Powering the periphery: how renewables are reshaping rural development in the Arab world

Affordable models

In most countries, particularly those with middle and low incomes, conventional models focused on large-scale, centralised investments have proven expensive and insufficient for reaching dispersed rural communities. Thus, a new financing mechanism has emerged to mobilise capital through innovative, blended financing frameworks.

These models combine public funding with private sector investment, international development financing, and local community contributions to develop more bankable projects adapted to the realities of rural contexts. As such, they promote shared costs and risks and accelerate deployment. Blended finance is central to making rural electrification affordable and scalable and has flourished across the MENA region.

Morocco's electrification journey provides a leading example of how rural communities can gain access to rapid and inclusive energy access through blended finance. Between 1990 and the mid-2000s, the country transformed its rural electrification landscape, increasing access from just 18% to nearly universal coverage. A key part of this effort targeted remote communities where approximately 5% of the population had access to electricity either through renewable energy mini-grids or off-grid solar home systems service models owned by the national electricity utility (ONE) and operated by the private sector through long-term concession agreements.

In addition to strong political backing and institutional coordination, the success of Morocco's rural electrification programme largely hinged on its blended financing, which combined public, private, and international finance sources. Around 75% of solar electrification costs were covered by ONE, using revenues from cross-subsidy tax, concessional loans and equity, and international donor funding. The remaining 25% was paid by end-users, often with support from local municipalities funded through VAT allocations and national funds.

Community ownership

Community ownership has proven critical for sustaining rural energy access, going beyond participation to build local capacity and ownership. Lebanon's solar community systems offer a compelling example. As the national grid deteriorated under economic and political strain, villages sought alternatives to unreliable and costly diesel generators. In Kabrikha, Lebanon's first community solar initiative emerged as a pioneering model. This system complements either the national grid or local generators during outages and supplies consistent electricity to households. Several similar systems have since been replicated across the country.

These initiatives can also operate as cooperatives: community members pool funds and share the costs and benefits of the system. This model fosters ownership and local know-how, enabling residents to learn how to maintain batteries, clean panels, and troubleshoot issues. These systems thrive because they are embedded in local social structures and decision-making processes. Members also pay monthly fees to cover operations and build reserves for equipment replacement, thus enhancing sustainability and long-term resilience.

Yet, blended finance should also be accounted for within community systems' funding, as rural households and businesses may not possess sufficient capital and may not be able to take on financial risk. Moreover, financing mechanisms that rely solely on rural consumers' contributions can falter if income levels are unstable. These risks highlight the importance of strong institutional support, oversight, and contingency planning.

A catalyst for development

One of the most overlooked yet powerful roles of rural renewable energy is its potential to catalyse socio-economic development. Energy poverty is closely linked to limited income-generating activities, poor service delivery, and regional disparities. Without reliable energy, rural communities struggle to power schools, clinics, irrigation, and businesses, reinforcing cycles of poverty.

Renewable energy offers a transformative pathway. Small and medium-scale photovoltaic systems can be rapidly deployed and adapted to local needs. They enable cold storage for crops, power health clinics and workshops, support connectivity, and extend productive hours. Yet to deliver on this promise, energy access must be integrated with strategies for livelihoods, education, and empowerment.

One initiative exemplifying this is ESCWA's Regional Initiative for Promoting Small-Scale Renewable Energy Applications in Rural Areas of the Arab Region. The initiative has supported agriculture, enterprises, and women-led cooperatives with tailored energy systems and business support, through combining energy access with economic development and women's empowerment, proving that energy can drive inclusive development.

This model highlights a critical pillar: energy solutions must go beyond meeting basic needs to unlock broader economic opportunity.

From pilot to policy

The Arab region's rural energy gap can be bridged by scaling proven models rooted in blended finance, community ownership, and development-oriented design. The examples from Morocco, Lebanon, and others demonstrate that sustainable rural electrification is achievable when governments move beyond traditional grid-extension approaches and embrace innovative models tailored to local contexts.

To sustain and scale these efforts, policy frameworks must evolve. Governments should institutionalise blended financing mechanisms that combine public, private, and donor capital that reduce the financial burden on rural households and small businesses.

Community ownership must be supported. This requires legal recognition of community energy models, clear procedures for cooperative formation, and access to technical assistance. Regulatory clarity on net-metering, licensing, and feed-in tariffs is also essential to unlock participation and scale.

Finally, rural energy programmes should be fully integrated into national development strategies. Energy access must be positioned as a catalyst for rural productivity, job creation, and inclusive growth.

Policymakers must prioritise comprehensive regulatory frameworks, sustained funding mechanisms, and meaningful community engagement to transform these initiatives into systematic change and lasting impact.