FROM PROCUREMENT TO PERFORMANCE: Towards a private sector-led, service-based model to scale up sustainable electrification of public institutions

This knowledge brief by Sustainable Energy for All (SEforALL) and ESMAP advocates for a shift from traditional equipment-ownership models to private sector-led, performance-based service models to ensure the sustainable electrification of public health and education facilities in low- and middle-income countries.

• The conventional equipment-ownership model for electrifying public institutions often fails due to a mismatch between short-term donor funding cycles and the long-term costs of operation and maintenance (O&M). This leads to a prioritization of asset procurement over service delivery, resulting in systems that prematurely fail or underperform.
• In Sub-Saharan Africa, electricity access in public institutions is severely limited; approximately 25% of health facilities have no electricity, and only 28% have reliable access. Similarly, two-thirds of schools lack reliable electricity, hindering quality education and distance learning.
• A performance-based service model shifts the burden of up-front capital investment to the private sector, which is paid by the government on a regular basis based on meeting specific key performance indicators (KPIs) over a 10- to 15-year period.
• Six primary barriers hinder the viability of service-based models: the public sector's ability to pay, private sector willingness to raise capital, high transaction costs, the risk of grid extension, the persistence of grant-based models, and the potential for international firms to crowd out national companies.
• To mitigate payment risks and attract private investment, the brief suggests using de-risking instruments such as results-based financing (RBF), Distributed Renewable Energy Credits (D-RECs), and government-backed payment guarantees similar to those used for independent power producers (IPPs).
• The World Bank's Regional Off-Grid Electricity Access Project (ROGEAP) is piloting a service-delivery model in Niger and Nigeria where private companies recover capital costs over four years and receive ongoing monthly payments for O&M, verified by digital remote monitoring.
• Other active pilots include GIZ's Grüne Bürgerenergie in Benin, which uses RBF to cover the viability gap; UNDP's Solar for Health, which is exploring an Energy-as-a-Service (EaaS) approach in five countries; and GreenStreet Africa, which uses a blended finance facility and 'lockbox' mechanisms to secure payments in Nigeria.
• Differ Community Power (DCP) is piloting a lease-to-own model for private health clinics in Kenya, utilizing a Special Purpose Vehicle (SPV) to bundle facilities and achieve economies of scale to reduce transaction costs.
• For a service-based model to be successful, certain preconditions must be met, including a demonstrated willingness of the customer (government ministry) to pay, a capable public-sector procurement system for long-term contracts, and an active local off-grid industry.
• The brief recommends four key actions to advance the model: investing in data regarding facility locations and energy needs, supporting demonstration pilots through DFIs and donors, fostering cross-sector dialogue, and coordinating stakeholders to prevent grant-funded projects from undermining market-led models.

APA

Sustainable Energy for All (2021). FROM PROCUREMENT TO PERFORMANCE: Towards a private sector-led, service-based model to scale up sustainable electrification of public institutions. https://www.seforall.org/system/files/2021-12/Procurement-to-Performance-SEforALL.pdf

Chicago

Sustainable Energy for All. FROM PROCUREMENT TO PERFORMANCE: Towards a private sector-led, service-based model to scale up sustainable electrification of public institutions. 2021. https://www.seforall.org/system/files/2021-12/Procurement-to-Performance-SEforALL.pdf.

Wikipedia

{{cite report |author=Sustainable Energy for All |title=FROM PROCUREMENT TO PERFORMANCE: Towards a private sector-led, service-based model to scale up sustainable electrification of public institutions |date=November 2021 |url=https://www.seforall.org/system/files/2021-12/Procurement-to-Performance-SEforALL.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sustainableenergyforall2021from, author = {{Sustainable Energy for All}}, title = {{FROM PROCUREMENT TO PERFORMANCE: Towards a private sector-led, service-based model to scale up sustainable electrification of public institutions}}, institution = {Sustainable Energy for All}, year = {2021}, month = nov, url = {https://www.seforall.org/system/files/2021-12/Procurement-to-Performance-SEforALL.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }