My move to the (clean) energy finance sector

As some of you know already, starting last November, I decided to move to a new sector for a one-year assignment (and a new city, I am now most of the time in Brussels) focusing on financing early stage projects in renewable energy across Africa, Asia and Latin America. I am sharing here, after three months, few observations:

– Large opportunities: driven by absence of the grid in a large part of Africa, but also the replacement of existing connections by cleaner, ┬ámore reliable or more affordable ones across continents. There is a clear pattern of moving away from the massive long term energy projects (still happening, still essential, but very cumbersome and slow) to short and mid-term solutions through the distribution of solar home systems, the installation of mini-grids to connect a number of small towns and the development of new energy storage systems.

– Challenging analysis: the analysis of these new initiatives and companies popping up with new technologies, new payment systems and new business models all together make our work quite difficult as investors. The track record is limited, the regulation is still unclear and the customer behavior is not well understood. I found myself very far from the final services “comfort zone”, where the KPIs and ratios are clearly set and the proxies are easier to identify.

– Some issues that ring a bell: although the impact is easier to measure and offers less room for controversy, some issues being discussed among impact investors remind me of the discussions I used to have within the Micro-finance space: Profitability vs. affordability to low income households, investing in access vs. investing in high capacity electrification etc.

Questions on comprehensive access to financial services for the poor, on customer protection, and responsible growth, find their alter egos in the energy space: what is access to energy? how to protect consumer against complicated leasing/pricing of solar panels? how to grow in saturated segments? Another proof to me that targeting the BoP is raising similar issues across sectors, and that much can be learned from the dilemmas, crisis and setbacks (but also successes) of the financial inclusion efforts.

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