Under the deal, the Luxembourg-based European Investment Bank, which relies on capital paid in by the EU’s 28 governments, will stump up 10 million euros ($10.87 million USD) of the fund’s capital, which aims to provide access to electricity to 1 million low-income people.

Energy Access Ventures Fund will make equity investments in small and medium-sized businesses involved in providing electricity and related services in particular through power generation systems such as solar home devices and micro- generation infrastructures — generally off-grid, energy distribution. Low-income populations and small businesses starting in Kenya, Uganda and Rwanda, and eventually west Africa, will be the main targets for investment.

Other investors include the French development agency, AFD, and the U.K.-based Commonwealth Development Corporation.

The project is the latest example of the EU “blending” development grants with finance from private sector investors to pay for large-scale investments. This approach is being employed in East Africa to finance renewable energy and energy efficiency projects, for geothermal energy installations, and in particular for the 310-megawatt Lake Turkana Wind Project.

But blending has its critics, particularly among non-governmental organizations who have warned the EU about the dangers of being “charmed” by the private sector and argue that blending projects can lead to developing countries being lumbered with expensive and risky public-private projects.

The World Energy Outlook estimates that nearly $400 billion  (350 billion euros) of investment will be needed to achieve universal access to electricity across Africa by 2030. The combined capacity of the 48 sub-Saharan African countries is 68 gigawatts — roughly equivalent to that of Spain.

Read more at EUObserver.