ENERGYAccess to reliable and affordable energy remains a considerable challenge in Rwanda. For Rwanda’s private sector to be competitive, the energy issue must be addressed as it is a crosscutting driver of economic growth. In order to fuel its growth, Rwanda’s target is to substantially increase its energy supply from its current level to 563 MW, over the next three years, at the same time increasing access to electrification to 100% of households (48% on grid and 52% off grid).

Over the next five years, the Bank will invest USD 185 million in the Energy sector and catalyze additional USD 638 million from other stakeholders. BRD’s interventions have been designed to address key constraints in the sector such as high startup costs and risks involved. Energy projects require significant time and financial investments and their long-term nature requires specialized financing terms.

The challenges in the energy sector are mainly related to insufficient financing, lack of infrastructure, risk aversion of financial institutions, human capital challenges, etc.

BRD has set up a Department of Energy Financing which will is in charge of implementing the Bank’s intervention in the Energy sector. These interventions are grouped into three main programs:

– Energy Generation: The Bank will provide solutions to energy developers through a combination of products
including Debt and Equity Financing and provision of Long Term financing with long grace periods. BRD will also collaborate with other financial institutions to provide syndicated financing for larger projects. The Bank’s investment, together with its lending partners, will contribute to a generation of 66MW of electricity over five years.

– Energy Efficiency: In line with the green economy initiative, the Energy efficiency program will intervene by financing energy reduction capital projects, financing alternative energy products etc. The Bank’s intervention in energy efficiency will result in a saving of 6.6 MW. Rwanda’s current energy needs are dominated by biomass, but as the country’s focus is shifting towards renewable sources of energy, the Bank’s priority is on alternative energy sources of renewable energy like solar, biogas, etc.

– Technical Assistance: The Bank intends to partner with other stakeholders to develop technical capabilities of the different players in the sector. BRD’s technical assistance program, in partnership with the stakeholders, will provide Technical skills in early stage development support, management and operations, and structuring energy deals among others. In-house expertise in packaging energy arrangements will be developed as the Bank’s goal is to be a hub for knowledge in energy financing by sharing lessons learned within the sector.

In a move to increase Solar Home System (SHS) installations and electrification of households in rural areas of Rwanda, the Renewable Energy Fund (REF) project of the Development Bank of Rwanda Plc. has launched a Results-based Financing (RBF) subsidy called “REF Window 5”.

The Subsidy is designed to address the affordability of SHS to rural households through the reduction of prices for the systems at varying amounts allocated for Ubudehe 1, 2, and 3 categories, and aiming to reach up to the lowest income population in Rwanda.
The USD 15 million subsidy window is funded by the World Bank and is expected to trigger at least 182,927 off-grid connections. It is expected that this RBF facility will boost uptake of REF funds thus enabling the BRD REF project to connect Rwandan households using off-grid solutions. The subsidy will be channeled through eligible Off-grid Solar Companies (OSCs).
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REF WINDOW 5 .:: Frequently asked questions (FAQs)

Q1: What is results-based financing? 

Results-based financing (RBF) scheme is different from traditional grants because incentives are disbursed upon delivery and independent verification of results. This means that participating companies will have to pre-finance their projects, either through loans or other sources of funds. This RBF provides direct financial support to beneficiary households and micro-enterprises to buy down most of the cost of a Solar Home System (SHS).

Q2: Does RBF provide grants to the companies for their capacity building and marketing activities?

No. The RBF subsidizes the price of SHS products to final households and micro-enterprises. The participating companies must transfer the entire subsidy amount to its customers. The companies are expected to leverage their own resources for capacity building, marketing and any other operational activities. However, REF may provide certain technical assistance (training, orientations, etc.) to participating companies.

Q3: What is the difference between EnDev Pro-Poor RBF and REF Window 5 RBF?

Both RBF schemes provide capital buydown subsidy for off-grid SHS. The procedure for participation, system installation, claiming, and verification are similar in both schemes. The major differences are in the subsidy amounts per Ubudehe, program duration, and subsidy disbursement timeline.

Window 5 RBF is a nationwide program however it does not work in those five districts (Ruhango, Gisagara, Nyanza, Nyamagabe, and Huye) where the Pro-poor RBF is currently active. These districts will be covered by Window 5 after the formal closure of Pro-poor RBF scheme.

Q4: Can a company currently in partnership with EnDev Pro-poor RBF be eligible for partnership with REF Window 5 RBF?

Probably. The company that has an active partnership with the Pro-poor program (or any other similar programs) is likely to fulfill the Window 5 eligibility criteria.

Q5: Can a company participate in Window 5 without participation in other REF windows?

No. Participation in the REF credit windows (Window 1, Window 2 or Window 4) is a prerequisite for a company to participate in Window 5. If the company has no active participation in the credit windows yet, the company can still be eligible for Window 5, subject to a clear plan of their participation in the credit windows. However, the company should have been participated at the time of subsidy disbursement.  Failure to achieve this condition will disqualify the company in the subsidy claiming process.

Q6: What are the eligibility criteria for a company to participate Window 5 RBF?

Any participating company should go through the eligibility criteria provided in the Window 5 Operations Manual, section 6.11. Failure to comply with the eligibility criteria will lead to suspension of the company from participating in Window 5. The company should comply with these criteria at all times. Whenever the company deviates from the eligibility criteria and the stipulated roles and responsibilities, a credible commitment in the form of a time-bound action plan needs to be prepared by the company and submitted to EDCL and BRD. EDCL, BRD and the World Bank team will closely review the action plan and decide accordingly.

Q7: What if a household changes Ubudehe category after the launch of the Window 5 RBF? How will this change impact the incentive level?

While Ubudehe categories may change, the Window 5 only considers the Ubudehe category of a potential beneficiary at the time of the eligibility check and fund reservation through the Eligibility Tool. Any changes to the Ubudehe category thereafter will not affect the incentive allocation for that particular customer.

Q8: Can two individuals from the same household apply for the Window 5 subsidy?

No. Once an individual from an eligible household buys a SHS and the sale is registered in the Eligibility Tool, all household members will be marked as ineligible. In other words – one subsidized system per household.

Q9: Can a household already having a SHS (subsidized or not) apply for the Window 5?

No. Only the households that have not yet connected through SHS are eligible for Window 5. Only the households identified as eligible under the Eligibility Tool check are qualified for Window 5. The households who are demarcated by National Electrification Plan as potential mini-grid beneficiaries are eligible in Window 5 until the mini-grid is developed and commissioned.

Q10: Are companies able to claim incentives for SHS sold before the Window 5 started and register sales through the Eligibility Tool retroactively?

No. Companies are only able to claim SHS sold after the date of signature on the Grant Subsidiary Agreement (GSA) between the company and BRD. The GSA specifies the contract period and timelines for claim submission, verification and disbursement.

Q11: What is the incentive level for an eligible household?

The subsidy level is different for different Ubudehe categories. See Window 5 Operations Manual (Section 6.4 and Section 6.6) about the subsidy amount and the disbursement schedule.

Q12: Can the company claim all subsidy (per Ubudehe) amount regardless of customer contribution?

No. The second and third subsidy installment are tied to the customer contribution. The company can claim first installment immediately after the system installation, regardless of customer contribution. However, the second and third installments will be released only against the verification of the remaining amount (after subsidy) paid by the customer.

Q13: What is the Eligibility Tool and when is it used?

The Eligibility Tool is a web-based tool, managed by EDCL, which supports the implementation of Window 5. The Eligibility Tool is linked to the OMIS, which is used to check customer eligibility and serves as a data repository for registered sales.

Basic functionalities of the Eligibility Tool allow participating companies to check the eligibility of potential customers and corresponding incentive levels. This function will be available to each participating company immediately after they sign the GSA with BRD.

The complete functions of Eligibility Tool allow companies a. To pre-register sales and reserve funds for an interested customer for 15 calendar days, and b. To register a sale once the contract is signed with the customer. The company may have to manually submit the pre-registration and sales record to EDCL until this complete function is available.

Each participating company receives user logins to access an individualized Eligibility Tool site. Apart from being able to perform the activities mentioned above, the site allows each company to review and adjust potential sales for which funds were reserved and get an update on the remaining budget allocated to the company and each Ubudehe category.

Q14: When should sales be pre-registered through the Eligibility Tool? What is the purpose of the fund reservation?

This function is available only in the complete Eligibility Tool. Following the eligibility check, companies should then pre-register interested customer to ensure that sufficient budget is available for the incentive at the time the contract is signed between the participating company and customers. At the time of pre-registration, funds required to subsidize the sale are reserved for 15 calendar days. During this period, other companies are not able to reserve funds for this customer. If a sale is not registered within 15 days, the reservation is automatically lifted and the household is free and eligible to purchase a subsidized SHS from other companies. Companies are able to pre-register and reserve funds for each household only once.

Q15: When does a sale need to be registered through the Eligibility Tool?

Sales should be registered through the Eligibility Tool immediately after the contract between the company and the customer is signed, and SHS installed. This ensures that there is sufficient budget to cover the corresponding incentive. If a company decides to register sales outside of the 15 days reservation period, there is a risk that 1) the entire incentive budget has been allocated to other households, or 2) another company has reserved funds for the household, which will take precedence. Hence, the company would need to cover the remaining gap itself. This function is available only in the complete functionalities of the Eligibility Tool.

Q16: How much is the maximum threshold of subsidy amount per participating company?

There is no threshold of subsidy amount for participating company. However, the company can sign GSA at a level of maximum US$ 1 million subsidy (contract) amount. Once the company utilizes the committed amount, BRD can renew the GSA for another round of the contract amount. BRD reviews the GSA every six month and may adjust the initially agreed amount.

Q17. What type of business models are allowed under Window 5?

Companies are free to apply any type of business models, i.e. PAYGO, cash, SACCO, etc. However, at the time of application, the company should provide different price of different sales models.

Q18: Is there any cost the Window 5 charges to participating companies?

Yes. BRD charges 4% of the subsidy amount as an incremental cost coverage. The company has two options: this fee will either be paid upfront, at the time of signing GSA or it will be deducted from confirmed subsidy amount, at the time of disbursement. This fee will slightly reduce the actual subsidy amount for final beneficiary households.