Since 2018, Creating Hope in Conflict: A Humanitarian Grand Challenge has provided proof of concept (Seed) and transition to scale (TTS) funding to 75 innovations intended for use with conflict-affected populations in over 20 countries. We embarked upon a learning journey to better understand how innovative products and processes could be tested and pointed towards scale in humanitarian settings, in order to help solve some of the most complex problems and barriers within the humanitarian sector.
This post is one of many SEED Stories: a series of blogs reflecting on what HGC-funded innovators have achieved and key lessons learned during the duration of their seed grant periods.
Global energy investments have surpassed $300 billion, but only 6% goes to the Middle East and Africa, with fragile, conflict-affected regions receiving a tiny fraction. In regions where renewable energy is available, it is typically beyond the financial reach of the poorest communities, pushing them to rely on unclean and unsafe fuel sources such as wood and charcoal. Energy insecurity impedes development prospects and hampers the capacity for economic recovery from conflict-induced damages. There are many benefits of renewable energy use in conflict settings, but the challenge lies in making clean energy sources both affordable and accessible to the most vulnerable populations. Increased energy access requires a combination of policy shifts and financial innovation to link existing solutions with those most in need.
How Energy Peace Partners Tackled this Challenge
To support the development and adoption of renewable energy in fragile settings, Energy Peace Partners (EPP) created the Peace Renewable Energy Credit (P-REC). P-RECs are designed to leverage the $1 billion Renewable Energy Credit (REC) market and achieve the following: link private sector renewable energy investments to conflict settings and create new revenue streams and economic incentives to support clean energy project development in places that lack other incentives.
Creating Hope in Conflict: A Humanitarian Grand Challenge (CHIC) funded EPP with a CAD $250,000 seed grant to test their model and sell three P-RECs in two conflict-affected regions: Democratic Republic of Congo (DRC) and South Sudan. By the end of the grant, EPP successfully facilitated two P-REC transactions in DRC, both implemented by Nuru, another CHIC-funded innovator.
The transaction, purchased by Microsoft, enabled the installation of night-time streetlights in the Ndosho neighborhood in Goma. An have benefited from the additional safety and security provided by the streetlights, and approximately 72% of the businesses in the neighborhood have reported being able to operate longer hours into the evening. EPP’s second P-REC transaction involved the construction of two small rural solar mini grids near Garamba National Park in northwest DRC, including a pre-purchase of 5 years’ worth of P-RECs, which Nuru will use to help finance the construction of the grids. Most recently, a was purchased by Block under which EPP partnered with International Organization for Migration (IOM) to launch a solar project to electrify health clinics in an IDP camp in Malakal, South Sudan.
The completion of the first successful P-REC transaction in South Sudan was a landmark achievement. It proved that the P-REC could bring additional financing to UN agencies for humanitarian interventions from the private sector, overcoming challenges in UN financing regulations. The deal paved the way for future catalytic funding partnerships, with conversations already underway with several UN agencies.
In addition to the direct outcomes of its deals, EPP has effectively created a platform for a wider group of actors to proactively participate in the humanitarian ecosystem. Developers (such as Nuru) and private corporations (such as Microsoft and Google) are an important part of the ecosystem and by choosing to operate in conflict-affected areas using P-REC deals, they can complement the work of humanitarian workers, bringing additional value to the humanitarian system at large.
Partnerships Built
During their CHIC funding period, EPP successfully collaborated with Nuru on implementation of two P-REC transactions, resulting in Nuru and EPP being collectively included among a group of innovative climate solutions on the longlist for the Ashden Awards for Humanitarian Energy. EPP’s partnership with the IOM in South Sudan, meanwhile, involved further coordination with the International Medical Corps, who manages the health clinics and local hospital, and Kube Energy, which developed, along with Scatec Solar, the humanitarian hub facility leased to IOM in Malakal. Additionally, renewable energy developers such as PowerGen, Winch Energy and ZIZ Energie have reached out to EPP to discuss partnership opportunities and the issuance and sale of P-RECs from their projects.
EPP also has a growing number of other P-REC transactions in the pipeline. There is significant interest in the now proven model which could lead to significant investment. So far, EPP has already reported a pipeline of projects under discussion that could raise the total value of P-REC deals to over USD $800,000.
Key Lessons
Some key lessons learned over the course of EPP’s seed grant include:
- Partnerships with humanitarian organizations and corporations that do not typically work in fragile or conflict-affected regions can be challenging; effective partnerships require extensive trust-building and significant time investments.
- Working to change processes within the UN requires internal champions and/or pre-existing momentum.
- Innovators working in conflict-affected regions must build risk mitigation plans into their business models to minimize the impact of instability on business operations.
- Ongoing advocacy and corporate engagement are needed to shift technical criteria, reduce legal barriers, and expand thinking on renewable energy procurement in conflict-affected settings.
- The humanitarian context can be difficult to penetrate, but CHIC can leverage their position to introduce innovators to key stakeholders.
What’s Next?
Following the completion of the seed grant, CHIC commissioned TripleLine Consulting, a third-party research firm, to develop an in-depth case study to validate key outcomes and a value for money assessment of EPP’s work. The were promising and provided further validation that EPP is bringing positive direct and indirect benefits to conflict-affected people and humanitarian actors, creating progress towards wider adoption of the innovation, and, at scale, has the potential to increase the efficiency and cost-effectiveness of humanitarian activities.
Given the compelling results generated by EPP, CHIC has awarded EPP a Transition to Scale (TTS) grant under which it will execute eight new P-REC transactions worth a total of $1.5M USD, expand the number of countries in which it is authorized to issue P-RECs to eight from the current four, and onboard seven new unique P-REC buyers. EPP also intends to use TTS funds to further develop P-RECs as a recognized and established instrument for renewable energy credit transactions, with a strong pipeline of new projects and growing corporate demand for P-RECs. Following the completion of the new TTS-funded deals, EPP also hopes to gain clarity on the price at which P-RECs can be sold in the market. This knowledge will be key in helping EPP build a successful business model and identify areas in need of further strengthening. Finally, EPP will leverage its TTS funding to develop a P-REC Aggregation Fund, including sourcing the financing, establishing the legal entity, and facilitating the P-REC projects that will flow through the Fund.