Winner of the 2019 Ashden Award for Innovative Finance & 2019 UN Global Climate Action Award
From Zambia to Africa:
Bringing clean energy access
to five million people beyond the grid.
Announcing the Beyond the Grid Fund for Africa
The success of the pilot programme, Beyond the Grid Fund for Zambia has led Sweden to request the Nordic Environment Finance Corporation (NEFCO) to establish a new separate funding facility, which aims to expand the BGFZ approach into new Sub-Saharan African countries and launch a new funding round in Zambia. The programme aims to incentivise the emergence of new private sector business models offering affordable and clean energy access at scale to people living in rural and peri-urban areas in Africa. For more information on the BGFA please visit: Beyond the Grid Fund for Africa (BGFA).
What is the Beyond the Grid Fund for Zambia?
The Power Africa: Beyond the Grid Fund for Zambia (BGFZ) is an ambitious multi-year program aiming to increase energy access, improve livelihoods and catalyse economic activity in rural and peri-urban areas. The BGFZ aims to bring modern energy services to at least 167,000 households – translating to one million Zambians – by 2021.
The core of the BGFZ is a EUR 20m results-based “social impact procurement” fund. Unlike a challenge fund or other traditional concessional financing, the BGFZ operates rather like a traditional public procurement – following strict guidelines on eligibility and tender from potential awardees, and enforcing deployment and delivery schedules.
The major difference between the BGFZ and a traditional procurement lies in what we are procuring, and in how our we evaluate, investigate, monitor and verify our projects. Rather than a distinct physical asset or service, the BGFZ is procuring social impact: the provision of energy services for Zambian consumers. The programme is not buying the energy services on behalf of customers; rather the fund closes the “viability gap”, on a per-connection basis, incentivising rollout and scaling up in areas that would – in the absence of the BGFZ – not represent viable markets for companies.
To ensure that these energy services meet the needs of the Zambian market and Zambian consumers, we have developed a series of criteria defining Energy Service Subscriptions – or ESS – of various types (scroll down for more on ESS and the ESS Tier System).
Because delivery of energy services at scale will take time, REEEP puts special emphasis on evaluating and testing the capabilities, track records, and business plans of bidders, so as to minimise the risk of failures throughout the programme period. REEEP monitors each Awardee closely throughout the programme lifecycle, and tracking the deployment of every single ESS electronically to ensure compliance with the procurement.
BGFZ will contribute to the Government of Zambia’s rural energy access goals through an innovative public partnership approach, which aims to bring electricity to 1 million Zambians by 2021, while supporting the long- term growth of sustainable energy markets in the country.
WHY IS BGFZ NEEDED?
Ninety-five percent of rural Zambians (and over 70 percent of all Zambians) have no access to modern energy. With a highly dispersed population (around 20 people per km²), expansion of the national utility grid to rural areas is in the near term neither economically nor technically feasible. At the same time, with over 60 percent of the population living under the poverty line and the value of Zambia’s currency having declined precipitously over the past year, the market for rural energy has struggled to take off, lacking in investment and in capacity of energy service providers able to deliver energy to rural areas.
WHY IS BGFZ SUPPORTING THE PRIVATE SECTOR?
The BGFZ is designed not as a standalone initiative, but rather to augment and complement various other programmes and activities, including those which support large-scale power production, transmission and distribution via the central utility grid. Grid scale projects require significant amounts of time and money, however, with projects often requiring close to 10 years to be completed and per-connection costs of well above USD 2,000.
At the same time, there is an acute and immediate demand in rural and peri-urban parts of Zambia for energy services – as is clear from statistics on access – and a demonstrated capacity among private sector players to provide energy services that meet this demand with innovative distributed renewable energy-powered systems.
These systems, either as individual household systems (commonly known as solar home systems, or SHS for short), or as small micro-utility grids (commonly known as micro grids or mini grids), have revolutionised the energy sector much as mobile phones revolutionised the telecommunications sector, and they are improving by the day.
In looking at the situation in Zambia, BGFZ noted that the market for off-grid, distributed energy systems was extremely immature and lacked investment and new commercial activity for a number of reasons – monetary instability, highly dispersed populace, nascent state of financial services, and so on. But in an otherwise stable environment with potentially significant consumer market, BGFZ believed that the private sector would enter and/or scale investment and activities in the market if they were lightly incentivised to do so. In a “reverse auction” mechanism, BGFZ asked the private sector to set their own price, on a per-connection basis, for what this incentive would have to be to trigger a full market rollout.
BGFZ selected those companies providing the best value for money to deploy their business plans in Zambia and deliver ESS as part of the BGFZ.
WHAT IS AN ENERGY SERVICE SUBSCRIPTION?
Social impact is, logically, at the centre of the BGFZ’s “social impact procurement”. But in practical terms, what is it exactly we are procuring?
The answer is that we are procuring the delivery, to an end-user, of a modern, affordable, high-quality Energy Service Subscription, or ESS for short.
Because there are so many energy-related products on the market, both in Zambia and worldwide, BGFZ developed a set of minimum criteria for each ESS, under which a product would be excluded from the Fund. The most important criteria of the BGFZ are quality, warranty and minimum service.
These criteria also include aspects such as power output and availability, as well as the numbers and types of lighting and appliances that can be powered by the service..
BGFZ developed an ESS “Tier System” to classify and track ESS deployment in the country. This system, based on the Multi-Tier Framework for Energy Access of the World Bank and Sustainable Energy for All (SE4All), was adapted to fit the Zambian context and tracking requirements of BGFZ’s EDISON automated tracking system.
WHAT IS THE “ENERGY LADDER” AND WHY IS IT IMPORTANT?
The energy ladder is in simple terms the concept of providing consumers with an energy service that can grow with them. BGFZ looks for solutions and companies that will provide consumers with a long-term, upgradeable and sustainable energy service. This means SHS or micro grid connections that can be expanded or upgraded to allow more and better appliances. Because these systems are typically expensive, it also means appropriate and available financing options for consumers.
WHAT BENEFIT DO CONSUMERS GET FROM BGFZ?
The BGFZ has made the availability of affordable, high quality and innovative technology for Zambians in rural and peri-urban areas its priority. Consumers in Zambia are ready and willing to make a large investment into their own energy services, and they deserve the same quality and reliability that consumers in Sweden and other European countries enjoy when making similarly large purchases.
For this reason, we are enforcing minimum warranty periods of three years on all core equipment, including solar panels, batteries, charge controllers, wiring, mobile charging points and LED lights, and one year on accessory appliances such as radios and television sets.
The BGFZ is only supporting technologies that have undergone quality control and meet international standards.
The BGFZ is carefully tracking ESS deployment to ensure our standards are being met by Awardees.
If you have specific concerns regarding the quality and/or warranty of equipment sold with support of the BGFZ, we ask that you contact us directly using the Contact Us form.
The Beyond Grid Fund for Zambia is an initiative of the Government of Sweden, together with Power Africa and in cooperation with Zambian partners, to rapidly scale-up energy access and energy service markets in Zambia, with the goal of bringing modern energy services to one million Zambians by 2021. The BGFZ programme is implemented by REEEP, the Renewable Energy and Energy Efficiency Partnership.
Under its first round of financing, BGFZ has contracted four private companies representing a range of product offerings and approaches, though all are dedicated to making clean, modern and reliable energy affordable to every Zambian. The four awardees are introduced below.
Fenix International is an energy and financial services company transforming customers’ lives through access to clean power and inclusive financing. Fenix’s flagship product, ReadyPay Power, is an expandable, pay-to-own solar home system designed and priced for off-grid households. Financed through affordable installments over mobile money, ReadyPay solar systems charge phones and power bright lights, radios, and efficient appliances while displacing kerosene lanterns and candles. Fenix’s systems range from 10 to 34 watts, including an affordable option available for just K2.5 per day. By analyzing real-time transaction data, Fenix creates a next-generation credit score to finance power upgrades and other life-changing loans. Fenix has sold over 130,000 solar home systems across Uganda, has recently expanded into Zambia, and aims to bring power and financing to over 2 million customers across Africa by 2020.
VITALITE is a Zambian registered sales and service company that aims to make quality products and services accessible and affordable to all rural Zambian households. VITALITE offers pay-as-you-go (PAYGO) mobile technologies combined with a locally appropriate last mile distribution approach that increases opportunities for access to modern, renewable energy and productive use products and services that improve quality of life in low income, rural Zambian communities. As the pioneer of PAYGO solar in Zambia, VITALITE is currently scaling across all 10 provinces with the aim of providing high-quality solar home systems to 100,000 off-grid rural Zambian households by 2021.
Standard Microgrid provides reliable electricity to communities through an innovative financing mechanism. The company’s distributed renewable energy services are customisable and affordable, allowing communities to stay in control of their energy usage and expenditure. Their 10kW micro power utilities can be deployed in three days, with the capacity to deliver power to upwards of 150 homes.
Emerging Cooking Solutions
Emerging Cooking Solutions combines bio-energy and solar in their SupaMoto Energy products for cleaner and more efficient cooking. Since 2012, they have pioneered the use of pellets for cooking in Africa, a cost effective alternative to environmentally detrimental charcoal. Their pellet-fuelled SupaMoto stoves will soon be made available on a pay-as-you-go system, making the products accessible to more people.