Rwanda gets $303m for landmark energy overhaul

From the newsletter

The African Development Bank (AfDB) has approved $202 million for Rwanda’s energy sector. The Asian Infrastructure Investment Bank (AIIB) will contribute an additional $101 million. The joint $303 million under the Result-Based Financing (RBF II) program aims to modernise grids, expand clean energy access and support productive use of energy.

  • Results-Based Financing, where disbursements are tied to verified outcomes, is a shift toward accountability in energy projects, ensuring that funds directly translate into measurable impact.

  • Similar models are being tested in Nigeria (Nigeria Electrification Project) and Ethiopia (Ethiopia Electrification Program), where disbursements are contingent on metered connections or renewable capacity additions.

More details

  • The RBF II program will connect 200,000 households and 850 productive users to the main grid, create 50,000 off-grid connections, supply clean cooking devices to 100,000 households and 310 public institutions, and install streetlights along 200 km of roads in secondary cities.

  • The initiative aligns with Rwanda’s Energy Sector Strategic Plan (ESSP II 2024-2029), focusing on both infrastructure upgrades and building technical and institutional capacity across the energy sector.

  • Rwanda’s success in results-based financing is because it actively aligns financing with clear national targets and leverages close government coordination with donors and private sector partners. The model is mainstreamed in the country’s Energy Sector Strategic Plan and has already passed the test with the earlier RBF program, establishing institutional trust and technical capability, both in public and private sectors.

  • The country has a mountainous terrain, which increases grid expansion costs by 50% compared to flatter regions, while low rural population density further complicates cost recovery. The RBF II program will address this by prioritising off-grid solar solutions for 50,000 households and deploying prepaid meters to reduce losses, a strategy that could benefit other highland nations like Lesotho and Ethiopia.

  • Energy reliability in the country remains another hurdle. According to the World Bank and ESMAP, power outages cost Rwanda $68 million annually, disproportionately affecting manufacturers and farmers. The program’s focus on grid modernisation, including automated substations and battery storage, aims to reduce outages by mirroring successful upgrades in South Africa and Tanzania.

  • Critically, the project emphasises productive-use energy (PUE) by connecting 850 agro-processing and small business customers. Similar initiatives have boosted rural incomes, demonstrating how energy access must extend beyond household use to drive economic growth. Rwanda’s inclusion of clean cooking for 100,000 households further highlights the need for holistic solutions, as indoor air pollution from biomass claims lives annually.

Our take

  • Grid overhaul is non-negotiable in Africa’s energy future. But real progress needs a package, ie grids, off-grid, and clean cooking, just like Rwanda’s doing. This holistic formula is Africa’s best bet for sustainable, inclusive growth.

  • Donor trust is still very shaky in Africa’s renewables. Only clear, trackable results can win back confidence. Governments must adopt robust monitoring and independent verification to show genuine progress and attract bigger investments.

  • In a continent where clean energy projects often stall due to misappropriation of funds and weak accountability, RBF is a fresh, pragmatic solution. Countries which have struggled to turn grants into actual electrification progress would benefit greatly from piloting RBF frameworks.