As donors search for ways to promote energy access in the developing world, a new tool being piloted in the sector is results-based financing (RBF). It offers incentive payments on the basis of results achieved to businesses that deliver pre-specified outputs—such as the number of new electricity connections or advanced cookstoves that are sold.
By doing so, it tries to overcome market failures that constrain private sector delivery of modern energy services. So far, the global community has had limited experience with the RBF in the energy sector, but a number of programs and initiatives are under way to explore how to pilot and mainstream RBF into their activities. This paper focuses on how the RBF works in theory and in practice, with a special focus on a project to spur solar market development in Tanzania.
Hüls, Marco; Raats, Marcel; Sebastian, Josh; Veen, Martijn; Ward, John. 2017. Results-Based Financing: A Promising New Tool for Energy Access. State of Electricity Access Report. Washington, D.C.: World Bank Group. http://documents.worldbank.org/curated/en/793121494941318265/Results-based-financing-a-promising-new-tool-for-energy-access