Financing the next chapter of off-grid energy

As the off-grid solar sector prepares to gather in Kigali for the Global Off-Grid Solar Forum & Expo (GOGSFE26), there is much to reflect on. Over the past decade, considerable progress has been made in extending access to electricity, developing local energy markets, and demonstrating the potential of distributed renewable energy.

Yet, more than 600 million people in Africa still lack access to electricity, and many businesses and communities continue to face barriers to accessing affordable, reliable energy.

With the momentum generated by Mission 300 and growing recognition of the contribution of off-grid solar, there is an opportunity to accelerate progress. But as we move from commitments to implementation, we need to pay closer attention to the commercial viability of business models, and how financing reaches the businesses and markets expected to deliver on these ambitions.

Equally important is ensuring that finance is available at the right time, in the right form, and that it responds to the needs of different markets and business models.

Results-based financing (RBF) has become an important instrument in expanding energy access. Over the past 15 years, it has evolved from relatively small-scale pilots into larger programmes that support market development and attract private-sector investment.

There is now considerable experience to draw upon, including lessons about where RBF has worked well and where the approach needs to improve.

One persistent challenge is the availability of upfront capital. RBF generally rewards companies once they have delivered and verified results. However, companies need finance to establish distribution networks, invest in stock, and reach customers before those results can be achieved.

This can be particularly difficult for smaller, locally established businesses and companies entering new markets. Without access to working capital or other forms of financing, the opportunity to participate in RBF programmes may remain out of reach.

Our experience with the BRILHO programme in Mozambique illustrates this challenge. When the programme was being designed, relatively few off-grid energy companies were operating in the country, and there was limited appetite among investors and businesses to enter the market. Providing incentives after verified sales would not, on their own, have been sufficient. BRILHO therefore combined results-based incentives with catalytic grants linked to market development milestones, helping companies manage some of the risks associated with entering and expanding into a relatively new market. In parallel, the programme worked on demand activation and policy reform, including the development of the country's first regulatory framework for off-grid energy, to facilitate market growth and private sector development.

As the BRILHO programme (2019–2026) comes to a close, more than 513,000 electricity access solutions, 437,000 improved cooking solutions, and 66,000 productive use of energy applications have been supported through 24 private sector suppliers. This has helped mobilise £59 million in private investment and expand access to clean energy for more than 4.8 million people across Mozambique.

Beyond these results, the programme's support to businesses and institutions has helped lay the foundations for continued market development and sustained energy access in the years ahead. This example illustrates why the choice of financing instruments must be informed by the market. Depending on the context, it should be combined with other instruments as needed. An approach that works well in a relatively established market may be unsuitable where companies are still struggling to build distribution networks or attract investment.

As RBF becomes more widely used, we also need to consider how different sources of capital can work together more effectively.

Public and concessional finance have an important role in reducing risks and encouraging investment in markets that commercial financiers may otherwise consider unattractive. But financing facilities are often designed and implemented separately, with different requirements, processes, and priorities.

For businesses trying to access finance, this can create additional costs and complications. RBF payments, for example, may provide an incentive to expand into a new market, but companies still need to find a lender willing to finance that expansion.

Involving financiers and businesses at an earlier stage of programme design can help address these gaps. It also means being clearer about the purpose of public funding and how it can complement existing sources of investment.

Another important consideration is the level of support provided. Incentives need to be sufficiently attractive to encourage companies to enter more challenging markets, while avoiding unnecessary subsidies or distortions to competition. As markets develop, these incentives should be reviewed and adjusted.

There are also opportunities to improve efficiency. Different financing programmes frequently ask companies to provide similar information through separate reporting, verification, and due diligence processes. Greater alignment could reduce the administrative burden on businesses and allow more resources to go towards delivering energy services.

These may appear to be operational considerations, but they have a direct bearing on whether financing is accessible, effective, and sustainable.

Earlier this year, during the Energy Access Investment Forum in Nairobi, SNV facilitated a workshop with experienced RBF practitioners and partners to reflect on some of these challenges.

The discussions brought together lessons from established financing facilities and identified five areas where shared principles could help improve the design and management of RBF programmes.

These cover purposeful design, capital coordination, appropriate market support, common frameworks, and operational integrity.

The principles are intended as practical guidance rather than a set of fixed rules. Markets differ considerably in their maturity, financing needs, regulatory conditions, and the businesses operating within them. There is no single financing model that will be appropriate in every context.

What the principles offer is a common starting point for funders, implementers, financiers, and companies to consider the decisions that can determine whether an RBF facility achieves its intended objectives.

They also reflect the importance of looking beyond the immediate results of a financing programme. The quality of products and services, consumer protection, predictable payments to companies, and the longer-term viability of the market all deserve attention.

The opportunity now is to build on this shared experience and consider where greater alignment across the sector could improve the effectiveness of future financing programmes.

These lessons are becoming increasingly relevant as the off-grid sector expands its attention towards the productive use of renewable energy.

Supporting businesses in using electricity for irrigation, cooling, processing, and other economic activities entails additional financing considerations. Energy service providers are only one part of the picture. The financial viability of these applications also depends on the needs and capabilities of farmers, enterprises, and the wider value chains in which they operate.

Financing arrangements, therefore, need to reflect the intended productive activity, rather than starting with a particular energy technology or financial instrument.

The same applies to extending energy access into more remote and fragile contexts, where the risks and costs of serving customers can be substantially higher. These markets may require different combinations of grants, incentives, commercial capital, and technical assistance, with adjustments as local conditions change.

As we pursue the ambitions of Mission 300, we should be making better use of the experience already available across the sector. There is much to learn from programmes that have succeeded, as well as from those that have encountered difficulties or had to adapt their approaches along the way.

GOGSFE offers a valuable opportunity to continue these discussions, particularly at a time when the sector is looking to mobilise investment and accelerate delivery.

I look forward to exchanging experiences with partners and fellow practitioners in Kigali, including on the emerging shared principles for sustainable RBF. We have accumulated considerable knowledge about financing energy access over the past decade. Putting that learning into practice and improving how we work together will be important if we are to build energy markets that continue serving people and businesses well beyond the lifetime of individual projects.