Short Answer
Grants are funds provided with no expectation of repayment. Concessional loans, or soft loans, have more generous terms than market loans. These generally include below-market interest rates, grace periods in which the loan recipient is not required to make debt payments for several years or a combination of low interest rates/grace periods.
The availability of free or cheap capital in the form of a grant or concessional loan can be a huge boon to mini-grid project developers facing financing challenges. While there are several sources of grants and concessional financing, the funds are limited, and competition can be considerable. Some limit or restrict the countries in which they can be used, or they require a portion of funds be spent on equipment or services from donor countries. Grants sometimes have significant reporting and other administrative requirements, which cost money in the form of added staff time and transactional costs.
Putting it Into Practice
Researching Grants and the Grant Application Process
A successful grant application requires a good match between donor and applicant, a compelling case for funding (including rigorous metrics for judging project success) and a strong team with a credible track record.
Many funding entities request a short (one- or two-page) introductory letter as part of an initial screening process before they invite applicants to submit a full grant application. Project developers will need to research which grants are available, the focus of each grant-giving organization and their potential interest in the project, information about previous awardees that have managed similar projects, the grant cycle and the application process. Following are key questions to consider:
- What grants are available?
- How much time is required to complete the application process?
- If the grant is accepted, will the timing of funds match project needs?
- What are the reporting requirements?
- What limitations are placed on the use of grant funds, and are they workable?
- How robust is the competition likely to be?
- How crucial is the grant to project development?
Sources of Grants and Concessional Finance for Mini-grids
The following organizations have been involved with grantmaking or concessional finance for mini-grids, although they may not provide funding at this time. This list is illustrative and provided for informational purposes only, and an organization’s inclusion does not imply endorsement by USAID. Additional grant programs for mini-grids are described in the “Grants” page of the Green Mini-Grid Help Desk.
International Funding Agencies
African Development Bank (AfDB)
The AfDB invests heavily in energy infrastructure, among other things. It has provided grant funding and technical assistance to African countries interested in building out mini-grids.
In 2016, the AfDB launched the Green Mini-Grid Help Desk as a portal to support African project developers.
Agence Française de Développement (AFD)
AFD is a public financial institution that implements French government policy, with a focus on fighting poverty and promoting sustainable development.
AFD and the United Kingdom’s Department for International Development (DFID) have created a £30-million green mini-grid program for Kenya.
Climate Investment Funds (CIF)
The $8.3 billion CIF provides concessional financing in 72 countries for projects to reduce greenhouse gas emissions, including energy projects. CIF provides financing to test new business models and unproven markets.
Two programs provide funds for renewable energy: Scaling-Up Renewable Energy Program in Low Income Countries and the Clean Technology Fund.
DFID is a United Kingdom government agency that administers overseas aid. Its goal is to promote sustainable development and eliminate world poverty.
DFID and the French AFD have created a £30-million green mini-grid program for Kenya.
European Union (EU)’s Africa Caribbean Pacific - European Union (ACP-EU) Energy Facility
Established in 2005, the ACP-EU Energy Facility (EF) is intended to co-finance projects that increase access to modern and sustainable energy in ACP countries. There is a focus on rural and peri-urban areas.
The EF provides grants to distribution systems (including mini-grid facilities) that reach at least 30,000 beneficiaries.
Finnish Ministry of Foreign Affairs
The Energy Environment Program (EEP) is funded and implemented by the Finnish Ministry of Foreign Affairs through grants for renewable energy, energy efficiency and clean-technology investments. EEP’s target regions include the Andean region, Central America, Indonesia, the Mekong region, and southern and eastern Africa.
Grant for mini-grids includes support for solar mini-grids in Kenya and a comprehensive mini-grids support package in Myanmar.
Gesellschaft für Internationale Zusammenarbeit (GIZ)
GIZ is Germany’s federally owned corporation for international cooperation, operating in more than 130 countries.
GIZ provides funding for mini-grids through technical training, policy and regulatory support and funding for pilot projects.
Inter-American Development Bank (IDB)
The IDB provides loans and guarantees for financial intermediaries in Latin America and the Caribbean.
Their Green Credit Lines provide subordinated debt for a variety of green businesses, including those dedicated to renewable energy.
Norwegian Agency for Development Cooperation (NORAD)
NORAD provides grants for larger projects (grid electrification), but also through rural electrification agencies (REAs) in developing countries. See, for example, the Tanzania Rural Energy Agency.
Swedish International Development Agency (SIDA)
SIDA is an agency of the Swedish Ministry for Foreign Affairs, responsible for development assistance to developing countries.
SIDA offers financing via development loans and guarantees (loan aid). Development loans consist of a donation from SIDA and a market-rate loan from a commercial lender. Development loans can be combined with a guarantee issued by SIDA to the lender for the borrower’s obligations.
USAID has played a leading role in supporting mini-grid infrastructure worldwide, primarily through its Global Development Alliances (GDAs) and Development Credit Authority (DCA).
GDAs are public-private partnerships catalyzed by USAID, pairing private sector businesses with development needs—a real market approach.
DCA provides risk-sharing agreements to help finance opportunities the private sector won’t finance. DCA has been instrumental in successfully mitigating risk so private capital can work in developing countries.
U.S. Millennium Challenge Corporation (MCC)
The MCC is a bilateral U.S. foreign-aid agency that focuses on promoting economic growth in recipient countries.
Some eligible countries have chosen to invest in power infrastructure. For example, the MCC’s Green Prosperity Facility in Indonesia is offering $30 million in grants for off-grid community-owned renewable energy projects. Other countries may have similar grant programs in the pipeline.
U.S. Trade Development Association (USTDA)
USTDA is an independent agency of the U.S. government that helps countries establish a favorable trading environment and a modern infrastructure that promotes sustainable economic development.
USTDA has provided grants for mini-grid projects in Tanzania and India, among other countries.
The World Bank’s energy division has undertaken some pioneering research into studying the economic and technical viability of mini-grids.
Through its sister agency, the International Finance Corporation, the World Bank has promoted mini-grids worldwide but particularly in Africa.
Private Foundations and Non-governmental organizations
Some private foundations and non-governmental organizations (NGOs) provide grants for mini-grid development. NGOs that don’t provide funding may help developers in other ways. Some NGOs help mini-grid developers identify relevant grants, write business plans, build technical and managerial capacity and develop pilot projects.
The following list is illustrative and provided for informational purposes only, and an organization’s inclusion does not imply endorsement by USAID.
Ashden Prize for Renewable Energy
The Ashden Prize is given for exceptional work to improve rural livelihoods. Organizations have won the Ashden Prize for their work in rural infrastructure, water, finance, lighting, electricity and mini-grids.
The DOEN Foundation supports projects or organizations active in sustainable development, culture, welfare and social cohesion. The foundation provides financial support in a variety of forms such as grants, loans, micro-financing, subordinated loans, guarantees and participating interests.
Energy 4 Impact supports businesses that provide energy access to off-grid communities in Africa. They offer a range of services from micro-, small- and medium-enterprises, to larger local or international businesses and project developers in the energy sector.
Green Empowerment is a U.S. NGO that partners with rural communities and NGOs in developing countries to improve access to affordable and renewable energy, safe drinking water, sanitation systems and fuel-efficient cook stoves.
Green Empowerment works with partners to install the following clean energy technologies micro-hydro, solar and wind power.
Hydro Empowerment Network (HPNet)
HPNet is an industry association of practitioners that facilitates implementation of small mini-grid systems built around mini-hydropower facilities. HPNet is active in South and Southeast Asia.
They are powerful advocates for the potential of small hydro and mini-grids to transform economic livelihoods of the communities that use them.
Practical Action supports a variety of renewable energy technologies (solar water pumping, improved cookstoves and micro-hydropower) in Africa, Central and South America and South Asia.
The Sri Lankan spin-off Janathakshan focuses on intermediate technology with a strong emphasis on capacity building and participation by communities themselves.
The generation and consumption of clean energy is an issue central to many of The Rockefeller Foundation’s initiatives. The foundation is working to expand rural electrification in an environmentally and economically sustainable way and catalyze long-term economic growth.
The Rockefeller Foundation’s Smart Power for Rural Development has promoted mini-grids in India. The Foundation is developing a similar initiative in Myanmar.
Shell Foundation is an independent UK-registered charity established by the Shell Group in 2000 to create and scale new solutions to global development challenges. Shell Foundation works with entrepreneurial partners to identify the market failures that underpin many of the world’s problems and co-creates new social enterprises to solve them.
They provide patient grant funding, extensive business support and access to networks to help pioneers to validate new models, achieve financial independence and to expand across geographies.
Developing-country Government Programs
Rural electrification agencies (REAs) and other government agencies also may provide financial support for energy access and renewable energy. REAs in developing countries such as in Tanzania are local, autonomous agencies funded by levies on electricity sales and donor contributions. REAs use these funds to provide matching support to early-stage rural energy projects (such as feasibility studies) or output-based aid in the form of subsidies for each new electrical connection completed.
Relevant Case Studies
Hydropower in Tanzania’s Rural Highlands.The Mwenga Hydro Generation and Rural Electrification Project in Tanzania’s Iringa region provides electricity to more than 2,200 households in 17 villages, a local tea and coffee factory and the national grid. The Rift Valley Corporation installed the 4-MW facility in 2012 with funding from the Africa Caribbean Pacific-European Union Energy Facility and Rural Energy Agency.
Resources
Sustainable Energy for All Africa Hub (2017). Green Mini-Grid Help Desk.
This website provides complete information service for developers of green mini-grids in Africa. The website includes market reports, links to industry and financial stakeholders, instruction guides, business forms and templates and financial models.
SE4ALL (2015). High Impact Opportunity Clean Energy Mini-Grids: Mapping of Clean Energy Mini-grid Support Providers and Programmes.
This report maps public, philanthropic and commercial sources of funding and technical support available for the deployment of clean energy mini-grids.