Are Scale-up: facilitating private sector investments in renewable energies in Africa

panneaux solaires — ©Erwan Rogard pour l'AFD

The AFD Group, with the support of the European Union, has set up the African Renewable Energy Scale-Up facility (ARE Scale-Up facility) to boost private sector investment in on–grid and off-grid renewable energy production in Africa.

To meet Africa’s constantly increasing energy requirements, support must be provided for mass development of the renewable energy technologies – especially solar energy – that will play such a key role over the coming years, given the recent drop in prices and the emergence of new innovative business models.

In particular, decentralised power generation using small scale renewables is proving to be a viable way to expand energy access. These types of models are growing rapidly in rural zones where they can provide solutions to the rural/urban energy divide and also address the needs of the poorer sections of the population. They significantly enhance living conditions for families.

To address these challenges and support renewable energy projects in Africa, the AFD Group, with the support of the European Union, has set-up the Africa Renewable Energy Scale-Up Facility aimed at sustaining the growth of the off-grid private sector in Africa. The facility has been designed to rally both public and private stakeholders, as it is composed of:

A Technical Assistance component, managed by AFD, to strengthen regulatory and institutional frameworks in the countries concerned and to prepare financing of private or public sector renewable energy initiatives in Africa.
A Guarantee Facility managed by Proparco to support investment in off-grid, mini-grid and decentralised power industry players.

List of services and subsidies contracted as part of the project

The Gurantee fund

The ARE Scale-up Guarantee fund de-risks direct equity investments in pioneering businesses and prepare these companies in accessing business investors and large scale debt funding. To that end, the Fund partially guarantees Proparco‘s minority equity investments in the off-grid, mini-grid and decentralised energy sector. It also includes a Technical assistance envelope to support beneficiaries in their development and inclusive growth.

This financial instrument is supported by the European Commission under its Electrification Financing Initiative.

Proparco’s investments supported the EU-funded ARE Scale-Up Guarantee should facilitate access to energy to some one million African households and increase the Continent’s renewable energy capacity by 50MW.