NEEDED: A paradigm shift for achieving SDG7 Lars Ronnås Clean and affordable energy for all – How public funds can generate private flows. Being here at COP 24 to discuss energy solutions in African countries, I’d like to start with a few general observations. The Paris Agreement and the Agenda 2030 with its Sustainable Development Goals – or SDGs – are two sides of the same coin. Together these two landmark documents represent a global framework to fight poverty and bring better and decent life to all, while staying within the planetary boundaries. The key challenge is how to bring about economic growth and development in a way that can be sustained over generations. The climate economy is emerging as the new development story. The opportunities are certainly there and if seized upon they can put us on a good path.”

Clean energy paves way for sustainable development The supply of energy lies at the heart of developing our societies. Access to energy is perhaps the single most important factor for a decent life. While over 80% of global energy is based on fossil fuels, the trend towards renewable energy is clear. Last year, close to 2/3 of all new capacity in the world came from renewable sources. Renewable energy also offers new smart solutions to bring electricity to rural areas and to low income households. As a political leader from an African country said at a previous COP meeting: ‘Why invest in floppy discs when 4G is available’ Today, 600 million people in sub-Saharan Africa lack access to modern energy services. This accounts for 70% of the total population. This presents a huge challenge. But the prospect to deliver is certainly there thanks to new smart and clean technology.

Sweden as a partner Sweden a long-standing development partner Transformed approach Private financing is needed to meet SDGs Stimulate investments Sweden, as a long-standing development partner with Africa, has been engaged in energy sector development for more than 50 years. Our focus has primarily been on grant-funded investments in rural electrification, in capacity building, and in support of energy sector reform.   In the last four years however, Sweden’s support to energy sector development has been complemented by initiatives that stimulate investments renewable energy and energy efficiency, drawing on resources from the private sector. An important driver for this change is the recognition that public financing will not be enough to achieve the SDGs – we need come up with ways in which we can stimulate more investments from the private sector. The SDG targets for access to clean energy will not be met unless public financing is complemented by private financing. The traditional Business-As-Usual is giving way for new solutions to realise SDG7 without compromising on energy being accessible, affordable and climate friendly.   Public money, either from a national budget or from a development partner, can play a major role in catalysing and mobilising private resources to provide clean and affordable energy. As a development partner to African countries, Sweden’s support to the energy sector and to electricity access has increasingly focused on risk sharing and so-called blended finance. With blended finance, development funds are used to mobilize private funds in developing nations. As a development partner, we can contribute with a grant element to financing  coupled with support to capacity building. The regulatory environment is crucial for enabling this. It is encouraging to see that in many sub Saharan countries, progress is made to facilitate for the private sector to be part in solving the energy access gap. Sweden is helping a number of partner countries with the necessary reforms to create a stable and predictable environment for private investors.

Mobilising capital for private investment Different types of capital and funding at different stages of maturity Sweden’s development agency Sida has been part of several initiatives aimed at meeting the needs of different actors. Let me give a few examples. Seed capital is often an essential component to help start-ups to take off and grow. Here Sweden supports the African Enterprise Challenge Fund and its REACT initiative, which provides seed financing for start-ups through innovation competitions. Companies like M-kopa, Mobisol, BBOX and a few others all started their journeys with seed funding from REACT. These companies currently operate in countries such as Rwanda, Togo, the DRC, Kenya, Tanzania and Uganda. Today they have connected more than 600,000 homes with solar energy services. They are now using commercial loans to expand their business and services to clients that previously lacked access to electricity.   Through public procurement, governments can provide incentives to companies to scale their business. Governments can purchase a large enough volume of services or products for the companies to invest in bringing their technology to the mass market. Later we will hear more details about The Beyond the Grid Fund for Zambia, as an example of a public procurement. But I am excited to hear that in about 15 months almost 65,000 homes or 350,000 people have been connected to off-grid and mini-grid systems in Zambia. And most of that investment was made by the private sector. Crowdfunding is another, still small, but potentially key way to source funding for companies in the field of renewable energy services. Crowdfunders step in where commercial banks are unwilling to lend because of a company’s lack of collateral or history. In March this year, Sweden signed a guarantee agreement with the Crowdfunding Platform Trine. This is the first time that a development agency provides a guarantee to a crowdfunding platform. Under this agreement Sweden shares the risk of lending to Pay-as-you go (PAYGO)   companies that provide energy services to customers who live beyond the national power grid. These solar companies need capital, which few actors other than Crowdfunding platforms are willing to offer. In the first seven months, the guarantee provided by Sweden has been used to lend 7 million EUR to PAYGO companies in sub-Saharan Africa. The guarantee has also affected the willingness of investors to lend money. Average lending on Trine’s platform has gone up from 200,000 EUR to 750,000 EUR per month. Another example is Sweden’s support to several programs called "transaction advice". These provide support for developers to present their projects to matching investors, which is one of the biggest obstacles to more investment, including in renewable energy. The biggest program of this kind is the Private Financing Advisory Network, PFAN. These various initiatives complement each other. We can see companies that have previously received support from challenge funds in their early start-up phase and have since submitted tenders with the Beyond the Grid Fund for Zambia. We also have companies that benefited from the advice of the Private Financing Advosory Network, and have since taken up loans from the Trine Debt Platform to expand their businesses and reach more people. New and different approaches are necessary to achieve energy for all, in other words SGD7, and to enter a low carbon path. We need to forge new partnerships. New funding mechanisms are needed. Sweden has taken steps to play a new role in contributing to energy sector development in sub-Saharan Africa. We believe that some of the insights we have made in adapting our approach can serve as inspiration to others to scale innovative pro-poor business models. All of these can substantially help provide energy for everyone without increasing greenhouse gas emissions.

Thanks!