The innovative Beyond the Grid Fund for Zambia, funded by Sweden and developed and implemented by the Renewable Energy and Energy Efficiency Partnership (REEEP), has brought clean energy to 119,000 households, businesses and institutions who would otherwise struggle to afford it. It has done this by making it less risky for businesses to enter the country’s off-grid energy market.
Many households in one of the world’s poorest countries can now buy lights and mobile phones for the very first time – including many families living in isolated rural areas. The fund builds the market by offering financial incentives to renewable energy companies – their performance is closely watched and payments are linked to the financial requirements of the project. Crucially, the scheme ensures that only high quality products are sold.
We have received many types of grants in the past, but BGFZ is by far the best-designed intervention to support off-grid, private sector-led market development in an African country.
Beyond the Grid Fund for Zambia partner company
Nearly 70% of Zambians, 11.8 million people, live without access to modern energy. Extending the grid to rural areas is technically difficult and very expensive. Decentralised clean energy is a reliable, clean and affordable alternative to the grid, one people are willing to pay for.
But in countries such as Zambia the companies selling these solutions are held back by low investor confidence, poor market knowledge, unhelpful laws and government policies, and the poverty of potential customers.
The $22m Beyond the Grid Fund for Zambia (BGFZ) funded by Sweden and designed and implemented by the Renewable Energy and Energy Efficiency Partnership, has brought clean energy to 119,000 households, businesses and institutions, including many families living in isolated areas. It has done this by making it less risky for businesses to enter the country’s off-grid energy market.
The fund is implemented by The Renewable Energy and Energy Efficiency Partnership (REEEP), with money from the Swedish International Development Agency. It is designed to kick-start a vibrant, sustainable market for clean energy services in the country, supported by an enabling policy environment.
The fund closes the ‘viability gap’ in remote or poor parts of the country, places that would otherwise not be realistic markets for sustainable energy companies. It uses a ‘results-based financing’ mechanism, where companies receive a tranche of funding based on the number of connections they commit to deploying.
The fund works like a public procurement process but, rather than a distinct product or service, the fund buys a social impact – the connection of people to clean, high-quality energy. Bidding companies must show they can provide a set level of energy service for their customers, for the long term. Their products must be good quality, and come with strong warranties and long-term service contracts. The companies must also share data and market intelligence that makes the market less risky for investors.
As of June 2019, there are four companies contracted under the BGFZ. They offer clean, bright lighting, solar home systems – which power mobile phones, televisions, radios and more – and cleaner cookstoves that cut indoor air pollution. Solar micro-grids are supporting a range of small businesses, from barbershops to small cinemas. Many of these customers would be left behind by a purely market-driven model.
The presence of new companies in Zambia is also boosting rural employment. Around 1,200 local jobs have been created in operations, sales and marketing. The fund has also helped companies establish their credibility with donors and financiers, and develop a deep understanding of what it takes to build inclusive markets in challenging settings.
The fund is designed to complement the country’s other energy development plans, including those which support large-scale power production, transmission and distribution via the central utility grid. REEEP has also facilitated the launch of the Zambia Off-Grid Energy Task Force, bringing together government ministries and agencies, businesses, and development partners. The task force, which is hosted by the Zambian Ministry of Energy and co-led by the Zambian Office of the Vice President, coordinates off-grid electrification efforts, removes legislative hurdles and improves the policy environment for off-grid energy companies. Sweden, together with REEEP and NEFCO, has this year commenced an expansion of the programme to three other countries in Sub-Saharan Africa through a new facility, the Beyond the Grid Fund for Africa.