun 2015
ARE Grant Application 19 Jun 2015
OFID Governing Board Decision (Approval of 4 projects in Africa and Asia) 19 Jun 2015
Implementation Phase (Bangladesh, India, Mali and Mozambique)
Oct 2015 –
Sep 2017

12. 12
Conclusions: Way forward towards reducing inequality
• Partnerships to allow local business development in DCs:
• Operational excellence of / by managing energy service companies
• Segmentation of rural electrification market with different financing requirements:
• Solar lanterns & Pico systems (soft loans and commercial debt/equity)
• SHS and mini-grids (blend of external subsidies and soft loans)
• Policies that enable private sector initiatives:
• Legal framework in place for rural electrification
• Sustainable tariff level arranged prior to implementation
• Market-near financing approaches (e.g. ElectriFI by the European Commission)
• More efforts needed from global development and finance organisations to
mitigate risks related to regulatory, economical, fiscal, policy issues
• Financiers need to assess renewable energy projects with a long term perspective
and bear political, financial and operational risks
• Rural electrification should come along with energy saving appliances

13. Conclusions: Why & how to get engaged
• Why should you get engaged?
• Huge market and demand
• Huge renewable energy potential
• Huge relevance of independent solutions based on decentralised
renewable energy («off-grid»)
• Just makes sense from a business and CSR point of view
• How can you get engaged? Get in touch with ARE!
• Find partners to implement your project
• Linking financiers with project developers
• Realise your CSR objectives
• Showcase your green efforts
• Help us advocate decentralised RE generation in developing countries
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14. Alliance for Rural Electrification
Rue d’Arlon 69-71
1040 Brussels, Belgium
are@ruralelec.org
www.ruralelec.org
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AREBoardSource:ARE
David Lecoque, ARE Policy and Business Development Officer
(d.lecoque@ruralelec.org)