By Mansoor Hamayun, Chief Executive, Bboxx and Adjadi Bakari Shegun, Senior Energy Advisor, Government of Togo
The scale of our global challenges is so significant and we really need to think about the how in meeting the Sustainable Development Goals (SDGs) as time is running out and we have less than 10 years to act.
In order to achieve our common goal of combatting energy poverty, it is crucial that the industry and governments come together to adopt new ways of accelerating energy access.
We are working to solve a major problem: energy poverty. Currently, 850 million people live without access to energy, of which 650 million are in Africa. An additional billion people are connected to an unreliable grid.
So, in order to close the energy access gap, we are today calling on the sector to adopt new ways of accelerating the pathway towards energy access as means to alleviate poverty and to unlock the potential of citizens, communities and countries. This marks a concerted push towards achieving SDG7 – for affordable, reliable and sustainable energy – over the next decade, and is the main driver to tackling in particular, SDG1, no poverty but also SDG8, decent work and economic growth and SDG13, climate action, among others.
As we firmly set our sights on positively impacting more people, partnerships with governments, manufacturers, distributors, investors and more are integral to this next chapter.
We first partnered one year ago on the CIZO project which has really showed the impact of subsidies to help increase energy access and reach the poorest. What makes the CIZO project unique is the use of mobile money, remote monitoring data and direct payment to customers. It allows full transparency. Customers know the real cost of a service and can choose with which company they want to use the subsidy money.
The Government of Togo translated that ambition into money and funded the CIZO project themselves as the development community was unwilling to do so, their requirements were not fit for purpose, or frankly they were just too slow to help achieve the SDGs by 2030.
So how do we make subsidies scalable?
The only answer is if subsidies are no longer a cost but an investment − that investors providing the subsidy could get a return. Without subsidies, we can’t reach everyone and the planet will miss meeting the Sustainable Development Goals by 2030.
This why the Affordability Accelerator Fund has been born. It will transform subsidies into an investment class. It achieves this through the operator sharing a percentage of its revenue back to the Affordability Fund that provides the subsidy.
Why should an operator share a percentage of its revenue back to the Affordability Fund? Because it helps the operator increase the size of its market, decrease the credit risk and ultimately generate value for its shareholders. For that the Affordability Accelerator Fund deserves a percentage of the revenue. The Affordability Fund solves the issue of the gap between economic output of a solution and the time it takes until it becomes productive.
With the right capital structure, the Affordability Accelerator Fund could also allow a certain proportion to be raised using sustainability bonds.
We are working together to make this a reality this year. We encourage the development world and others to join us. It’s not just for us, it’s for the entire sector from solar home systems to minigrids and even beyond. We need all of us and more to hit the Sustainable Development Goals by 2030. In the future we are sure this concept can be extended to other SDGs as well.
Our partnership on the Affordability Accelerator Fund was announced at GOGLA, the Global Off-Grid Solar Forum, in Nairobi. It is a clear response to GOGLA’s Market Trends Report which highlights the current $11 billion affordability gap, estimating that the sector would need to grow at an accelerated rate of 13%, with up to $7.7 billion in external investment to companies and up to $3.4 billion of public funding to bridge that gap.
We therefore look forward to collaborating with more partners across the industry and using this innovative model as a catalyst for change.
This approach would enable subsidies to reach everyone, with subsidies becoming an investment and structuring the capital to allow it to scale to billions of people which is what is needed to end energy poverty. And this is what the world needs to end poverty as a whole.