The $22.5 million fund aims to bring modern clean energy access to one million Zambians and jump-start the country’s burgeoning markets for energy services. The fund will directly support private enterprises in the off-grid energy space through a new financing approach.
First announced in March of 2016, the Power Africa: Beyond the Grid Fund for Zambia seeks to support business models able to provide modern, clean energy solutions to customers in rural villages, as well as those in the rapidly growing outskirts of metropolitan areas, known as peri-urban zones. In Zambia, 75 percent of the total population and 95 percent of people outside major cities lack access to electricity, a reality that is hindering economic growth in this highly dynamic region.
At the same time, the country is endowed with tremendous potential in terms of renewable energy generation. “Of course, hydropower is Zambia’s most abundant and important energy resource,” says Peter Storey, who leads the fund development team at REEEP. “But beyond hydro we see countless possibilities in solar, sustainable biomass and even wind. We expect to receive business ideas leveraging a wide range of renewable resources,” he added.
The fund is designed around a ground-breaking Social Impact Procurement approach, which offers opportunities for the private sector to contribute to developmental challenges while directly linking financial payment to on-the-ground results. In this case, the Beyond the Grid Fund for Zambia will offer to purchase tens of thousands of new off-grid electricity connections from Energy Service Providers (ESPs) who can then use the contracts with the Fund to leverage even more capital and customers in Zambia. Firms are invited to bid for contracts for a range of Energy Subscription Services – from stand-alone household systems providing basic lightning to more comprehensive connections suitable for businesses and public facilities.
In order to maximize flexibility for participating companies, the Fund is offering two types of financing: a start-up and incubation component, aimed at allowing firms to establish operations and build a foundation for expansion in the country; and a scale-up component, aimed at growing the customer base so that ESPs can reach sustainable investment scale in Zambia. “One of our biggest priorities with the fund is sustainability,” said Klas Waldenström of the Swedish Embassy to Lusaka. “And by that we mean economically, as well as ecologically. By using this market-based approach, we want to unleash Zambia’s long-term economic potential, as well as helping to bring modern energy to those currently left out.”
The fund is part of the Power Africa initiative, a partnership of more than 120 private sector companies, multilateral development banks, and the governments of the United States, Norway, the United Kingdom, Sweden, the European Union and several African countries which aims to double access to electricity in sub-Saharan Africa. The Beyond the Grid Fund for Zambia is financed by the Government of Sweden through Sida, the Swedish International Development Cooperation Agency and managed by REEEP, the Renewable Energy and Energy Efficiency Partnership.