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At the Africa CEO Forum, AFD Group – in partnership with the European Union – unveiled the “African Renewable Energy Scale-Up facility”, designed to boost private sector investment in on-grid and off-grid renewable energy production in Africa.
In order to meet Africa’s constantly increasing energy requirements, support must be provided for mass development of the renewable energy technologies – especially solar energy – that will play such a key role over the coming years, given the recent drop in prices and the emergence of new innovative business models.
The EU’s electrification funding initiative, “ElectriFI”, helps to harness and stimulate private sector investment to enhance access to renewable energy. More specifically, it focuses on poorly-served rural populations and regions that suffer from an unreliable electricity service.
AFD Group has secured €24-million from the fund to deploy the African Renewable Energy Scale-Up (ARE Scale Up) facility. With the help of the European Union, AFD Group will use this lending facility to partner the early-stage development of innovative electrification projects. While priority will be given to solar energy projects, other technologies (biomass, mini-hydro, etc) will also be considered.
ARE Scale-Up has been designed with a view to unlocking synergies between AFD and its private sector financing subsidiary, Proparco, and rallying stakeholders in both the public and private sectors. Of the €24-million allocation secured from the EU fund:
* €12-million will be used by AFD to provide technical assistance facilities to strengthen regulatory and institutional frameworks in the countries concerned and to prepare financing of private or public sector renewable energy initiatives in Africa.
* €12-million will be used by Proparco to fund back-stop facilities for venture capital investments in private off-grid electricity providers (ie: solar power kits and mini-grids). This should provide around 1-million African households with access to energy and add additional renewable energy capacity of 50MW for the Continent as a whole. Over the next five years, Proparco will provide seed funding for between five and 10 businesses with innovative, high-potential projects.
As Emmanuelle Matz, head of Proparco’s energy and infrastructure division, explains: “The ARE Scale-Up facility will provide us with fresh resources to partially cover our risk exposure in the new off-grid solar energy sector and allow us to partner other types of business models (such as mini-grids and small-scale distributed generation systems).
“These types of models are growing rapidly in rural zones where they can provide solutions to the rural/urban energy divide and also address the needs of the poorer sections of the population. They significantly enhance living conditions for families thanks to the positive benefits in terms of health, productivity and education.”
ARE Scale-Up is part of the Africa Renewable Energy Initiative (AREI) being supported by a number of countries, notably France, within the framework of the climate negotiation process and it has two main objectives: improving access to energy for all and financing 10 GW of renewable energy generating capacity on the African Continent by 2020.
Grégory Clemente, CEO of Proparco, comment: “This represents a first for us. By signing this convention, Proparco – which has been accredited by the European Commission since September 2015 – becomes one of the first DFIs to use the new resources being provided by the European Union to support private sector intervention.”