GCF scaling-up clean energy access through solar based mini-grids in Mali
Mali is a landlocked country in the Sahel belt of West Africa where 80% of the population in the rural areas do not have access to electricity, while those with access are getting most of the electricity from diesel generators. The country’s primary electricity grid is dominated by hydro and thermal generation, with an increasing share of fossil fuel in the generation mix. Despite the immense potential of solar resources in the country, it represents only 3% of the country’s installed capacity. Efforts to extend the main grid are unlikely to solve the country’s energy access problems, as the development of energy projects is hindered by a range of exacerbated financial and technical barriers for rural electrification.
The GCF board approved the Mali solar rural electrification project at its 22nd meeting in February 2019. The project is expected to provide funding to solar-based mini-grids for rural electrification, with a total investment of EUR 46.2 million of which EUR 33.64 million in high concessional sovereign loan and EUR 2 million grant for technical assistance. GCF funding will additionally mobilise EUR 10.6 million from BOAD, the West African Development Bank. The first approved stage of the project will deliver access to clean energy to 50 localities in Mali, reaching 28,300 new households and reducing 821,000 tCO2eq of emissions over the project’s lifespan.
"The Mali solar electrification project will build the capacity of rural electrification players while supporting access to financial services for productive users,” said Mr Christian Adovelande, President of BOAD. “The Bank seeks to align itself with the Paris Agreement aiming to set aside more than EUR 200 million for the promotion of private sector investments in solar energy”, he added.
Public-private partnership is the business model chosen for the project where the ownership of electrical assets will lie within the responsibility of the Government. For construction, competitive public tenders will be used to selected EPC companies. Operations and maintenance of the assets, on the other hand, will exclusively lie within the responsibility of the private sector through 15 years concession agreements. Selected operators will be required to invest 20% of assets value while gaining in exchange the ability to collect revenue from the sales of electricity over the 15 years at the approved tariff.
“Finding the right balance between cost recovery of electricity prices and consumers’ ability to pay is a major barrier to commercial off-grid rural electrification activities in Sub Sahara Africa,” said Mr Pierre Telep, Renewable Energy Senior Specialist at GCF. “To bridge this gap, the Government of Mali has borrowed from GCF at concessional terms, which are 40 years at 0% interest rate with a 10 years grace period. These concessional terms will help the Government support private sector operated mini-grids while achieving a uniform tariff”, he added.
By funding green mini grids, GCF recognises the high impact opportunity offered by this electrification approach. Mr Sambou Wagué, Minister of Energy and Water in Mali stressed the project’s high impact opportunity: “The high solar potential in Mali is an underestimated fortune for the Country. The use of this resource at scale for such projects will not only contribute to our country’s energy security but will also create employment and enhance energy access to our rural areas. The GCF project will also reduce emissions in the energy sector helping Mali achieve its NDC targets”.
GCF contributes to global energy transformation by helping developing countries reduce their carbon footprint in power generation and increase access to clean energy.