Remote microgrids pay off in the long run by bringing power to developing communities around the world that lack access to electricity. But up-front capital is often unavailable to get the projects underway.
Areas of the world with the highest energy poverty are those closest to the equator, giving them the greatest solar generation potential. Lack of access to financing prevents them from leveraging this rich energy source. To change this trend, the start-up 10 Power is working to finance renewable energy projects, including microgrids, in developing communities.
Long term, low interest loans
There are multiple ways to effectively finance a microgrid, an appropriate one being a long-term, low-interest government backed bond type structure, according to Sandra Kwak, CEO and founder of 10 Power. In the absence of these bonds, it can become difficult to source the capital.
“I see a role for philanthropic institutions and foundations to bring in capital, maybe in the form of grants or low-interest loans to be able to catalyze investments into microgrids,” Kwak told Microgrid Knowledge.
A grant of $1 to $1.5 million can be used as the security to encourage more conservative pools of capital and could be turned into $10 million worth of impact.
Sourcing debt for Haiti solar power
10 Power recently funded a solar project in Haiti. Working directly with commercial institutions and Haitian solar installers, 10 Power provided a lease of capital for the solar equipment. The start-up created flat monthly re-payments equal to or less than what the customers previously spent on their energy, so that the customers achieved an overall net saving.
Debt for the project was sourced by 10 Power through raising money. The project received a loan from LIFT Economy’s force for good, an impact investing fund that invests in businesses run by women of color. A zero interest loan was also provided by ShEO, an organization that supports and finances female innovators.
As the start-up matures, 10 Power will approach international lending and larger financial institutions.
Electric co-operatives for Puerto Rico
The picture is slightly different in Puerto Rico. Community-owned microgrids would work well on the island given its strong sense of community, according to Kwak.
So 10 Power plans to take an approach similar to that used by the National Rural Electric Cooperative Association (NRECA), where remote communities pool together their resources with federal funds to pay for off-grid electrification.
Rather than working with commercial entities, 10 Power can work directly with communities to support the formation of co-operatives, and provide the initial infrastructure investment. Over time, through rates, microgrid users pay back the capital expenditure, as well as the maintenance costs of the systems.
The structure is subtly different from what the company is doing in Haiti.
“The way the leases are structured in Haiti, it’s more like car payments. We’re working with a commercial customer and they’re giving a flat payment every month,” Kwak explained. “If we use the NRECA structure, then it would be more like your typical utility payment, where you’re getting bills based on your usage.”
Other financing options for remote microgrids
Seeking funding from the likes of 10 Power is not the only option for financing a microgrid to bring electricity to a remote community. Paralleling the shift away from centralized grids towards distributed energy, crowdfunding sites are changing the face of financing.
Rather than asking a few people for large sums of money, crowdfunding allows a large number of people to loan a small amount of money. This provides an alternative funding platform for retail investors, project developers, and communities to achieve their goals.
There are many examples of energy specific crowd-funding sites, such as SunFunder, who have so far provided $50 million loans to 38 solar companies, and CrossBoundary Energy, which is Africa’s first dedicated fund for commercial and industrial solar energy projects.
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