Webinar: Pioneering Financial Aggregation for Renewable Energy in East Africa

Climate Aggregation Platform

On 15th June 2023, UNDP hosted a webinar on "Financial Aggregation for Distributed Renewable Energy in East Africa" as part of the Climate Aggregation Platform (CAP). This event's primary focus was on innovative solutions and strategies to overcome market barriers in countries like Uganda, Rwanda, and the broader East African Community.

Financial Aggregation: A Possible Game-Changer for Distributed Renewable Energy Financing

Financial aggregation is the process of bundling smaller energy projects or assets to create scale, allowing for larger-scale financing based on future cash flows. This method offers numerous benefits, including risk diversification, scale, reduced transaction costs, and transparency. For sellers, the advantages include lower financing costs, growth, increased access to new finance sources, and appropriate finance.

However, André Troost of TFE highlighted the challenges, stating that financial aggregation is currently slow due to the high costs of setting up off-balance sheet securitization structures. This has led to investors primarily seeking larger deals. He emphasized the need for stakeholders to collaborate and expand the current distributed renewable energy asset base.

Insights from the Panel Discussion

The webinar featured a panel discussion with experts from Solaris Offgrid, Solar Frontier Capital, Finding XY, and Mirova Sunfunder. The discourse revolved around unique strategies and pioneering approaches towards DRE financial aggregation. The panelists also addressed the performance and financing nuances of various DRE sectors, including off-grid solar, mini-grids, captive power, and electric mobility.

Despite challenges like high-interest rates, smaller projects not meeting investor requirements, and extended transaction times, the consensus was clear: financial aggregation can significantly mitigate these issues. The off-grid solar segment, in particular, stands out as the most mature, offering substantial opportunities for financial aggregation.

To accelerate market readiness for aggregation, the panelists recommended:

  •  Improved financial reporting and data management.
  •  Remedial strategies to address low repayment rates.
  •  Bridging early and late-stage funding gaps.
  •  Exploring ways to reduce legal fees.

Conclusion

Financial aggregation holds immense potential for the renewable energy sector in East Africa. While the distributed renewable energy market is still evolving, pioneering transactions have set the stage for future growth. Through initiatives like the Climate Aggregation Platform, UNDP hopes to demystify aggregation, highlight challenges, and illuminate the solutions and opportunities available.

With upcoming reports on Uganda, Rwanda, and East Africa, the future looks promising for financial aggregation in the region. As Eduardo Appleyard concluded, the goal is to shed light on the challenges but also to highlight the solutions and opportunities that exist. The journey towards a cleaner and greener future in East Africa is well underway.

Upcoming UNDP reports on “Financial Aggregation for Distributed Renewable Energy" in Uganda, Rwanda and East Africa will be launched soon, offering detailed insights into market assessments and action plans.

Watch the Webinar

YouTube Link
Read the Slides

PDF

The CAP is implemented by UNDP and funded by the Global Environment Facility.