Results-based Financing as a Governance Instrument for Energy Access Programs – a Contentious Innovation

Ayda A. Frings, H. Romijn

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Abstract

Seed Panel 24 - Energy in Times of Unprecedented Challenges: Rethinking Off-grid Solar Technologies in the Global South

Keywords: Results-based financing (RBF); energy access; effectiveness; goal displacement

Results-based Financing as a Governance Instrument For Energy Access Programs: Pros & Cons

Ayda A. Frings1, Henny A. Romijn2

1: Green Link B.V.; 2: Eindhoven University of Technology, the Netherlands

Results-based financing (RBF) of programs promoting the diffusion of small and pico solar systems and clean cookstoves in low-income regions in the Global South has become an increasingly popular policy instrument adopted by aid donors in search of ways to speed up progress towards SDG7. Gearing up is considered essential in view of the enormous numbers of people who still lack even the most basic electricity access and rely on traditional cooking fuels. RBF has come to be widely embraced as a promising vehicle for making a dent in these numbers, more than conventional subsidized donor financing.

RBF's essential unique feature is that subsidies to organizations involved in disseminating energy access devices are disbursed only after pre-agreed sales numbers have been achieved. RBF thus shifts the risks associated with non-performance by implementing organizations from the donor to the subsidy receiver, an arrangement which supposedly provides a greater incentive to program implementers to deliver, thereby enhancing program effectiveness.

The economistic logic used to justify the utilization of RBF for energy access is however not grounded in solid research-based evidence about how RBF design and implementation work out in practice for the implementing organizations, their target groups, and the societies in the Global South at large. Our panel contribution aims to start filling this gap.

We start by outlining the results of a systematic review of the existing (mostly "grey") literature about RBF for energy access to date, in which we try to disentangle actual evidence from unverified assumptions and speculative discourse. This work yielded several potentially important points of attention for RBF design and implementation that we then carried forward into a round of primary data collection. In this round, we probed these issues deeper by means of a series of semi-structured in depth interviews with parties that had gained experience with RBF either as a donor, or as a recipient organization working in the field.

The results from this work yielded lessons on different levels. From an instrumental point of view, which is of interest to donors, we found it useful to distinguish four distinct stages in RBF design and implementation. Different issues need to receive attention by the subsidy-providing organization in each of these stages in order to achieve an RBF scheme that will perform satisfactorily on aspects such as target group focus and cost-effectiveness.

Yet, one can also raise more fundamental questions that give cause for deeper reflection about the desirability of RBF as a governance instrument for energy access in the poorest regions of the world. RBF incentivizes speed in program roll out, which is best achieved by means of targeting organizations that already have the competences, resources and capabilities for scaling. In low-income countries, these are almost invariably actors with majority ownership from the Global North and under western management. Local entrepreneurs, if at all aware about the subsidy possibilities, are unable to qualify because of the unattainable starting conditions. In this way, donors contribute to an questionable unlevel playing field on the market for small energy access devices.

One can also question the meaning of energy access as conceived in RBF schemes. We argue that the framing of RBF targets as simple sales numbers signals harmful goal displacement, in which crucial questions of how to achieve local embedding and assimilation of the new technologies; what role a local productive sector could or should play in this process; and how to safeguard environmental sustainability and social fairness become subservient concerns.
Original languageEnglish
Number of pages1
Publication statusPublished - 12 Jul 2023
EventEADI General Conference 2023: Towards New Rythms of Development - Centre for African and Development Studies (CEsA), ISEG-Lisbon School of Economics and Management/University of Lisbon, Lisbon, Portugal
Duration: 10 Jul 202313 Jul 2023
https://www.eadi.org/eadi-cesa-23/seed-panels/sp24-energy-in-times-of-unprecedented-challenges-rethinking-off-grid-solar-technologies-in-the-global-south

Conference

ConferenceEADI General Conference 2023
Country/TerritoryPortugal
CityLisbon
Period10/07/2313/07/23
Internet address

Keywords

  • energy access
  • least developed countries
  • results-based financing
  • off grid
  • goal displacement

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