The International Institute for Sustainable Development (IISD) provides the October update on global developments in sustainable energy finance
Sustainable Energy Finance Update: Support Encourages Economic Growth, Private Investment
Many sustainable energy finance initiatives announced this month are supplying large amounts of financing to one or more entities for on-lending to local companies or households interested in energy efficiency or renewables projects.
Several publications and many financing announcements were launched in the context of encouraging sustainable development, low-carbon growth or enhancing private sector investment.
1 November 2016: The broad support for the sustainable energy sector in many countries around the globe was clear in October’s financing announcements from multilateral development banks (MDBs) and the EU. On-lending was a repeated theme, with many initiatives supplying large amounts of financing for one or more entities to handle small loans to local companies or households interested in sustainable energy projects.
Sustained Sector Support
A number of large-scale initiatives intended to inject capital into various countries’ sustainable energy sectors, with a range of projects likely to receive support, were announced in October.
The EU, for instance, has announced a programme amounting to €44.2 million in the Caribbean for sustainable development. The funding includes €9.2 million for the technical assistance programme for sustainable energy in the Caribbean (TAPSEC), which supports the development of regulatory frameworks and financing mechanisms that favor renewables and energy efficiency, and the improvement of energy information and statistics.
With a similar vision toward sustainable economic growth, the Asian Development Bank (ADB) has announced a new Country Partnership Strategy with Indonesia for 2016-2019, which includes support for energy infrastructure to increase efficiency and reliability of the grid and for some clean energy sources, such as geothermal.
The Turkish sustainable energy sector is also getting a boost, with the European Bank for Reconstruction and Development (EBRD) announcing US$55 million in new funding, including a €1.9 million grant from the EU, for Isbank to on-lend to companies for renewable energy and resource efficiency projects. Potential projects under the programme include: solar, hydropower, wind, geothermal, waste-to-energy, energy efficiency, water saving and waste minimization.
The lending to Isbank is an example of the work of EBRD’s Mid-size Sustainable Energy Financing Facility (MidSEFF). Thanks to a Green Climate Fund (GCF) project approved in October, EBRD’s SEFFs are receiving a US$1.4 billion investment for private sector lending to projects related to energy efficiency, renewable energy and climate resilience in Armenia, Egypt, Georgia, Jordan, Moldova, Mongolia, Morocco, Serbia, Tajikistan and Tunisia.
In other news related to the Morocco Sustainable Energy Financing Facility (MorSEFF), EBRD, the European Investment Bank (EIB) and the Agence Française de Développement (AFD) are providing a €35 million line of credit under MorSEFF to BMCE Bank of Africa. BMCE will on-lend to Moroccan businesses for sustainable energy investments and, in addition, raise awareness about energy-efficient and renewables technology. The EU Neighbourhood Investment Facility (NIF) and EBRD Southern and Eastern Mediterranean (SEMED) Multi-Donor Fund will provide technical assistance, investment incentives and business development tools in support of the programme.
Furthermore, with the adoption of the New Urban Agenda at the Habitat III conference, EIB confirmed its intention to make US$105 billion available for sustainable urban development, including clean energy and sustainable transport, over the next five years.
To help break down barriers to renewable energy deployment, financing for steps in the early stage of project development was announced. The Nordic Environment Finance Corporation (NEFCO) approved financing for feasibility studies of nine new projects, including for a solar energy plant, biogas plants, and components for the wind energy sector. If all nine projects move ahead, total investments in them will exceed €7.8 million.
In Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines, the Sustainable Energy Facility for the Eastern Caribbean, approved for US$190.5 million in financing from the Green Climate Fund (GCF), will address, in relation to geothermal development barriers, high investment cost, uncertainty during early development stages, inadequate regulatory and policy frameworks, and a lack of technical skills. The funding will aid in strengthening institutions and building capacity through a combination of concessional loans and reimbursable grants.
Lastly, operational and technical support totaling US$500,000 for Chile’s Sustainable Energy Programme was approved by the Inter-American Development Bank (IDB) in October.
Milestones in Wind
ADB has announced US$75 million in financing for Pakistan’s largest wind farm. At 150 megawatts (MW) of installed capacity to be completed in 2018, the project is expected to reduce the use of coal and petroleum for power generation, according to ADB.
Georgia has set its sights on its first wind farm, with a US$22 million syndicated loan from EBRD. Totaling 20.7 MW of capacity upon completion, the wind farm is expected to provide enough low-carbon generation to meet Georgia’s seasonal demand in the winter. In addition, one-third of the power generated from the plant, which will also be the Caucasus region’s first commercial wind farm, is intended to be exported to Turkey.
EBRD is also financing the first wind project under round one of Jordan’s renewable energy feed-in-tariff. The US$70 million loan will support an 86 MW project that will increase the country’s installed wind capacity by approximately 40%.
A €1.1 billion offshore wind farm in Belgium will source 27% of its project costs from EIB. The €300 million loan from EIB includes €250 million guaranteed under the European Fund for Strategic Investments (EFSI), a part of the European Commission’s Investment Plan for Europe. With 42 wind turbines and a nameplate capacity of 294 MW, the project will be one of the largest in Belgian territorial waters.
ADB is making US$500 million available to Punjab National Bank to make loans to developers and end users in India to install solar rooftop systems. US$170 million of the funding is being sourced from the Climate Investment Funds (CIF) Clean Technology Fund (CTF). The project supports the Government of India’s carbon mitigation goals under the Paris Agreement, as well as its target to install 40 gigawatts (GW) of capacity through solar rooftop systems by 2022.
IDB approved a US$200,000 grant to support the private investments incentive mechanism for rural solar energy in Honduras, which strives to show how risk mitigation instruments can attract private investment and that lower-cost, more-efficient and innovative solar rural electrification designs are optimal solutions for “delivering access to energy solutions in the poorest remote villages of Honduras.”
Enabling Energy Efficiency
A new guarantee backed by the Government of Lithuania is expected to generate bank lending of up to €500 million for the modernization of up to 32,500 apartments in nearly 1,500 multi-apartment buildings by 2023. The Lithuanian Leveraged Fund, comprised of €100 million of EU Structural and Investment Funds and national resources, anticipates significant energy bill savings for Lithuanian homes benefiting from the energy efficiency investments guaranteed under the programme.
Similar residential refurbishments are being planned for the building stock in Poland through EBRD’s new €200 million framework, the Polish Residential Energy Efficiency Financing Facility (PolREFF). Borrowers will be eligible to use PolREFF funds for projects such as: insulation; energy-efficient windows; heating system upgrades; lighting modernization; heat pumps; and installation of solar thermal and photovoltaic (PV) systems.
Energy efficiency improvements and other upgrades are also being made possible at the retail and entertainment complex, Arena Centre, in Zagreb, Croatia, through a €34 million EBRD loan.
With a US$200 million ADB loan, energy savings of approximately 3,800 GWh are predicted for India due to planned lighting and irrigation efficiency upgrades. Energy Efficiency Services Ltd, recipient of the loan, intends to use it and US$200 million of its own funds to finance the installation of 1.5 million light-emitting diode (LED) municipal streetlights, 42 million domestic LED lights and energy-efficient fans, and 225,000 energy-efficient agriculture water pumps.
Extending Electricity to Everyone
The EU has teamed up with EBRD and EIB to bolster electricity supply in Kyrgyzstan and the Dominican Republic. In Kyrgyzstan, the EU is providing a €1 million grant and EBRD is furnishing a €4 million loan to undertake transmission upgrades that will benefit 400,000 people, through both reduced electricity losses and installation of 18,500 advanced smart meters.
In the Dominican Republic, the EU has announced a €9.3 million grant, complemented by a US$100 million EIB loan to improve the power supply to more than 680,000 households over the course of three years. The project agreement was signed at the EU-Caribbean Sustainable Energy Conference that took place in Bridgetown, Barbados, on 10-11 October 2016.
Finally, the GCF approved the Universal Green Energy Access Programme for Sub-Saharan Africa, which targets off-grid and mini-grid systems in particular to benefit rural households. The total project investment is over US$300 million.
- Improving Energy Efficiency in South Asia: Within the power system itself, many energy efficiency opportunities exist, such as in thermal power plants, transmission lines and distribution networks. This publication explores areas for improvement in South Asian systems in particular, noting coal-fired generation could be more efficient, lines losses could be reduced, and demand side management could be expanded.
- Green Cities Programme (GrCP): Under this programme, EBRD plans to use its business model, “combining bankable investments with technical cooperation and policy dialogue,” to help cities prioritize among sectors and investments to address environmental challenges. Two pilots under the programme have featured energy efficiency improvements.
- Making Power Affordable for Africa and Viable for Its Utilities: This report studies the power sectors of 39 Sub-Saharan African countries and identifies operational efficiency improvements and, in some cases, rate increases to ensuring the financial viability of utilities, while also providing affordable power to customers.
- Attracting Private Investment through Power Sector Reforms: This brief highlights that a steady and affordable power supply is crucial for economic growth and industrialization. It explores models for privatization in the utility sector, with a view to achieving a greater enabling environment for private investment.
- The Renewable Energy Sector and Youth Employment in Algeria, Libya, Morocco and Tunisia: This report recommends that that Maghreb countries “invest in renewable energy infrastructure, harmonize regulatory frameworks, develop consumer protection and progress towards efficient and integrated energy markets.”
- Third Annual West Africa Forum for Clean Energy Financing (WAFCEF-3) Business Competition: Businesses and entrepreneurs operating in the Economic Community of West African States (ECOWAS) can submit clean energy proposals that require an initial capital investment of over US$1 million to this competition, for a chance to win individual professional mentoring and a West African Clean Energy Financing award.
- Unlocking Value: Alternative Fuels for Egypt’s Cement Industry: This study explains how alternative fuels can help move the cement industry away from state-subsidized natural gas and heavy fuel oil, in an effort to make the cement production process less carbon-intensive.
- AfDB Green Mini-Grid Help Desk: The Sustainable Energy for All (SE4All) Africa Hub, managed by AfDB, has launched this Help Desk to provide online technical assistance related to selling, installing, operating and maintaining a green mini-grid. The resource is intended to support project developers, whose work is integral to delivering energy access.