This publication is CPI’s analysis of PopLuz, an innovative climate finance instrument endorsed by the Global Innovation Lab for Climate Finance (the Lab). CPI serves as the Lab’s Secretariat. Each instrument endorsed by the Lab is rigorously analyzed by our research teams. High-level findings of this research are published on each instrument, so that others may leverage this analysis to further their own climate finance innovation.

Scaling up distributed solar power in Brazil can not only help the country achieve its climate targets, but can also provide increased energy access to low-income communities. However, low-income tenants typically lack the upfront capital required to purchase distributed solar systems. In addition, commercial lenders see low-income borrowers as higher risk, inhibiting their access to credit.

The Distributed Energy for Social Housing Fund (DESH) is a financial solution that can accelerate distributed solar power for low-income tenants in Brazil. It is a third-party ownership and rental model for distributed solar systems in low-income condominiums in Brazil. It provides a robust, low-risk structure for investors, and energy cost savings for the low-income tenants.

INNOVATION

DESH is the only financing option in Brazil that enables distributed energy at feasible rates that match the lifetime of solar projects. DESH will pose no upfront costs for low-income households, providing a 10-20% discount on energy bills from day one. Also, because DESH is a rental model, low-income households aren’t charged any interest rates and don’t have operations and maintenance responsibilities. In addition, DESH has a robust legal and financial structure that is set up to minimize risks to investors, like payment default. In the event of default, DESH has the ability to reallocate energy credits within 90-120 days among its clients. The 15 MW first phase has the potential to provide affordable clean energy to 26,000 low-income households, with monthly savings of 10%. The ambition for 2030 is that DESH can scale up to 300 MW, reaching almost half a million households.

IMPACT

The first phase of DESH will consist of three individual 5 MW projects in the state of Minas Gerais, which will benefit low income communities in Belo Horizonte, the state’s largest city.

DESH aims to support UN’s Sustainable Development Goals 7 “Affordable and Clean Energy” and 1 “No Poverty” and the impact from the first phase of DESH is estimated as:

• Renewable energy produced per year- 23,652 MWh 
• Avoided greenhouse gas emissions per year – 8,728 tCO2eq 
• Number of people with access to affordable, reliable and modern energy services – 80,396 people
• Revenue from products serving low income groups per year – EUR 676,920 

Furthermore, the ambition for 2030 is to reach 300 MWp, which will have an estimated impact of:

• Renewable energy produced per year – 430 GWh 
• Avoided greenhouse gas emissions per year – 150,000 tCO2eq 
• Number of people with access to affordable, reliable and modern energy services 1.5 m people
• Revenue from products serving low income groups per year –  EUR 12.3 mn

The aim of the DESH Program is to be able to supply solar energy to almost 1.5 million people in Brazilian classes D and E until 2030 and to mobilize US$ 300 million in investments.

DESIGN

The Distributed Energy for Social Housing Fund (DESH) is a third-party ownership and rental model for distributed solar systems in low-income condominiums, that will pose no upfront costs to the tenants. Tenants will only pay a monthly rental fee that is 10-20% lower than their standard utility rate and will bear no risk related to procurement, operations & maintenance costs. It provides potentially attractive investment opportunities for the implementation of these systems and through that is able to fund 100% of the distributed generation projects with no Brazilian local content requirements for the equipment, no guarantee requirements, and terms that match the lifetime of the projects.