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| | = Overview<br/> = | | = Overview<br/> = |
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| | '''Results-based financing (RBF)''' is form of [http://en.wikipedia.org/wiki/Payment_by_Results Payment by Results] and generally refers to the delivery of national or sub-national outcomes and outputs. RBF could be used by developing country governments (national or local), state agencies, or donor agencies to incentivize the provision of goods or services, create or expand markets, or stimulate innovation. Possible target outputs might include the number of new electricity connections that are provided in a defined area, or advanced cookstoves that are sold. Results-based financing is distinct from <span class="mw-redirect"></span>[[Results-Based Aid|results-based aid]] which applies at a level above and is concerned with outcomes (such as number of households using electricity) rather than outputs (such as electricity connections).<br/> | | '''Results-based financing (RBF)''' is form of [http://en.wikipedia.org/wiki/Payment_by_Results Payment by Results] and generally refers to the delivery of national or sub-national outcomes and outputs. RBF could be used by developing country governments (national or local), state agencies, or donor agencies to incentivize the provision of goods or services, create or expand markets, or stimulate innovation. Possible target outputs might include the number of new electricity connections that are provided in a defined area, or advanced cookstoves that are sold. Results-based financing is distinct from <span class="mw-redirect"></span>[[Results-Based Aid|results-based aid]] which applies at a level above and is concerned with outcomes (such as number of households using electricity) rather than outputs (such as electricity connections).<br/> |
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| − | For the off-grid solar marke, the RBF could be based on indicators such as: no of SHS systems installed, no of homes or businesses served and volume of energy (Kwh) produced. They can be either one time payment upon instalment of the system or distributed over lifetime to promote also after-sales services<ref name="Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies_(English)">Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies_(English)</ref>. | + | For the off-grid solar marke, the RBF could be based on indicators such as: no of SHS systems installed, no of homes or businesses served and volume of energy (Kwh) produced. They can be either one time payment upon instalment of the system or distributed over lifetime to promote also after-sales services<ref name="The World Bank, 2020. The World Bank, 2020. The World Bank, 2020. Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies">The World Bank, 2020. The World Bank, 2020. Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies</ref>. |
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| | = Definition<br/> = | | = Definition<br/> = |
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| | *RBF can beneift a range of companies (from start-up to full growth) for deploying the off-grid technology | | *RBF can beneift a range of companies (from start-up to full growth) for deploying the off-grid technology |
| | *Flexible source of funding for off-grid companies as they are attached to the delivery of outcomes and not to how the funds are used to achieve it. This increases liquidity of off-grid companies. | | *Flexible source of funding for off-grid companies as they are attached to the delivery of outcomes and not to how the funds are used to achieve it. This increases liquidity of off-grid companies. |
| − | *RBF can be used to target certain market, technoloiges, geographical regions or consumer groups<ref name="Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies_(English)">Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies_(English)</ref>. | + | *RBF can be used to target certain market, technoloiges, geographical regions or consumer groups<ref name="The World Bank, 2020. The World Bank, 2020. Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies">The World Bank, 2020. Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies</ref>. |
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| | = Limitations<br/> = | | = Limitations<br/> = |
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| | Results-based financing should not be seen as a 'silver bullet', but as a potentially useful addition to the range of measures that developing country governments and their development partners might deploy to promote energy sector development. Commonly cited limitations of RBF include the '''need for agents to secure pre-financing, higher data collection and auditing costs, and the challenge of accurately setting the incentive to avoid rent-seeking whilst achieving the desired results'''.<br/> | | Results-based financing should not be seen as a 'silver bullet', but as a potentially useful addition to the range of measures that developing country governments and their development partners might deploy to promote energy sector development. Commonly cited limitations of RBF include the '''need for agents to secure pre-financing, higher data collection and auditing costs, and the challenge of accurately setting the incentive to avoid rent-seeking whilst achieving the desired results'''.<br/> |
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| − | Other challenges include: certain companies can make fraud outcomes (i.e installign the technologies but not delivering the adequate energy), can be expensive for the funding agencies in case of high demand for it, RBF that pays only after the service has been deliverd may not be suitable for earlier stage companies<ref name="Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies_(English)">Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies_(English)</ref>. | + | Other challenges include: certain companies can make fraud outcomes (i.e installign the technologies but not delivering the adequate energy), can be expensive for the funding agencies in case of high demand for it, RBF that pays only after the service has been deliverd may not be suitable for earlier stage companies<ref name="The World Bank, 2020. Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies">The World Bank, 2020. Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies</ref>. |
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| | = Opportunities<br/> = | | = Opportunities<br/> = |
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| | <br/> | | <br/> |
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| − | = National Calls for Proposals = | + | = Experiences with RBF = |
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| − | == DFID/EnDev RBF Programme<br/> == | + | *[[First_Lessons_Learnt_From_Results-based_Financing_in_EnDev|First Lessons Learnt From Results-based Financing in EnDev]] |
| | + | *[[Dissemination_Of_Solar_Lantern_(PicoPV)_In_Bangladesh_Through_EnDev’s_Result_Based_Financing_(RBF)_Mechanism_For_Improving_Access_To_Clean_Energy:_Achievements_And_Challenges|Dissemination Of Solar Lantern (PicoPV) In Bangladesh Through EnDev’s Result Based Financing (RBF) Mechanism For Improving Access To Clean Energy: Achievements And Challenges]] |
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| | + | == DFID/EnDev RBF Programme old Call for proposals<br/> == |
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| | Under the [https://www.gov.uk/government/organisations/department-for-international-development DFID]-funded RBF country pilot, [[Energising Development (EnDev)|EnDev]] has launched the following calls for proposals, to trigger market development for off-grid energy access: | | Under the [https://www.gov.uk/government/organisations/department-for-international-development DFID]-funded RBF country pilot, [[Energising Development (EnDev)|EnDev]] has launched the following calls for proposals, to trigger market development for off-grid energy access: |
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| − | == Other RBF Programmes ==
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| | ''Energising Development (EnDev) is a program that supports development through energy access. In 2013, with the support of UK aid and the SNV Netherlands Development Organisation (SNV), it began a five-year RBF project in the Lake and Central Zone of Tanzania.'' | | ''Energising Development (EnDev) is a program that supports development through energy access. In 2013, with the support of UK aid and the SNV Netherlands Development Organisation (SNV), it began a five-year RBF project in the Lake and Central Zone of Tanzania.'' |
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| − | ''The RBF was structured to provide retailers and distributors with incentives for verified proof of sales of solar products in the target regions. There were two forms of the incentive: a product bonus installment to retailers and a capital bonus installment to suppliers, linked to retail sales volumes. The RBF was structured so that neither party could earn the incentive without the verified performance of the other party; the incentive was therefore dependent on cooperation between suppliers and retailers. Incentives are paid on Lighting Global–verified solar products and are linked to product performance. They range from €1 ($1.12) to €40 ($45); they are capped to limit oversubsidization. By the end of 2017, more than 60,000 Lighting Global–verified solar products had been sold under the RBF, and more than €1.3 million ($1.46 million) of the RBF fund had been disbursed as incentives<ref name="Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies_(English)">Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies_(English)</ref>.'' | + | ''The RBF was structured to provide retailers and distributors with incentives for verified proof of sales of solar products in the target regions. There were two forms of the incentive: a product bonus installment to retailers and a capital bonus installment to suppliers, linked to retail sales volumes. The RBF was structured so that neither party could earn the incentive without the verified performance of the other party; the incentive was therefore dependent on cooperation between suppliers and retailers. Incentives are paid on Lighting Global–verified solar products and are linked to product performance. They range from €1 ($1.12) to €40 ($45); they are capped to limit oversubsidization. By the end of 2017, more than 60,000 Lighting Global–verified solar products had been sold under the RBF, and more than €1.3 million ($1.46 million) of the RBF fund had been disbursed as incentives<ref name="The World Bank, 2020. Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies">The World Bank, 2020. Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies</ref>.'' |
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| | ''KOSAP is a World Bank–funded project, implemented by the government of Kenya, that aims to expand electricity access through off-grid solar products and solar mini-grids in Kenya’s underserved counties—the poorer and more remote regions in north and northeast Kenya. It includes an off-grid solar component of $42 million, made up of a $12 million RBF facility and a $30 million debt facility. SNV and SunFunder were chosen as implementation partners by the government of Kenya, following a competitive selection process. The facilities were launched in June 2019.'' | | ''KOSAP is a World Bank–funded project, implemented by the government of Kenya, that aims to expand electricity access through off-grid solar products and solar mini-grids in Kenya’s underserved counties—the poorer and more remote regions in north and northeast Kenya. It includes an off-grid solar component of $42 million, made up of a $12 million RBF facility and a $30 million debt facility. SNV and SunFunder were chosen as implementation partners by the government of Kenya, following a competitive selection process. The facilities were launched in June 2019.'' |
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| − | ''This facility competitively awards financial incentives to companies to compensate them for the up-front, ongoing, and opportunity costs associated with expanding into underserved counties. Counties are divided into service territories, and tenders are held for each service territory. Companies bid based on a financing amount per household that they estimate would be required to electrify the household and a sales target they estimate they can reach. The companies with the lowest financing requirements win, assuming they meet eligibility criteria, have proven track records, and can reasonably be expected to stay in the underserved county once the subsidy period comes to an end. For each tender, there is a percent cap for the maximum amount any individual company can receive, in order to ensure that there are multiple, competing companies in each service territory and customers have a meaningful choice of products and suppliers<ref name="Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies_(English)">Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies_(English)</ref>''. | + | ''This facility competitively awards financial incentives to companies to compensate them for the up-front, ongoing, and opportunity costs associated with expanding into underserved counties. Counties are divided into service territories, and tenders are held for each service territory. Companies bid based on a financing amount per household that they estimate would be required to electrify the household and a sales target they estimate they can reach. The companies with the lowest financing requirements win, assuming they meet eligibility criteria, have proven track records, and can reasonably be expected to stay in the underserved county once the subsidy period comes to an end. For each tender, there is a percent cap for the maximum amount any individual company can receive, in order to ensure that there are multiple, competing companies in each service territory and customers have a meaningful choice of products and suppliers<ref name="The World Bank, 2020. Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies">The World Bank, 2020. Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies</ref>''. |
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| | ''Payments were made to domestic and nondomestic installers on the basis of each kilowatt hour (kWh) their product produced. The initial subsidy was £0.09 ($0.12) per kWh for heat and £0.10 ($0.13) per kWh for hot water. The annual subsidy for installers was to last 20 years for commercial installations and 7 years for home installations. On this basis, installers could expect to recover the costs of installation within five to eight years from the incentive. Payments received were tax free.'' | | ''Payments were made to domestic and nondomestic installers on the basis of each kilowatt hour (kWh) their product produced. The initial subsidy was £0.09 ($0.12) per kWh for heat and £0.10 ($0.13) per kWh for hot water. The annual subsidy for installers was to last 20 years for commercial installations and 7 years for home installations. On this basis, installers could expect to recover the costs of installation within five to eight years from the incentive. Payments received were tax free.'' |
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| − | ''In 2017 the scheme came under intense scrutiny for overspending, and a public inquiry was launched. During the inquiry, allegations were made that some users installed heating systems to profit from the scheme rather than to meet genuine heating needs. In 2017 the subsidy was reduced, highlighting the risk to installers where payments are made over a long period, during which there is potential for policy change<ref name="Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies_(English)">Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies_(English)</ref>''. | + | ''In 2017 the scheme came under intense scrutiny for overspending, and a public inquiry was launched. During the inquiry, allegations were made that some users installed heating systems to profit from the scheme rather than to meet genuine heating needs. In 2017 the subsidy was reduced, highlighting the risk to installers where payments are made over a long period, during which there is potential for policy change<ref name="The World Bank, 2020. Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies">The World Bank, 2020. Funding the Sun : New Paradigms for Financing Off-Grid Solar Companies- https://energypedia.info/wiki/Publication_-_Funding_the_Sun_:_New_Paradigms_for_Financing_Off-Grid_Solar_Companies</ref>''. |
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| | = RBF - Case studies for Improved Cookstoves = | | = RBF - Case studies for Improved Cookstoves = |
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| − | *Please refer to this article: [[Result_Based_Monitoring_of_Cookstove_Projects|Result Based Monitoring of Cookstove Projects]] | + | *Please refer to this article: [[Result Based Monitoring of Cookstove Projects|Result Based Monitoring of Cookstove Projects]] |
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| | = Further Information<br/> = | | = Further Information<br/> = |
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| | *[[Energising Development (EnDev)|Energising Development (EnDev)]] | | *[[Energising Development (EnDev)|Energising Development (EnDev)]] |
| | *Find more documents on RBF at the collaborative platform for RBF/OBA practitioners by World Bank/GPOBA: [https://collaboration.worldbank.org/groups/output-based-aid-cop-oba-cop https://collaboration.worldbank.org/groups/output-based-aid-cop-oba-cop] | | *Find more documents on RBF at the collaborative platform for RBF/OBA practitioners by World Bank/GPOBA: [https://collaboration.worldbank.org/groups/output-based-aid-cop-oba-cop https://collaboration.worldbank.org/groups/output-based-aid-cop-oba-cop] |
| − | *[[:Category:Results_Based_Financing_(RBF)|All articles on RBF on energypedia]] | + | *[[:Category:Results Based Financing (RBF)|All articles on RBF on energypedia]] |
| | + | *[[Portal:Financing and Funding|Portal:Financing and Funding]] |
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| | = References<br/> = | | = References<br/> = |
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| − | [[Category:Results_Based_Financing_(RBF)]]
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| | [[Category:Financing_and_Funding]] | | [[Category:Financing_and_Funding]] |
| | + | [[Category:Results_Based_Financing_(RBF)]] |
For the off-grid solar marke, the RBF could be based on indicators such as: no of SHS systems installed, no of homes or businesses served and volume of energy (Kwh) produced. They can be either one time payment upon instalment of the system or distributed over lifetime to promote also after-sales services[1].
Results-based financing should not be seen as a 'silver bullet', but as a potentially useful addition to the range of measures that developing country governments and their development partners might deploy to promote energy sector development. Commonly cited limitations of RBF include the need for agents to secure pre-financing, higher data collection and auditing costs, and the challenge of accurately setting the incentive to avoid rent-seeking whilst achieving the desired results.
Other challenges include: certain companies can make fraud outcomes (i.e installign the technologies but not delivering the adequate energy), can be expensive for the funding agencies in case of high demand for it, RBF that pays only after the service has been deliverd may not be suitable for earlier stage companies[9].
Aside from OBA there is limited experience with RBF in the energy sector. In part to build up this experience a number of programs and initiatives are actively exploring ways to pilot and mainstream RBF into their activities. These include:
