A Global Plan of Action - Background Paper: Finance for Energy in Refugee Settings - Moving from ‘Doing Good’ to ‘Doing Well’

Description

There are today an estimated 65.5 million displaced people globally. Energy issues are not at the forefront of humanitarian aid funding efforts, as more immediate needs like nutrition and health are prioritised over sustainable energy. The Moving Energy Initiative estimates that there is currently a funding gap of $335 million USD to provide all refugees with basic levels of energy access for cooking and lighting. Moreover, in the context of camps for displaced people, electricity for the camp infrastructure is mainly provided through unsustainable diesel generator solutions, instead of applying renewable energy technologies. A transition towards more sustainable financing is required, since fuel alone costs camp operators an annual estimated of roughly 100 million USD.

To match the growing needs and achieve the targets of SDG 7, new ways and sources of funding energy should be explored. To start exploring, we would distinguish between financing and grants. For us, financing relates to the provision of debt and equity with certain return expectations that offer economically sustainable returns. We see the inclusion of financing by this definition as the key to enable structural change in the sector. In this session we aim to explore how financing efforts relative to grants can be increased and in which areas grants have to remain the key enabler for renewable energy initiatives in humanitarian settings.

 

Problem Analysis  

Currently, funding in situations of displacement comes traditionally through grants and ‘energy’ has to compete with other needs. Commercial finance of energy plays virtually no role in this sector.

In addition, funding in general is often short term (max. 1-2 years), due to budget regulations from donors, internal procedures, and the fact that sometimes the duration of humanitarian operations are unpredictable. This short term thinking and unpredictability makes it difficult to cover higher upfront costs for renewable energy systems or plan power purchase agreements.

Many macro trends are changing the playing field and their influence on financing shall be introduced and discussed during the sessions. These macro trends most notably include a higher relevance of refugee and migration issues at global political level, growing political interest about Africa, awareness for the necessity to identify more sustainable energy solutions in the humanitarian aid context in view of reduced funding, global agreements such as the CRRF, the falling cost of renewable energy systems, interest of RE companies to support rural electrification, CAPEX free business models, negative interest rate environment, crowd investments, a shift in policy within independent donor foundations towards impact investments, peer to peer transactions, and blockchain backed applications.