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Desert to Power G5 Sahel Facility

Burkina Faso, Chad, Mali, Mauritania, Niger (the) | African Development Bank (AfDB)

5 October 2020

Please submit the completed form to [email protected], using the following name convention in the subject line and file name: “CN-[Accredited Entity or Country]-YYYYMMDD”

Project/Programme Title: Desert to Power G5 Sahel Facility

Country(ies): Burkina Faso, Chad, Mali, Mauritania and Niger

National Designated Authority(ies) (NDA):

Mr. Issaka Ouedraogo - NDA of Burkina Faso Mr. Ahmat Mahamat – NDA of Chad Mr Mr Boureima Camara – NDA of Mali Mr Sidi El Wavi – NDA of Mauritania Dr. Kamaye Maâzou – NDA of Niger

Accredited Entity(ies) (AE): The African Development Bank (AfDB)

Date of first submission/ version number: [2020-05-15] [V.1]

Date of current submission/ version number [2020-05-15] [V.1]

mailto:[email protected]

PROJECT / PROGRAMME CONCEPT NOTE Template V.2.2

Notes

• The maximum number of pages should not exceed 12 pages, excluding annexes. Proposals exceeding the prescribed length will not be assessed within the indicative service standard time of 30 days.

• As per the Information Disclosure Policy, the concept note, and additional documents provided to the Secretariat can be disclosed unless marked by the Accredited Entity(ies) (or NDAs) as confidential.

• The relevant National Designated Authority(ies) will be informed by the Secretariat of the concept note upon receipt.

• NDA can also submit the concept note directly with or without an identified accredited entity at this stage. In this case, they can leave blank the section related to the accredited entity. The Secretariat will inform the accredited entity(ies) nominated by the NDA, if any.

• Accredited Entities and/or NDAs are encouraged to submit a Concept Note before making a request for project preparation support from the Project Preparation Facility (PPF).

• Further information on GCF concept note preparation can be found on GCF website Funding Projects Fine Print.

http://www.greenclimate.fund/how-we-work/funding-projects/fine-print/#p_p_id_56_INSTANCE_4CvAHaIYKHcJ_

PROJECT / PROGRAMME CONCEPT NOTE Template V.2.2 GREEN CLIMATE FUND | PAGE 1 OF 12

A. Project/Programme Summary (max. 1 page) A.1. Project or programme ☐ Project

☒ Programme A.2. Public or private sector

☒ Public sector ☒ Private sector

A.3. Is the CN submitted in response to an RFP?

Yes ☐ No ☒ If yes, specify the RFP: ______________

A.4. Confidentiality1 ☐ Confidential ☒ Not confidential

A.5. Indicate the result areas for the project/programme

Mitigation: Reduced emissions from:

☒ Energy access and power generation

☐ Low emission transport

☐ Buildings, cities and industries and appliances

☐ Forestry and land use Adaptation: Increased resilience of:

☐ Most vulnerable people and communities

☐ Health and well-being, and food and water security

☐ Infrastructure and built environment

☐ Ecosystem and ecosystem services

A.6. Estimated mitigation impact (tCO2eq over lifespan)

18 MtCO2eq reduction (directly attributable) + 60 MtCO2eq reduction (indirectly attributable)

A.7. Estimated adaptation impact (number of direct beneficiaries and % of population)

TBD

A.8. Indicative total project cost (GCF + co-finance) USD 1250 million

A.9. Indicative GCF funding requested USD 340 million

A.10. Mark the type of financial instrument requested for the GCF funding

☒ Grant ☒ Reimbursable grant ☐ Guarantees ☐ Equity ☐ Subordinated loan ☒ Senior Loan ☐ Other: specify___________________

A.11. Estimated duration of project/ programme:

a) disbursement period: 6 years b) repayment period, if applicable: TBD

A.12. Estimated project/ Programme lifespan

7 years

A.13. Is funding from the Project Preparation Facility requested?2

Yes ☐ No ☒ Other support received ☐ If so, by who:

A.14. ESS category3 ☐ A or I-1 ☒ B or I-2 ☐ C or I-3

A.15. Is the CN aligned with your accreditation standard?

Yes ☒ No ☐ A.16. Has the CN been shared with the NDA? Yes ☒ No ☐

A.17. AMA signed (if submitted by AE)

Yes ☒ No ☐ If no, specify the status of AMA negotiations and expected date of signing:

A.18. Is the CN included in the Entity Work Programme?

Yes ☒ No ☐

A.19. Project/Programme rationale, objectives and approach of programme/project (max 100 words)

In response to the Sahel countries for support, AfDB seeks to assist them with mobilizing financial resources from its own budgets, and among its partners to address barriers that hinder these countries from adopting a low emission power generation path and achieving universal access to electricity using their untapped solar potential. The proposal for a “Desert to Power G5 Sahel Facility” consists of up to USD 340 million GCF financing that leverages USD 430 million from AfDB and an additional USD 480 million co-financing from other partners and the private sector for projects that addresses investment barriers to the deployment of grid for renewables, clean energy access and decentralized solar

1 Concept notes (or sections of) not marked as confidential may be published in accordance with the Information Disclosure Policy (Decision B.12/35) and the Review of the Initial Proposal Approval Process (Decision B.17/18). 2 See here for access to project preparation support request template and guidelines 3 Refer to the Fund’s environmental and social safeguards (Decision B.07/02) 4 G5 Sahel, Stratégie pour le Développement et la Sécurité des Pays du G5 Sahel, September 2016, p. 13, Accessed on November 30, 2018. https://www.g5sahel.org/images/Docs/SDS_G5S_VF.pdf.

http://www.greenclimate.fund/documents/20182/184476/GCF_B.12_32_-_Decisions_of_the_Board___Twelfth_Meeting_of_the_Board__8_10_March_2016.pdf/020edfa1-53b2-4abf-af78-fccf5628db2ahttp://www.greenclimate.fund/documents/20182/751020/GCF_B.17_18_-_Review_of_the_initial_proposal_approval_process.pdf/559e7b1c-7f34-44dd-9eff-8fa235714312http://www.greenclimate.fund/gcf101/funding-projects/project-preparation/#step-2-submit-a-ppf-applicationhttp://www.greenclimate.fund/documents/20182/24943/GCF_B.07_11_-_Decisions_of_the_Board_-_Seventh_Meeting_of_the_Board__18-21_May_2014.pdf/73c63432-2cb1-4210-9bdd-454b52b2846b


energy solutions among 5 countries in the Sahel Region. The Desert to Power G5 Sahel Facility provides a regional approach to achieving universal electricity access for the G5 Sahel countries (Burkina Faso, Chad, Mali, Mauritania and Niger). The Facility will deploy financing for low emissions power projects for both on-grid and off-grid solar projects to the benefit of over 30 million people.

B. Project/Programme Information (max. 8 pages) B.1. Context and baseline (max. 2 pages) Countries context The Sahel is a vast semi-arid region that lies south of the Sahara Desert and stretches from Africa’s Atlantic Coast to the Red Sea. It covers 11 countries including Burkina Faso, Chad, Djibouti, Ethiopia, Eritrea, Mali, Mauritania, Niger, Nigeria, Senegal, and Sudan. These countries are among the hottest living places in the world with increasing temperatures of 0.3 °C per decade between 1979-2015. The Sahel countries are also among the poorest in Africa with an average GDP 2.5 times lower than the rest of the continent. The G5 Sahel includes a group of 5 Sahelian countries including Burkina Faso, Chad, Mali, Mauritania and Niger. G5 Sahel countries have a total population of 86 million as of 2020i, where 75% live in rural areas. In all 5 countries, agriculture and cattle-raising remain the pillar of the economy and the occupation of a large majority of the population, despite the presence of high-value resources like gold, oil, uranium, and manganese. The G5 Sahel countries rank last in the Human Development Index (HDI) and are among the 10 poorest countries in the world. Table 1 below summarizes key metrics such as a GDP/Capita, life expectancy and energy access rates. The G5 Sahel’s Strategy for Development and Security identifies its members as ecologically vulnerable states, and recognizes that this vulnerability, combined with insecurity and a history of low state capacity as a key contributor to the region’s development challenges4. These issues are further compounded by weak infrastructure, which restricts the movement of people, goods and energy into land-locked and desert countries. G5 Sahel countries also share common socio-economic and infrastructural characteristics, providing the opportunity to tackle their common climate challenges in a coherent manner. Table 1: Key HDI Metrics for G5 Sahel Countries

Chad Burkina Faso Mali Mauritania Niger GDP/Capita (current US$ 2019) 709,54 774,84 890,74 1677,92 554,60

Life expectancy at birth m/f (years 2016) 53/55 60/61 58/58 63/65 59/61

Total expenditure on health as % GDP 3,6% 5% 6,9% 3,8% 5,8%

Energy access rate 11% 25% 43% 43% 20% Climate rationale With a population which is expected at least to double by 2050 (see Annex 1), the countries of the Sahel region aspire to embark on a sustainable path with regard to use of natural resources as expressed in their INDCs.

• Chad: The GHG emissions of Chad are expected to rise from 18 million tCO2eq to 28 million tCO2eq between 2020 and 2030 in the business as usual scenario. Adopting a low emissions path will be achieved by various means, including increasing its renewable electricity supply from 0 to 750 GWh/year in 15 years from the 2015 baseline.

• Burkina Faso: Without international assistance and climate finance, GHG emissions in Burkina Faso will reach 118,000 million tCO2eq by 2030. To mitigate this path, the country has adhered to the “Sustainable Energy for All (SE4ALL)” initiative of the United Nations Secretary General, which aims to achieve three major objectives between now and 2030: Assure universal access to modern energy services. Double the rate of improvement of energy efficiency. Double the share of renewable energy in the global energy mix

• Mali: Mali’s economy relies on the use of natural resources and climate change has induced an over-exploitation and degradation of these natural resources. Projected climate scenarios state an average temperature increase of 3°C with a reduction of 22% rainfall by 2100. Yet 78% of energy supply in Mali currently comes from biomass mainly in the form of wood and charcoal for domestic use. In 2020-2030 climate mitigation scenarios, the energy sector is the largest contributor to the country’s climate mitigation, with a mitigation potential estimated at 31% of total emissions abatement potential.

• Niger: Niger is among a few countries that have recognized the transformative role which access to clean energy can play in climate strategies. While only 10% of Niger´s emissions come directly from the energy sector,


deforestation which is principally driven by households needs for wood and agriculture practice is the largest emissions contributor.

• Mauritania: In its first INDC, Mauritania identified the energy sector as its first climate mitigation priority area and the second largest contributor to emissions after agriculture, forestry and land use. Mauritania is expected to see an average decrease of 10 to 15% in water resources by 2030, driven by significant temperatures increases and reduction in rainfall. A lack of access to modern sources of energy has significant negative impacts on the Mauritanian population for whom 87% of energy is from biomass.

Power sector context The power sector in the G5 Sahel is characterized by low energy access rates which are as low as 2% in the rural areas of Chad, and high reliance on fossil fuel and biomass to cover the growing energy needs. G5 Sahel countries share common features in terms of low energy access in the rural areas, insufficient share of renewables in their generation mix and a steady growing energy demands that are being served in ways not always friendly to the environment. . As a result, utilities in the G5 Sahel countries have opted for emergency power supply solutions with the increasing use of fossil fuels to meet the increasing energy demand. Although initial investments have sporadically taken place to improve their generation mix with more renewables, various barriers explained below still stand in in the way of widespread renewable energy adoption. Table 2 shows the current energy access rates and power generation profile of the G5 Sahel countries. Table 2: Energy statistics of G5 Sahel Countries

G5 Sahel Country Energy Access Rate Rural Energy Access Rate

Solar Proportion in Generation mix

Electricity yearly demand growth

Burkina Faso 25% 10% 14% 9% in 2017 14% in 2018

Chad 11% 2% < 1% 9% Mali 43% 12% 3% 10% Mauritania 43% 2% 16% 10% Niger 20% 11% 5% 16%

• Electricity grids context and barriers: Existing electricity networks across the G5 Sahel countries were not

designed to integrate non-dispatchable renewable energy. With power distribution infrastructures that are operating at the edge of acceptable voltage ranges, connecting additional variable renewables such as solar or wind to these distribution grids requires careful consideration. These considerations include several technical factors such as voltage variations, power plants reactions under faulted systems, interactions with protection systems, and the overall operational flexibility for dispatch centres including potential economic consequences of ad-hoc integration. In addition, the lack of interconnection between national grids make it impossible to dispatch renewable energy generation surplus across the countries, thus widely limiting the uptake of a regional solar market and private sector investments. In the current situation utility scale energy dealings within the G5 Sahel countries require an agreement with the sole potential off-taker, the national utility of that country. This further slows down the uptake of solar investments, given the poor financial situation of national utilities. Investments for the modernization and the extensions of electricity grids would establish the backbone for a regional renewable energy market, which is the entry point for private sector investment. Beyond these technical barriers, governance and management challenges within the 5 national electricity utilities result in power grids being operated with frequent and persistent load-shedding, thus lacking a uniform base-frequency which enables injection of solar power in a distributed manner. A second consequence of load-shedding is customer’s dissatisfaction resulting in large portions of the population and businesses relying on small-scale diesel generators across the G5 Sahel to cover their electricity needs. The “Ease of Doing Business Report for 2019” ranked out of 190 countries shows the G5 Sahel countries, Burkina Faso, Chad, Mali, Mauritania, Niger, respectively at position, 151, 181, 145, 148, and 143 in the “getting electricity indicator”.

Upgrading the electricity grids infrastructure with the inclusion of either utility scale storage or distributed storage would provide the basis for operating higher shares of variable renewable energy. Other grid refurbishment works, especially near pre-identified sites for solar generation plants at transmission level and upgrades at distribution level are also necessary to de-risk IPPs and distributed generation by making the power in-take possible upon commissioning solar power generation assets. Finally, training grid system operators to equip them with the required capacity to deal with variability of inputs and demand management mechanisms is an important manner of preparing these countries to start their energy transition journey.

• Energy Access context and barriers: A significant proportion of the population in the G5 Sahel is made of

isolated communities who live far from national electricity grids. Expanding the grid to these communities is significantly more expensive and time consuming than deploying decentralized solutions. By 2030, more than


6.15 million rural households (42 million people), will need to be electrified with decentralised solutions across the region. As illustrated within the National Road Maps developed by G5 Sahel countries, each country has already identified several decentralised electrification projects to connect some of these households. However, even if all of these projects are developed – some are at a very preliminary or conceptual stage. More than 4 million off-grid households (30 million people) will still need to be electrified to reach universal access by 2030. Bridging this gap will require considerable efforts from all stakeholders. Governments will need to develop the necessary plans and policies, and lead project implementation. Financial partners need to access the right financial mechanisms and the private sector needs to invest despite current regional uncertainties. . Key barriers to the deployment of private sector operated mini-grids in the region are the high up-front cost for non-capex related investments such as licensing, costs for adequate systems sizing and design that are made higher with the remoteness of the sites, outdated regulations where national utilities still control or are perceived to be the sole players in the entire power distribution value chain, and the lack of adequate concessional terms from local financing. On top of not having yet sufficient confidence in the commercial viability of off-grid electrification businesses, local financial institutions are lending at rates much higher than the expected returns of most promising off-grid electrification businesses. Private sector led green min-grids on the other hand face commercial uncertainties related to their first years of operation. Achieving scale in a fragmented manner could be very challenging, as markets are relatively small and landlocked, with a limited availability of capital in a post-COVID context. An ambitious pan-Sahelian off-grid program could play a key role in addressing these barriers and attract large experienced players. This requires policy harmonisation and standardised procurement processes to accelerate the off-grid program implementation.

• Power generation context and barriers: Growing electricity demands in the region that averages 10% yearly are mainly driven by population growth, cooling demand amid growing temperatures, and commercial/industrial demand for the production of commodities and services. While a large portion of non-electricity energy needs is still covered by biomass, which has led to the depletion of forests over the years, all 5 countries aim to tap into their solar potential to increase their power generation capacity. Electricity supply further represents an opportunity for land conservation in the Sahel countries where energy poverty leaves the communities with no other alternative for cooking or heating water than to burn biomass from Savannahs. For instance, 90% of the forests in Chad have been cleared between 1970 and 2019, mainly to cover basic energy needs. Initial consultations with AfDB and the G5 Sahel countries on DtP Initiative have further brought an emphasis on the transforming role which additional renewable energy capacity will have on green mobility in the region. While every fossil fuel based generated electricity unit is subsidized by governments across the 5 countries, additional solar capacity will help reduce these recurrent fossil fuel subsidies that are for the moment unavoidable, as the countries have the obligation to assure energy security as much as they can. Yet market lending rates are not always conducive with the level of tariffs which the utilities can safely honour vis-a-vis private sector investors. The integrated approach of Desert to Power which will facilitate solar power generation while also paving the way for higher shares of renewables with grid intervention will also help create conducive circumstances for electric mobility in the region for the future.

Policy and regulatory context G5 Sahel countries have expressed a common desire to utilize their untapped solar potential under a common Desert to Power Framework and transform their growing desert area into a solar energy generation source that changes their entire power generation mix while delivering climate adaptation co-benefits. Amid these objectives, the G5 Sahel countries have articulated their policies around a green and climate resilient vision expressed in their updated NDCs, where they have also recognized the energy sector to be a priority contributor to their climate action efforts. Various policies and regulatory reforms have started or have been put in place with different progress statuses with the aim to create an enabling environment to support their NDC goals.

• Niger: In October 2018, the Government developed the National Electricity Policy Document (DPNE) and the National Strategy for Access to Electricity (SNAE), which aims to reach 80% household access by 2035. The SNAE includes an Electrification master plan, while the Government Niger has also approved an Electricity Act in 2016 which opens its Power Generation market to private sector given tax exemptions on solar and wind equipment. However, gaps still exist in creating an open and transparent process for IPP awards.

• Mauritania: The sector’s strategy is still under development resulting in uncoordinated efforts and overlaps between the utility SOMELEC and ADER, the Rural Electrification Development Agency.

• Mali: Mali revised its energy policy in 2018 enforcing the regulator’s role in promoting least cost plans and adopted a PPP plan in 2016 which is yet to be operationalized. With most IPPs being awarded in Mali on a direct negotiation basis with high tariffs, improving the IPP regulatory framework in consultation with the Malian Government is overdue.

• Chad: In 2018, Chad enacted 2018 a new Electricity Act which has liberalized the sector opening the power generation segment to competition, where distribution activities for assets with less than 1 MW capacity are only required to declare existence. Despite this policy reform, the scope of the main utility SNE per its incorporation


documents remains the same, the sole player in charge for generation, transmission and distribution across the country. This confusion, which is exacerbated by lack of delineation of responsibilities between the Ministry of Energy and the newly created Regulatory Agency, is a barrier to investments in solar energy in the country. The Energy Act still needs to be operationalized with clear delineation of responsibilities. Concessional funds will be required as a stimulus to new players in this market where not much has happened, with the notable exception of one IPP of 28 MW currently in preparation with AfDB support.

• Burkina Faso: Burkina Faso has the most advanced framework, with an Electricity Law approved in 2017 which opens the power distribution segment to private sector. As a result, AfDB and GCF have partnered to support the Yeleen mini-grid project which will install 100 green mini-grids in rural areas (in addition to on-grid work that the AfDB is supporting).

B.2. Project/Programme description (max. 3 pages) This Facility seeks to enable the African countries of the Sahel region adopt a low-emission path by transforming their desert area into an opportunity to address their energy security needs using clean technologies, while delivering various adaptation co-benefits. AfDB proposes to support this transformation towards a decarbonized power system in partnership with the GCF. The proposed approach, the Desert to Power G5 Sahel Facility, will address the barriers presented in section B.1 through the execution of four components that are part of the overarching priorities of the Desert to Power initiative endorsed by the G5 Sahel Heads of State.

• The first component will focus on grid investments to de-risk solar IPPs and pave the way for the uptake of a regional solar market. This component will include investments in grid ancillary infrastructure for solar integration, grid upgrades to enable distributed solar generation, storage for grids stability and regional interconnections to enable cross-border dispatch while reducing commercial risks attached to sole off-takers.

• A second component will provide additional finance to IPPs, to catalyse private sector investments in solar generation.

• A third component will provide access to electricity through 1000 mini-grids across the five countries of the G5 Sahel.

• The fourth component will focus on technical assistance with the standardization or development of standards for solar integration into the grids, build the capacity of institutional stakeholders among which national utilities, transmission system operators and regulators, and finally operationalise the policies and the existing regulatory frameworks in a way that promotes private sector investments in solar energy.

Expected Outcomes and Impact of the Desert to Power G5 Sahel Facility Through these 4 components the Facility intends to generate the following outcomes (i) A backbone grid that is capable of accepting the integration of up to 3 GW generation capacity (ii) minimal technical conditions in place for a regional solar market with cross-border transmission of clean energy for up to 3 GW (iii) creation of market opportunities for solar energy that are less reliant on the balance-sheet of single off-takers, for instance power wheeling deals (iv) IPPs for up to 700 MW of solar energy generation and the opportunity for more IPP integration beyond project´s immediate focus (v) Base load and stable grids using utility scale storage for solar generated power (vi) Access to energy for 1000 localities including various related adaptation co-benefits in rural areas, (vii) Creation of enabling conditions with local transformation such as the ability of stakeholders to adequately organise the sector, the capacity of operators to operate grids that have higher shares of renewables, the operationalization of conducive policy and regulatory frameworks that are inclusive of private sector participation. The Facility will achieve a directly attributable climate mitigation impact estimated at 18 MtCO2eq emissions abatement over the lifetime of the 700 MW solar capacity which will be installed during its implementation and set the basis for an additional 60 MtCO2eq emissions abatement for additional solar capacity which the grid will be able to absorb, thus achieving a total directly and indirectly attributable climate impact of 60 MtCO2eq emission reduction. Desert to Power G5 Sahel Facility Components

• Component 1: Grids investments to de-risk solar IPPs. This component will provide investments for grid ancillary equipment as well as grid upgrades to enable feeding higher shares of solar generated power into electricity networks in the beneficiary countries. Such ancillary equipment will include but will not be limited to storage for grid stability, contingency and flexibility reserves as well as tools for synchronized regulation. It will also provide capital for solar integration activities which are normally not covered by utilities neither by project sponsors. The component will finally invest in regional interconnection grids to enable a regional solar market as a commercial risk-mitigation measure for IPPs.

• Component 2: Additional Finance for Private Sector sponsored Solar Power Generation. This component

will seek to achieve uptake in private sector investments across the 5 countries with the provision of finance for new solar IPPs as well as support for hybridization with solar of existing diesel plants.


• Component 3: Energy Access for 1000 localities. This component will seek to achieve clean energy access

for 1000 localities through solar mini-grids across the G5 Sahel countries displacing 50 MW of diesel based generation through a combination of green mini-grids and retrofit of existing brownfield mini-grids.

• Component 4: Technical Assistance. This component will seek to build the capacity of institutional

stakeholders (utilities, transmission system operators, and regulators) on demand management and operation of grids with higher shares of solar. It will further operationalize existing policies and regulatory frameworks in order to realize more private sector investments on IPPs. The component will also achieve standardization and develop standards for solar integration into the grids across the region.

Theory of Change

Figure 2. Desert to Power Theory of Change Implementation Arrangements AfDB is well placed as an Accredited Entity to undertake the planned activities and has already started engagement with a broad range of financial and technical partners as well as coordination with relevant initiatives. In September 2019 Heads of States of the G5 Sahel countries met in Ouagadougou and endorsed the Desert to Power Initiative with the creation of a Task Force hosted by AfDB. National Focal Points were appointed to work closely with the Task Force. The Task Force currently leads resource mobilization and is engaging with potential partners to help syndicate projects. These efforts will lead to the fine tuning of implementation arrangements, including identification of the executing entities in each country and for each component, as set in the above Theory of Change. At this time of preparation, the implementation arrangements are as set as below.


Figure 3. Implementation arrangements during project preparation and resource mobilization The Facility will support a pipeline of IPPs for component 2 and specific grid integration measures that will de-risk the achievement of this pipeline on component 1, while at the same time paving the way for future IPPs. This will draw on the national Desert to Power Roadmaps that have been developed jointly with the countries. Risks and Mitigation Measures: At current stage, a few risks to the Facility have been identified and presented below with their mitigation measures:

• Operational risks due to safety and armed conflicts in the region: while the region is subject to arm conflicts, there are no records as yet of armed groups attacking electricity infrastructure. This risk will therefore be mitigated by including security costs as appropriate in projects total costs and maintaining dialogue on those aspects with the country and partners during projects design and procurement.

• Deployment risks linked with countries limited institutional capacity to plan and implement multiple projects simultaneously: As a result of this risk, capacity building is a cross-cutting component of the initiative aiming at improving institutional capacity to implement projects, but also to develop local workforce and value chains.

Use of proceeds: Different financial instruments are sought for the Facility with proceeds being allocated based on appropriateness with the activities of the theory of change. For instance, highly concessional loans to the public sector are proposed to finance public infrastructure such as transmission grids. Some ancillary infrastructure such as storage that will end up being in public ownership and are necessary for private sector investments but do not show sufficient financial viability will require much higher concessionality, thus the request for a grant instrument on component 1, that will further reduce the repayment burden on the sovereign borrower. Loans will be blended where appropriate with other mobilized resources by the accredited entity to provide long-term finance at viable interest rates to the private sector on IPPs, enabling the projects financial sustainability and overall bankability. A Reimbursable Grant instrument is proposed to de-risk large scale green mini-grids operations which usually face revenue uncertainties during the first years of operation. The Reimbursable Grant proceeds shall be used to capitalize a Mini-Grid Guarantee Facility which addresses these uncertainty issues. Such guarantees shall be triggered in the event where revenues do not match expectations in the first years of operations, providing an incentive for private sector investment and addressing directly the issue of initial uncertainty. Small scale mini grids would be more suitable with grants disbursed in the form of subsidies to attract private sector investors. In all cases, a guarantee instrument set up with the proceeds of the GCF will not be used to cover a GCF loan at the same time. The objective is to have either local banks or a guarantee facility such as AGF manage the operations of the guarantee. Grant instruments will be required to cover technical assistance and capacity building activities. The proceeds shall be allocated to the 4 windows of the Facility according to the following flow of funds diagram:


Figure 4: Diagram of Flow of Funds B.3. Expected project results aligned with the GCF investment criteria (max. 3 pages) Impact potential

Mitigation impact: The Facility has the potential to deliver important climate mitigation impacts which are currently estimated at 18 MtCO2eq for the 5 countries over its lifetime. The project preparation stage will help fine tune the abatement calculation using data which will be further collected during the pre-feasibility study on the grounds of the underlying pipeline. The Facility will help achieve 700 MW of solar energy generation capacity which will significantly increase the share of clean energy in the generation mix across the five countries. Co-benefits: By contributing to the energy security of these countries the project will also achieve significant socioeconomic benefits through employment creations during and beyond the project and through economic value-add with the use of clean electricity for industrial transformation.

Paradigm shift potential

Harnessing the solar potential of the G5 Sahel countries in an economically viable manner requires an enabling environment that allows for private sector participation, on a commercial basis, on power wheeling arrangements and a regional solar market. By putting in place grid infrastructure and enabling energy policy frameworks, the Desert to Power Facility is establishing conditions for transforming the energy sector of the G5 Sahel countries and shifting them towards a low emission path. While enabling more private sector investments in power generation, the Facility helps establish a clear paradigm shift in the energy sector of these countries from the current situation where national integrated utilities are operating the entire energy value chain. The activities further provides potential for knowledge and learning for institutional players such as transmission system operators and regulators on efficient dispatch of variable renewable energy but also will create lessons learnt for efficient replication across the other Sahel countries. Further to contributing in the creation of enabling environments and providing a robust framework for knowledge and learning, the Facility will also provide a high potential opportunity for scaling-up the uptake of variable renewable energy in the Sahel region, through grid and ancillary investments that will contribute in further absorption of solar capacity.

Sustainable development potential • Economic co-benefits: The Facility activities will generate various economic benefits during and after construction.

Investors will be able to enter a market and the provision of electricity will support the economic growth of the beneficiary countries. Clear linkages and correlations have been established in the past between countries GDP and energy access. While providing broader energy access in rural areas the Facility sets the beneficiary countries on a better economic trajectory.

• Social co-benefits: Covering the cost for grid ancillary equipment for power plants integration will help achieve fairer feed-in tariffs which will result in lower electricity prices for end users. The energy access component will also subsidize mini-grids, thus achieving electricity prices that are compatible with the ability to pay in rural areas. Access


to energy will also promote gender equality by enabling women to contribute to social activities especially in the rural areas where the production of daily livelihood for families is often the responsibility of women.

• Environmental co-benefits: The Facility will help displace a large amount of fossil fuel generation helping the five countries to reach an average proportion of 30% solar generation from the current average of 10%. This translates into significant environmental benefits especially when one considers the many diesel generators that are currently running to cover electricity needs through self-generation.

Needs of the recipient The Sahel region is home to the 40% of the African population that does not have access to electricity. The G5 Sahel countries are according to the Gain Index the top five countries in the world that are the most exposed to climate change. The vulnerability is exacerbated in the rural areas where communities without access to electricity must cope with growing needs for cooling. According to the IMF more than 85 million sub-Saharan African are expected to be forced to migrate by 2050 due to climate change threats5, and 4.2 million people in the G5 Sahel region are already displaced4. G5 Sahel countries are among the Least Developed Countries (LDCs) and have limited institutional capacity to tackle their own energy security using renewable resources such as solar and are pruned to internal security challenges, where capital investments that are subject to long term returns are often deemed too risky for traditional investors. At the same time, public investments need to continue taking place, but have been happening at the cost of an unsustainable indebtedness trend which needs to be shifted towards more concessional terms, at the risk of letting these countries enter series of unbearable debt distress. The Facility will result in more access to clean energy across the region for the most vulnerable people while also paving the way for private sector investment in solar energy which in return will achieve significant adaptative co-benefits. Country ownership The overarching strategy for DtP with the five priority areas was endorsed by the Heads of State in a dedicated Desert to Power Summit in September 2019. In addition, detailed national DtP Roadmaps are being finalized and validated by the countries complemented by a regional Sahel G5 Roadmap. These outline the specific targets, priority actions to achieve along the five areas and an assessment of an initial list of identified priority projects. The action plan identifies 5 priority areas for intervention, 4 of which are the components of this concept note. The fifth priority action in the action plan is about achieving financial sustainability of utilities by reducing commercial losses and improving revenue collection which is not planned to be included in the GCF proposed funded activity. Additionally, all G5 Sahel countries mention the energy sector in their NDCs as part of the national priorities for climate change mitigation. Key priority areas include integrating renewables in the energy mix, promotion of wind and solar PV for rural electrification and increased commitment to climate change mitigation targets.

• In Mauritania NDCs, priorities in the energy sector are rural electrification with a baseline scenario that accounts for projects planned between 2020 and 2030.

• Mali first national priority for climate change mitigation as expressed in its NDCs is on the energy sector and it seeks to accelerate the integration of renewable energies in the energy mix.

• Niger major priorities for climate change mitigation also start with the energy sector and include rural electrification and the conservation and replacement of wood energy. It also seeks to promote solar photovoltaic for pumping and electrification and exploitation of wind energy.

• Though Chad in 2014 was still only contributing to 0.11% of global greenhouse gas emissions (USAID), in its first NDC submitted in 2015 it was already clearly evidenced that without any mitigation measures these emissions profile could change course and could double by 2030 from their 2015 levels. The country has committed itself to bend the curve and to achieve unconditionally 18% climate mitigation benefits from its business as usual scenario. Further climate benefits could be achieved, and the country climate plans could result in 71% mitigation benefits compared to the same baseline provided the country receives an incremental support that sets it on a lower emission path.

In its 2015 NDC submission Burkina Faso has made the determination that it has adhered to the “Sustainable Energy for All” initiative which aims to achieve universal access globally by 2030 and double the share of renewables in the global energy mix by the same year. Efficiency and effectiveness • Cost-effectiveness and efficiency: Assuming a climate mitigation impact potential of 18 MtCO2eq that is envisaged

by the Facility, the abatement cost born by the GCF will be about USD 18.8 per tCO2eq. Given on the other hand that modernization of grid infrastructure will pave the way for additional solar capacity beyond the implementation time of the facility, enabling 3 GW of solar will result into a final abatement cost which is even more efficient.

6 IMF Working Paper, ‘Africa Rising, Harnessing the Demographic Dividend’, 2014. Accessible here: https://www.imf.org/external/pubs/ft/wp/2014/wp14143.pdf

https://www.imf.org/external/pubs/ft/wp/2014/wp14143.pdf


• Amount of co-financing: Each dollar of GCF funding will leverage an additional 2.7 dollars from the accredited entity, and other co-financiers and the private sector. The Facility also puts in place conditions to leverage additional private sector investments on solar energy beyond the implementation timelines, which though not participating directly as co-finance to the funded activity, will represent additional leveraged climate finance over time.

• Market efficiencies: By covering the cost of grid integration for solar power plants the Facility achieves an overall

market efficiency in reducing the time for effective injection of solar energy in the grids from the current situation where IPPs would usually wait integration to be completed by the Public Utilities.

B.4. Engagement among the NDA, AE, and/or other relevant stakeholders in the country (max ½ page) A Task Force to coordinate the implementation of the Desert to Power overall program, hosted by the African Development Bank and steered by the high level steering committee chaired by the CEO of the Moroccan Agency for Sustainable Energy (MASEN) and comprising Ministers of Energy of the G5 Sahel countries and key partners has been established. The Task Force will coordinate activities in support of the Ministries of Energy in each country through a designated country focal point working in the ministries. A country implementation structure for each country is under review and will be streamlined in consultation with the NDA during stakeholders’ consultations. The Facility takes its origination from the desires of the countries and the concept note has been shared with the NDAs of the five countries. C. Indicative Financing/Cost Information (max. 3 pages) C.1. Financing by components (max ½ page) Component/ Output

Indicative cost (USD M)

GCF financing AfDB co-financing Other Mobilized / Leveraged financing

Amount (USD M)

Financial Instrument

Amount (USD M)


Amount (USD M)


Component 1: Grids investments to de-risk solar IPPs

330 90 50

Senior Loan Grant

80 Senior Loan

110 Equity/Loans

Component 2: Additional finance for Private sector sponsored solar power generation

700 100 Senior Loan 300 Senior Loan 300 Equity/debt

Component 3: Energy access through 1000 solar mini grids

190 25 60

Senior Loan Reimbursable Grant

20 20

Senior Loan Grant

65 Grant/Equity

Component 4: Technical assistance

30 15 Grant 10 Grant 5 In-Kind

Indicative total cost (USD) 1,250 340 430 480

Annex 1 provides a preliminary list of pipeline projects derived from the Desert to Power Roadmaps. C.2. Justification of GCF funding request (max. 1 page) Alignment with climate targets: The Facility is fully aligned with the climate targets of the beneficiary countries as evidenced in their submitted INDCs. Supporting these countries to transform their desertic area into an opportunity to adopt a low emission path while addressing issues of energy security and achieving adaptive co-benefits at the same time is at the core of GCF mandate. Concessionality: According to the Climate Change vulnerability index 2017, projections estimate that climate change threat will lead to an equivalent of 2-4% annual loss in GDP in the Sahel region by 2040. While there is an established co-relation between energy security and countries GDP, the overall economic situation of the G5 Sahel countries does not allow them to efficiently address the growing energy demands with a national integrated utility model as a


vehicle to invest on generation, transmission and distribution assets. The balance sheet of the utilities is not strong enough, as these national utilities are themselves recurrently subsidized by the states given the gap between their revenues and costs. The 5 countries are among the Least Develop Countries (LDCs) and their current debt levels leave them no other choice than to seek highly concessional terms to finance key public infrastructure. Private sector is also shy to invest on utility scale solar plants in the context of single utility off-takers, given the balance sheets of national utilities. Power wheeling dealings would be much better arrangements for the private sector, but these dealings require having in place common infrastructure for power transmission which the countries cannot solely finance now. Decentralized energy solution such as mini-grid presents an opportunity for private investment, however this has been hindered by high perceived risks and inadequate regulatory frameworks Unlocking private sector on grid connected solar: The use of GCF funding will facilitate private sector investments with a catalytic measure that delivers financing to solar projects. As LDCs with public sector utilities as off-takers in power dealings, the Sahel countries face a limited appetite from regular investors in power projects. Another important aspect is linked to the levels of private sector returns on any solar investments, given that power grids are only capable of absorbing injected power a few hours in a day and power purchase contracts would mostly be based on injected power in the grids. Therefore, the GCF funding will be an enabler for solar independent power producer projects in the Sahel region, catalysing private sector investment that is not readily available. Ancillary services for grid integration: In markets where solar energy dealings have taken off, the portion of power grids which is required to connect new solar plants to existing networks is usually paid for by the public sector. In the G5 Sahel countries, asking private sector as it´s done today to cover these additional costs makes investments simply more capital intensive while slowing pay-backs under the current tariffs regime. De-risking transactions by strengthening the regional grid interconnection and transmission capacity for integration of solar power will ultimately lead to more favourable environment to accommodate intermittent renewable energy, improving solar projects economics for both the sponsors and the off takers. Bankability of green mini-grids projects: Energy access projects targeting off-grid electrification are still not a commercially viable activity. On one hand it´s an activity that is often slowed down by the limited financial capabilities of beneficiaries, and on the other hand it´s a capital-intensive activity whose returns take a long time. Well-tailored financial instruments that acknowledge both the risk taken by sponsors and the realistic revenue requirement to ensure financial viability are needed and few institutions other than the GCF are able to provide such instruments today at the scale needed. Market transformation: By building the capacities of institutional stakeholders such as grid operators and regulators this Facility will achieve enabling conditions for decarbonizing the power supply systems of the G5 Sahel countries. The GCF funding will also provide an opportunity to operationalize sector reforms such as the ones already in place with the Energy Act in Chad, which unfortunately is still only on paper and is not translating into practical investments in solar energy supply in the country.

C.3. Sustainability and replicability of the project (exit strategy) (max. 1 page) The Facility will enhance the capabilities of key institutions (regulators, transmission system operators etc) and other stakeholders (utilities, ministries of energy) with increased abilities to operate and control electricity networks with higher shares of variable renewable energy. Such knowledge within the market itself will be the first pillar for sustainability of the


intervention. By doing direct investments in the grid and key infrastructure that enable solar integration during implementation and beyond implementation timeline, the proposed activities will enable additional solar capacity to be continued being installed even after all disbursements have occurred. By enabling large scale green mini grids, the Facility provides a framework for replicability where the commercial risk profile of large scale green mini grids will be known, enabling an increased use of commercial funding on energy access, which historically has only been moved by the presence of subsidies. The Facility will avail some proceeds as public sector loans, for instance those for common infrastructure, while other proceeds will be availed directly to the private sector, for instance those that will lend first movers independent power producers. The sovereign loans will be repaid by the countries through their treasury. Given however the borrowers are LDCs, it is important that these loans are provided with the highest possible level of concessionality. Private sector borrowers will be able to repay using the revenues generated through their power purchase agreements which shall be made commercially viable, given the opportunity of channelling energy to other viable off-takers. Overall, the first phase that targets the G5 Sahel countries will be replicable over the other 11 Sahelian countries, with lessons learnt and knowledge which shall be transposed in the second phase.

D. Supporting documents submitted (OPTIONAL) ☒ Map indicating the location of the project/programme ☒ Diagram of the theory of change ☐ Economic and financial model with key assumptions and potential stressed scenarios ☐ Pre-feasibility study ☐ Evaluation report of previous project ☐ Results of environmental and social risk screening ☒ Indicative Pipeline as to date

Self-awareness check boxes

Are you aware that the full Funding Proposal and Annexes will require these documents? Yes ☒ No ☐ • Feasibility Study • Environmental and social impact assessment or environmental and social management framework • Stakeholder consultations at national and project level implementation including with indigenous

people if relevant • Gender assessment and action plan • Operations and maintenance plan if relevant • Loan or grant operation manual as appropriate • Co-financing commitment letters Are you aware that a funding proposal from an accredited entity without a signed AMA will be reviewed but not sent to the Board for consideration? Yes ☒ No ☐

i Annex 1, data from https://www.populationpyramid.net/

https://www.populationpyramid.net/


Annex 1 : Preliminary Pipeline of Projects and TA


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