Private investment potentially plugging offgrid gap

Following on from yesterday’s report of a further $16m investment in Off-Grid Electric led by Zouk Capital and SolarCity, Greentech Media has collated the number of early-round investments in off-grid solar throughout 2014. These included M-Kopa Solar’s gaining access to $20m in debt finance and grants, SunFunder’s $2.5m closing round A financing, d.light’s gaining of $11m in Series C round, SolarNow’s raising of $2.4m, and Little Sun’s impact investment of $5m from Bloomberg Philanthropies. In total, Greentech Media said that such early stage investment in 2014 had reached $63.9m.

Greentech Media Senior Correspondent Stephen Lacey wrote: “Advocates of off-grid solar are hoping that new investors can fill in where traditional multilateral development banks (MDBs) have been slow to act.” Guidelines from the International Energy Agency suggest that two-thirds of funding should be aimed towards distributed technology.

Lacey referenced Failing to Solve Energy Poverty, an October 2014 report from Sierra Club and Oil Change International, which gave failing grades to all of the MDBs. Among its findings, that report stated: “With the exception of the African Development Bank at 38% of its energy portfolio (by dollar amount), the MDBs’ overall energy portfolios largely did not target energy access for the poor.”

Erwin Spolders, CEO at Redavia, told pv magazine that the issue is that the MDBs are designed to support large projects. Redavia is a provider of “redeployable solar farms,” which aim to reduce diesel reliance. Spolders says that solar investment is often a poor fit for MDBs as it involves long-term projects that can represent many small, high-risk installations.

“[Solar] is not about big centralized power plants,” said Redavia’s Spolders. “It’s distributed energy technology. With that, you have lots of small little assets, of which the power taken off is by lots of small off-takers. That’s very diversified across many different types of risk. That’s not what the MDBs are used to, and they’re not set up to do it. They’re not set up to do small yield and small project finance deals. They don’t like giving out – they like to work on a project basis rather than a program approach. That’s why there is this mismatch. It goes throughout [their] industry.”

With almost $64 million in early stage investment into offgrid distributed generation companies in 2014 alone, there are signs that the private sector and venture capital markets are better suited to funding the offgrid solar and energy access gap.