Financing Green Energy solutions for Agricultural value chains in Uganda
Among all renewable energy sources, solar energy in Uganda has the highest adoption rate, offering a viable solution to scale up energy access in rural areas and villages in the country where on-grid power is still inaccessible and unreliable.
Financing Green Energy solutions for Agricultural value chains in Uganda
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@New Vision
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OPINION
By Peter Babyenda, PhD
Uganda possesses abundant renewable energy resources that can be harnessed for energy production and the provision of energy services. These include hydro, solar, nuclear, geothermal, wind and biomass among others.
However, there is a significant constraint on utilisation and access to both untapped energy resources, both on and off-grid. Currently, the hydropower sector is Uganda’s largest source of renewable electric energy, yet still about 32% of the population has no access to any form of electricity, and merely 24% have access to electricity for more than 4 hours per day (GIZ, 2022). The unreliability nature of the electricity downplays efforts to promote clean cooking and carbon-neutral solutions, including achieving the Nationally Determined NDCs.
Among all renewable energy sources, solar energy in Uganda has the highest adoption rate, offering a viable solution to scale up energy access in rural areas and villages in the country, where on-grid power is still inaccessible and unreliable. A key driver of renewable energy is increasing access to financing. In our consultation with over 20 Key Informants (KIIs) consisting of policy makers and actors on financing of green energy solutions for agricultural value chains in Uganda, we highlighted the major challenges in accessing finance, which include;
- Limited awareness of green financing options
- Lack of supportive incentives, policies, or subsidies
- Perception of renewable projects as risky by investors
- Currency fluctuations due to cross-border operations
- Few institutions willing to fund renewable energy projects
- High borrowing rates and collateral requirements
- Corruption and bureaucracy in finance applications, and stiff competition for funding with other industry players.
Given the above circumstances, we recommend strengthening partnerships with the private sector through Public Private Partnerships, provide technical assistance in meeting financiers’ criteria, inclusion of more NGOs and CSOs in the sector, elimination of collateral requirements for access these funds, fostering partnerships between businesses and financial institution, offering support in developing bankable projects that meet climate investors' criteria, and providing information on climate finance trends and investor preferences.
Furthermore, SMEs suggested key levers and tools to unlock climate financing for SMEs in the ag-energy space. These suggestions emphasised building strong Public-private partnerships, increasing government and NGO support and advocating for flexible and lower interest loans from climate finance investors.
Additionally, SMEs also proposed several options or tools to enhance the deployment of climate finance to ag-energy SMEs and SMEs in general. These include the establishment of dedicated climate funds, enhanced microfinance options tailored for SMEs, support for programs that nurture early-stage SMEs through mentorship and technical assistance and training for SMEs to improve the quality of proposals and build government collaboration with private funders. Other tools include the attraction of more international funders, encouragement of group and association work for better visibility to funders and promotion of microfinance and community lending.
The writer is a policy engagement specialist at EfD-Mak Centre and CoBAMS, Makerere University.