April 21, 2024

Oredola Adeola

 

Concessional Consumer Financing (CCF) has been identified as a major step that could be adopted by the governments to close the electricity access and affordability gaps that will be responsible for the over 565 million people in Sub-Saharan Africa projected to live without electricity in 2030.

 

This was the views expressed in a report by a team of researchers at Sustainable Energy for All (SEforALL) and obtained by EnergyDay.

 

Sustainable Energy for All (SEforALL) is an international organization that works in partnership with the United Nations and leaders in government, the private sector, financial institutions, civil society and philanthropies to drive faster action towards the achievement of Sustainable Development Goal 7 (SDG7) – access to affordable, reliable, sustainable and modern energy for all by 2030 – in line with the Paris Agreement on climate.

 

According to the report the world is not on track to achieve Sustainable Development Goal 7 (SDG7), as the current trends show that 670 million people will remain without access to electricity in 2030, out of which over 565 million people are going to be from Sub-Saharan Africa.

 

EnergyDay’s check showed that Concessional consumer financing (CCF) concept is a financial facility with an interest rate that is lower than commercial rates.

 

The researchers in the report explained that the CCF is often made available by governments for products or services that deliver on desirable social, economic, and/or environmental outcomes.

 

They suggested that the CCF could potentially be used to target a wide range of products including low-tier lighting systems, household, or productive use systems, as well as solar generators.

 

The SEforALL experts recommend that if the government of sub-Saharan Africans adopts CCF, the financing model could potentially reduce the affordability gap and cancel the “poverty premium” faced by poorer customers who are unable to pay for products over the counter in cash.

 

They are of the view that despite the high uptake and impressive repayment rates, CCF has rarely been used in an energy access setting in Sub-Saharan Africa.

 

The experts’ report said, “One notable example of CCF in an energy access setting comes from the IDCOL solar home system (SHS) programme in Bangladesh, which enabled one-quarter of previously unelectrified households – around 20 million people – to gain access to electricity.

 

 

“In Europe and North America, CCF is a commonly used public funding mechanism to overcome high upfront costs and enable households to access renewable energy and energy efficiency products such as heat pumps, electric vehicles, and home insulation.

 

“The Scottish Government, for example, has supported zero-interest loans for more than a decade to meet its national emission reduction targets.

 

“CCF models relevant in an energy access setting can be split into two categories: third-party lending and direct lending by energy service providers.

 

“Third-party lenders could include development banks; commercial banks, MFIs or Savings and Credit Cooperatives (SACCOs); or non-profit organizations. Energy service providers that could lend directly include utilities; mini-grid developers; and pay-as-you-go (PAYG) companies.

 

 

“Analysis by Energy Saving Trust suggests that CCF could help to make lower tier electricity access products affordable, support households with moving up the energy ladder more quickly and enable access to larger SHS or productive use systems” the report stated.

 

As part of recommendations, the researchers said that zero-interest loans extended over a 5-year repayment period could nearly close the affordability gap in Sub-Saharan Africa if Pay As You Go (PAYG) was available to everyone.

 

They also noted that CCF could significantly increase affordability even in countries with low electrification rates and low ability to pay like Malawi, thereby paving the way for a multi-light and mobile charger from 16 percent with the traditional PAYG model to more than 80 percent of households with CCF over five years.