In modern times, electricity is often an unseen resource in one’s home. Lights are turned on at night to study late. Cell phones and computers run on power, as do the servers and modems we increasingly rely on to connect and communicate. We use electricity to keep our food cold. Sometimes, we use it to keep the cold or heat at bay. For many of us, electricity is ubiquitous – it’s just there. But take it away and almost every aspect of our everyday lives falls apart.
Thinking about it from this point of view, it becomes easier to grasp the sheer impossibility of sustainable long-term economic growth in countries where a large proportion of the population is left without power. Yes, economic growth and development are possible in these conditions, but everyone without access to electricity gets left behind. One could hazard to say that, for development to be truly sustainable and inclusive for all sectors of a society, universal access to electricity is required.
However, there are countries where the majority of the population has no access to electricity whatsoever. The Republic of Benin is one such country: 66% of its population has little to no access to electricity. Electricity in Benin is mostly provided and centrally managed by several governmental institutions, but the government is struggling to keep pace with the growing demands on its grid, and efforts to expand the grid are hampered by a lack of finances and capacity – specifically expertise.
As such, the solutions to Benin’s electricity shortage must come from the private sector, especially in the form of less expensive, more efficient renewable energy sources. But private sector investment in the electricity sector is limited, and stakeholders and would-be entrants into the sector find it almost impossible to access financing at reasonable interest rates. There is a huge gap between demand and the private sector’s ability to supply.
Addressing the shortfall through investment
Acting on behalf of the Congress of the United States, the Millennium Challenge Corporation (MCC) signed a second grant agreement (the Benin Compact) focused on electric power with the Government of Benin on 9 September 2015. The Benin Compact is valued at USD 375 million, with Benin providing USD 28 million. The Millenium Challenge Account – Benin (MCA–Benin II) was created to implement the Benin Compact programme from 22 June 2017 to 21 June 2022, accelerating economic growth in the country through investments in the electricity sector.
One of MCA–Benin’s four main projects is the Off-Grid Electricity Access Project, which aims to improve access to and availability of electricity for use by public infrastructure, communities, and households; stimulate the market for off-grid electricity; and increase the adoption of energy efficiency measures and the use of energy-efficient appliances and equipment. The project has three main components: creating an environment conductive to the use of off-grid electricity, energy efficiency, and the Off-Grid Clean Energy Facility (OCEF).
Facilitating clean energy through funding
NIRAS has been contracted to manage the OCEF, a Challenge Fund valued at US$32 million. Learning from their experiences running a similar fund for the Energy and Environment Partnership in the Greater Mekong Subregion (EEP–Mekong), NIRAS has structured the OCEF to be a result-based fund, which means that, in addition to a minimum 25% self-funding requirement, beneficiaries only receive portions of the grant upon reaching certain pre-determined milestones.
OCEF provides funding in four windows:
Window 1: off-grid energy for essential public infrastructure such as water treatment and pumping facilities, street lighting, hospitals, public health centres, courts, universities, schools, etc. The focus of this window is to install off-grid power generation equipment and accompanying electrical systems, along with establishing an administrative framework for operations and maintenance to ensure continuous delivery of critical services.
Window 2: decentralised generation and distribution of electricity via mini-grids or micro-grids for community and/or productive use. Under this window, the OCEF particularly supports models that involve an anchor tenant that produces/consumes power for production while also supplying power to the community. While OCEF grants will not fund agricultural equipment directly (e.g. food processing equipment), such equipment could count towards the grantee contribution requirement
Window 3: household energy systems. This window supports companies that import, sell, distribute, install, and maintain household-level photovoltaic technologies, including solar home kits and other similar products. Companies are encouraged to provide affordable financing terms and convenient payment systems that fit client needs. In addition to solar lighting, applicants to this window are also encouraged to provide solar-powered technologies that may improve the livelihoods or generate time savings for households, particularly women (e.g. solar drip irrigation or mini solar-powered appliances).
Window 4: energy efficiency measures. This window focuses on supporting business models for the deployment of energy efficiency measures to the benefit of public institutions, households, and users in the commercial and industrial sectors. The goal is to support the distribution of energy-efficient appliances and equipment that reduce not only the overall costs for electricity consumers, but also the demand for electricity.
Funding for windows 1–3 are only available if the sites being funded are located at least seven kilometres from the currently existing electricity grid and any expansions planned for the next ten years. Window 4 funding has no such limitation.
Except for funding, the OCEF also provides technical assistance to beneficiaries, both during the submission process and after funding, to ensure that the planning, implementation, and monitoring and evaluation of the selected projects are as strong as possible.
Project selections in progress
Two calls for proposals will be held during the OCEF’s run. The first, which covered windows 1, 3, and 4, ran from 22 February to 22 May 2018. The OCEF uses the SmartME – an online fund management and M&E platform – to process its proposals. Of the 39 proposals received, the OCEF’s project selection panel has chosen eight projects to proceed to the next round and placed two on a reserve list. These projects have until 24 November 2018 to revise their applications, incorporating training they will receive from the OCEF team. These revisions will mostly take the form of improvements to business plans by improving the quality of financials and by including considerations such as the project’s environmental impact, social inclusiveness, and gender inclusion. After this process, an investment committee will make a final decision regarding the funding of these projects.
The second call for proposals will be to fund enterprises and organisations falling in window 2. It will be launched in the fourth quarter of 2018 and follow the same protocol as the first call.