A description of how results based financing can help overcome typical development barriers for clean energy technologies in off-grid areas

1. DIFFICULT CHALLENGES:
FINANCING OFF-GRID ENERGY AND ENERGY EFFICIENCY
PROJECTS
Alfredo Baño Leal
Energy Consultant
A D B E n e r g y f o r A l l
Benefits of Results-Based Financing
in Off-Grid Technology Deployment

2. Barriers for off-grid deployment: Money!
 Initiatives targeting the rural poor face a vicious cycle of:
 Expensive products
 Low affordability
 Low WtP
 Expensive financing
 Micro-size operations
 No economies of scale
 High taxes
 Low demand
 Small market size
 No experience in
alternative finance
Limited
Demand
Limited
Credit
Limited
Supply
And... the Economic Benefits of new technologies are not clearly communicated!!
High supply costs:
Low income:
Limited finance:
Expensive
financing
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3. What is RBF?
 Results-Based Financing (RBF): Financing and subsidy
mechanisms that are linked to pre-agreed and verified results.
 Output-Based Aid (OBA): Specific area of RBF that links grant
subsidies to pre-agreed project outputs, usually targeting the poor.
Characteristics
 Financing is disbursed after the results have been delivered and verified.
 Explicit beneficiary targeting ensures effective support to beneficiaries.
 Implementation and financing risks are absorbed by service providers.
 Disbursements require independent verification of delivered results.
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4. What is RBF?
 Universe of RBF:
Adapted from Johannes, L., Mimmi, L., & Mumssen, Y. (2010). A Snapshot of the OBA Universe. OBA Approaches, (33).
Output
Based
Aid
Cash
Transfer
Cash on
Delivery
Performance
Bonuses
Performance
Based
Contracting
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Results
Based
Lending
RBF

5. What is RBF for?
 Bridging the affordability gap:
And... promoting local economic growth by supporting local businesses
Low
consumer
affordabilit
y
High
Service Cost
Gap
Subsidy
Financing
OBA
RBF
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6. RBF Advantages
RBF increases EFFICIENCY
Payments based on outputs encourage
SPs to become more efficient and
innovative in delivering outputs.
RBF increases TRANSPARENCY
RBF's explicit targeting system allocates
clearly how much subsidy per output
each beneficiary would receive.
RBF improves MONITORING
Monitoring is an intrinsic element of the
program, as outputs need to be monitored
before payments occur.
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7. RBF Advantages
RBF increases ACCOUNTABILITY
Subsidies and costs per output are analyzed
and pre-agreed in advance, increasing good
governance and reducing corruption.
RBF increases FINANCIAL LEVERAGE
OBA subsidies incentivize private SPs to
invest and kick-start businesses and
leveraging private funding.
RBF reduces IMPLEMENTATION RISKS
Donors and governments face reduced
implementation risks, as funds are disbursed only
when outputs have been delivered, and not before.
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8. RBF Disadvantages
RBF increases ADMINISTRATIVE COSTS
Monitoring and verification of outputs involve
higher costs.
However, improved monitoring reduces subsidy
leakages, offsetting the increased admin costs.
RBF transfers EXCESSIVE RISK
SPs need to undertake all risks, including
customer demand, pre-financing, regulatory
changes, competition, etc.
RBF/OBA provide some economic incentives to
bear those risks , although some projects fail
due to inadequate risk assessment.
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9. RBF Initiatives by ADB
 Preparation of OBA projects for rural grid electrification
in Cambodia and Vietnam (under implementation)
 Preparation of OBA projects for off-grid solar systems in
Myanmar (under implementation)
 Approval of the 'Policy on Piloting Results-Based Lending
for Programs'
 1st operation: $200 million for Sri Lanka education sector
 Preparation of OBA project for energy access (biogas) in
Nepal
 Large potential for RBF/OBA opportunities in
off-grid operations
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10. Supplementary financing channels to RBF
 Results-based funds are disbursed upon delivery, so
pre-financing is not allowed, but:
 Advanced or phased disbursement by milestones, when up-
front Capex are high (e.g. mini-hydro) is possible.
 Risk-sharing facilities (partial guarantees) through partnering
FIs can complement RBF.
 Working Capital credit lines through partnering FIs, under the
overall RBF program umbrella.
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11. Example: Solar Home Systems in Myanmar
Rural Beneficiaries
Private Suppliers
Local Government
Verification
40%-
60%Subs
idies
Technical
Assistance
IVA
ADB
Coordination
Payments
SHS
installation
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Report
OBA partial subsidies help:
 reduce the affordability gap
 increase demand
by reducing up-front costs to
consumers, and
 increase access to electricity
 increase sustainability
 and systems quality
by leveraging private investors
and verifying project results.

12. Involvement of Energy for All
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 The Energy for All initiative (E4All) leads the efforts
within ADB to scale up Access to Energy,
 champions the use of RBF and OBA funding, and
 collaborates with all stakeholders through its Energy
for All Partnership.
WE AIM TO PROVIDE ENERGY ACCESS TO
100 MILLION PEOPLE IN ASIA AND
THE PACIFIC REGION BY 2015.

13. Thank you for your kind attention
Any question?
For further information:
Alfredo Baño Leal
ADB E4All Consultant
Email: abanoleal.consultant@adb.org
Skype: alfredobano
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