Page 26 - Lighting a Billion Lives - Developing Pathways for Energy Access
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market was highly disorganized, if at all there was any. Over time, even though clean energy technology
has advanced by leaps and bounds, availability of finance persists, as a bottle-neck, in off-grid lighting
and improved biomass cookstove projects. In the following section, we describe some approaches to
financing clean energy projects adopted in the LaBL campaign.
Optimizing Sources of Finance
The LaBL programme has attempted to entwine public and private sources of finance in its projects.
The collaborative role of both types of entities has not been limited to provision of finance, but has also
involved strategic planning for convergence of mandates. This approach has gone beyond conventional
roles of public and private entities in public-private partnership (PPP) models, encouraging partnership
at every stage right from the inception of the project. However, finance from the government,
multilateral/bilateral agencies, and corporate social responsibility grants have been principally utilized
for meeting the initial hardware and balance of system costs, with a smaller percentage of equity and/
or debt contribution. On the other hand, payment from the village community has mostly financed the
operation and maintenance of clean energy systems, with the role of grant-making institutions limited
to providing ‘incentives’ or results-based finance for achieving a preset performance standard.
Approaches to Financing LaBL Projects
Full grant: In the initial years of the campaign, the entire hardware and balance of system costs of
community lighting projects was financed through a grant from a donor organization. Various types of
donor entities, including government departments, government agencies, multilateral organizations,
bilateral organizations, corporate organizations, private charities, and individual philanthropists have
contributed to scaling up the reach of LaBL in its formative years. While this model of financing permits
provision of clean energy to remote and extremely poor rural communities, long-term disadvantages
like low community ownership and decreased legitimacy of the village level entrepreneurs (VLE) to
collect user fees have been observed.
Grant + Equity: After the first two years, the impact and global presence of LaBL helped in attracting
increased funding from diverse donor organizations and individuals. Initiatives such as ‘Greenathon’
launched in partnership with a renowned TV media house in India encouraged people from various
walks of life to make private contributions to the campaign to ‘adopt a village’ with clean and reliable
lighting. At the same time, it was realized that the full-grant model of program implementation was not
tenable or sustainable in the long run. Hence, the campaign made a strategic decision to insist on equity
contribution from the VLE and beneficiary households to cover 20–40 per cent of the hardware cost,
or the entire balance of system costs. While this model helped scale up the programme to many Indian
states previously untouched by the campaign, it was felt that the insistence on equity contribution made
community lighting systems unaffordable for villages that predominantly consisted of BPL households.
Grant + Equity + Debt: In order to ensure that the campaign reaches out to villages where the
community has inadequate financial capacity to make equity contribution, LaBL partnered with
various financial institutions (e.g. banks and micro-finance institutions) to leverage debt for VLEs who
were willing to invest in community lighting systems. The loan would be recovered by the VLE through
user fees collected daily or monthly. This development has led to higher thrust on judicious selection of
VLEs and equipping them with business development and accounting skills through intensive
training programmes.
24
has advanced by leaps and bounds, availability of finance persists, as a bottle-neck, in off-grid lighting
and improved biomass cookstove projects. In the following section, we describe some approaches to
financing clean energy projects adopted in the LaBL campaign.
Optimizing Sources of Finance
The LaBL programme has attempted to entwine public and private sources of finance in its projects.
The collaborative role of both types of entities has not been limited to provision of finance, but has also
involved strategic planning for convergence of mandates. This approach has gone beyond conventional
roles of public and private entities in public-private partnership (PPP) models, encouraging partnership
at every stage right from the inception of the project. However, finance from the government,
multilateral/bilateral agencies, and corporate social responsibility grants have been principally utilized
for meeting the initial hardware and balance of system costs, with a smaller percentage of equity and/
or debt contribution. On the other hand, payment from the village community has mostly financed the
operation and maintenance of clean energy systems, with the role of grant-making institutions limited
to providing ‘incentives’ or results-based finance for achieving a preset performance standard.
Approaches to Financing LaBL Projects
Full grant: In the initial years of the campaign, the entire hardware and balance of system costs of
community lighting projects was financed through a grant from a donor organization. Various types of
donor entities, including government departments, government agencies, multilateral organizations,
bilateral organizations, corporate organizations, private charities, and individual philanthropists have
contributed to scaling up the reach of LaBL in its formative years. While this model of financing permits
provision of clean energy to remote and extremely poor rural communities, long-term disadvantages
like low community ownership and decreased legitimacy of the village level entrepreneurs (VLE) to
collect user fees have been observed.
Grant + Equity: After the first two years, the impact and global presence of LaBL helped in attracting
increased funding from diverse donor organizations and individuals. Initiatives such as ‘Greenathon’
launched in partnership with a renowned TV media house in India encouraged people from various
walks of life to make private contributions to the campaign to ‘adopt a village’ with clean and reliable
lighting. At the same time, it was realized that the full-grant model of program implementation was not
tenable or sustainable in the long run. Hence, the campaign made a strategic decision to insist on equity
contribution from the VLE and beneficiary households to cover 20–40 per cent of the hardware cost,
or the entire balance of system costs. While this model helped scale up the programme to many Indian
states previously untouched by the campaign, it was felt that the insistence on equity contribution made
community lighting systems unaffordable for villages that predominantly consisted of BPL households.
Grant + Equity + Debt: In order to ensure that the campaign reaches out to villages where the
community has inadequate financial capacity to make equity contribution, LaBL partnered with
various financial institutions (e.g. banks and micro-finance institutions) to leverage debt for VLEs who
were willing to invest in community lighting systems. The loan would be recovered by the VLE through
user fees collected daily or monthly. This development has led to higher thrust on judicious selection of
VLEs and equipping them with business development and accounting skills through intensive
training programmes.
24
