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.
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.
Nowadays, donations are coming from:
- Traditional donor groups both, in the humanitarian and the development context
- Development finance institutions
In addition, many other partners from academia, NGOs are supporting the topic through numerous pilot projects.
To match the growing needs and achieve progress on a larger scale, other partners need to be involved, such as:
- Private finance institutions/Debt providers
- Private equity providers
- Impact investors
- RE Industry with appetite for new operating and delivery models
- Corporations with funds for CSR in the energy field
- Implementing agencies and NGOs
Outlining Options – What is Needed to Solve the Problems – Short, Medium and Long-term?
By increasing the uptake of commercial financing for renewable energy projects, humanitarian grants can be leveraged as more funds become available to focus on areas where they are indispensable. As shown below, the overall size of the grant funding available increases through an increase in commercial finance. To achieve this, innovative concepts that look beyond traditional grants and include the private sector and novel business models are needed - along with a concept to incentivise private companies to enter markets in remote regions that appear risky to them due to high investment on transportation and logistics. As a precondition, a “shift of culture” in the humanitarian aid community is required to move from free donations towards market based approaches.
The implementation fields for humanitarian grants and commercial financing will be mapped during the session.
Concrete Questions – What are Key Questions as a Basis for the Discussion in Berlin?
- In which fields can commercial financing already be applied?
- In which application areas are grants more needed and appropriate?
- Who are the actors in the respective fields?
- Which technologies and applications are most appropriate?
- How are the macro trends changing this environment?
- How can traditional grants be used to incentivise market based solutions?
Further Information on the Global Plan of Action
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This background paper was written by GIZ for Berlin Conference on “Energy for Displaced People: A Global Plan of Action for sustainable energy solutions in situations of displacement". January 2018.
- ↑ Lahn and Grafham (2015), Heat, Light and Power for Refugees, Chatham House, London, pg 20