GFSE Side Event: Creating Opportunities for Sustainable Energy Investments and Businesses in Developing Countries

Before the High-Level Conference on “Regional Sustainable Energy Cooperation for Development”, co-organized with the United Nations Industrial Development Organization (UNIDO), the Austrian Development Agency (ADA) and the Federal Ministry for Europe, Integration and Foreign Affairs of Austria (BMEIA), two separate events took place - with a focus on innovation and entrepreneurship in developing countries - on the 2nd of October 2018 in the Vienna Impact Hub.

The afternoon side event titled “Creating Opportunities for Sustainable Energy Investments and Businesses in Developing Countries” was organized by the Global Forum on Sustainable Energy (GFSE) in cooperation with the Foreign Ministry of Austria, the Austrian Development Agency and UNIDO. This event brought together entrepreneurs in decentralized renewable energy technologies and financiers to share best practices, discuss challenges, bottlenecks and exchange experiences.

In his opening remarks, Mr. Robert Zeiner (Director, Programmes and Projects International, ADA), highlighted the role of innovative finance schemes, the need for accelerated efforts, multilateral cooperation and regional centers in order to reach the development goals. Mr. Felice Zaccheo (Head of Unit, DG DEVCO) addressed the crucial role of private sector and the crucial interlinkages of energy with other sectors. Dr. Tania Rödiger-Vorwerk (Director General, Environment and Infrastructure, BMZ) addressed different development barriers such as the lack of bankable projects and large-scale infrastructure projects, while also presenting the Green People's Energy for Africa initiative. Mr. Marcus Wiemann (Executive Director, ARE), presented the conclusions from the 1st side event “Business Forum on Decentralized Energy in Developing Countries”, which took place in the morning of the 2nd of October 2018.

Innovative financing schemes and new business models accompanied by appropriate technologies enable the provision of clean energy services to low-income populations in a more flexible and equitable manner. In the second half of the side event, the main financial challenges and bottlenecks that entrepreneurs face to scale-up their products were discussed by the panelists, namely:

  • Mr. Michael Wancata, Member of the Executive Board of the Development Bank of Austria (OeEB)
  • Mr. Daniel-Alexander Schroth, Adviser to the Vice President, Power, Energy, Climate and Green Growth Complex, African Development Bank (AfDB)
  • Mr. Mahama Kappiah, Executive Director, ECOWAS Center for Renewable Energy and Energy Efficiency (ECREEE)
  • Mr. Peter Storey, Private Financing Advisory Network (PFAN)
  • Mr. Harald Hirschhofer, Senior Advisor, TCX Investment Management Company
  • Mr. Charles Wetherill, Program Manager, Nordic Development Fund (NDF), and
  • Mrs. Ana Hajduka, Founder & CEO Africa GreenCo.

The audience was given the chance to listen to various aspects of the above-mentioned challenges from different market actors. The crucial role of small- and middle-sized enterprises was addressed by Mr. Michael Wancata, as well as the importance of bankable projects, which are currently lacking on the market. Mr. Daniel-Alexander Schroth emphasized the need of bringing local financial intermediaries into the mix in order to optimally use the potential of private sector actors in the energy sector. As an example, Mr. Schroth pointed out that concessional guarantee is a key dimension on the mini-grid side; however, addressing barriers on the market intelligence side and policy side is equally important. Mr. Mahama Kappiah highlighted the benefits of the regional approach, which allows pulling funds together rather than distributing funds to individual countries. The regional sustainable energy centers also cooperate with development partners to establish renewable energy entrepreneurship facilities that provide training for entrepreneurs, advice on technical matters and project proposals and business management. Mr. Peter Storey addressed the need for bottom-up project development and the importance of loan finance cash flow. He also emphasized how important coaching and mentoring project developers and businesses to develop sound business plans and financial structures for their projects is.  Mr. Harald Hirschhofer highlighted how the depreciation of local currencies can substantially affect the returns of renewable energy projects. Instruments that enable loans in local currencies hedge currency risks due to exchange rates are necessary. He further stressed the importance of incorporating currency risks at the early stage of the project. Mr. Charles Wetherill also indicated that innovative energy access models should account the costs and risks more carefully. Ms. Ana Hajduka highlighted the problem of different realities in terms of guarantees and working business models in the regional context.

Some additional key messages of the side event were as follows:

  1. Start-ups in the sustainable energy business face challenges to access finance to cover the up-front capital for projects.
  2. There is a lack of pre-feasibility and feasibility studies on investment projects. Many project ideas have not been developed to the level of detail required by financial institutions. Financing to conduct feasibility studies and to prepare project proposals to seek financing is necessary
  3. Early-stage support to start-ups through the provision of capital and risk-sharing mechanisms is necessary.  At later stages, growth capital and debt  are required for companies to expand their business
  4. A portfolio of financial instruments focusing on SMEs and small-scale projects is required to scale up access to finance. These instruments include guarantees to reduce risk, blending instruments combining grants with loans, investment platforms to facilitate matchmaking between project developers and financiers and measures to improve the investment climate.
  5. Development banks participate in equity funds focusing on renewable energy that work closely with local project developers and companies along the value chains to close funding gaps in small-scale energy projects.
  6. The regional sustainable energy centres enable the creation of regional markets for on-grid and off-grid technologies. For this purpose, they support the development and implementation of regional policy and regulatory frameworks, encourage the development of an entrepreneurial ecosystem and collaborate with partners on business promotion.

You can find the final concept note & agenda of the side event here.

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