The Climate Aggregation Platform (CAP) of the United Nations Development Program (UNDP) has launched an innovation course in off-grid solar financing for increasing electricity access in developing countries, mainly in Africa. The first edition of the initiative named ‘CAP Financial Innovation Challenge’ will cover East Africa.
The CAP Financial Innovation Challenge aims to develop innovative financial aggregation structures and models that would help to increase availability and reduce the clean energy financing costs in developing countries. The competition will award successful applicants with up to $40,000 for developing the proposed innovations.
Financial aggregation is a method of bundling multiple energy assets, projects, or companies into portfolios, which then receive funding from investors based on future cash flows. This reduces transaction costs and risks for investors, along with countering investment barriers and unlocking new financing for small-scale renewable energy projects.
New sources of funding and financing mechanisms are required to close the investment gap to achieve the Sustainable Development Goal of universal access to clean, affordable, reliable energy for all by 2030. A recent report by UNDP and Climate Bonds reveals that the potential of financial aggregation for small-scale renewable energy investments remains untapped.
Eduardo Appleyard, CAP Project Coordinator, UNDP, said “While the market is still nascent, financial aggregation could one day be a game-changer for distributed renewable energy companies. With the CAP Financial Innovation Challenge we want to support the development innovative solutions that could lead to financially closed transactions in the near future and eventually be scaled up and replicated.”
The CAP Financial Innovation Challenge will facilitate the transfer of know-how and innovative solutions that will help to overcome energy-related challenges in African countries via solar energy. According to UNDP, off-grid solar mini-grids are key to providing reliable electricity to the under-served communities that have no access to electricity or in the regions where the grid is not reliable.
With funding from the Global Environment Facility (GEF), the CAP’s initiative will select up to five projects in East Africa. This includes at least one project each in Rwanda and Uganda, respectively. The competition is open until August 31, 12 pm (EAT).
The competition will be led by ‘Sell-side’ actors such as project owners, and energy companies developers. It is also open to ‘buy-side’ actors including impact investors, development banks, crowdfunding platforms, etc. The CAP has also opened this opportunity to civil society organizations, NGOs, research institutes, consultancy firms, and credit-raising agencies.