Page 25 - U4SSC Compendium of practices on innovative financing for smart sustainable cities projects

Energy Agency. Revolusolar currently employs five solar installers to install and maintain the
2
systems, one administrative manager, two ambassadors focused on communications, one local
accountant, four teachers and one educational coordinator.
• Increased awareness and empowerment of local populations: Revolusolar contributes to
improving the awareness and empowerment of the population about sustainability and energy.
The favelas can become poles for generating clean energy for the city, and the very term
“favela” can take on new meanings and become a reference in innovation, sustainability and
entrepreneurship.

Financial information

The investment of USD 180 000 covers all the capital expenditures (CapEx) and expenses for the
initial six months of operation. It also covers payment to the local residents installing the solar
panels, including all their training. Local residents were trained as electricians and solar installers,
and then five were hired to install the cooperative’s solar system.

The financing model includes institutional sponsors and a rental component. Solar energy
beneficiaries pay a monthly fee, which is approximately 70 per cent lower compared with their regular
electricity bill. The collected fees, in addition to covering fixed project costs and remunerating local
workers who carry out maintenance, are accumulated to finance new facilities in the community.
As photovoltaic panels are guaranteed for at least 25 years, operation costs remain low, allowing
payments to be used to repay the investment.

At the first stage, the project is funded by non-refundable sources such as grants and scholarships,
with discounts of 30 per cent for low-income beneficiaries. After initial validation of the monthly
payments made by the cooperative members, the plan is to implement a blended finance structure
consisting of an estimated 30 per cent grants, 30 per cent equity and 40 per cent CapEx funded
with debt. The debt has an eight per cent interest rate and a payment term of 10 years, with constant
amortization and a grace period of two years. There are an estimated eight years of payback, in
which the internal rate of return (IRR) will be 7.63 per cent, slightly over the 6.98 per cent weighted
average cost of capital (WACC) rate. Positive impact indicators such as social return on investment
(SROI), will be measured and reported to have the other 30 per cent of the project funded by
grant-makers interested in sustainable economic development.

Observations

• Despite schedule delays, mainly due to the pandemic and non-compliance with regulatory
deadlines by the local utility, the installation of the system and the professional training of
community residents hired for installation were successful.

2 International Renewable Energy Agency (IREA), Renewable Energy and Jobs – Annual Review 2018. Available at: https://
www .irena .org/ publications/ 2018/ May/ Renewable -Energy -and -Jobs -Annual -Review -2018.

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