Learning to lend for o!-grid solar power: policy lessons from World Bank loans to India, Indonesia, and Sri Lanka

The World Bank has sought to advance the di!usion of solar photovoltaic (PV) technology for o!-grid applications in the developing world. As these systems are fundamentally di!erent to centralised power stations and conventional rural electri"cation, the World Bank has been learning how best to lend for such technology. This study seeks to highlight the lessons learnt from the World Bank's "rst loans for o!-grid PV to India, Indonesia, and Sri Lanka. It uses lifetime cost analysis to justify continued intervention in this sector, and it draws on theories of innovation di!usion to guide analysis and ultimately policy recommendations. Because of the special role of entrepreneurial start up companies in the rural PV sector, the paper also uses a company cash #ow model to demonstrate the e$cacy of various supply-side policies. Finally, the study concludes with a checklist of policy lessons and a consideration of the role of the International Finance Corporation in this sector.