Sierra Leone Adopts Results Based Financing Mechanism for Solar Mini-grids with EUR 20m Financing from the European Union

The Government to electrify 35,000 rural households with renewable energy.

Freetown, Sierra Leone – 13 December 2024: The Government of Sierra Leone has prioritized energy development in key national strategies to meet the growing demand for electricity and to address the need for new generation capacity. To meet the growing demand for electricity in rural communities, the Government is adopting a cost-effective solution that maximizes their renewable energy resources. With EUR 20 million support from the European Union (EU), the Government is launching a Results Based Financing (RBF) mechanism for the rollout of the next wave of solar mini-grids expected to electrify 35,000 households.

“The EU funding will support rural development by powering productive use of energy in communities currently lacking access to electricity. This will positively impact the livelihoods of communities. It also reinforces President Bio’s ambition to pursue both bulk power and decentralized renewable energy solutions to power Sierra Leone’s economic development,” said Hon. Dr. Kandeh Yumkella, Energy Sector Lead and Chairman of the Presidential Initiative on Climate Change, Renewable Energy and Food Security (PI-CREF).

The RBF model provides financial incentives (grants) to private mini-grid developers/operators based on the number of connections they set up. Under this multi-partner scheme, the United Nations Office for Project Services, (UNOPS) and Sustainable Energy for ALL (SEforALL) are implementing partners while the initiative will be funded by the EU under the EUR 50 million Transformational Energy Access for Sierra Leone financing agreement with the Government of Sierra Leone.

“UNOPS is committed to the collaborative effort required to provide access to sustainable energy for all. In Sierra Leone, we are proud of our record of offering practical solutions to the government in their drive for clean energy access, by helping set-up solar mini-grids across the country. We look forward to bringing our operational capacities to further support this work, to deliver on the Sustainable Development Goals and ensure communities can thrive,” emphasized Jorge Moreira da Silva, UNOPS Executive Director and Under-Secretary General.

“This partnership demonstrates the power of collaboration, clear leadership from Sierra Leone’s government and innovation to scale clean energy solutions for underserved communities and, importantly, this incentive structure drives economic development by boosting the viability of local companies and the sector, ensuring everyone benefits from electrification,” underscored Damilola Ogunbiyi, CEO and Special Representative of the UN Secretary-General for Sustainable Energy for All.

The decisive move to an RBF approach for rural electrification, is the result of previous successful implementation in three locations (Borup, Kalangba and Kasirie), where Power Leone set up mini-grids with a total number of 500 connections using grant funds from the Universal Energy Facility (UEF), a multi-donor facility designed to scale up and speed up energy access across Africa. Power Leone continues to supply modern energy reliably in all three locations.

“The use of Results Based Financing for the roll-out of solar mini-grids is an important step for Sierra Leone. As the RBF mechanism is scalable, it has the potential to lead to a palpable acceleration in rural electrification. We would be very happy to see other donor partners of Sierra Leone join the European Union in supporting the Government’s initiative,” said Jacek Jankowski, EU Ambassador to Sierra Leone.

As identified through the Ministry of Energy’s National Online Database for Electrification, (NODE), there are 703 sites with mini-grid potential in the country in addition to the 104 mini-grids already under operation. These additional mini-grids will serve approximately 180,000 households. The envisaged EU RBF grant amount will therefore provide incentives for 20% of the projected additional customer connections.

Policy & Regulatory Improvements to Attract Private Sector Participation

The Government of Sierra Leone has taken a strategic approach to developing energy solutions by establishing effective policies and regulations that enable private sector participation.

Under the Sierra Leone Renewable Energy Policy, adopted in 2016, the Government envisioned a clear role for mini-grids in expanding access to rural populations and began taking steps to facilitate their expansion. In 2016 and 2017, the government implemented duty waivers and Value Added Tax (VAT) exemptions on imported quality certified (IEC-compliant) solar products. Although these were suspended in 2022, they will be revived in 2025.

In 2019, the Government adopted the Mini-Grid Regulation, which spell out license issuing, cost-reflective tariff setting, service quality etc. for the provision of electricity through the construction and operation of mini-grids by the private sector. Updates and improvements of the Sierra Leone Electricity and Water Regulatory Commission, (SLEWRC) Act and the Mini-Grid Regulation are under way.

There are over 100 solar mini-grids in operation in Sierra Leone under Private sector portfolios. Based on experience and with support from SEforALL, SLWERC has developed an improved Multi Year Tariff Order, (MYTO2), which provides further improved transparency, clarity and equity.

“Sierra Leone is advancing its energy future through innovative partnerships and sustainable solutions. With the Results-Based Financing mechanism, we are not just powering homes but empowering communities and driving economic growth. Together, we’re building an energy-secure nation for generations to come, noted Dr. Eldred Tunde Taylor, Deputy Minister of Energy 1.

A Call for Developers and Development Partners

The Government of Sierra Leone and the European Union are developing the requirements to access the RBF grant funds in partnership. Several other Development Partners have expressed interest in providing grant support to the GoSL’s RBF initiative for solar mini-grids.

Procedures for the selection of developers/operators for the provision of the required licenses and the grant awards are under preparation. Successful developers will finance, build, own and operate the mini-grids. RBF grants will be disbursed upon verification of the achievement of pre-agreed milestones.