Shell Foundation and Rockefeller support $11bn African mini-grids fund

Crossboundary Energy Access (CBEA), which describes itself as Africa’s first project financing facility for mini-grids, has launched with a goal of unlocking more than $11 billion from investors to bring electricity to at least 100 million people.

Fundraising has proven difficult to date, with the CBEA pointing out solar mini-grids, like all energy projects require a significant upfront investment and yield low returns over 10 to 15 years. Most mini-grid companies operate in an emerging asset class with smaller balance sheets, and struggle to raise large amounts.

That is despite solar mini-grids being a viable option to bring energy access to more than 600 million people in sub-Saharan Africa.

“Mini-grids are critical to achieving universal electrification in Africa at the least cost,” said Gabriel Davies, head of energy access at Crossboundary. “We believe long-term project finance structures will allow mini-grids to scale. We’re building investment portfolios that will attract the long-term, infrastructure-type capital the sector needs from institutional investors.”

Oil majors get the ball rolling

The new financing facility attracted $16 million in its first close – enough to fund mini-grids that could connect 170,000 people, according to the organization. CBEA said it will focus in the first round on markets with supporting regulatory frameworks, such as Tanzania, Nigeria and Zambia.

The Rockefeller Foundation, Ceniarth and the Shell Foundation were among the first supporters of the initiative. “We are supporting Crossboundary Energy Access because we believe that its aggregation approach will catalyze the hundreds of millions of dollars of private capital that is needed – alongside public finance – to grow the sector,” said Sam Parker, director of the Shell Foundation.

Ashvin Dayal, managing director for power at The Rockefeller Foundation, highlighted the opportunity cost of energy poverty, and said the CBEA would bring a much needed sense of urgency and an effective platform for public and private sector coordination.

While the CBEA says it is the first project finance facility in Africa dedicated to mini-grids, it is far from the only organization active in the sector, and sees great potential. This month, Ugandan off-grid solar installer SolarNow said its plan to install 2.5 MW in its home market would improve the lives of 70,000 people.

The African Development Bank Group has approved equity investment of up to $25 million for the ARCH Africa Renewable Power Fund and the private equity fund claims an investment volume of $250 million for renewable energy projects in sub-Saharan Africa. According to the development bank, the fund will provide equity for the development of 10 to 15 renewable energy projects with a total capacity of around 533 MW in areas with weak grid supply, to provide improved base load and peak load power.