Four ways to accelerate solar-powered electrification in humanitarian settings

Innovative finance:

Humanitarian agencies need to transition to sustainable energy to power their operations and lower their dependence on fossil fuels. Many private-sector energy companies have the expertise and technologies needed to drive this transition forward. But the ways in which these collaborations are to be financed and realized have remained unclear.

The GPA Coordination Unit has been working to tackle this crucial challenge. The team convened and worked with the key stakeholders, including the UN, humanitarian agencies and private companies, to understand how the humanitarian sector could increase its uptake of more efficient and renewable electricity systems. Together, they identified key areas of consensus and, with their support, partners are making sure agreed follow-up actions are pursued.

In addition to reducing costs and carbon emissions, these systems can help provide more reliable services, such as health and education, and improve the livelihoods and well-being of refugee populations and host communities. Transitioning to renewable energy is essential if the sector is to contribute to SDG7, ensuring access to affordable, reliable, sustainable and modern energy for all, including for displaced populations who are often left out of national energy plans.

As part of this work, the Coordination Unit held two workshops in recent months. While it is still early days, several promising areas of consensus and opportunity are beginning to emerge:

Energy as a service. Humanitarian organizations understand the potential financial benefits and the reduced administrative burden of buying energy as a service, rather than owning and operating separate renewable energy systems. This approach would:

• reduce capital expenditure,

• improve the design of energy projects thanks to technical input from private sector experts,

• transfer operation and maintenance costs to a third party, and

• provide additional opportunities to the displaced and host communities, by building off energy systems that are anchored to a UN client.

While there are market opportunities to provide energy services to both humanitarian agencies and displaced people’s households, workshop participants agreed to start by looking at what is needed to power operational facilities with sustainable energy sources.

Financial guarantee mechanisms. In all long-term agreements, the UN generally includes a termination clause, which would be enacted if the displacement situation improves. This termination clause creates a commercial risk for private energy providers because the long-term agreement for the supply of electricity could be terminated before the capital investment has been paid back through charges to energy users.

A guarantee mechanism would make it possible for service providers to recover outstanding investment costs should they need it, increasing their willingness to invest and provide energy services to humanitarian organizations. Workshop partner GIZ is supporting the development of standard contract clauses to speed up the contract review process, which includes the development of a termination clause that supports the introduction of a financial guarantee mechanism. In parallel, a consortium of private sector providers is drafting a white paper setting out how the guarantee mechanism would work and how it could be financed.

Collaboration with aid agencies and development of shared electricity sources. Humanitarian actors agreed on the benefit of having central, shared electricity supplies that meet the needs of many organizations working in a camp and nearby areas. They also agreed that there are commercial advantages in combining renewable energy projects within a region or country to improve the likelihood of attracting a private sector operator. The potential to reduce costs through economies of scale was also mentioned. As a result, participants said they would be willing to collaborate with one another to develop joint energy projects.

More expertise on procuring sustainable energy services. While humanitarian agencies’ procurement rules do not impede new, more collaborative delivery and financial models, the practical aspects of procuring these projects are likely to be challenging. Humanitarian procurement teams need greater expertise and experience in purchasing energy services and assessing costs for technically and financially complex energy solutions. In addition, there are no standardized processes that management and programme staff can follow to support the procurement of sustainable energy services. These factors perversely encourage the purchase of diesel generators and low-efficiency appliances to meet immediate energy needs.

The Coordination Unit will continue to work on this topic over the coming months, as part of its ongoing work programme in support of the Global Plan of Action for Sustainable Energy in Situations of Displacement.

For more information, contact Mark Gibson, Senior Desk Officer, GPA Sustainable Energy Solutions for Situations of Displacement, mark.gibson@unitar.org, +41 22 917 8929

 

Further readings:

• Fossil Fuel Powered Generators in Humanitarian Operations Produce High CO2 Emissions
• How to insure long-term activities in short-term funding? A Guarantee Mechanism in Humanitarian Energy Contracts
• Helping the UN cut down on fossil fuels by de-risking energy service contracts
• Helping the UN cut down on fossil fuels through standard energy service contract clauses