2023西非清潔能源白皮書

CLEANENERGYINWESTAFRICA

WhitePaper2023

CLEAN ENERGY INWEST AFRICA 2023

CONTENTS

WHYINVESTINCLEANENERGY?

Energyinfrastructure 5

Cleanenergybusinessmodels 10

Importanceofenergyaccess 16

Cleanenergyimpactpotential 9

Cleanenergypotential 15

Needforinvestment 13

Currentenergyaccess 17

Casestudy:EasySolar 18

HOWTOINVESTINCLEANENERGY?

Indirectvsdirectinvestments:MFIsSMEs 18

Importantsectorcharacteristics 19

OF

Businessmodelfinancing 22

Marketbarriers 24

Casestudy:Access 25

TABLE

Businessmodelrisks 25

WHATAREOURKEYCHALLENGES,ANDHOWDOWEDEALWITHTHEM?

Challenges&ourapproach 25

Assessingcleanenergybusinessmodeltypes 27

Casestudy:MobilePower 30

Financialperformanceassessment 35

Trends&lessonslearned 43

Financingoff-gridsolar 43

3

WHYINVESTINCLEANENERGY?

INTRODUCTION

Part1

WhyinvestinCleanEnergy?

InpreparationforlaunchingtheWestAfricaBrightFutureFund(WABFF),CordaidInvestmentManagement(henceforth,CIM)initiatedresearch(1)toidentifythesectorswiththemostdevelopmentimpactpotential.Thestudyhasrecognisedcleanenergyasoneofthemostimpactfulsectors-thedevelopmentofwhichcouldboosteconomicgrowth,employment,socialinclusion,safetyandcontributetoclimatechangemitigation.

FinancingcleanenergyinWestAfricapresentsexcitingopportunities,butmostinvestorscautiouslyavoidthemsincethesectorisrelativelynew.Tohelpovercomethefearoftheunknown,CIMdevelopedthiswhitepaperbasedonthelatestindustryresearchandin-houseexpertise.

ThewhitepaperwaspreparedbyJo?lleDuff,InvestmentAnalystatCIMwithaparticularinterestincleanenergybusinessmodels.Jo?llehasgainedknowledgeonthesubjectthroughpost-graduatecoursesinclimateadaptationandclimate&renewableenergyfinancefromFrankfurtSchoolofFinance&ManagementandthroughinvestingincleanenergycompaniesatCIM.Thisknowledgeissharedinthis3-partseriesoninvestingincleanenergyinWestAfrica.

PartIofthecleanenergyseriesprovidesanoverviewoftheimportanceofthesectorforsustainableeconomicdevelopment,theenergysituationinWestAfrica,thecountry-specificconsiderations,theeligiblebusinessmodels,andthepotentialimpactofcleanenergyinvestment.

/news-and-stories/claiming-impact-research-is-key

CLEANENERGYIS...

WhyinvestinCleanEnergy?

Cleanenergyisthe‘energythatcomesfromrenewable,zero-emissionsourcesthatdonotpollutetheatmospherewhenused,aswellastheenergysavedbyenergyefficiencymeasures(2).AsexplainedbyTWI,‘cleanenergy'powerisproducedwithoutnegativeenvironmentalimpacts,suchasthereleaseofgreenhousegases.

Cleanenergyisoftenrenewableandgreen(fromanaturalsource),andcanbegeneratedusingwindpower,hydroresources,solarpower,andnaturalbiogas.

https://

/technical-knowledge/faqs/clean-energy

4

PAGE

6

IMPORTANCEOFENERGYACCESS

WhyinvestinCleanEnergy?

Sustainabledevelopment

By2030,theUN’sSustainableDevelopmentGoal(SDG)7aimsto(i)ensureuniversalaccesstoaffordable,reliable,andmodernenergyservices,

(ii)substantiallyincreasetheshareofrenewableenergyintheglobalenergymix,and(iii)doubletheglobalrateofimprovementinenergyefficiency.

Inadditiontoimprovinglivelihoodsdirectly,accesstomodern,sustainableenergyservicesisalsoaprerequisiteforachievingalltheotherSDGs.

Energy,asanenablerforsustainabledevelopment,allowsforimprovementsin:

Technology(accesstonewtechnologies),Health(healthcareandcleancooking)Education(onlinelearning,Lighting)Communication(newcommunicationtools)Employment(newbusinesses,creatingemploymentopportunities)

Environment(safeguardingbiodiversityandtheenvironment)

ThelackofreliableelectricityaccessatanaffordablepriceisakeyimpedimenttotheeconomicdevelopmentofWestAfrica.Lackofenergysecurityandreliablepowergridshavedeprivedmillionsofbetterlivingconditionsandopportunities(3).

Cleanenergyiskeytooverallsustainabledevelopmentandpovertyreduction

Ensureaccesstoaffordable,reliable,sustainableandmodernenergyforall

/energy/putting-africa-path-universal-electricity-access

IMPORTANCEOF

ENERGYACCESS

Economicgrowthandpovertyreduction

WhyinvestinCleanEnergy?

Theprovisionofenergyaloneisnotsufficienttoliftpeoplefrompoverty,anditiscrucialtogobeyondbasicenergyneedsinordertoempowerthepoor,particularlywomen,tousemodernenergyinwaysthatbenefitthemandtheircommunities.

Touseenergyforincome-generatingactivities,oneneedstohaveaccesstoaffordable,reliable,andmodernenergyservices.Suchenergyservicescancreateemploymentandadditionalincome,betteraccesstoeducationandhealthcare,andimprovedlivingstandards(4).

Inturn,theproductiveuseofenergydirectlycontributestoincreasedincomegeneration,economicgrowth,andfinancialstabilityofbothoff-gridandon-gridsustainableenergysystems.

Cleanenergy

promoteseconomicgrowth,

expandsemploymentopportunities,

supportstheprovisionofsocialservices,

promoteshumandevelopmentandsocialinclusion.

CLEANENERGYHELPSTOOVERCOMEPOVERTY

Thereisabi-directionalrelationshipbetweenpovertyandthelackofaccesstoenergy.Therelationshippresentsaviciouscircle:populationslackingaccesstocleanandaffordableenergyareoftenentangledinare-enforcingcycleofpovertyandlowerincomeswhileatthesametimeusingsubstantialportionsoftheirincomeoncostlyandharmfulformsofenergythatsupplyinferiorand/orhazardousservices(5).

https://

/en/chronicle/article/developing-renewable-energy-sectors-and-technologies-west-africa

https://previous.iiasa.ac.at/web/home/research/Flagship-Projects/Global-Energy-Assessment/GEA_Chapter2_development_hires.pdf

IMPORTANCEOF

ENERGYACCESS

Energyaccesscontributestowomen'sempowerment

WhyinvestinCleanEnergy?

Studieshaveshownthatelectrificationislinkedtoadvancinggenderequalityandwomen'ssafety.Cleanenergyaccesscanhelpwomenandgirlsto:

enterthelabourforceorfocusonschool;decreaseexposuretoharmfulindoorfumeswhilecooking;

alleviatewomen’shouseholdactivitiesandsavetimeforunpaidhouselabour:byeitherspeedinguporeliminatingtheneedforroutinetasks;

getaccesstoinformation,whichcanleadtochangesinsocialnormsthatconstrainthesocialandeconomicpowerofwomen;reducerisksandacceptanceofgender-basedviolence.(6)

Betterhealthoutcomes

Cookingaccountsforalargeshareofenergyuse,with86%oftheWestAfricanpopulationusingfirewoodandcharcoal.

Thishasatremendousimpactonhealthandtheenvironment,inparticularforwomenandchildren.Women’sandgirl'stypicalhouseholdroleasthecookexposesthemdirectlyanddisproportionatelytothispollution.Pneumonia,stroke,heartdisease,andlungcanceraresomeofthedeadlyeffectsofindoorpollution.

Asaresult,theusageoffuelcookstoveskillsapproximately490,000sub-SaharanAfricansannually(7).

/news/powering-households-and-empowering-women-gendered-effects-electrification-sub-saharan-africa

https://

/reports/sdg7-data-and-projections/access-to-clean-cooking

IMPORTANCEOF

ENERGYACCESS

WhyinvestinCleanEnergy?

WestAfricaalreadyexperiencestheeffectsofclimatechange,thereforeithasbecomeincreasinglyurgenttomitigateemissionsandpromoteadaptationmeasures.

Climatechangemitigation

Increasedfrequencyandseverityofextremeweatherevents,increasingsealevels,anddepletionofnaturalresourcesarejustafewofthewaysthatclimatechangeishavinganimpactonthearea.Asaresult,it'scrucialfortheareatocutitsgreenhousegasemissionsandputadaptationplansinplacetohelpcommunitiesandecosystemsadapttothechangingconditions.

Thisrequiresacoordinatedeffortbygovernments,internationalorganizations,andlocalcommunitiestoraiseawarenessandinvestinrenewableenergyandotherlow-carbontechnologies.

Theburningoffossilfuelsreleaseslargeamountsofcarbondioxideandothergreenhousegasesintotheatmosphere,causingtheEarth'stemperaturetoriseandleadingtoawiderangeofnegativeimpactsontheenvironmentandhumansociety.Climatechangeisconsideredoneofthebiggestchallengesfacinghumanitytoday,andreducingourrelianceonfossilfuelsisseenasacriticalstepinaddressingthisglobalissue.

Andwhilethegrowingenergydemandallovertheworldistherootcauseoftheclimatechallenge–renewableenergyisalsothekeytoitssolution.

Byreducingtheregion'sdependenceonfossilfuels,renewableenergycanhelptomitigatetheimpactsofclimatechangeandenhancetheresilienceofcommunitiesandecosystemsinthefaceofachangingclimate.

CURRENTENERGYACCESSINWESTAFRICA

Energyaccess

Withoutaccess:

>75%

50-75%

25-50%

<25%

Population(M)

WhyinvestinCleanEnergy?

TheEconomicCommunityofWestAfricanStates(ECOWAS),whichincludeWABFF'sfocuscountriesMali,SierraLeone,BurkinaFaso,andGuinea,rankslowintermsofaccesstoenergy,withonly42%ofthetotalpopulationand8%oftheruralpopulationabletoaccesselectricity.(8)

Whileurbanareastendtousediverseandmodernenergysolutions,ruralareasstillrelyontraditionalbiomassfortheirenergy.Cookingaccountsforalargeshareofenergyuse,forwhichthevastmajorityofthepopulationstillusesfirewoodandcharcoal.

Withonlyasmallpercentoftheruralpopulation,oftenlivinginremoteareas,havingaccesstoelectricity,gridextensioniseconomicallyunsustainable.Inthiscontext,off-gridelectrification(mini-gridsandstand-alonesystems)providesamorecost-effectivesolution.TheECOWASRenewableEnergyPolicyhassetatargetofcreating60,000mini-gridsand2.6millionstand-alonesystemsacrosstheregionby2020,atatotalcostof€13.6billiontoserve71.4millionpeople.Mini-gridswillbepoweredmostlybysolarphotovoltaics,hydro,wind,biomass,biofuels,andhybridsystemswithdiesel.Stand-alonesystemsincludeacombinationofsolarhomesystemsandpico-solar.(9)

CURRENTENERGYACCESS(10)

/indicator/EG.ELC.ACCS.ZS

https://

/en/chronicle/article/developing-renewable-energy-sectors-and-technologies-west-africa

/MTCD/Publications/PDF/TE1793web.pdf

10

ENERGYINFRASTRUCTURE

ENERGYDEMAND

WhyinvestinCleanEnergy?

Populationgrowth,agrowingmiddleclass,andexistinglowelectrificationratesareexpectedtodrivetheincreaseinenergyconsumptioninWestAfrica.EnergydemandinWestAfricaisforecastedtogrowbymorethan250%by2030.

POPULATIONGROWTHANDCHANGINGLIFESTYLE

By2030thetotalpopulationofWestAfricaisexpectedtoincreaseto490.9millionatanaverageannualrateof2.48%.Theoverallincreaseisexpectedtocontinuealsobeyond2030.By2050,theWestAfricanpopulationisexpectedtodoubleandreach736.8millionpeopleoralmost34%ofthetotalAfricanpopulation.Lifestylechangesandincreasedconcentrationofthepopulationinlargercitieswillinfluenceenergyusehabits.Theywillfosterashifttootherformsofenergyandtechnologicalsolutionsifthenecessarystructuresaretheretosupportsuchshifts(11).

Thisshowstheconsistentandstrongincreasestillexpectedinthenexttenyears,drivenprimarilybyindustrialandcommercialenergydemand.Energycaneffectivelysupportandguidetheeconomicdevelopmentofacountry.

/MTCD/Publications/PDF/TE1793web.pdf

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2

ENERGY

INFRASTRUCTURE

ENERGYSUPPLY

EnergydeprivationisprojectedtoremainthepredominantchallengeforWestAfricauntil2030.

Country

MaliSierraLeoneBurkinaFaso

Guinea

TotalCapacity(TW)

639

175

614

403

WhyinvestinCleanEnergy?

ElectricitycostinWestAfricaisoneofthehighestintheworld,mainlyduetorelianceonthermalpowerandobsoletegenerationassets.

ChronicshortagesofsupplyarearealityinalmostallWestAfricancountries,regularlyleadingtoserviceinterruptionsandoutages,whichhaveenormouseconomicandsocialcosts.

Supplyofenergycomeseitheron-gridoroff-grid,throughgridextension,orthroughstand-alonesystemssuchasmini-grids,commercial&industrialsystems,andsolarhomesystems.(12)

Hydropower21.6%

Sola1.8%

Fossilfuels75.9%

TOMEETEXCESSDEMANDMUCHOFTHEENERGYSUPPLYISIMPORTEDDIRECTLYTHROUGHTHEWESTAFRICAPOWERPOOLGRIDORINDIRECTLYINTHEFORMOFFOSSILFUELS.

r

InstalledelectricitycapacityinWESTAFRICAIN2019.(13)

/sites//files/app-desa-electrification/index.html

/region/west-africa

INSTALLEDELECTRICITYCAPACITYINWESTAFRICA

On-gridinstalledgenerationcapacityinWestAfricamostlyusesnaturalgasandhydropower.

InrecentyearsSolarPhotovoltaics(PV,conversionoflightintoelectricityusingsemiconductingmaterials)capacityhasincreased.Withcostscontinuingtofall,solarisexpectedtobethetechnologywiththelargestinstalledcapacityby2030.

Significantinvestmentsinnaturalgaspowerplants,solarandreservoirhydropowerareprojectedtoresultininstalledcapacitymorethantriplingby2030.

ENERGYINFRASTRUCTURE

Off-Grid

OFF-GRIDDECENTRALIZEDRENEWABLEENERGYSOLUTIONSARECONSIDEREDTHELEASTCOSTLYSOLUTIONFORMOSTUNCONNECTEDPOPULATIONS.

WhyinvestinCleanEnergy?

Themarginalcostofconnectingdisperseduserstothenationalgridisexpensiveandisoftenprohibitivelyhighfordistributioncompaniesincountriesfacedwiththeelectricityaccesschallenge.

Salesinsolarlightingproductsandappliancescontinuetogrow,despiteadipin2020duetoCovid.Inaddition,385mini-gridswithapowerof30MWalreadyoperateinWestAfrica,with95%basedon(hybrid)PV.

Salesofoff-gridsolarenergykitsinWestAfricabetweenJanuaryandJune2022reached632,000units.Itisan8%increasecomparedtothesecondhalfof2021anda33%increasecomparedtothefirsthalfof2021.(14)

https://

/global-off-grid-solar-market-report

CLEANENERGYPOTENTIAL

WESTAFRICAHASENOUGHRENEWABLEENERGYRESERVESTOPROVIDEUNIVERSALANDABUNDANTACCESSTOELECTRICITYANDSUPPORTTHEREGION’STRANSITIONTOALOW-CARBONGROWTHPATH.

WhyinvestinCleanEnergy?

CLEANENERGY

WestAfricancountrieshavesignificantsolar,wind,andbiomasspotential(15)

Overthepastdecade,ECOWAShasbeenworking-throughtheWestAfricaPowerPool(WAPP)-towardsafullyintegratedpowermarket.TheWestAfricaEnergyDevelopmentPolicyFinancing(DPF)supportsapolicyreformprogrambeingimplementedbyBurkinaFaso,C?ted’Ivoire,Guinea,Liberia,Mali,andSierraLeone,tofacilitatetradeincleanerlow-costelectricitygeneratedfromgas,hydropower,andrenewableenergyacrossborders.Thiswillreplacethemoreexpensiveelectricitygeneratedfrominefficientsmall-scaleoil-firedanddieselgeneration(16).

https://

/africa/West-Africa-Clean-Energy-Corridor

https://

/en/news/press-release/2020/07/28/electricity-trade-to-unlock-affordable-and-reliable-electricity-in-west-africa

CLEANENERGYPOTENTIAL

Enablingenvironment

InJuly2013,theECOWASAuthorityofHeadsofStateandGovernmentadoptedtheECOWASRenewableEnergyPolicy(EREP),whichaimstoincreasetheshareofrenewableenergyintheregion’soverallelectricitymixto35%by2020and48%by2030.

WhyinvestinCleanEnergy?

ECOWASalsoestablisheditsEnergyEfficiencyPolicy(EEP),aimingtomakeavailable2,000MWofpowergenerationcapacitythroughefficiencygainsandtoeventuallymorethandoublesystem-wideenergyefficiencycomparedto2010levels.

Off-gridsolutionsrepresentanimportantsourceofaccesstoelectricityinruralareas,especiallyinthoseareasthatarelocatedataconsiderabledistancefromthepowergrid.ProjectionsbytheIEAsuggestthatby2040,70%oftheelectricityinruralareaswillbeprovidedthroughthesesources.WestAfricaisprovingtobe‘fertileground’forpay-as-you-gosolar.(17)

ElectricityCapacityinWestAfrica,in2015andforecastedfor2030

TheIRENAreport‘Planningandprospectsforrenewablepower:WestAfrica’explainsthatasignificantincreaseinenergyinWestAfricawillcomefromgas,hydro,biomass,solarPV,andwindsources.Mostoftheseareclassifiedasrenewableenergy,whichinthebest-case(nationaltarget)scenario,wouldleadtoa38%shareofrenewableenergyintotalregionalgenerationby2030.Thebest-casescenarioshowsanelectricitycapacityof70,000MWby2030.(18)

https://

/africa/West-Africa-Clean-Energy-Corridor

https://

/-/media/Files/IRENA/Agency/Publication/2018/Nov/IRENA_Planning_West_Africa_2018.pdf

CLEANENERGYIMPACTPOTENTIAL

Renewableenergyisthekeytoensuringahealthyworldforpresentandfuturegenerations.Cleanenergytransitionhastremendouseconomic,societal,andenvironmentalbenefitspotential.

ENVIRONMENTAL

Emissions

WhyinvestinCleanEnergy?

CO2eemissionsreduction

LandUsePreventionofdegradation&deforestation

SOCIAL

ECONOMIC

Income

Increasedtimeforrevenuegeneration,Increasedincome

Expenses

Reducedcostoffuel

Safety&Security

Lightaftersunset,Lesstimeandmoresafetycollectingwood(genderimpact)

Jobs

DirectandIndirectjobcreation,Skillsdevelopment,Morestudytime

Health

15

Improvedlifeexpectancy(women&children),Betteraccesstohealthcare

CLEANENERGYBUSINESSMODELS

01

BIOMASS

02

CLEANCOOKING

WhyinvestinCleanEnergy?

DIGESTIONOFBIOLOGICALMATERIAL(WASTE)TOGENERATEGASAND

FERTILISER

STOVESANDHEATSOURCESWHICHUSECLEANFUELSAND/ORBURN

MOREEFFICIENTLY

03

04

MINI-GRIDS

C&I

DISTRIBUTIONSYSTEMFORLOCAL

COMMUNITY

DISTRIBUTIONSYSTEMFORCOMMERCIALANDINDUSTRIAL

PRODUCTIVEUSE

USE

16

SMALLINDIVIDUALDEVICESANDSTANDALONESYSTEMS

05

06

SHS&PICO

APPLIANCESSUPPORTINGREVENUE-

GENERATINGACTIVITIES

NEEDFOR

INVESTMENT

InWestAfrica

$280M

INVESTEDINENERGYACCESSBETWEEN2010AND2019

WhyinvestinCleanEnergy?

INVESTMENTINOFF-GRIDRENEWABLEENERGYINWESTAFRICAISOUTPACINGINVESTMENTINEASTAFRICA

FUNDINGCOMESFROMGRANTS,EQUITY,ANDDEBT

SOLARHOMESYSTEMSRECEIVEMOSTINVESTMENTCAPITAL

$14,000MINVESTMENTSTILLNEEDEDBETWEEN2020AND2030

17

https://

/-/media/Files/IRENA/Agency/Publication/2020/Nov/IRENA_CPI_Global_finance_2020.pdf

CASESTUDY:EASYSOLAR

(SME,SIERRALEONE)

EASYSOLARTRANSFORMSLIVESINRURALAREAS,MAKINGACCESSTOELECTRICITYAFFORDABLETOTHEMOSTVULNERABLEPOPULATIONS,EMPLOYINGYOUTHANDPRESERVINGTHEENVIRONMENTWITHTHEIRSOLARHOMESYSTEMS.

WhyinvestinCleanEnergy?

234DIRECTJOBSCREATEDANDSUSTAINED

75,900TONSOFGREENHOUSEGASEMISSIONSAVOIDED

410,000PEOPLEGAINEDACCESSTOCLEANENERGY

26,500,000€TOTALENERGYCOSTSAVINGSFORHOUSEHOLDS

18

19

EASYSOLAR

(SME,SIERRALEONE)

WhyinvestinCleanEnergy?

Operatingsince2016,EasySolarfocusesonprovidingsolarhomesystems(SHS)tolow-incomehouseholds.Inonlysixyears,EasySolarhasbecomethelargestandbest-knowndistributorofsolarproductsinSierraLeone,operating22shopsandsupportingover150jobstodate.Itoffersarangeofproducts,fromsmallhomelanternstolargecustomsystemsforbusinesses,throughcashsalesandpay-as-you-go(PAYGO)facilities.EasySolar'suniqueapproachallowscommunity-basedagentstocollectphysicalcashpaymentsfromPAYGOcustomers,reachingpopulationsunabletousemobilemoneysolutions.

“We’veknownEasySolarfromitsbeginnings.WesawthehugeunmetneedforenergyinSierraLeoneandthehighpotentialofEasySolartoservetheseneeds.ThefirstdebtinvestmentwasmadeduringtheearlymonthsofEasySolar’scommercialoperations6yearsago.Cordaidwasthefirstinternationallender:ourearly-stagefinancinghelpedEasySolardemonstratethattheirbusinessmodelworksandthatthesocialimpactcanbesignificant.Thatgaveconfidencetootherimpactinvestorstojoinin,”saysLorisaCanillas,SeniorInvestmentManagerofCordaidInvestmentManagement.

Athree-partUSD1.5millionworkingcapitalfacility,disbursedin2017,2019and2021,aimedathelpingEasySolarfurtherfinanceitsgrowthplan,increasingreachandintroducingnewproducts.WiththehelpofCordaidInvestmentManagement'sloanproducts,EasySolarmanagestoincreasecleanenergyaccesstobottom-of-the-pyramidusers,contributestothereductionofcarbonemissionsandcreatesjobs,specificallybenefittingwomenandyouth.

20

CONCLUSION

WhyinvestinCleanEnergy?

ThecleanenergysectorinWestAfricaisinneedofsignificantinvestment.Theexistingpoorlevelofenergyaccess,togetherwiththestrongpopulationgrowthandincreasingmiddleclass,isharmingthesustainabledevelopmentoftheregionandlimitinghumandevelopment.ThereisagoodpotentialforcleanenergyinWestAfrica,whichcanprovideapositiveeconomic,social,andenvironmentalimpact.Jobscreatedareofhighqualityandparticularlyaccessibletowomenandyouth;womenbenefitstronglyfromproductive-useappliancesandemissionsreductionastheuseofharmfulenergysourceslowers.

Next,inPartIIofthecleanenergyseries,we'llexploretheCordaidInvestmentManagementapproachtoinvestinginthecleanenergysectorinWestAfrica,takingintoaccountthesectorattributes,marketbarriers,businessmodelrisksanddifferentwaystoinvestdirectlyandindirectly.

HOWTOINVESTIN

CLEANENERGY?

Part2

INTRODUCTION

Howtoinvestincleanenergy?

PartIIofthecleanenergyseriesprovidesanoverviewoftheCordaidInvestmentManagementapproachtoinvestinginthecleanenergysectorinWestAfrica,takingintoaccountthesectorattributes,marketbarriers,businessmodelrisksanddifferentwaystoinvestdirectlyandindirectly.

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4

IMPORTANTSECTORCHARACTERISTICS

Howtoinvestincleanenergy?

EARLYSTAGE

Cleanenergytechnologyisstillrelativelynewandconstantlyimproving,whichmeanscostsaredecliningandaffordabilityisimproving.Therefore,cleanenergycompaniesinWestAfricaareoftenyoung,havingeitherjuststartedoperationsorjuststartedworkingwithaspecifictechnology.Banksarestillunfamiliarwith,anduncomfortableinvestinginthesector,soonlylimitedlocalfinancingisavailable.

PUBLIC&PRIVATEINTERTWINED

Cleanenergycompaniesareoftenprivatelyownedandoperated,unliketraditionalstate-ownedenergycompanies.Accesstoenergyis,howeverconsideredapublicgood,sotomakeitaccessibletolargepopulationsandimprovetheeconomicbusinesscase,ablendedfinanceapproachisrequired.Cleanenergycompaniescanbenefitfromregulatorypoliciespromotingthetechnologybutarealsoatriskifthesepolicieschange.Themini-gridsub-sectorstillreliesontariffsubsidiestomatchgridtariffs.

INVESTMENT&RISKS

Investingincleanenergydoesn’tusuallygenerateanincomeorrevenuestreambutrathergeneratesacostsaving.Thelargeupfrontcostsofinvestmentleadtolongpaybackperiods,althoughthesereduceason-gridenergytariffsrise.Sellingtoindividualhouseholdscreatesaspecificoff-takerriskasthesecustomershavehard-to-predictrevenuestreams.

FINANCIALSTRUCTURE

Manycleanenergycompaniesarehighlyverticallyintegrated,managingproductdesign,manufacturing,distribution,softwaredevelopment,andcustomercredit.PAYGOcompanieshavesignificantdebtlevelstosupporttheircustomerreceivablesaccounts(~10xtheinventoryfinanceneed).Negativeequitypositionsarecommonasprofitabilitycanbeslow.TheBiomass,Mini-grid,andC&Ibusinessesareoftenstructuredonaprojectbasis,withalimitedlifespan.

https://

/sites/default/files/recource_docs/final_full_deck.pdf

MARKETBARRIERS

GeneralMarketBarriers

ALTHOUGHFALLINGRENEWABLEENERGYTECHNOLOGYCOSTSHAVESIGNIFICANTLYREDUCEDTHEFINANCIALCAPITALNEEDEDTOINVESTINPOWERSYSTEMS,FINANCINGRENEWABLEENERGYPROJECTSISSTILLDIFFICULTINMANYPARTSOFTHEWORLD.

Howtoinvestincleanenergy?

UNDERLYINGMARKETBARRIERSANDAPERCEPTIONOFHIGHRISKCONSTRAINTHEDEVELOPMENTANDFINANCINGOFRENEWABLEENERGYPROJECTS.

HIGHCOSTOFCAPITALANDRISKPREMIUMSTAGEOFINVESTMENTREADINESS

LACKOFAPPROPRIATEFINANCE

strengthendocumentation.

supportpilotprojects,and

astheyfosterinnovation,

beginningoftheprojectlifecycle

fundingcanbecriticalatthe

Technicalassistanceandgrant

projectrevenuestreams.

helpovercomebarriersand

investmentenvironments,to

createstableandpredictable

Sectorenablingpoliciescan

investmentopportunities.

themtoignoreevenprofitable

renewableenergy,leading

administrativebarriersof

regulatory,financialand

assessthetechnical,

Investorsfinditdifficultto

tohighcostsofcapital.

capacityoffinancierscanlead

Limitedexperienceand

BOTTLENECK: SOLUTION:

investment.

criticaltomobilizingprivate

liquidityreservefacilitiesare

hedginginstruments,and

asguarantees,currency

Riskmitigationinstrumentssuch

repaymentperiods.

theyalreadyencounterlonger

forcleanenergyproducersas

Thisisparticularlyburdensome

https://

/publications/2016/Jun/Unlocking-Renewable-Energy-Investment-The-role-of-risk-mitigation-and-structured-finance

https://

www.kfw-entwicklungsbank.de/PDF/Evaluierung/Themenbezogene-Evaluierungen/Nr11_Evaluation-update_Mobilising-private-

capital_E.pdf

MARKETBARRIERS

Investmentreadiness

TheRegulatoryIndicatorsforSustainableEnergy(RISE)areasetofindicatorsintendedtocomparecountrypolicyandregulatoryframeworkswhichsupportSDG7("Ensureaccesstoaffordable,reliable,sustainableandmodernenergyforall.")

Howtoinvestincleanenergy?

RISEmonitorsandassessespolicyandregulatorysupportforsustainableenergytopromoteenergyefficiencyandtheuseofrenewableenergywhileexpandingaccesstoelectricityandcleancookingfuels.TheRise2022assessmentofcountryreadinessformobilisingprivatecapitalintotheenergysectorrankstheWABFFfocuscountriesasmediumtolow,showninyellowandredonthemap.

Amediumscore(Mali:37,BurkinaFaso:39)indicatesthatthecountryhasbeguntomakeseriouseffortstodevelopapolicyframeworkbutstillhassomeroomforimprovement.Alowscore(SierraLeone:29,Guinea: