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Briefing Note:
African Rural Energy Enterprise Development (AREED) Initiative

Sustainable Energy/Climate Change Proposal Supported by the UN Foundation

With the support of the UN Foundation, UNEP is initiating an effort directed at the African rural energy service sector. The AREED initiative seeks to create energy companies that use renewable energy technologies to meet the energy needs of the poor, thereby reducing the environmental and health consequences of existing energy use patterns. This note explains the main concepts behind the project, describes its objectives, and introduces our partners in the effort.

Brief description

The initiative will develop new skills within African NGOs, financial institutions and UN agencies to nurture local energy enterprises while accelerating the use of renewable energy technologies. The initiative will be undertaken in five African states1, and will use an innovative approach that couples enterprise development services with modest amounts of start-up support. This approach has been used successfully in other parts of the world, but has not been applied systematically in sub-Saharan Africa.

A focus on Africa

Nine out of ten Africans have no access to electricity and three-fourths of the energy used in domestic settings comes from dwindling supplies of traditional fuels. The lack of clean and sustainable energy supplies is a significant barrier to the development and prosperity of African countries and a major contributor to a host of environmental and human health problems. New investments in clean energy can couple economic development to environmental amelioration. One of the best means to expand the access to clean energy services in Africa is to engage the private sector in distributed energy supply using renewable energy technologies.

The AREED approach

The AREED approach offers rural energy entrepreneurs a combination of enterprise development ‘hand-holding’ and start-up support. Providing both environmental venture funds and services that help new enterprises develop as businesses significantly improves the impact of each activity. The result is that entrepreneurs can plan and structure their companies in a manner that makes eventual investments by mainstream financial partners less risky. Viable private sector energy companies can help meet the energy needs of the rural poor in countries where governments cannot, for fiscal or geographic reasons, expand national grids.

The project objective

The AREED initiative will broaden the depth of organizations and people who can nurture energy entrepreneurs and thereby foster small and mid-size rural energy enterprise development. Specifically, the initiative will:

Partners

The AREED initiative will involve UNEP’s Energy sub-programme and Regional Office for Africa, the UNEP Collaborating Centre on Energy and Environment, and E+Co, a non-profit organisation that has helped start 50 renewable energy businesses in 24 developing countries.

AREED will also involve leading African financial institutions and NGOs. Discussions with the following organisations is currently underway: the African Development Bank, Development Bank of Southern Africa, Agricultural Finance Corporation., Centre for Innovation and Enterprise Development (Ghana), Botswana Technology Centre, Renewable Energy Information Network of Namibia, Centre for Energy, Environment and Eng. (Zambia), Biomass Users Network Zimbabwe, Southern Centre for Energy & Environment, Organisation for Rural Associations for Progress.

Links to the UNF/UNFIP Programme Framework

The AREED initiative addresses UNF’s desire to increase the use of sustainable energy technologies for community-based rural electrification (Objective 1 in UNF Sustainable Energy/Climate Change Strategy document). The initiative will not fund technology pilots or demonstration projects but will focus on establishing commercially-operated enterprises that serve the rural poor in a manner that makes replication easier.

Rationale for UNEP involvement

UNEP has been active in the evaluation and promotion of the rural energy sector in Africa, assessing both methodologies for successful technology transfer and national policies that hinder or favour the deployment of RET systems. So that countries can fully realise the environmental and social benefits of RET commercialisation, UNEP is integrating the private sector in UN projects, particularly building links to financial institutions. For example, UNEP’s draft strategy for Africa proposes efforts to secure additional financing for environmental initiatives from the African Development Bank and local financial institutions.

With the support of the GEF, UNEP established in May 1999 a RET/EE Investment Advisory Facility that helps financial institutions make informed investment decisions on renewable energy and energy efficiency projects in developing countries. The AREED Initiative extends and complements this initiative.

(1) Senegal, Côte d’Ivoire, Ghana, Namibia, Botswana, Zimbabwe and  Gambia are countries currently under consideration.