A Cleaner, More Reliable Way to Power Businesses

The analysis is based on a Development Impact Case Study of the Access to Clean Power Fund (ACPF) Commercial and Industrial Portfolio. It was prepared by the IFC's Development Impact Measurement Department in partnership with the Financial Institutions Group and Partnerships & Blended Finance Department.

By Roshin Joseph , Senior Economist, Development Impact Measurement; Matthew McClymont , Investment Officer, Blended Finance; Andrey Shlyakhtenko , Senior Operations Officer, Blended Finance; Mariyam Zhumadil, CFA , Investment Officer, Financial Institutions Group.

The lack of reliable, affordable electricity has long held back business in developing and emerging economies, creating a level of uncertainty that incentivizes companies to look elsewhere for cheaper and more reliable energy.

Now some firms are looking at distributed generation (DG) as a possible solution. Distributed generation (DG) emerges as a decentralized approach to electricity generation, where power, in this case renewable energy, is produced at or near the location where it will be used. One common application, for instance, is rooftop solar panels. Until recently, distributed generation had not gotten much of a foothold among commercial and industrial (C&I) clients. But an IFC-supported project is helping to mainstream the concept.

In 2019, IFC invested $45 million both from its own account and from concessional finance into the Access to Clean Power Fund (ACPF), managed by responsAbility Investments AG . The fund gave loans to solar DG projects in Africa and Asia, of which three quarters was expected to be for the C&I segment. At the time, ACPF was one of the largest debt funds in the DG sector focused on the C&I segment in sub-Saharan Africa and Asia.

Key Impacts: ACPF Fund Impact and Portfolio Highlights

Over the next four years, ACPF invested $102 million in 13 DG companies in Southeast Asia, South Asia, and Africa. Those companies then brought cheaper, more reliable and sustainable electricity to 738 end beneficiaries. Most were large companies, but 7 percent were small and medium enterprises and 6 percent were government entities.

Most solar installations were mounted on rooftops but 6 percent were mounted on the ground and 0.1 percent floated on water. Notable clients included a rubber plant in Thailand and a pipe manufacturer in India. The fund gave loans to solar DG projects in Africa and Asia, of which three quarters was expected to be for the C&I segment. At the time, ACPF was one of the largest debt funds in the DG sector focused on the C&I segment in sub-Saharan Africa and Asia.

Economic and environmental effects

Overall, these installations helped companies reduce energy costs by 39 percent. They also reduced emissions by about 1.2 million tons of carbon dioxide equivalent between 2019 and 2023. That’s comparable to taking almost 273,000 gasoline-powered cars off the road for a year.

Reliable source of electricity

An IFC survey found that, while sustainability commitments and cost savings were major motivations, particularly in countries with high energy prices, many smaller firms cited the improved reliability of the power generated as a draw. That could be an incentive for other firms to adopt the technology, particularly in countries with a weak power grid.

Increased sales and market expansion

The DG companies used ACPF’s investment to enter new markets and diversify into new technologies. Collectively, the companies generated $603 million in sales and paid $18.5 million in taxes between 2019 and 2023. Two of the 13 companies have repaid their loans and are now able to get cheaper debt financing and in larger volumes.

Future outlook

More such investment is coming. Global installed DG capacity for commercial and industrial businesses will nearly triple by 2027, according to a survey commissioned by IFC. Investment demand will reach $50 billion. ACPF's strategic investments have played a pivotal role in providing early-stage financing to C&I developers. This support has been instrumental in scaling the distributed generation market, thereby attracting additional investors to the sector and ensuring the influx of much-needed capital.

Concessional finance for the project was provided through CIF’s $8.9 billion Clean Technology Fund (CTF), which was established in 2008 for investing in clean technology in low- and middle-income countries.