Turning up the volume: financial aggregation for off-grid energy

Despite headway made in recent years, the decentralised renewable energy sector is still at an early stage and investing in this sector presents the significant challenge of matching the type and scale of finance offered by investors with the finance needs of small-scale energy access for unelectrified households. In response to this challenge, innovative forms of ‘financial aggregation’ are emerging – bundling together energy opportunities to lower transaction costs, risks, and the cost of capital. Financial aggregators can bring together enterprises or their assets into portfolios, diversifying risk across many investments and making the sector more attractive for investors. Bundling together smaller loans and assets from relatively small-scale decentralised renewable energy projects and enterprises can create investment products that meet the larger-scale needs of institutional investors. This paper explores the benefits and challenges faced by aggregators through five in-depth case studies, highlighting lessons learned to date as well as the need for further experimentation in this growing sector