De-Risking Clean and Renewable Energy Finance: Tips from Our Experience
Financing Clean Energy? Maybe your experience is like ours. Let us share the tips with others who are considering getting there. After all, clean and renewable energy generation and usage contributes to positive climate action.
Our Experience. While large solar arrays dominate clean energy usage and financing in Uganda and elsewhere in Africa, there is a quieter, potentially impactful energy revolution taking place at the micro-level: small-scale biodigester technology. For Uganda’s Tier 4 financial institutions, financing these systems represents a massive, untapped, and in some cases considerably challenging market.
FREINDS Consult LTD has worked with Private Sector Foundation Uganda, GiZ, Uganda Energy Credit Capitalization Company (UECCC) and a couple of financial institutions to develop Solar Energy financial products, all with notable success. It has also worked with other stakeholders to develop, popularize and roll out Biodigester Energy products, with modest success at best and no success at worst. Reason? Read on…
The Real Barriers to Biodigester Finance Adoption. Local financial institutions do not only look at environmental benefits; they also look out for risk and reward/ profitability. Many lenders hesitate to fund smallholder bio-waste infrastructure because of:
- Very low understanding of biodigester technology and its benefits (which are many)
- The somewhat messy process of fermenting bio waste in digesters and laborious process involved
- High asset depreciation and short operational lifespans of biodigesters
- Lack of traditional, tangible collateral among rural smallholder farmers and rural households
- Few biodigester technicians s available in rural areas to support the users, and the generally low level of their skills
- Technical operational failures leading to defaults
- The yet undemonstrated financial viability of financing biodigesters, largely because there is not critical mass of demand in the market.
Before we think about scaling up biodigester financing, we must first provide complete, practical solutions to each of the above challenges. Once we do this, we shall unlock a yet nascent subsector with a potential revolutionize rural energy in Africa for more sustainability and better livelihood.
Dr. Keren Obara
Projects Officer, Marketing and Innovation, FCL