Off-grid Solar Uganda Acceleration
Off-grid Solar Uganda Acceleration
Project Overall Goal
The project will finance Fenix International (a subsidiary of ENGIE)’s deployment of solar home systems (SHS) in Uganda. The systems are composed of a solar panel, a central unit and several appliances and will be sold on a payment plan basis to individual beneficiaries under pay as you go contracts.
The operation aims at facilitating access to energy for households and micro-entrepreneurs in Uganda by financing the design, production, distribution, installation and payment plans of about 290,000 Solar Home Systems (SHS). These SHS provide basic, clean energy services, such as lighting and phone charging to households without grid access which have to rely on inferior and more expensive alternatives. The operation is expected to significantly improve living conditions of the final beneficiaries and thereby generate high development impact.
The operation will contribute to the EU development priorities in the Africa-EU Strategic Partnership, and the Agenda for Change, endorsed by the EU Ministers for Development Cooperation. The project also supports the objectives of the UN Sustainable Energy for All Initiative (SE4All), and the Sustainable Development Goal (SDG) 1 (Ending poverty in all its forms), SDG 7 (Affordable and clean energy), SDG 8 (Promote sustained, inclusive and sustainable growth, full and productive employment and decent work for all) and SDG 13 (Climate action). SDG 5 (Achieve gender equality and empower all women and girls) is also pursued by the operation, as women and girls tend to be more exposed to indoor air pollution from kerosene lights.
The demand for modern energy services in Uganda is high, both in the rural areas that are mostly not connected to the grid, and (peri-)urban areas where households and SMEs only have access to an unreliable grid. More than 5 million households live off-grid in Uganda. These households rely mostly on kerosene lanterns, candles, and flashlights for lighting and often face high cost and considerable travel for cell phone charging. The traditional off-grid solutions are expensive, polluting and provide inferior lighting.
Relatively recently, solar devices and SHS have become a more affordable, clean and reliable alternative for off-grid households. These solutions provide better energy services at lower cost. However, the relatively high up-front cost presents a challenge to low- and medium-income households. Pay-as-you-go (or lease-to-own) financing models are a solution to this issue and have enjoyed rapid uptake in Sub-Saharan Africa but result in high financing needs for off-grid solar companies. The present operation aims to address this need.
The Promoter (Fenix Uganda) is one of the pioneering companies in the SHS sector and is active in Uganda since 2013, providing a complete service including sale, maintenance and customer care. Products include an entry-level SHS with two light points and mobile phone charging capabilities at about 3.7 EUR per month over a lease-to-own tenor of 35 months. Larger systems can power more light points, a radio, a hair trimmer and even a small TV. However, over 70% of sales is expected to concern the smaller, basic SHS systems, in line with the high share of low-income rural clients and the Promoter’s focus to serve these clients.
The Promoter offers a lease-to-own model for SHS, which enhances the product affordability for lower income households by allowing users to pay for the SHS in small instalments instead of the entire product cost upfront. In this model, it is the Promoter who needs to shoulder the capital-intense up-front financing of the SHSs that are then leased out to the final beneficiaries. The proposed financing will allow the Promoter to finance the SHSs upfront and repay with lease payments from the leased-out units.
Overall, the operation is expected to have an important positive social impact, which will be monitored and reported by the Promoter. The operation supports the provision of improved energy access to about 290,000 households and SMEs, reaching approximately 1.7m final beneficiaries. Moreover, the operation is expected to result in annual CO2 emission reductions of at least 62 kt.