Evaluation of the United States-Africa Clean Energy Finance Initiative (US-ACEF)

Weidemann Associates, Inc. performed this evaluation from October 2015 through June 2016 and submitted the report to the Department of State in July 2016.

Purpose of the Evaluation and Questions Addressed

US-ACEF prepares clean energy (CE) projects in Africa to attract investment by providing grants that offset the costs of early-stage project development. Implemented by the Overseas Private Investment Corporation (OPIC) and the US Trade and Development Agency (USTDA), the US-ACEF 1.0 period of performance runs from 2012-2018. US-ACEF supports power generation, market-based solution, and market catalyzer projects. At the time of the evaluation, US-ACEF supported 32 projects, some of which were regional, whiles others were country-specific, operating in Ethiopia, Kenya, Morocco, Namibia, Nigeria, Rwanda, Senegal, South Africa, Tanzania, and Uganda. This midterm evaluation reviews the progress made by US-ACEF in catalyzing investment, expanding access to CE, and reducing greenhouse gas (GHG) emissions in Africa.

This evaluation has three principal purposes:

1. Inform the Department of State, as well as OPIC and USTDA, on the performance and current outcomes resulting from US-ACEF intervention.

2. Conduct an assessment of US-ACEF support with robust quantitative and qualitative data.

3. Assess conditions and project preparation that enabled US-ACEF projects to reach financial close (FC) and capital mobilization.

The evaluation responds to the following questions:

1. How effective has US-ACEF been, to date, in making progress towards its central objective: to increase access to clean energy for eligible countries and reduce greenhouse gas emissions by stimulating increased investments in clean energy generating capacity and related infrastructure?

2. What is the total investment in clean energy generated by the program? Identify key factors supporting the investment leveraged to date as well as potential impediments to reaching the goal.

3. In advance of the project’s completion, how effective is US-ACEF in achieving progress as measured by each indicator listed in the agreements?

4. The evaluator should verify completed results that OPIC and USTDA have reported to the Department, to date and ascertain progress toward achieving each of the indicators with an emphasis upon, but not limited to, the number of projects supported, the amount and nature of capital mobilized, amount of power deployed, and actual and potential GHG mitigation.

5. In cases in which OPIC and USTDA did not report on certain indicators, the evaluator should analyze whether anticipated or actual results can be ascertained currently or whether there will be a sufficient basis for reporting after the conclusion of the project.

6. What type of data and information were gathered for reporting on indicators? Does the list require revision in light of past experience?

7. In cases where OPIC and USTDA have reported on anticipated and actual investment leveraged by US-ACEF funding, the evaluator should review whether the firms making the investment have been identified and whether the investment has been committed.

8. What are the composition and proportion of the financing sources for US-ACEF projects supported by OPIC and/or USTDA? The evaluator should review the breakdown of funding for each project at FC. Total project funding is typically comprised of US-ACEF support, partner equity, OPIC debt, and other third party debt/equity. Ascertain any overarching patterns of proportionality of the funding source derived from the composition of each project.

9. What is the profile of successful projects that resulted in attracting investment? What factors such as project preparation, negotiations with interested parties, and the political and economic environment of host countries contributed to capital mobilization for these projects?

Methodology

The evaluator used quantitative and qualitative data collection and analysis methods. These methods included a review of program reporting documents, published research, and summary reports; key informant interviews (KIIs) of USTDA and OPIC staff and key stakeholders; and a telephone survey with project developers. Data collection included site visits in Rwanda and Tanzania to conduct KIIs, in-country focus groups, and direct observation. The KIIs and telephone survey served as primary information sources. The team identified common themes from the qualitative data, and analyzed quantitative data to develop statistics on reported indicators. The report reflects feedback from State, USTDA, and OPIC.

Key Findings and Recommendations

US-ACEF has been successful in advancing project developers towards financial closure and in leveraging investments for CE projects. The evidence from the evaluation shows the initiative as effective because overall US-ACEF projects have raised $398,105,591 in funding, or 39.8 % of US-ACEF’s overall program-level target (up to $1 billion).

The report identifies several factors that explain why US-ACEF is effective. One is US-ACEF’s willingness to provide support at very early stages of project development, indicating a high tolerance for risk. US-ACEF is almost unique among development finance programs in offering early-stage support to CE project developers, which reduces the level of risk. Interviewees praised US-ACEF’s light-touch design and flexible approach to providing support.

Despite Africa’s significant demand for energy, numerous political, social, and economic barriers inhibit the introduction of renewable energy infrastructure and other CE solutions. Prospective project developers, many of whom are small-scale entrepreneurs, are faced with a lack of access to viable financing, high early-stage development costs, lack of availability and low levels of local management and technical expertise, and challenging regulatory frameworks and political climates. US-ACEF addresses these challenges by providing access to technical services, including environmental impact assessments, legal counsel, and resource measurement studies, the cost of which represents a significant barrier for small project developers. US-ACEF allows its awardees to meet critical early-stage project milestones and improve project viability before entering into negotiations with potential investors, which enables viable projects to attract financing and increase access to clean energy. US-ACEF has developed an effective model. It is targeting its services toward the correct recipients: power generation, market-based solution, and market-catalyzer project developers in the early stages of project development. To replicate the successes of US-ACEF 1.0, US-ACEF 2.0 should pursue the same programmatic model because it fills a gap that few other donors cover.

Use of Recommendations

This midterm evaluation was commissioned by the Department of State to review the progress made by US-ACEF in catalyzing investment in CE projects, expanding access to CE, and reducing greenhouse gas GHG emissions in Africa. The results of this evaluation will be used to guide planning and implementation of ongoing and future US-ACEF activities.