AEF 2018

Annual Report

The Access to Energy Fund (AEF) provides risk-bearing funding to projects supporting sustainable access to energy in Sub-Saharan Africa.

The Access to Energy Fund (AEF) was set up to actively support the creation of sustainable access to energy in developing countries. The goal of the fund is to provide access to energy to at least 3 million people. To reach this goal, EUR 110,9 million worth of funding has been made available by the Dutch Ministry of Foreign Affairs. Since December 2012, the fund has been focusing solely on Sub–Saharan Africa, specifically targeting affordable, clean and renewable energy solutions, both on-grid and off-grid.

As the decade is coming to an end, one billion people – mostly concentrated in South Asia and Sub-Sahara Africa – still live without proper access to electricity. For the past ten years the Access to Energy Fund (AEF) has contributed to overcome this global challenge.

At a glance

Achievements portfolio as per 31-12-2018

2.4 million

Beneficiaries reached

Providing access to energy to 2.4 million people. 

907,013

Jobs supported

2,305 direct jobs supported and 976,709 indirect jobs supported

442,437

Jobs supported for women

Direct jobs supported for women 1,048 and indirect jobs supported for women 441,389

215 MW

Installed capacity

915,317  avoided greenhouse gas emissions (tCO2eq)

Total committed portfolio

€110 million

Total committed portfolio by region

Consumer protection code in the off-grid solar sector

The off-grid solar sector is growing quickly. This growth is mainly fueled by the rapid increase in investments in companies using the ‘pay as you go’ (PAYGO) business model, which attracted approximately 85% of all investments in the off-grid solar sector between 2012 and 2017.

The off-grid solar sector is growing quickly. This growth is mainly fueled by the rapid increase in investments in companies using the ‘pay as you go’ (PAYGO) business model, which attracted approximately 85% of all investments in the off-grid solar sector between 2012 and 2017. In this model, customers buy Solar Home Systems on credit. As this involves extending consumer finance to people with unstable and low incomes, it is important to pro-actively mitigate the risk of overselling. 

FMO has therefore financed an initiative by the sector organisation GOGLA to develop and promote a consumer protection code that is intended to become the de facto sector standard. The Access to Energy Fund (AEF) has invested in several off-grid solar companies to which this code is relevant. In a recent investment, AEF supported d.light with USD 7 mln in equity alongside the Infrastructure Development Fund (IDF), which invested USD 3 mln, and Norfund, Swedfund and Inspired Evolution, which invested another USD 30 mln.

Potential impact of d.light

Country: Keyna, Uganda, Tanzania & Nigeria Investment: USD 7.5 million Purpose: Growth funding Contracted: December 2018

Off-grid solar companies can impact the lives of their customers and the environment in many ways. Among the outcomes cited most often are: 1) an increase in productive hours, used by children to study longer at night, for example; 2) saving money previously spent on lighting, which costs households in d.light’s markets between 7% and 10% of their annual income; 3) increasing physical health by reducing indoor air pollution, which is especially important in Nigeria where mortality due to indoor air pollution is significantly higher than the SSA average; and 4) a reduction in CO2 and soot emissions from kerosene lamps. Soot is the second-largest contributor to global climate change after CO2.

d.light targets families at the base of the pyramid (earning <USD 3,000 per year) without reliable power. Access to electricity is lowest in Tanzania and Uganda, with only approx. 18% of the population having access, and highest in Nigeria at approx. 53%. In rural areas, access is significantly lower, however, at 9% in rural Tanzania and Uganda and approx. 32% in rural Nigeria. d.light’s customers therefore range from underserved to extremely underserved.

To sketch a picture of the potential impact of d.light, we can draw on the growing body of research on the impact of off-grid Solar Home Systems. Studies of the impact on time spent studying mostly observe a modest increase in total study time (~ 0.5 to 1 hour per day). The impact on educational attainment remains unclear, however, ranging from zero to little impact. Based on data from Acumen, we expect the average d.light customer to spend USD 43 less per year on lighting compared to traditional sources, such as kerosene or candles, while reducing their GHG emissions by approx. 550 kg of CO2 equivalent per year. With regard to improving physical health, quantitative data on the exact health effects, e.g. in terms of mortality, is unavailable. However, a study by SolarAid observes that 63% of its clients in Kenya, Tanzania and Uganda feel healthier after switching to solar lighting.

AEF (alongside IDF) closes a critical funding gap for d.light because of the perceived high risk of the off-grid solar sector and the countries in which it operates.

The data used to estimate the potential impact of d.light paints a diverse picture. Therefore, it is essential to point out the risk that the impact does not materialise as expected. This risk is not negligible. Acumen’s data on lighting cost savings and GHG emission reduction, for example, is highly heterogenous, with some of Acumen’s off-grid portfolio companies even increasing their customer’s lighting cost, instead of decreasing them.

Read more about: Consumer protection code in the off-grid solar sector

Powering opportunities

This 8.5 MW solar power plant, located at the Agahozo Shalom Youth Village in Rwanda, is the first large-scale, commercial solar plant in East Africa. It supplies electricity to 15,000 households, increasing Rwanda’s power generation capacity by 6%.

This 8.5 MW solar power plant, located at the Agahozo Shalom Youth Village in Rwanda, is the first large-scale, commercial solar plant in East Africa. It supplies electricity to 15,000 households, increasing Rwanda’s power generation capacity by 6%.

The plant is of great importance to Rwanda’s development as only 30% of Rwanda’s population currently has access to electricity (Status 2017). At the time of construction in 2014, less than 15% of people had access. The plant also reduces Rwanda’s GHG emissions by 7,500 tons of CO2 equivalent per year and provides long-term employment to 18 people.

The Access to Energy Fund (AEF) contributed to the funding of the power plant in the form of a loan of USD 10.6 mln in 2014. In view of the sound and stable performance of Gigawatt, FMO took over the investment from the fund in April 2018.

Read more about: Powering opportunities

ZOLA Electric, Tanzania 

Affordable reliable solar solutions

ZOLA Electric is the leading distributed renewable energy provider in Tanzania and operates across East and West Africa in Rwanda, Ghana, Cote d’Ivoire and Nigeria. ZOLA provides more than one million customers with access to energy each day and employs more than 1,000 people across Africa.

FMO invested USD 17.5 mln in ZOLA Electric (USD 5 mln from AEF, USD 12.5 mln from FMO) and mobilised an additional USD 15 mln from Symbiotics. FMO’s share in this investment is expected to create 1,089 new jobs, connect 78,360 new households to electricity and yield a GHG emission reduction of 36,476 tons of CO2 equivalent.

In addition to this investment, FMO is also providing technical assistance by funding the development of a new credit scoring methodology through the Frankfurt School of Management. This method will significantly improve ZOLA Electric’s ability to assess the risk of extending credit to new customers.

d.light, Kenya

Before she could only stay open for a few minutes after dusk

Margaret Muchina runs a groceries and food kiosk in South Lake, Naivasha (Kenya), selling mostly to local workers.

Before she bought a d.light solar home system, she could only stay open for a few minutes after dusk, using her phone’s flashlight. The little light her phone produced was not enough to properly run her shop for long, however. Now that she uses d.light’s D30 solar home system, she can keep her shop open up to 2.5 hours after dusk, which has increased her revenue by 30%.