The document discusses mobilizing private investment for climate compatible development in Africa. It introduces a diagnostic tool for mapping incentives and investment to better understand how public support can leverage private financing. An example application of the tool in Uganda's energy sector found significant gaps in public incentives, a historic focus on grid expansion leaving rural energy underserved, and a lack of information about policies. Peer-to-peer learning between African countries on mini-grid policies and models is highlighted as an effective way to develop better tailored solutions. Clear and transparent public signals are seen as essential to drive private climate mitigation investment in Africa.

1. Mobilising private
investment in Climate
Compatible Development in
Africa
Leo Roberts, Climate and Energy Programme, ODI
European Think Tank Group seminar series 28 September 2018

2. Contents
1. Financing climate compatible
development
2. Introducing the diagnostic tool for
mapping incentives and investment
3. Brief findings from Uganda's energy
sector
4. Peer-to-peer learning for minigrids in
Africa

3. Financing Climate Compatible Development (1)
• Why Climate Compatible Development (CCD)? Mitigation doesn’t happen in a
vacuum!
• Driving the shift to a low-carbon world will require massive investment
• Public finance accounts for some of this, but the expectation is that private investment
will need to make up the majority
• NDCs and the Paris Agreement lay out broad financial needs and refer to private
finance, but not in detail
• How can public finance be used to leverage private investment?

4. Financing Climate Compatible Development (2):
Understanding the role of the private sector
• When it comes to mobilising private investment, domestic public policies have a far
greater influence than international public finance (Buchner et al., 2015).
• However information on existing private investment in climate-relevant sectors is
extremely limited, and mainly at a global level…
• …while the vast majority of climate-related investments are domestic investments
• This makes understanding why private investment isn’t be flowing into mitigating or
adapting to climate change challenging.

5. Mobilising private investment into
climate compatible development:
Our theory of change

6. ODI’s Diagnostic tool for mapping incentives and investment
into climate compatible development: aims and methodology
• Aims to support governments and development partners to understand the role of
public support in mobilising private finance for climate-compatible development
(CCD):
• filling information gaps about regulatory, economic and information incentives;
and
• enhancing understanding of how public support (both domestic and
international) is linked to private investment

7. ODI’s Diagnostic tool for mapping incentives and investment
into climate compatible development: aims and methodology

8. ODI’s Diagnostic tool for mapping incentives and investment
into CCD: assessing wider economic and political context
Provides a brief overview of the 'climate' for private investment, including:
• Basic information about market maturity
• Role of selected sector in wider development objectives
• What (if any) objectives exist for investment in the sector
• What (if any) enabling conditions exist
• Key policies and institutions
• Any climate objectives for the sector (e.g. in NDC).
#hashtag

9. ODI’s Diagnostic tool for mapping incentives and investment into CCD:
mapping policy instruments
#hashtag
• We use the term ‘incentives’ to describe the
policies, subsidies, support, aid, assistance,
fiscal policy and fiscal instruments which
shape private investment.
• We map these out under 3 themes:
• Regulatory instruments
• Economic instruments
• Information instruments

10. • Aims to assess where existing
financial incentives are coming from
(public, private, domestic,
international)
• And also what form they take
(grant, equity, debt, guarantee etc.)
• And to then establish what the
major sources are and what
patterns exist
ODI’s Diagnostic tool for mapping incentives and
investment into CCD: mapping sources of capital

11. Diagnostic tool example from Uganda’s energy sector:
Economic and political context
• Ranks low globally on most socio-economic indices
• Small domestic financial sector
• Low (but growing) energy access, with rural/urban
split (highly dispersed population)
• Uncertain power supply a major obstacle to
development and investment (i.e. energy sector is
central to Uganda’s planned socio-economic gains.

12. Diagnostic tool example from Uganda’s energy sector:
Policy instruments

13. Diagnostic tool example from Uganda’s energy sector:
sources of capital

14. Conclusions
• Still significant gaps in public support for private investment in energy, especially small-
scale.
• Historic focus on grid extension has left a lack of instruments supporting rural energy
investment.
• Many existing instruments only work for major int’l investors, not Ugandan start-ups.
• Critical lack of information provided on existing policies and incentives by GoU
Diagnostic tool example from Uganda’s energy sector:
Scale of support, conclusions and analysis

15. Financing minigrids in Africa (1): key challenges and factors
in private sector involvement
• Financing small-scale energy projects such as mini-grids is often considered
risky by private investors (and developers):
• Unpredictable energy demand (from poor rural consumers)
• Unclear investment signals from government
• Difficult to access finance for small-scale projects
• History suggests that public subsidies are essential (sustainable business
models are challenging)

16. Financing minigrids in Africa (2): overcoming information
barriers by sharing learning between countries
• Africa Minigrids Community of Practice (AMG-CoP) set up to respond to
demand from policymakers for support on minigrids policy development
• Peer-to-peer nature allows for sharing between African countries – solutions
much better fit in other African markets
• Rapid exchange of context-specific learning and ideas

17. "You may feel that you’re doing something fantastic in
your country, but when you share what you’re doing you
often find that a similar program has been rolled out in
another country and didn’t work out. We’ve never learnt
this fast”
Victor Osu, Rural Electrification Agency of Nigeria (REA)

18. Conclusions
• Clear and transparent public signals/incentives are essential to drive private investment
in mitigation in Africa.
• Major data gaps are preventing domestic and international private investment
• A strong regulatory and enforcement environment is as important as the incentives
themselves
• Aligning different public actors around incentives is a challenge
• Mitigation actions are most successful when they have a clear development outcome
• Peer-to-peer sharing of best practice between countries can advance business models in
Africa

19. Thankyou