Investing in Grid-Connected Solar PV: Structured Finance for NDC Implementation in the Gambia
The NAMA support project (NSP) ‚„Investing in grid-connected solar PV: Structured finance for NDC implementation‘‘ is based on the two Nationally Appropriate Mitigation Actions (NAMAs) „Rural Electrification with Renewable Energy in The Gambia“ and „Feasibility Study for Grid-Connected Solar Energy Production in The Gambia“, which were developed in 2015 and 2016 with UNDP’s support. Its objective is to support the financing of the country’s first ever independent energy producer (IPP) commercial model for renewable energy, whereby the renewable energy installations will be connected to the regional electricity grids. The initially targeted capacity is 11 MW of solar energy, with an option to increase capacity in the future if the programme demonstrates success. In the solar energy sector, private sector actors recognise the potential of the Gambian market, but their main concern remains the introduction of a credible risk reduction mechanism to address the risk of financial failure of the public companies involved in the project.
The planned project activities are: (i) increasing network capacity, (ii) developing public-private partnerships (PPPs) and (iii) strengthening capacities of various stakeholders. The project qualifies as a good practice because the financial plan systematically addresses private sector investment barriers at the necessary scale and can easily be replicated in other developing countries. The provision of affordable financing options will overcome barriers to private sector investment and have a catalytic effect. Through the structured finance approach, costs of capital for low-carbon technologies will decrease to a level that will make future solar PV additions bankable even in The Gambian context. The proposed finance mechanism will lead to rapid uptake of solar PV investments in the existing regional grids and ensure that there is a pathway for private sector investors. Through the experience gained with accelerated investments in solar PV solar projects in The Gambia, capacity will be built up quickly, leading to scaling-up of investment.