Today, IIED and Hivos launch a new publication that explores new ways to attract more finance for off-grid solutions in hard-to-reach areas. The policy briefing shows how policymakers, financiers, civil society and the private sector can leverage ‘inclusive’ financing models by using public finance to unlock the private investment to provide off-grid systems to marginalized communities.
Although the number of people served by off-grid renewable energy increased substantially over the last couple of years, it is still not going fast enough to achieve Sustainable Development Goal 7 (SDG7): sustainable energy for all by 2030. The main problem is the lack of finance. Currently only a fraction of annual global investments in energy provision ends up financing off-grid solutions, while this is a key solution in order to reach ‘all’. Different barriers, such as actual and perceived risks and investor short-termism are causing this lack of investments.
Finance aggregation, where energy enterprises or investors pool capital into a portfolio of projects to cut costs and hedge risks, is a new promising path for promoting investments in off-grid energy. It can be used to merge several projects into a single investment vehicle. As such finance aggregation can leverage the private investment needed for off-grid energy while at the same time a well-tailored combination of grants, subsidies and concessionary loans, make it possible to also include hard to reach areas.
However, finance aggregation for off-grid energy can only work when considered holistically in terms of specific policy, regulatory and social context. IIED and Hivos therefore recommend governments, DFIs and other stakeholders work closely together to make sure regulatory and policy changes unlock the right finance for off-grid projects.
For more specified measures needing to be taken by governments and other stakeholders, download the briefing.