Long-term renewable energy assets for the humanitarian sector
Helping humanitarian organisations generate cost savings by allowing them to invest in assets with high upfront costs and a longer lifespan with a focus on renewable energy production in refugee camps
In 2016, more than 65 million people were forcibly displaced from their homes, of which 11.6 million for more than 5 years and 2.6 million living in refugee camps for over 5 years. In this context, humanitarian organisations typically provide aid material assistance in terms of shelter, energy and WASH for instance.
Unfortunately, these are usually not adapted to protracted displacement: they are expensive, harm the environment and provide poor living conditions when used over extensive periods of time. More sustainable solutions exist (e.g. solar PV systems) and have a high potential from both a cost-saving and social/environmental impact perspective.
However, they require a higher upfront investment, which do not meet the budgetary constraints of humanitarian organisations. Annual budgets cycles and ad-hoc fundraising from donors prevent humanitarian agencies from committing to multi-year financing agreements and to purchase long-term assets with higher upfront costs, as they take several years to recoup. Yet, they generate significant cost-savings. In addition, although donors have never been as generous as today, the humanitarian financing gap is estimated at around US$15bn.
As a consequence, there is a general call for private sector to help bridge the financing gap through innovative financing mechanisms. A leasing mechanism would allow spreading high upfront costs over multiple years, thereby making it possible for humanitarian organisations to procure longer-term assets that provide enhanced services and generate cost-savings over the years, while complying with their budget constraints thanks to the yearly payments. This would also help bridge the humanitarian-development nexus.
In 2017, KOIS conducted a feasibility study and demonstrated the potential to set up a multi-hundred million dollars leasing facility for the humanitarian sector with a primary focus on solar-powered pumping installations and (hybrid) solar electricity production for camp offices and infrastructure. This facility can then be further extended to mini-grids for the provision of electricity to households in camps and surrounding local communities. We are now looking into potentially structuring such a blended finance mechanism with interested parties.
“Humanitarian crises have become increasingly protracted in nature. Yet, humanitarian organisations have yearly budgets that prevent them from planning for multiple years. Innovative finance can help humanitarian agencies overcome this budgetary constraint and provide more cost-efficient and adapted services to displaced populations.”