Health facilities need reliable, uninterrupted power supply to deliver quality and critical medical services. Yet globally, 1 billion people rely on health facilities that have unreliable or no electricity.

In South Asia and Sub-Saharan Africa (SSA), 12% and 15% of health facilities respectively have no access to electricity. In SSA alone, this is the equivalent of 25,000 medical facilities without electricity access. Health facilities without electricity are associated with 39% lower patient foot traffic than those with reliable electricity. 

Decentralized renewable energy (DRE) — particularly solar photovoltaics (PV) and battery storage — is a practical solution for reliable power supply in energy-constrained areas. There are already global donor commitments to solarize over 98,000 health facilities. Case studies of health care facility electrification show that DRE is viable as a primary power source or as a backup to grid electricity.

Yet scaling electrification is capital-intensive: globally, it requires an investment of between $3.6 billion and $4.9 billion. This includes the technical expertise and financing required for maintaining energy systems as well as replacing key components such as batteries over the project’s lifetime. It means there is still a huge funding gap to close between what is currently available and what is needed.

Bridging this gap requires innovative financing models that can mobilize capital at scale. We highlight several existing finance models implemented in India and Kenya that show how financiers, governments and implementing agencies can work together to provide the essential capital needed to scale up electrification in health facilities through DRE. In doing so, it can improve healthcare access and quality for millions of people. 

Three Financing Models for the Electrification of Health Facilities  

There are three major financing models that have been used in delivering electrification to health facilities:  

  1. Asset ownership or capital expenditure (capex) model: The health facility procures and owns the DRE system from the start. This is the most prevalent model for health care facility electrification. Financing may be from a single source or multiple sources (blended).
  2. Lease-to-own model: The health facility makes regular payments to the developer to use the DRE system and gains full ownership once the lease period ends.
  3. Energy service company (ESCO) or energy-as-a-service (EaaS) model: More common in larger, often urban hospitals, this model allows the facility to pay only for the energy it consumes from the DRE system. The developer installs, operates and owns the system for its entire lifespan. 

Each model requires a different set of conditions to work. Here we outline the asset ownership and lease-to-own models from India and Kenya, respectively. While asset ownership is the fastest route to DRE implementation, the health care sector cannot rely on philanthropic funding or public budgets alone to meet the required investment needs. As a result, private sector engagement needs to be brought in through innovative financing models where ownership and financial risks shift from a single entity towards shared risks and responsibilities.  

Asset Ownership Models: Lessons from India 

The asset ownership model, where the facility itself owns and manages its resources, has become the most common way to fund health facilities in rural and remote India. This includes public health facilities providing free health care and not-for-profit charitable hospitals providing low-cost care to patients. 

In not-for-profit health facilities, operations and electrification infrastructure are implemented through a mix of philanthropic funding and corporate social responsibility (CSR) grants. India was the first country to mandate CSR, allowing private and public sector companies to invest a portion of their profits toward achieving India’s Sustainable Development Goals (SDGs). Health care became the second-most favored recipient of CSR spending, after education.

Through this framework, WRI India’s decarbonizing health care initiative with private sector CSR and a charitable hospital network provided solar power to 30 health facilities across four states from 2021 to 2025. The initiative used CSR funds to install hybrid solar energy systems in rural and peri-urban health facilities with reliable grid electricity. Similar CSR initiatives were also piloted at the AMRIT clinics in Rajasthan and at BMCH Hospital in Assam.  

However, CSR grants are mostly used to finance upfront investment of electrification infrastructure with nominal amounts set aside for operations and maintenance (O&M) of DRE systems for up to five years. Beyond the five-year period, the health facilities become accountable for financing the long-term energy system operations and management costs for maintenance and the replacement of system components.

Some states in India have leveraged public budgets to solarize public health facilities, covering both upfront costs and long-term maintenance expenses. In the state of Chhattisgarh, the Chhattisgarh Renewable Energy Development Agency (CREDA) has led efforts to solarize over 1,400 public health facilities as of March 2023, with most systems installed over 5 years ago. CREDA leveraged public financing from multiple sources, including the National Health Mission, the District Mineral Development Fund and CSR funds. In this way, CREDA anchored the initiative by leveraging a combination of public budgets and CSR to install energy systems at scale and manage and maintain them in the long run through contracted service technicians.  

To build on this, IKEA Foundation and Selco Foundation, in partnership with the Ministry of Health and Family Welfare and various state health missions, plan to install 100 megawatts of solar energy systems and energy-efficient equipment in 25,000 health facilities in 12 states. These efforts combine multiple philanthropic and CSR financing sources with public co-financing and resource deployment from state health departments to cover upfront costs, ensure local asset ownership at the state and facility-level, and support long-term energy system maintenance by budgeting for O&M within the local and state health care budgets. 

Similar asset ownership models have also been piloted in Kenya. In Makueni County, the county government has used its budget to solarize its largest hospital, Makueni County Referral Hospital. With support from WRI and Strathmore Energy Research Centre, a feasibility study informed the sizing and installation of a 205 kilowatt-peak solar PV system, with an annual generation potential of 288 megawatt-hours. This is enough to meet 30% to 33% of the hospital’s electricity needs and saves the county about 7 million Kenyan shillings ($54,000) each year, with a payback period of four years on a capital cost of 28 million Kenyan shillings ($217,000). The success of this asset ownership model, especially for the public hospital, was driven by political support and proactive county leadership. To ensure long-term operational efficiency, the county continues to train its technical working group in the O&M of the installed solar PV system. 

Lease-to-Own Model: Lessons from Kenya

WRI, in partnership with Differ Community Power and PS Kenya, piloted the deployment of a lease-to-own model for the provision of electricity services to private health clinics. Under this model, a developer installs and maintains the solar PV system while the health care facility makes regular repayments over a fixed period, after which ownership transfers to the facility. This differs from the energy-as-a-service model, where repayments are based on actual energy generation.  

The lease-to-own model can support private investment in health facilities while reducing reliance on polluting diesel generators. One such beneficiary, Top Care Nursing Home (out of 11 surveyed health care facilities), reported positive financial outcomes following the installation of a solar PV system. 

Top Care reduced monthly electricity costs from $400 to $100 and eliminated the diesel generator’s O&M costs, previously an additional $100 per month. The switch to solar PV enabled the facility to operate 24/7 with uninterrupted power supply, ensuring continuous patient care, including running energy-intensive services like the operating theater without additional energy costs. Notably, the solar system was able to keep the facility fully operational during Kenya’s longest power blackout on Aug. 25, 2023, which lasted more than 24 hours.

 Energy-as-a-Service or Energy Service Company Model

In a service-based model, the health facility or government chooses a project developer to provide electricity service over a long period. In return, the health facility pays the project developer for the electricity consumed from the solar PV system. In such a model, the responsibility of raising finance and human resources for the installation, operation and maintenance of the solar PV system rests with the developer throughout the project life cycle.  

The project developer raises funding from debt, equity and, in some cases, government subsidies. Because repayments are recovered through electricity charges, continuous system operation is essential. The ability and willingness of health facilities to pay for electricity services is a key factor in determining where this model is viable.

Key Observations Models for Healthcare Electrification 

Based on our experience in India and Kenya, shifting from prevalent financing models to newer, innovative alternatives requires multiple actors to share the financial risks and responsibilities of sustaining these projects.

Several key lessons emerge for financing approaches that balance upfront investment with long-term sustainability: 

  1. Grants and donor support remain the most common form of financing under asset ownership models, but more attention is needed on long-term sustainability. This model offers the fastest route to project implementation through upfront investments in DRE assets. However, long-term sustainability is a major challenge, particularly the costs of operations, maintenance and component replacement. Unless health facilities can retain and reinvest energy cost savings from reduced grid and diesel generators usage for O&M purposes, the DRE systems risk becoming nonfunctional.
  2. Asset ownership models should reduce dependence on a single source of financing. This can be done by leveraging blended finance, low-interest debt, combining grants, CSR and integrating budgets from government departments such as health care and energy, as well as state- or county-specific development budgets.
  3. Service-based models play an important role in bridging the financing gap for health care electrification, but they must be tailored to local needs. While the lease-to-own model was offered to 11 health facilities in Kenya, only Top Care successfully implemented it. This experience highlights the need to adapt such models to local contexts and accommodate the diverse financial profiles of health facilities, allowing service-based models to scale.

Some early considerations to drive uptake of service-based models include:  

  • Longer repayment periods. Extending the repayment period could reduce monthly repayments by spreading costs over a longer duration. A longer loan tenure also provides more time for facilities to raise additional funds and frees up resources for other priorities, helping ensure smooth operations. Although longer repayment periods may be unattractive to project developers, development partners and impact investors can help by providing concessional financing that cushions developers from lower rates of return.
  • Matching costs and loan repayment. Aligning monthly loan repayment amounts with the costs facilities would have incurred purchasing electricity from the utility can allow facilities to redirect their usual electricity payments toward the loan, making repayments more manageable. Linking repayment to energy usage, as in an ESCO model, provides flexibility and helps ensure long-term sustainability of facility operations without creating excessive debts.
  • Lower downpayments. Reducing downpayments, particularly for smaller health facilities with limited capacity to raise initial upfront capital, could be beneficial. This can include spreading the downpayment into monthly repayments over the contact term or providing a grace period of at least one year after installation to give facilities greater repayment flexibility.
  • Align financing with repayment capacity. Structuring finance to align with the paying capacity of smaller facilities is important because the overall investment cost for renewable energy infrastructure is high relative to their revenue. For these facilities, regular cash flows are often insufficient to cover a lump-sum downpayment and to meet monthly repayments. Incurring long-term debt to finance energy infrastructure is therefore not viable. Leveraging government incentives or philanthropic grants to subsidize the upfront costs or repayments can help make renewable energy financing more feasible for smaller, rural health facilities. 

Mobilizing Investments for Sustainable Healthcare Electrification 

As we move beyond asset ownership models, it is imperative that financing options meet the long-term sustainability needs of health facilities. While both rural and urban facilities were affected by the economic downturns resulting from the COVID-19 pandemic, rural and remote health facilities remain the most in need of reliable electricity and innovative financing solutions that can generate new revenue while integrating clean energy solutions.

As the lessons above highlight, service-based models require flexibility and must be tailored to local contexts. Payment terms and loan tenure should be designed according to size, financial health and the risk profile of each health facility.  

 

About the authors: Anderson Chembe is Finance Associate - Energy Access at WRI Africa. Lanvin Concessao and Harsha Meenawat are Program Manager – Energy and Program Lead – Energy for Equitable Development at WRI India. Birouke Teferra is Economist/M&E Specialist - Energy Program at WRI Africa.