Bringing renewable energy to the centre of IFAD operations

By Karan Sehgal

On 23 January 2018, IFAD held an in-house seminar that took up the issue of renewable energy and how it is addressed throughout the Fund’s development portfolio. The panel was chaired by Roshan Cooke, Regional Climate and Environment Specialist for the Asia and Pacific (APR) region and Karan Sehgal, Renewable Energy Technologies Specialist.

While IFAD has made an effort to integrate rural energy solutions into its projects as a means of powering agricultural processing and value-added activities, this has not been conducted systematically from COSOP to project implementation in most cases. Indeed, only 22 projects between 2006-2016 have included renewable energy technologies (RETs). 2014 accelerated the expansion of the renewable energy portfolio with the launch of the Adaptation for Smallholder Agriculture Programme (ASAP), which has integrated renewable energy into 15 projects.

The results so far demonstrate a variety of domestic and commercial applications for renewable energy in the agricultural sectors. Country Programme Managers (CPMs) on the panel shared experiences from their respective projects.

Philippe Remy, Mali CPM showcased the fixed dome biogas systems that have been undertaken by communities as part of the ASAP-supported Fostering Agricultural Productivity Project (PAPAM). By placing the biodigesters at the centre of productive activities, communities achieve upstream benefits by utilizing animal waste as a fuel source and an organic fertilizer (a by-product of the digesters), and downstream benefits that accrue especially to women, who spend much less time cooking and collecting fuelwood. PAPAM has installed more than 500 biodigesters coupled with solar panels. The reported impacts include over 230 ha. of forests saved due to reduced demand for fuelwood, and 2.7 tonnes of CO₂ emissions avoided.

Similarly, the Post-Harvest Agribusiness Project (PASP) in Rwanda has disseminated over 310 flexibiogas systems, which have also generated jobs in installation, repair and maintenance.

Lakshmi Moola, Nepal/Bhutan CPM spoke about the utility of grants as a tool to level the economic playing field and create incentives for private firms to view rural communities as prospective markets. Here she highlighted the ESCAP grant, which established an 18kw solar-powered system run jointly by the private sector and three communities in Tanahu district, Nepal. This public-private partnership has the advantage of ensuring sustainability of the grid, since both parties have a stake in it. The grant was also instrumental in revising the renewable energy subsidy policy of the Alternative Energy Promotion Centre (AEPC), a Government of Nepal institution with the objective of developing and promoting RETs in Nepal; and thereby demonstrates how grant resources can influence broader-based policy changes that create an environment conducive to private sector entrepreneurs. As a result of the Memorandum of Understanding (MoU) with AEPC, more than 7,500 RET units are scheduled to be installed under IFAD’s Adaptation for Smallholders in Hilly Areas (ASHA) project by July 2019.

As the renewable energy portfolio matures, new opportunities to dovetail with government policies are emerging. For instance, the Jharkhand Tribal Empowerment and Livelihoods Project (JTELP) in India has partnered with the Jharkhand Renewable Energy Development Agency (JREDA), a state-owned administrative department, a research institute that has piloted more than 1,000 RETs (solar home systems, solar lanterns and improved cookstoves).

Currently, access to electricity in rural Jharkhand ranges from 26 - 60 per cent. Through the JTELP programme, IFAD aims to bring its comparative advantage to bear through its presence on the ground and achieve a wide coverage of renewable technologies in tribal areas.

There are many advantages to working with JREDA: they operate rigorous tendering and a competitive bidding process for installation work, IFAD can ensure its activities are streamlined with government policies, and JREDA maintain accountability for the technologies they install, ensuring the technologies will not fall into disrepair after a few years.

While the spread of renewable energy has the potential to be transformative, there remain significant policy barriers that are not easily discounted. High fossil-fuel subsidies deter renewable energy technology companies from entering rural markets where transaction costs are high. There is a lack of fiscal incentives for existing renewable energy suppliers to come into rural areas, where market demand may be sporadic, diffuse and disorganized. Finally, knowledge and capacity among local decision-makers is often low, which impedes well-designed policy frameworks.

Perhaps the greatest challenge are barriers in the legal system, such as lengthy bureaucratic procedures to obtain subsidies for RETs; and on the trade side, high import tariffs that impose barriers on innovative technologies.

Moving the renewable energy agenda forward, IFAD is in the process of drafting a new renewable energy strategy. The strategy proposes a dedicated financing window in IFAD, housed within the ASAP2 fund, which would help catalyse the design and integration of renewable energy elements in IFAD projects. This would also help to align global operations with the IFAD Strategic Framework, in which it states, “farming at any scale is a business, and smallholders and producers must be treated as entrepreneurs.” We must therefore recognize the role of energy as an essential input for thriving businesses, and do more to augment the supply of rural energy. Critically, the financing window would be able to access funds specifically earmarked by governments for the scaling up of renewable energy. These funds, owing to the conditionality attached to them, are complementary in nature, and would be put toward, supporting technical assistance and diagnostics, streamlining procurement, piloting, and policy dialogue and advocacy.

To capitalize this financing window, IFAD will seek support from a subset of interested donors that range from bilateral sources (Finnfund, AFD), Intergovernmental Organizations (IRENA), Philanthropic institutions (Global Good), and multilaterals (Green Climate Fund, African Development Bank).

As IFAD clients diversify their production and aim for higher marginal incomes through value-added activities, there is a rapidly increasing need to address the deficit of rural energy through the Fund’s business model. This year, there will be further opportunities for in-house consultations that will ultimately guide how the new Renewable Energy Strategy is framed. The session last week offered a useful survey of what IFAD has achieved to date, identified entry points for future integration, and mobilized staff to engage with an issue that can spur job creation and economic growth in the agricultural sectors.