The Rural Energy Enterprise Development (REED) initiative is a flagship UNEP Energy effort focused on enterprise development and seed financing for clean energy entrepreneurs in developing countries. Today REED programmes are operating in five countries of West and Southern Africa, Northeast Brazil and China’s Yunnan Province. This energy through enterprise model has been pioneered by the clean energy investor E+Co and advanced by a partnership between UNEP, E+Co, the UN Foundation, the W. Alton Jones Foundation and a diverse group of country enterprise development partners.
The African programme, AREED, is the most advanced to date with debt and equity investments in 25 clean energy enterprises. These investments, ranging in scale from $20,000 to $120,000, have seeded businesses in the areas of solar crop drying, sawmill waste charcoal production, efficient cook stove manufacture, wind water pumping, solar water heating, liquefied petroleum gas (LPG) distribution and energy efficiency.
REED investments are placed in small and mid-size enterprises (SMEs) that deal in clean energy products and services, a sector generally considered too risky to attract conventional sources of finance. An underlying goal of REED deal structures is to prepare young enterprises for later growth capital from more commercial sources. A young enterprise that services a first loan from REED is well positioned to attract later financing from a local bank.
Underlying the REED approach is a shift from conventional grant based technology demonstration programmes to the seed capital business. Instead of dropping a few wind pumps into some rural villages, for example, equivalent funds can be used to invest risk capital in a clean energy entrepreneur who, if successful, could eventually install, maintain and service hundreds or thousands of pumps. UNEP firmly believes that assisting entrepreneurs to take risks, to innovate the way they deliver goods and services, and to continuously refine their business models, is an effective way to gain public trust while attracting commercial investment into the sustainable energy sector.
There are currently three REED initiatives:
- In Africa, AREED operates in Senegal, Mali, Ghana, Zambia and Tanzania
- In Brazil, B-REED operates in the northeast provinces
- In China, C-REED is helping to preserve biodiverstiy in the province of Yunnan.