Starting with the latter, there is a massive gap in the market, where large consultancy firms are inaccessible to early and medium stage companies at market rate. Donor organizations should work with partners to promote and initialize more projects that offer business consultancy and potentially incubation to early stage clean energy companies. This would allow more small energy enterprises a better chance at providing services to those who desperately need them.
Ideas like repayable grants offer more flexibility with little to no interest and funding for securitization would reduce risks for commercial loans which would be a game-changer. An example is the SIDA funded Loan Guarantee Fund that sought to underwrite commercial loans to small scale entrepreneurs. Notwithstanding the mixed success in terms of administration and thus re-payment, there were definite examples of instances where the funds made the difference in the viability of a business. Donors should look to understand the optimum conditions for these types of funding structures, by analyzing previous projects and primary data. Through research they could identify where these types of innovative financing structures could have the most impact and channel more funds there to encourage development.
The key is to attract enough players to enable a vibrant environment where potential solutions are quickly tested and competitive innovation encouraged. The Governments can help promote such an environment by addressing policy on grid-tie-in, net-metering, developing robust PPAs up to the inclusion and easing licensing and permitting requirements of small scale developers. Here, donors can also play a crucial role by leveraging expertise on advising governments and helping to shape policy towards the enabling environment. They could consider co-funding asset development, short term subsidies and performance based financing where appropriate.
Note: This is the final part of the guest post introduced in Part 1 by MAKENA IRERI an Engineer, Energy professional and blogger. The images used were downloaded from Google, image credits to the owners.