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Increasing Private Capital Investment Into Energy Access: The Case for Mini-Grid Pooling Facilities

TitleIncreasing Private Capital Investment Into Energy Access: The Case for Mini-Grid Pooling Facilities
Publication TypeJournal Article
Year of Publication2015
AuthorsMonk, A, Gershenson, D, Tilleard, M, Cusack, J, Cooper, D, Kammen, D
JournalUnited Nations Environment Programme
Date Published04/2015
Keywordsenergy access, mini-grid, pooling facilities
Abstract
Mini-grids are viewed as one of the key elements in securing universal energy
access in the developing world. However, current levels of investment into
renewable decentralized energy are insufficient to reach the development
goals identified by initiatives such as the UN’s Sustainable Energy for All. In
order to reach such levels of deployment, new models of financing need to be
designed.
 
In this report, we provide a conceptual framework for the development of a
private sector facility to pool and cross-collateralize diverse capital to support
international mini-grid portfolios. We begin by discussing the current status
of electrification initiatives in developing countries, and the approaches
adopted to access finance for their implementation. We then argue that two
key barriers exist to the effective financing of mini-grids. First, mini-grids in
emerging markets have a complex risk profile that is difficult to mitigate at the
individual project level. Furthermore, individual mini-grid projects are so small
that their fixed transaction costs reduce their financial viability.
As a solution to these barriers we propose the Mini-grid Pooling Facility (MPF)
concept. The remainder of the report focuses on the key topics of finance
pooling and project bundling, the conceptual development of multiple designs
for bundling facilities, and a discussion of the benefits and drawbacks of each
design. We conclude by discussing the opportunities for public and private
financiers to work together with academic researchers, development finance
institutions, and entrepreneurs to expand the understanding of the risks and
returns in the mini-grid space, and collaboratively implement the Mini-grid
Pooling Facility concept.
URLhttp://apps.unep.org/publications
AttachmentSize
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