For the millions of people living in remote rural areas of Ethiopia who lack access to the power grid or cannot afford electricity, solar energy represents an important first step on the energy access ladder.
Instead of relying on kerosene, candles, dry cell batteries and other fossil fuel-based sources of power, they can now turn to off-grid solar to light up their homes, watch television and charge mobile phones, thanks to an initiative of the Government of Ethiopia supported by the World Bank.
“For households at the base of the economic pyramid, off-grid solar can dramatically boost the quality of life,” says Yemenzwork Girefe, Director of the Export Credit Guarantee & Special Fund Administration at the Development Bank of Ethiopia (DBE). ”Energy access has a large impact on the well-being of society in general, women and children in particular, in countries like Ethiopia where access to electricity is low for the vast majority of the population.”
The Development Bank of Ethiopia (DBE) in partnership with the International Development Association (IDA), the World Bank’s fund for the poorest countries, is providing working capital loans to private sector household solar providers, as well as micro-finance to households for the purchase of solar lanterns and Solar Home Systems (SHS) through a $20 million credit line under the Electricity Network Reinforcement and Expansion Project (ENREP). Another $20 million line of credit was approved by the World Bank Board of Directors in May 2016 as part of $200 million in additional financing to ENREP.
This line of credit leverages the market-based approach of the Lighting Africa program and supports Lighting Global’s list of quality-verified lanterns and SHSs to ensure Ethiopians have access to the best off-grid renewable lighting and energy products available. So far, 800,000 off-grid products meeting Lighting Global’s Quality Standards have been imported and distributed by eight approved retailers, providing clean, safe lighting and modern energy services to more than three million Ethiopians.
But while demand for these new off-grid solar technologies is taking off, barriers to consumer confidence must still be overcome before the market can be expanded to make a real impact on energy access in the poorest communities. Here is where the Carbon Initiative for Development (Ci-Dev), a $125 million fund with a pipeline of 12 pilot projects in Africa, is stepping in.
Ci-Dev has just signed an Emissions Reduction Purchase Agreement (ERPA) with DBE to deliver additional funding to the project through the purchase of greenhouse gas emission reductions. The funding will address concerns over insufficient warranties and battery replacement for SHS, thus helping to ensure the sustainability of off-grid solutions and to protect the market from counterfeit products.
“This Ci-Dev initiative in Ethiopia is an excellent example of leveraging carbon credits and concessional finance to enable off-grid solar,” says Program Manager Venkata Ramana Putti, who leads the World Bank Group’s Climate and Carbon Finance unit which oversees Ci-Dev and 18 other carbon pricing and results-based finance initiatives.
The carbon revenues generated from the Ci-Dev project will support the demonstration of a tracking and enforcement system to ensure SHS warranties are honored completely and consistently by the private solar suppliers. The pilot warranty program will also be used to collect data for carbon monitoring through 2024 that will ultimately enable the demonstration of carbon emission reductions achieved under the project.
In addition, the Ci-Dev project will include a system so battery replacement and other maintenance costs of SHSs are supported through carbon revenues, thus incentivizing suppliers to offer more robust maintenance programs. This part of the program design serves as a form of subsidy, which helps Ethiopians afford to replace their SHS batteries, with revenues covering a portion of the cost of replacing batteries, that break down or reach the end of their four-year life span.
ENREP team leader Issa Diaw says ensuring post-sale assistance to poor households is the key to scaling up off-grid solar in rural communities.
“This will incentivize them to adopt quality products further sustain the market,” Issa Diaw says. “Moreover, the warranty tracking system will give to the government a powerful monitoring tool not only to track the number of disseminated products versus their Growth and Transformation Plan goals but also their geographical distribution and quality of service provided,” he explains.
“By tackling these important consumer concerns, Ci-Dev’s results-based finance is playing a key role in supporting DBE and IDA to scale up off-grid solar in Ethiopia, ensuring that more than 1.5 million rural homes would have access to clean electricity through off-grid solutions. It is fully in line with the World Bank Group’s strategic engagement and support to the Government of Ethiopia to increase and improve delivery of infrastructure and services,” adds World Bank’s Country Director for Ethiopia, Sudan and South Sudan, Carolyn Turk.
The ultimate goal: to enable off-grid solar to have a truly transformative impact on energy access and climate change mitigation in the country.
Source: World Bank