Entrepreneurial-minded Investors Needed!

The last time I wrote I talked about a renewable investment meeting that I attended in Accra. That meeting has stayed with me because of the frustrating disconnect between viable energy options and monies available. The finance people that I spoke with cited that many commercial institutions don’t see distributed energy as bankable yet. But this is not true; many business models are quite sustainable. It’s more a question of belief. Most financiers are quite conservative. They are not comfortable in this new market (renewable, decentralised energy provision) with a new segment of the population (large numbers of customers with extremely low purchasing power) and a new business model (pay-as-you go schemes, such as progressive purchase models, use of scratch cards etc.) But the market is there as witnessed by the amount of money low-income households are willing to spend on energy services (candles, kerosene, diesel) and amenities like airtime for cellular phones.

Maybe my frustration is mis-placed. According to REN21’s 2013 Global Status Report, the tide is slowly turning. One key new trend in 2012 was the increasing role of smaller and newer development banks in renewable energy financing. These include the Development Bank of Southern Africa, which approved loan facilities totalling USD 1 billion earmarked for renewable energy projects, and the African Development Bank’s support of renewable energy programmes.

And small-scale distributed capacity is on the rise. Investment in small-scale installations rose by 3% to USD 80 billion, compared with the 12% decline in total new investment in renewable energy. This means that projects of less than 1 MW capacity attracted almost a third of the total new investment—up from 28% in 2011 and 27% in 2004. Although the 3% rise was far below the 24% growth seen in 2011, it came despite a further significant drop in solar PV module prices.

Perhaps the most feasible option—until banks embrace this new market—is “crowd-funding” which raises capital for projects from a large number of small investors. First developed in the United States, it is now being applied to renewable energy and spreading through Western Europe. It is particularly well suited to small-scale projects. As many companies in the distributed energy sector range between start-up and mid-size companies they are below the $20 million threshold that many funds set before they will even consider looking into a company. As Harald Schützeichel points out in his blog “Where is the new Muahammas Yunus?” (founder of Grameen Bank,) it is not a question of there being no money. It is a question of “developing an innovative financing concept that will assume in a wise and committed way the succession of Muhammad Yunus”.

So, would all those entrepreneurial-minded investors please step forward. We have work for you!

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