A New Investment Project Could Point The Way To Renewables For The Global Poor

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A new investment project is looking to get renewable projects over the financing hump in the region of North Africa and the Middle East (MENA). Called the Renewable Energy Development and Investment Vehicle for MENA (REDIMENA), the proposed fund would provide $1 to $5 million in risk capital to help renewable energy projects reach the construction phase.

The project is the brainchild of the Desertec Industrial Initiative (Dii) and was announced in conjunction with the group’s recent forecast that renewable energy capacity will double in the MENA region by 2015 — from 1.7 to 3.3 gigawatts. To help that move along, Dii is aiming to set REDIMENA up with initial funding of $40.5 million.

“North Africa and the Middle East are at the beginning of an impressive energy transition based on wind and sun,” said Dii CEO Paul van Son. “A well-developed, shovel-ready project then builds the basis for the much larger amounts of private sector investment necessary for constructing a renewable energy power plant.”

As of the early 2000s, almost 90 percent of the MENA region’s electricity generation was projected to come from oil and natural gas through 2030. Electricity use in most countries was anticipated to at least double by that same year. In terms of poverty, MENA is doing better than some, but remains a region of the world struggling its way into development. The number of people living on $2 a day or less was just shy of 40 million in 2010, or about 12 percent of the population. All of which would make the introduction of more renewable energy welcome in terms of both combating climate change and reducing energy poverty.

The good news is that access to electricity is quite high in both North Africa and the Middle East: 99 percent and 89 percent as of 2009, respectively. (Though only 71.8 percent for the rural Middle East.) That means the vast majority of people in these regions will have immediate access to the energy generated by the larger scale renewable projects Dii is talking about, since they’re already plugged into the grid.

South Asia and Sub-Saharan Africa are another story, where electrification drops to 68.5 percent and a paltry 30.5 percent. If Dii is interested in eventually expanding REDIMENA into these regions, the best way to do it is with small scale distributed generation projects — mainly solar — that allow people to bypass the need for a grid entirely. Entrepreneurs in Africa are already setting up mobile-powered, “pay-as-you-go” plans for communal off-grid solar power, or selling cheap, durable solar panels, to give just two examples.

But the biggest help projects like REDIMENA can provide in this context is encouraging distributed, individual solar generation. The poor in the developing world without electricity access face the individual equivalent of the financing hurdle REDIMENA is looking to address for larger projects: they’re unable to pull together the money for a one-time purchase of a home solar array, so they rely on traditional fuels like kerosene which can be purchased in small, discrete increments.

But the cumulative cost of those purchases is enormous in comparison to the one-off investment in something like a distributed solar system. Helping those people make that one-time purchase saves them much more over the long haul, helps cut energy poverty, and of course comes with all sorts of attendant health and environmental benefits.