COP29 closed in Baku, Azerbaijan with an agreement on a financing deal of USD 300 billion annually by 2035 to help low- and middle-income countries address climate change and transition away from fossil fuels. While this is higher than the previous commitment of USD 100 billion annually (due to expire in 2025), it falls far short of what climate-vulnerable low- and middle-income countries need to address the climate challenges they face.
It is intended that this new target will be reached through mobilising finance from different sources, including the private sector. This will mean much of it may not come in the form of grants, as low- and middle-income countries had pushed for, but rather as loans, which will have to be repaid and will add to the burgeoning debt burdens of many low- and middle-income countries.
Financing challenges and opportunities for solar mini grids
These challenges come to a head in efforts to expand energy access in low- and middle-income countries and, most especially, in contexts where private investment struggles to go, such as displacement settings or situations affected by conflict and fragility. Technology options to achieve energy expansion in these difficult contexts exist. Distributed renewable energy systems, such as solar mini grids, offer great promise in connecting the estimated 685 million people who still lacked access to electricity in 2022. Importantly, these technologies enable increased energy access while aligning with global decarbonisation efforts.
Financing for these efforts, however, remains a hurdle. Rolling out solar mini grids to reach populations unconnected to or underserved by existing grid infrastructure will require significant investment. Mobilising financing for these investments will need increased use of existing and innovative financing mechanisms designed for these challenging contexts, as well as key improvements in the investment environments of countries hoping to attract energy sector investments. Fortunately, the evidence base around the various factors needed to help support investments in solar mini grids is expanding, providing policymakers of fragile and conflict-affected settings, international energy organisations, and mini grid developers and investors with new information and tools needed to make advances in mini grid development.
Growing research and evidence on solar mini grids in fragile contexts
We at IGC’s State Fragility initiative, with support from the Rockefeller Foundation, have a new series of policy toolkits and case studies capturing this evolving evidence base across several key areas needed to support solar mini grid deployment, focusing specifically on fragile and conflict-affected settings. Unlocking investments in energy access in these settings is a global priority as they will be home to an estimated two-thirds of the world’s poor populations by 2030 and energy access is a critical pre-condition to enable economic growth.
These publications recognise that efforts are needed from governments of countries facing challenges of conflict and fragility as well as a range of other actors, including mini grid developers and investors, donors, development partners, and energy organisations if progress is to be made in enabling a scale-up of solar mini grids in these countries. The policy toolkits outline evidence from the existing literature and from numerous consultations with practitioners and experts on relevant topics, while the case studies provide practical examples of organisations and initiatives that are furthering progress on the ground in different areas.
First, to give an overview of the full set of publications, key findings and policy recommendations from the toolkits are summarised in Scaling solar mini grids in fragile contexts: An overview of key findings.
The toolkit on Financing and de-risking tools and approaches for solar mini grid projects in fragile contexts outlines a number of traditional and innovative financing mechanisms and tools to reduce the risk faced by investors, which can be leveraged to make mini grid projects in fragile settings more financially viable. This toolkit is accompanied by case studies on the work of Energy Peace Partners with their Peace Renewable Energy Credits (P-RECs) and P-REC Aggregation Facility, the Africa Enterprise Challenge Fund’s REACT SSA Somaliland programme, and Nuru’s experience with concessions in eastern Democratic Republic of Congo.
On the supply side more broadly, the toolkit on Improving the supply side for solar mini grids in fragile contexts explores the various factors that encourage or hinder investment decisions of mini grid developers and investors, including economic dynamics of a market, costs of components, and the state of supply chains and labour capabilities.
The toolkit on Legal and regulatory framework: Facilitating an enabling environment for solar mini grids in fragile contexts offers strategies for governments to create more conducive regulatory environments for solar mini grids, including streamlining licensing, enhancing quality standards, and protecting investors and consumers.
The Demand-side factors: Tools to measure, incentivise and sustain demand for solar mini grids in fragile contexts toolkit outlines methods to measure energy demand and metering and payment technologies that can enable customers to better manage and pay for their energy consumption. It also touches on strategies that can help grow and sustain energy demand.
This is further explored in the toolkit on Driving productive use of energy in fragile contexts. This toolkit explores evidence on how productive use of energy can unlock economic activities in low-income contexts and what has worked to stimulate and support the adoption of productive use of energy appliances. A case study accompanies this toolkit that looks at how the loan-based model and business support services offered by EnerGrow, an asset financing company, have supported the adoption of productive use of energy appliances in low-income communities in Uganda.
The toolkit on Data and technology: Challenges and opportunities for solar mini grids in fragile contexts outlines emerging data and technological innovations that can support energy planning in fragile and conflict-affected settings, including tools that help identify high potential sites for locating mini grids and enable remote monitoring of mini grid functionality and end users’ energy consumption. This is accompanied by a case study on Energy Access Explorer, an open-source, interactive platform that combines and analyses geospatial datasets to enable data-driven energy planning in several low-income countries.
The increased roll-out of solar mini grids and the productive use of energy appliances that energy access enables is leading to electronic waste (e-waste) - the fastest-growing waste stream in the world. Much of the e-waste ends up in low-income countries as a result of second-hand imports. The toolkit on E-waste management: Strategies and policies in fragile contexts provides key considerations for policymakers across fragile contexts to develop effective e-waste management systems to lower the risk that improperly handled e-waste poses to people and the environment. A case study looking at a collaborative e-waste management and repair project, involving UNHCR, UNITAR GPA, and the NGO Forum for Public Health, in the Rohingya refugee camps in Cox’s Bazar, Bangladesh, accompanies this toolkit.
A series of webinars have also been held on Financing mini grids, the Enabling environment for mini grid development, and Data, technology, and e-waste management, which saw experts sharing their insights on these topics. Audio recordings of the webinars are available in English, Arabic, and Portuguese.
The publications highlight a number of key insights, such as the significance of effective regulatory frameworks and streamlined processes for smaller capacity mini grids, and the need to better integrate financing for mini grids and productive use of energy appliances to support financial viability of mini grids. Additionally, there is growing evidence on the importance of designing and implementing solar mini grid projects in fragile settings in a conflict sensitive manner to ensure that they do not have unintended negative impacts, such as exacerbating community grievances or reinforcing existing inequalities.