SNV joins the debate on achieving universal energy access with end-user subsidies

January 2021

Event

SNV energy expert Martijn Veen participated in a virtual session entitled "'From ideas to action: Using end-user subsidies to achieve universal energy access", which took place on January 20, 2021.

About the event

The virtual session was organised by GOGLA, the global association for the off-grid solar energy industry in partnership with World Bank Group’s Lighting Global programme and ESMAP. The event was also supported by GET.invest.

During the event, participants joined the experts as they:

  • Explored how end-user subsidies can fit within the ‘tool-kit’ of public financing solutions to achieve universal energy access
  • Shared their own experience and insights around end-user subsidy design challenges in the off-grid solar standalone space and ‘smart’ solutions
  • Learned from, and participated in the design of, four pilot standalone solar end-user subsidy country programmes
  • Identified clear next steps to advance clean energy access for hundreds of millions of people living in energy poverty

End-user subsidies

End-user subsidies, which directly reduce costs for consumers, have the potential to address the affordability challenge and enable energy access for the most vulnerable communities. However, for them to be as effective as possible, they must be considered alongside other enablers, such as supportive fiscal policy and supply-side subsidies.

During the discussion, participants explored the ‘smart’ design of end-user subsidies to address this complexity and uncover solutions. I There was a particular focus on stand-alone solar technologies.

End-user subsidies

End-user subsidies, which directly reduce costs for consumers, have the potential to address the affordability challenge and enable energy access for the most vulnerable communities. However, for them to be as effective as possible, they must be considered alongside other enablers, such as supportive fiscal policy and supply-side subsidies.

During the discussion, participants explored the ‘smart’ design of end-user subsidies to address this complexity and uncover solutions. I There was a particular focus on stand-alone solar technologies.

SNV at the event 

At the event, Martijn Veen moderated a Niger focused session. During the discussion, he raised the following points: 

  •  'To achieve universal access to energy, and to address the affordability gap for energy solutions which is a reality in many countries where we operate, we can no longer ignore the importance of end-user subsidies – particularly if our aim is to leave no-one behind. Impact of the current Covid-19 pandemic is pushing even more people into extreme poverty, which further stresses the need for innovative consumer financing solutions.'
  • 'Demand-side subsidies cannot be considered in isolation. They will need to be looked at as part of a broader package to stimulate sustainable market development for energy access. This includes consumer awareness raising, and addressing challenges on the supply-side and enabling environment conditions as well.'
  • 'To avoid risks of market distortion, end-user subsidy schemes will need to be designed carefully, considering the specific context of the country involved.'
  • 'While affordability of off-grid energy products and services is a challenge, and demand-side subsidies can be a solution, availability and supply of quality products in remote areas is a challenge as well. Where possible, it makes sense to integrate demand-side subsidies as part of Results Based Financing schemes with the companies supplying these products and services. This is aimed to incentivize companies to engage in challenging, hard to reach markets, offering affordable products.'
  • 'Affordability and availability constraints of decentralised renewable energy products vary between countries, and within country – reason why it makes sense to consider geographical differentiation in subsidy levels. The Vulnerability Access Index, methodology developed by SNV to structure subsidy levels based on socio-economic conditions and market maturity, caters for this need.'
  • 'With size and cost of energy products and services varying a lot, applying flat subsidy levels might not be most appropriate in many countries. It calls for smart design of subsidy schemes, considering the energy output and further specifications of each product, capacity to pay of end-users, and the specific market context and challenges present in each country.'

End-user subsidies for off-grid solar discussion paper 

GOGLA, supported by GET.invest has just launched their latest discussion paper 'Using End-User Subsidies for Off-Grid Solar to Achieve Universal Energy Access' today. This paper aims to bring the private sector’s perspective to inform the discussion on how end-user subsidies for off-grid solar solutions fit within the ‘toolkit’ of public financing solutions to accelerate energy access. 

To learn more about the event and to see a recording of the sessions, please visit the event page

Expert

Martijn Veen

Global Sector Head - Energy


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