Building community energy projects in Madagascar

Objectives

Beginning in 2020, Sustainable Energy for All(SEforALL) established the Universal Energy Facility (UEF), a multi-donor subsidy fund to accelerate the deployment of community-scale electricity mini-grids initially, and later stand-alone solar-battery systems and clean cook stoves, across Sub-Saharan Africa and globally.

The fund uses a results-based financing (RBF) strategy to direct targeted subsidies to project developers, with payments released upon verified proof of delivery of energy to new households, businesses and social infrastructure.

If well-designed, RBF can greatly reduce administrative costs in supporting decentralized renewable energy projects and can deliver predictable support to help bridge known affordability gaps’ between the cost of providing the service and customers’ ability to pay for it. The funding thereby enables project developers to serve communities that would otherwise not be reached. We launched the Facility’s first fundin ground in October 2020 in Madagascar, Sierra Leone and Benin. Our wider objective for the UEF is to improve livelihoods for 2.7 million people through connections to clean energy, and the mitigation of 1.7 million tonnes of carbon dioxide equivalent (MtCO2e) greenhouse gas emissions by 2027.

"The UEF has the potential to become a unifying force and the platform of choice for those interested in results-based financing."
— Simon Harfor, CEO, Global Energy Alliance for People and Planet

Partners

The Universal Energy Facility was established by a coalition of partners including The Rockefeller Foundation, UKaid, USAID, GIZ, Shell Foundation, Good Energies Foundation, the Carbon Trust, and the Africa Minigrid Developers Association. The fund’s digital payments platform was developed in partnership with Odyssey Energy Solutions. The facility launched in Madagascar in partnership with the Government of Madagascar, and the first mini-grid projects were developed in Northern Madagascar by the company WeLight.

Technologies

The UEF supports community-scale solar-hybrid mini-grids that can reduce reliance on fossil fuel-based generators.

Our Role

SEforALL acts as the project and fund manager for the UEF. Together with our partners we mobilized a first round of funding to support mini-grid development, and conducted due diligence to identify the first countries in which the fund would launch. We worked to develop the operating procedures for the fund, and to develop partnerships with project developers in-country that would deliver the new mini-grid projects to serve remote communities. In addition to developing the UEF as a new funding vehicle, we worked to help co-ordinate a wider community of donors and practitioners of results-based financing through an ‘RBF Leadership Group.’

Results

The facility was launched in Madagascar in 2020with a second round of funding announced in2022. In Madagascar, the UEF has so far signed grant agreements with two project developers for nine mini-grid sites with over 2,400 electricity connections. The first developer has constructed eight solar-hybrid mini-grids with the UEF support and to date verified their first 786 connections to households and small businesses.

Next Steps

A second round of funding to mini-grids in Madagascar was announced in September 2022, and received proposals from developers for 28 mini-grid sites targeting an additional 16,300solar connections with support from the Global Energy Alliance for People and Planet. The UEF launched funding calls in two additional countries(Nigeria and the Democratic Republic of Congo).In Nigeria, the UEF also covers stand-alone solar-battery systems capable of replacing diesel generators for small businesses.

Based on learning from the work in Madagascar and feedback from developers, we are working continually to improve the design of the fund to better support developers in delivering new projects, at the same time as seeking new funding from donors to support additional countries, clean energy technologies and communities.

Longer-term, we are working to explore ways that the UEF can channel climate finance to decentralized renewables and clean cooking, for example through carbon markets finance and generation of Renewable Energy Certificates. Weare pleased to be working with GIZ to continue convening the RBF Leadership Group as a mechanism to foster co-ordination and learning within the sector.

"We see results-based financing (RBF) as a cost-effective way to apply development funding to the challenge."
— Ashvin Dayal, Senior Vice President, Power Initiative, The Rockefeller Foundation

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