IWP&DC: Can you provide an overview of the REPP 2 initiative and its goals for renewable energy expansion in Sub-Saharan Africa?

Ben Hugues: REPP 2 is a private debt fund designed to scale up support for innovative renewable energy SMEs in Sub-Saharan Africa (SSA). REPP 2 will finance and promote the growth of small to medium-sized renewable energy projects across SSA with the objectives of providing access to energy for all and mitigating greenhouse gas emissions. Through this process, REPP 2 will catalyse the growth of SSA’s smaller-scale renewable energy sector, mobilising additional public, private and commercial funding to combat climate change and increase the climate resilience of people, communities and energy infrastructure.

The fund is expected to deliver 330MW of new installed capacity, reduce or avoid more than 12.7 million tCO2e of GHG emissions, provide new or improved energy access to more than 7.7 million people, improve the resilience of nearly one million beneficiaries and make USD38 million worth of energy infrastructure more resilient.

What specific challenges in the hydropower sectors is REPP 2 addressing in Sub-Saharan Africa?

REPP 2 will specifically target small and medium-scale projects of up to 25MW for solar and hydro and up to 50MW for wind.

In the hydropower sector, development cycles are generally quite long and costly and capex requirements are high, particularly in a SSA context. By providing early-stage financing, including during the development phase, REPP 2 will support the development of small-scale hydro power in the region.

Could you explain how REPP 2 plans to leverage public, private, and commercial resources for supporting small-scale and decentralized renewable energy projects – particularly hydropower – in the region?

At the fund level, we’re looking to mobilise US$250 million from public and private sources in all tranches of the capital stack. At the level of investments planned to be made by REPP 2, we expect to mobilise total finance (total project costs less REPP2 investments) in excess of US$786 million.

Given the limited risk appetite from private and commercial funders, especially for smaller-scale renewables where funding quantum are lower and the potential for returns relative to the level of costs are constrained, it appears unrealistic to target a significantly higher private sector leverage ratio.

How will REPP 2 support climate-vulnerable communities and contribute to bolstering the resilience of national grid infrastructure? Are there specific regions or countries where these efforts will be concentrated?

The potential of REPP 2 to increase climate change resilience and adaptive capacity lies in:

  • The use of multiple energy sources and technologies to make energy systems more climate resilient against supply disruption. For example, hybridising hydropower generation (which is often seasonally variable and may be negatively impacted by reduced rainfall due to climate change) with solar or wind generation can provide a buffer against climate variability;
  • Decentralising and diversifying energy supply with renewable energy systems and off-grid solutions, which can provide increased energy security through the ability to localise and buffer grid-based supply disruptions;
  • Increasing access to renewable energy in off-grid communities to provide households and businesses with solutions that help to build resilience and respond to the impacts of climate change. Such solutions include electricity provision for clinics to respond to increased illness, malnutrition, and injury; electricity provision to refugee camps that are accommodating displaced people; electricity provision to educational facilities to improve awareness and knowledge about climate change; improved access to climate information through cellular networks, radios, and internet enabling people and communities to benefit from access to climate early-warning systems for disaster risk reduction and seasonal climate information for planning and decision-making for management of crops and livestock; providing power for increased cooling need; irrigation to increase agricultural productive output; e-mobility to provide increased access to markets as well as providing improved cooking solutions to households;
  • Supporting local private developers and helping them to become financial sustainable, thereby making the local renewable energy sector (as well as local economies more broadly) more resilient to macroeconomic shocks; and
  • Supporting technological innovations that build the capacity of households and communities to anticipate and respond to climate impacts, including innovations for the delivery of climate services (e.g., access to mobile phones and internet improves access to meteorological and agrometeorological reports and early warning systems), market information, and other information on climate change, its impacts and the solutions; as well as technological innovations for productive use applications.

The fund aims to invest $70 million in projects aligned with the 2X gender lens investing criteria. How will REPP 2 promote gender equality and empower women in the renewable energy sector in Sub-Saharan Africa?

All funding activities will be considered from a gender lens, with the view to target 30% of REPP 2 funding to female-owned and led companies, as well as companies that provide solutions to women as energy end users in line with the 2X GLI criteria. This will help to promote women’s empowerment and female ownership in REPP 2 investments leading to gender equity. In particular, REPP 2 will provide hybrid equity or loans to fund the scaling up of solar home system (SHS) and mini-grids businesses with a gender lens. This growth-stage capital, in the form of loans, will help to ensure that SHS business achieve scale and long-term commercial viability and will increase the renewable energy capacity and generation.

REPP 2 will integrate a gender equity perspective into the design, implementation, monitoring and assessment of all renewable energy activities financed by REPP 2. This will involve:

  • Analysing gender equity in the investee company, country of operation, and targeted sector;
  • Establishing an investee-specific gender action plan by identifying gender performance indicators and gender-disaggregated targets against an established baseline; and
  • Integrating the items listed in the two bullet points above into a monitoring plan.

Could you explain the role of blended finance in attracting private sector investments for clean energy transition and green growth in Africa? What incentives are in place for private investors in REPP 2?

The junior equity tranche of the blended finance structure, which will act as a first loss buffer, is designed to deliver incrementally greater impact and further mobilisation of third-party funds (both public and private) from more risk-averse investors.

Given the significance of the $50 million investment from the Green Climate Fund, how will the funds be allocated and utilized within REPP 2?

REPP 2 will:

  • Provide early-stage growth funding for off-grid companies
  • Provide development-stage funding for grid-connected projects
  • Finance expansion of SHS businesses
  • Finance construction of mini-grid and isolated grid portfolios
  •  Provide funding for construction of grid-connected projects

What is the expected timeline for the implementation of projects under REPP 2?

The fund will be launched in H1 2024, followed by a deployment and implementation period of five years.

Are there any specific partnerships or collaborations with local governments, organizations, or hydropower industry stakeholders that are crucial to the success of REPP 2?

The Camco team has had extensive engagement with key governmental and non-governmental stakeholders in the design phase of REPP 2 and will continue to do so during the investment period.

Once the programme is operational, REPP 2 will promote its activities internationally and in host countries through industry associations and its on-the-ground network and partners to ensure local companies in those markets are aware of – and have the opportunity to benefit from – the REPP 2 offering.