Bridging The Energy Gap: How Blended Finance Is Powering Off-Grid Solar Access – Report

Blended finance has emerged as a crucial strategy to unlock energy access for underserved communities through off-grid solar (OGS) solutions. Despite its vast potential, the OGS sector is currently facing serious challenges. Only 22% of households can afford Tier 1 OGS products, and serving remote areas costs 57% more. Compounding these barriers are global issues such as high interest rates, inflation, and currency devaluation. Achieving universal energy access by 2030 will require $21 billion, six times the capital committed to date. Out of this, $9 billion must come in the form of subsidies to bridge affordability gaps.

Blended finance plays a central role in attracting private capital by mitigating risks and improving the risk-return profile of investments. While some projects, like Nithio’s FAIR and Green 4 Access, have reported leverage ratios of 5:1 and even 18:1, respectively, the sector’s median remains at just 1.9:1. This underperformance highlights the ongoing struggle to mobilize commercial capital effectively. Only 37% of the capital in OGS blended deals comes from private investors. Furthermore, most deals remain too small, customized, and inaccessible to the hardest-to-reach communities.

To understand what works, eight successful blended finance models in the OGS space were analyzed. Each of these – from the Gigaton Fund to the Energy Access Relief Fund – demonstrated unique approaches. The Gigaton Fund, for instance, offers SME loans with tenors up to 11 years and has raised over $100 million in disbursements. It integrates concessional capital and guarantees to draw in private investors. The Acumen-led Hardest-to-Reach Initiative uses catalytic capital and impact-linked loans to support early-stage and scaling companies in low-income African markets.

The report emphasizes five key best practices that future blended finance vehicles should adopt. First, anchor concessional capital from trusted entities to build confidence. Second, target harder-to-serve populations through segmented facilities and impact incentives. Third, align financing terms with the operational realities of OGS businesses, offering local currency, long tenors, and flexible repayment structures. Fourth, build shared infrastructure like warehousing to reduce fund costs. Fifth, standardize legal frameworks and enhance risk transparency to lower transaction costs.

Collaboration across stakeholders is essential. Development finance institutions (DFIs), donors, investors, and enterprises must jointly design financing structures that match different investor risk profiles and are aligned with market needs. Direct public investment and subsidies remain vital, especially in low-income markets and areas with limited commercial returns.

Ultimately, while blended finance alone cannot meet the full scale of the energy access challenge, it is a vital mechanism to bridge the financing gap and bring light to millions still living without reliable electricity. By adopting the lessons from these case studies, stakeholders can design more effective, scalable, and inclusive solutions to drive the off-grid solar sector forward.