Latest update on sustainable energy finance

The SDG Knowledge Hub of the International Institute for Sustainable Development (IISD) provides the November update on global developments in sustainable energy finance.

 

Sustainable Energy Finance Update: Africa in the Spotlight

The month of November was filled with sustainable energy financing news out of Africa. This Update recaps the African finance initiatives announced concurrently with COP 22, along with various other funding news from around the world and a number of go-to renewable energy finance resources.

African Highlights

Africa has a vision for its renewable energy growth. Launched last year at COP 21 and with a focus on providing clean, safe and affordable energy access on the continent, the Africa Renewable Energy Initiative (AREI) aims to realize 10 gigawatts (GW) of new renewable capacity by 2020 and mobilize the potential to generate 300 GW by 2030. This year, on the eve of COP 22, the Government of France put forward a €6 million grant for the implementation of AREI. In addition, the continent-wide pool of financing known as the Sustainable Energy Fund for Africa (SEFA) received a US$11 million boost from the US Agency for International Development (USAID) Power Africa initiative. The funding, which is the second tranche of a US$20 million commitment, was presented in a signing ceremony at COP 22.

In addition to funding announcements, COP 22 witnessed a number of events shedding light on the state of sustainable energy finance. The African Development Bank (AfDB), which hosts both the AREI Delivery Unit and SEFA, organized an event with the World Bank’s Climate Investment Funds (CIF) on how public and private financing have shaped the ongoing renewable energy transformation in Africa, highlighting how public-private partnerships can reduce risk and mobilize the multi-million dollar investments required for renewable energy projects. A good example of AfDB’s interaction with the private sector came as its Board of Directors approved a US$10 million equity investment in the Technology and Innovation in Developing Economies (TIDE) Fund I. TIDE will invest in new technologies and new companies, including those active in renewables and with innovative business models to produce, finance, and distribute solar energy solutions, in line with the AfDB High 5 priority of ‘Light up and power Africa.’

In addition to the sweeping pan-African announcements, many regional and national initiatives in Africa were also approved for funding in November. The country host of COP 22, Morocco, is home to the NOORo Concentrated Solar Power (CSP) Complex, which just garnered a US$20 million equity investment from the World Bank’s International Finance Corporation (IFC). In addition, Banque Centrale Populaire (BCP) will be able to on-lend to Moroccan commercial and industrial enterprises for energy efficiency improvements, thanks to a €35 million Morocco Sustainable Energy Financing Facility (MorSEFF) loan from the European Bank for Reconstruction and Development (EBRD), the Agence Française de Développement (AFD) and the European Investment Bank (EIB). Furthermore, EIB and the Dutch development bank (FMO) announced at COP 22 a facility for Banque Marocaine du Commerce Extérieur (BMCE) to support solid waste management practices, which, among other things, are expected to increase energy generation from landfill gas.

During EU Energy Day at COP 22, and for the broader North African region, EBRD and the Union for the Mediterranean (UfM) launched a €227.5 million private renewable energy framework for North Africa and the Middle East, designed to develop private renewable energy markets. The first project under the Southern and Eastern Mediterranean (SEMED) Private Renewable Energy Framework (SPREF) will be the Khalladi windfarm near Tangiers, Morocco. EIB also confirmed its contribution of an additional €25 million to the Green for Growth Fund, to support energy efficiency and renewables across North Africa, in Morocco, Egypt and Tunisia, as well as Lebanon, Jordan and Palestine. A third COP 22 announcement for the Middle East and North Africa (MENA) was related to EIB’s Catalyst MENA Clean Energy Fund, which highlighted its first projects as five solar plants for the telecommunications company Orange in Jordan. The Fund aims to expand to Tunisia, Morocco and Egypt in the future.

Tunisia is the recipient of two €46.5 million loans announced in November by EIB and EBRD for the State-owned utility company to improve efficiency and reliability of its transmission. And, the country’s neighbor to its west, Algeria, was approved for a €900-million AfDB loan for its Industrial and Energy Competitiveness Support Programme (PACIE), which will include improving efficiency of the energy sector and promoting renewable energy.

On the other end of the continent, the UN Industrial Development Organization (UNIDO), South African Department of Environmental Affairs, Renewable Energy and Energy Efficiency Partnership (REEEP) and the European Commission Directorate-General for Climate Action announced the EU-funded pilot initiative for market-based clean energy technologies and services deployment in South African municipal water works. By, for instance, optimizing pumping and water treatment systems, the initiative intends to support pilot projects to maximize energy efficiency. Other examples of projects under the initiative include deploying renewable energy systems to replace coal-fired electricity production.

In other news throughout Africa, Rwanda launched its Sustainable Energy for All (SE4All) Action Agenda, the development of which was supported through AfDB technical assistance, and AfDB approved US$19 million in financing for energy sector reform in Madagascar, with the aim of, inter alia, improving the efficiency of electricity production.

Big Plans in Emerging Markets

November also featured important announcements outside the African continent. India has a new US$48 million loan from the Asian Development Bank (ADB) to improve access to an efficient and reliable power supply in Assam state and a US$470 million World Bank loan agreement to improve transmission and distribution in the northeastern states of Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura to extend “last-mile connections.” The country also has an additional US$22.93 million grant coming from the Global Environment Facility (GEF) for its Grid-connected Rooftop Solar Photovoltaic (GRPV) Program. In addition, the Indian Government and three State-run firms have announced a Clean Energy Equity Fund (CEEF) of up to US$2 billion for use by renewable energy companies starting next year, with a view to achieving national clean energy goals.

To help Turkey meet its clean energy goals, the World Bank and CIF are supporting geothermal development in the country. A US$250 million loan will help scale private investment in the sector by addressing the financing gap that license holders face in the resource development stages and through a Risk Sharing Mechanism (RSM) for Resource Validation that enables early stage exploratory and confirmation drilling by sharing the risk of failing to validate a geothermal resource.

In China, ADB approved a US$150 million loan for the creation of a financing platform for clean energy investments in Shaanxi Province. As a major fossil fuels producer, the Province will be able to use the financing channel to diversify its economy and improve energy efficiency.

Islands Eye Renewables

The Pacific small island developing States (SIDS) of the Solomon Islands and Fiji are among the many islands looking to both improve energy access and tap into their clean energy potential. A US$15.2 million ADB solar project approved last month for the Solomon Islands will expand energy access in rural communities, including through battery storage to power provincial towns at night. The project’s total funding includes US$6.76 million from the Government of the Solomon Islands. In addition, 2,500 homes will receive energy access through grid extension and mini-grids, thanks to a US$2.5 million World Bank grant. In Fiji, EIB has agreed to extend technical assistance to the national electricity authority to support the expansion of electricity supply to areas cut off due Cyclone Winston, with a focus on rebuilding transmission in a climate-resilient way.

Over in the Caribbean, the Renewable Energy/Energy Efficiency Unit (REEEU) at the Caribbean Development Bank (CDB) called for countries to have a clear roadmap for their energy sector transitions, in order to help attract financing for clean energy projects.

Support for Renewable Energy

Among the specific renewable energy projects that garnered financing this month are: the 60.3 megawatt (MW) Mafraq PV Independent Power Plant in Jordan with two US$27 million loans from EBRD and the Netherlands Development Finance Company; the 20.7 MW Karpatsky wind farm in Ukraine with financing of €8.6 million from EBRD, €4 million from the CIF Clean Technology Fund (CTF), €5.5 million from the Investment Fund for Developing Countries (IFU) and €5 million from the Nordic Environment Finance Corporation (NEFCO); and 48 MW Terna Energy wind farms and other renewables projects in Greece with €50 million in financing from EBRD and €10 million in financing from Piraeus Bank. Also in Greece, the European Commission approved the Government’s plans for a renewable energy and high-efficiency cogeneration support scheme consisting of incentives such as a feed-in tariff for small renewables and a price premium for larger projects.

Assistance to Advance Energy Efficiency

Energy efficiency also received wide support in November, with EBRD announcing the US$35 million expansion of the Kyrgyz Sustainable Energy Financing Facility (KyrSEFF), alongside €9.2 million in grants from the EU, for improving energy savings and resource efficiency Kyrgyzstan. EIB approved two lending programmes under the European Fund for Strategic Investments (EFSI) for near-zero-energy buildings in Finland: €170 million in financing to VVO Group and €150 million to SATO Corporation. IFC is offering technical assistance to the city of Belgrade, Serbia, on boosting the energy efficiency of public buildings, district heating, street lighting and other critical infrastructure. In Georgia, NEFCO has signed agreements with consultancies to: carry out a feasibility study on the investment potential for energy efficiency measures in public buildings and the promotion of renewable energy sources; raise awareness on the urgency and importance of investing in energy efficiency; and train local energy auditors and energy specialists.

Energy Access through Efficiency and Renewables

Energy efficiency and improving energy access go hand-in-hand. In Uzbekistan for instance, the World Bank is supporting, with US$150 million in financing, the modernization and upgrade of 22 high-priority transmission substations. The project will not only improve technical efficiency and reduce losses, but also simultaneously increase the reliability of power for households and firms. Similarly, an EBRD-arranged €116 million financing package to the CEZ utility in Bulgaria will allow the power company to upgrade distribution infrastructure which will reduce losses in the grid and help maintain stability of supply for end-users.

In Pakistan, a US$325 million ADB loan will augment electricity access to vulnerable communities in two large provinces through renewable energy power plants. The programme, which is accompanied by a US$750,000 technical assistance grant, will comprise the construction of 1,000 micro-hydropower plants in off-grid areas, installation of rooftop solar plants for 23,000 schools, over 2,500 primary healthcare facilities and a university, and promotion of public sector energy efficiency.

Go-To Resources

  • Funding for Renewable Energy Projects: The International Renewable Energy Agency (IRENA) and the Abu Dhabi Fund for Development (ADFD) have announced a funding round of approximately US$50 million in concessional loans for projects endorsed by IRENA.
  • Training for National Experts in Energy Planning: IRENA and the International Atomic Energy Agency (IAEA) have signed a capacity-building agreement that will include: information exchange on capacity building needs and energy planning capabilities in the two agencies’ respective member States; data and methodology sharing at capacity building events; participation in training events; cooperation in the development of national and regional case studies; and work toward combining capacity building opportunities.
  • Policy Guidance for Investment in Clean Energy Infrastructure: Expanding Access to Clean Energy for Green Growth and Development: The Organisation for Economic Co-operation and Development (OECD) produced this publication to help decision makers analyze and select the policies and domestic enabling conditions that can promote private investment in “green” – in particular renewable energy – infrastructure in developing countries.
  • Experience in Europe and the CIS Region with Clean Energy: UNDP, GEF, and UNECE: This brochure includes eight case studies from UN Development Programme (UNDP) and GEF technical assistance projects, as well as UN Economic Commission for Europe (UNECE) experiences, all related to energy efficiency and its utility in helping countries meet their Paris Agreement commitments.
  • Making the Switch: Energy-Efficient Street Lighting: CDB produced this brochure as a snapshot of how the Bank can support energy-efficient street lighting measures and street lamp retrofitting in the Caribbean region.
  • A Standardized Crediting Framework for Scaling Up Energy Access Programs: This World Bank Carbon Initiative for Development (Ci-Dev) report conceptualizes a streamlined carbon crediting approach that can be standardized and replicated for energy access operations.
  • A New Approach for Pre-Financing ERPAs for Household Energy Access Programs: Another Ci-Dev publication, this report considers an innovative way to reduce the delivery risk of carbon credits through a facility that provides financing before the signing of an Emissions Reduction Purchase Agreement (ERPA). The authors hope it could serve as a replicable model for scaling results-based climate financing.
  • Energy Storage: Business Solutions for Emerging Markets: This IFC publication explores the implications of advances in electricity storage technology for the way electricity is delivered to remote areas, including the business opportunities that could result.

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