Management response to the Review of Renewable Energy and Energy Efficiency Partnership, REEEP

Transcription

1 Management response to the Review of Renewable Energy and Energy Efficiency Partnership, REEEP Authors: Martin Hiller and REEEP Management Team Version: 31 August 2014

2 Executive Summary The governments of Norway and Switzerland, two of REEEP s largest funders, commissioned a review of REEEP operations, Project Call Facility, 8 th and 9 th Project Calls, and the Phased Financing Facility; it was conducted between March and June, REEEP is pleased at the findings of the Review, which recognize REEEP s ongoing efforts to ensure efficient and effective operations and solid financial accountability; confirm REEEP s specific impact on the market; validate REEEP s extensive strategic review and advancement over the period; and encourage productive discussion over REEEP s future activities. OPERATIONS The Review recognizes REEEP s robust operations and administration, praising efficient and effective structures, processes, and governance. It identifies REEEP as a high performance organization with a high level of internal efficiency. Processes are highly developed and streamlined. (Chapter 2.4). While REEEP s knowledge management systems were not at the core of the review, the report refers to REEEP s strong knowledge management and information-sharing systems as part of operations and of the Project Call Facility. PORTFOLIO As a donor that has operated in 58 countries and with a disbursement portfolio of EURO 4 million (9th call), [REEEP s] relative impact is high due to a number of factors. Firstly, its priority countries are the rapidly emerging economies of Brazil, China, India, Vietnam and South Africa, to which over 60 per cent of the funds were allocated last year. The team finds that the country profile of cooperating countries is logical, given its special objectives of policy development and demonstration projects. The capacities for innovation are the highest in these developing countries. Subsequently the insights gained could be spread to the rest of the developing world. The Portfolio Review of REEEP s 8 th and 9 th Call is positive, while including suggestions for improvement. These largely validate the extensive review of its project call facility, monitoring and evaluation, internal communication and post-project follow-up that already started in The reviewers did, however, suggest REEEP should exert greater influence on project design once the Project Call has been issued and before projects are submitted. In this case, REEEP believes it is precisely this flexibility in dealing with on-the-ground market realities that gives the project portfolio resiliency, assures donors the best chances for achieving impact, and provides future investors (including major multilateral institutions) with key insights and intelligence so they can better target their own activities. REEEP has further developed its pre-call intelligence, monitoring and evaluation processes to better manage the risks involved in this market space, and ensure donor priorities are kept in alignment with project outcomes on the ground. DAC CRITERIA REEEP management response to the Review of Renewable Energy and Energy Efficiency Partnership 1

3 The Review includes an evaluation based on the OECD s Development Assistance Criteria. Reviewers accord high levels for relevance as an important catalyst and risk-taker in small-scale ventures outside the mainstream, and efficiency, again recognizing that the administration is extraordinarily lean, which also reflects high administrative efficiency in project management, as well as the knowledge management system reegle. REEEP is important as a catalyst and risk-taker in small-scale ventures outside the mainstream. Its programs are in in harmony with the UN Sustainable Energy for All (SE4All). The Review recommended that REEEP connect [activities] to institutions like the international development banks, the UN system, or CTI PFAN to ensure a longer term impact. This validated REEEP s unique role as risk-taking, seed-level market investor (albeit of grant funding), in collaboration with partner institutions to transition project outcomes into long-term, sustainable impacts, specifically CTI PFAN. The Review noted that the main effects are expected down the road through new policies and replication projects. This both validated REEEP s revised strategy and encouraged new thinking on partnerships, which has already led to increased engagement with key institutions on leveraging REEEP project outputs into greater downstream impact. PHASED FINANCING FACILITY The Review is very positive on REEEP s new Phased Financing Facility in partnership with CTI PFAN: The Clean Energy Phased Financing Facility (hereinafter Facility ) is an innovative blend of public and private funding that targets clean energy initiatives with commercial promise, and bridges their funding gap through the acceleration stage. It is very possible that cooperation between the two [REEEP and CTI PFAN] can offer a one-stop service across the whole project development chain, thereby reducing complexity and time and accelerate the development process. Certainly, expertise and capability of REEEP and CTI PFAN are highly complementary. It is likely that the planned cooperation on the Facility will make both more attractive to their respective clients as well as donors. Presumably, this will mean an additional supply of quality-enhanced projects, through the initial granting processes. REEEP management response to the Review of Renewable Energy and Energy Efficiency Partnership 2

4 Contents Executive Summary 1 Contents 3 1 Introduction and Objective 4 2 Administration, management, partners 4 3 Portfolio review of REEEP Projects from 8 th and 9 th Call 5 4 Review by DAC criteria Relevance (7.1/from page 28) Effectiveness (7.2/from page 30) Efficiency (7.3/from page 31) Impact (7.4/from page 32) Sustainability (7.5/from page 33) The Phased Financing Facility 8 6 How REEEP is addressing the Review s recommendations 9 Contact: REEEP management response to the Review of Renewable Energy and Energy Efficiency Partnership 3

5 1 Introduction and Objective This is REEEP s official response to the Review of Renewable Energy and Energy Efficiency Partnership, REEEP (henceforth: the Review), commissioned by NORAD, on behalf of the Norwegian and Swiss governments, dated 26 June 2014 (date of internal NORAD communication). We would like to thank the Norwegian and Swiss governments, as well as NORAD, for undertaking this useful review. Our thanks go as well to the authors at SCANTEAM for their efforts and insights. In all, the Review offers overwhelmingly positive feedback while also providing lessons to be learned and recommendations for further improving REEEP s work. We are pleased that the Review s recommendations closely match, in many cases, the changes currently being implemented into REEEP s next generation (10 th Call onwards) project portfolio. This paper outlines the REEEP response to the main findings and recommendations of the Review. Preceded by an executive summary, the response is structured around four parts: Comments on administration and management; Detailed analysis of several critical points regarding the project calls and selection; A brief comment on the positive evaluation of the Phased Financing Facility (the joint endeavour of REEEP and CTI PFAN); and Comments regarding the list of authors recommendations located at the end of the Review. Each section describes the topic, summarizes key comments, and outlines the REEEP response. In each section, references to particular text in the review are given as chapter number/page. 2 Administration, management, partners TOPIC: The feedback on REEEP s administration, financial and project call management is unequivocally positive (see Chapters 2.2/page 12, and 2.4/page 13, as well as Chapters 4.1/page 15, and 7.2/ page 31). The Renewable Energy and Energy Efficiency Partnership (REEEP) is a high performance organization with a high level of internal efficiency. Processes are highly developed and streamlined. The international secretariat in Vienna manages all project-cycle tasks with a small team of eight to ten professionals. (Chapter 2.4) REEEP RESPONSE: REEEP has in place robust and proven governance, management, financial, and operational structures and processes. REEEP understands their vital importance for operating efficiently and effectively, and will continue to ensure lean structures, highly efficient processes and effective governance. REEEP puts high priority into maintaining and upgrading its structures and processes in order to keep the high standard recognized by the Review. REEEP management response to the Review of Renewable Energy and Energy Efficiency Partnership 4

6 3 Portfolio review of REEEP Projects from 8 th and 9 th Call TOPIC 1: The Review evaluated the 54 projects comprising REEEP s 8 th and 9 th Call project portfolio. The Review is positive in its appraisal. Of the 11 projects 2 were rated Highly Satisfactory, 8 Satisfactory and 1 Unsatisfactory. (Chapter 8.2) REEEP RESPONSE: REEEP appreciates this evaluation. It needs to point out that an additional advantage of its Project Call system and one reason behind the high success rate - through its results-based finance system, funding is withheld from projects that do not develop in a satisfactory way. TOPIC 2: The reviewers point out one element of the Project Facility system as a potential weakness: REEEP s lack of heavy influence on project design once the Project Call has been issued and before projects are submitted. This aspect of the Project Facility may result in deviations from the original, intentions as stated in the Project Handbook. REEEP RESPONSE: REEEP understands and recognizes the logic behind this commentary; however, REEEP believes the element in question is a positive aspect of the Project Facility, rather than a negative one. The Project Facility by design avoids constricting project implementers too much one significant advantage of the current system is that one receives genuine proposals derived on the basis of market realities and needs, rather than pre-designated external criteria. The system also allows for flexibility in adjusting the course of the project based on changing market realities over the course of the project, sometimes up to 24 months. This allows for a constructive dialogue, greater success of the projects, and avoids excessive imposition of developed world agency priorities upon local needs. REEEP takes great effort in merging donor priorities with local needs, as assessed by local promoters and mediated by REEEP s network of regional representatives (see Chapters 7.1/pages 28 and 29, and 8.1/page 34). If this lack of precision of the Project Facility became too great, however, it would then become a drawback; this REEEP has recognized and has taken strides to mitigate, already in the current 10 th Call: REEEP is intensifying interaction and collaboration with project implementers from the start, as such addressing a need pointed out by the Review in several places. This is an important step in our efforts to improve the quality and effectiveness of individual projects, as well as of the portfolio as a whole, for which REEEP has specially adapted and in some cases overhauled all related systems, including the call distribution, the PMIS management software tool, and our monitoring and evaluation (M&E) methodology. TOPIC 3: The Review comments on a perceived divergence between priority and second tier countries in the Project Handbook and in the final selection of projects: The geographical spread of proposals received has been very different from the expectations. (Chapter 6.1/page 27) REEEP RESPONSE 2: REEEP notes that reviewers are commenting on the distribution of selected projects, not of proposals received. The primary reason for the small number of projects from emerging economies reflects donor preference at the time of selection,; the interest in emerging economies, however, was clearly visible in the large number of proposals received from BICS REEEP management response to the Review of Renewable Energy and Energy Efficiency Partnership 5

7 countries: out of a total of 588 proposals, 47% were received from the four countries alone for the 9 th Call (India 150, South Africa 42, China 52, Brazil 32, in total 276). 4 Review by DAC criteria 4.1 Relevance (7.1/from page 28) TOPIC 1: The REEEP activities are found to be consistent with its overall goal. The existence of REEEP is important as a catalyst and risk-taker in small-scale ventures outside the mainstream. Its programs are in in harmony with the UN Sustainable Energy for All (SE4A), announced by the UN Secretary General in 2011, and supported by Norway through the Energy+ program. The review [also] finds that many countries have made available funds for the development of renewable energy, for example, Brazil, Mexico, Vietnam, South Africa and India. Funding is often assigned to mega projects by the respective governments. It is expected that funding will go to the larger projects that are needed to achieve the government mission goal, and not to the small scale, poverty oriented endeavors typical for REEEP. REEEP RESPONSE: REEEP points out that its focus is on identifying workable, practical business models for SMEs that can lead to large scale support programmes at this level. As such, REEEP sees its function as a pathfinder for larger funding entities. TOPIC 2: In summary, the Review rates meeting call objectives as satisfactory,, with some exceptions. The reviewers raise the question whether the 8 th Call in particular awarded too many projects to consultants in OECD countries. REEEP RESPONSE: Looking at the 8 th Call in separation of the others, the impression may arise. The differentiation purely be country of origin of a research institute is, however, superficial and must be rejected. The REEEP selection favoured a range of policy studies, independently of which research institutes would conduct them, merely on the merit of the proposals. One example is the development of voluntary EE standards for fridges and freezers in the West African region by Canadian consultancy Econoler: these standards have since led to a mandatory scheme in Ghana, have been integrated into the regional work program of ECREEE and increased funding for wider implementation by ECOWAS. Thus, this differentiation is not meaningful if OECD reserchers could not support processes in developing countries, transfer of knowhow and information would slow down to a trickle. 4.2 Effectiveness (7.2/from page 30) TOPIC: The Review notes that REEEP interjects at specific points in time, but does not handle large, comprehensive approaches. Reviewers state that most [projects] serve only an intermediate step in the clean energy context. For a country to move forward takes simultaneous efforts at many levels, which cannot be facilitated by the REEEP s mode of operation alone, unless complementary activities are assured. For this reason, it is very important that REEEP activities are connected to institutions REEEP management response to the Review of Renewable Energy and Energy Efficiency Partnership 6

8 like the international development banks, the UN system, or CTI PFAN to ensure a longer term impact. REEEP RESPONSE: REEEP takes the question of long-term sustainability and impact very seriously, and has carefully considered its role in developing clean energy markets amid the big picture, within which multilateral development banks, intergovernmental organizations, bi-lateral funders and others are active. While such institutions certainly have a great capacity to spend more and over longer periods than does REEEP, they do need partners who can operate at the earlier stages of business development and aggregate findings into comprehensive analysis for the larger players. To that end, REEEP s unique and specific strength is acting as a risk-taking, seed-level market investor (albeit of grant funding), as the Review correctly notes, and ensuring that those investments are translated into market returns. By this REEEP does not mean financial returns, but rather leveraged market impact. For the next generation project portfolio, REEEP is translating these investments into impact in two ways: First, by partnering with CTI PFAN to facilitate transitions to private financing; second, by implementing a rigorous monitoring and evaluation system that captures market and regulatory information and translates this into policy prescriptions. For this second aspect in particular, REEEP is working to expand collaboration with established institutions who can use the knowledge and insight generated through REEEP projects in their own work. 4.3 Efficiency (7.3/from page 31) TOPIC: The project call mechanism of REEEP is functioning efficiently, Secondly, the administration is extraordinarily lean, which also reflects high administrative efficiency in project management, as well as the knowledge management system reegle. REEEP RESPONSE: REEEP acknowledges the Review s positive ratings on efficiency, including on the Project Call mechanism, administration, overhead, cost effectiveness, and catalysing ability. REEEP understands the vital importance of efficient structures and processes and will continue these. 4.4 Impact (7.4/from page 32) TOPIC: In evaluating the impact of projects on CO2 emission reductions, livelihoods, and added value, the Review notes that the number of persons directly affected by REEEP in the first round could be a few thousand. The main effects, however, are expected down the road through new policies and replication projects (page 33). REEEP RESPONSE: REEEP echoes this view: It is part of REEEP s unique selling proposition to seek, identify and act upon critical leverage points, an approach that REEEP has further honed and developed as part of its recent strategy review. Whilst the immediate impact are localised and largely specialised, the wider impact lies in identifying the right models, levers, and patterns for sectorial, sub-regional and vertical action. REEEP management response to the Review of Renewable Energy and Energy Efficiency Partnership 7

9 4.5 Sustainability (7.5/from page 33) TOPIC: Regarding the sustainability of projects after project periods and donor funding end, the Review states that a plan for sustainability is often not discernible in approved projects. REEEP RESPONSE: As the reviewers note, most projects include some form of investment, which if the project is successful is a guarantor life beyond project end. As the Review also notes, REEEP is actively strengthening its regional offices and partners in order to remain better connected within local markets. Finally, the proposed cooperation with CTI PFAN in the new Phased Financing Facility strives to secure follow-up with investments, and a long-term perspective on viability for one part of the portfolio. This final point regarding the CTI PFAN cooperation is of special importance: only successful businesses can guarantee long term service, maintenance, and market expansion to new customer segments and it is precisely this that REEEP seeks to stimulate. 5 The Phased Financing Facility TOPIC: The Review was generally very positive and supportive regarding REEEP s cooperation with CTI PFAN, the Phased Financing Facility. The Clean Energy Phased Financing Facility (hereinafter Facility ) is an innovative blend of public and private funding that targets clean energy initiatives with commercial promise, and bridges their funding gap through the acceleration stage. It is very possible that cooperation between the two [REEEP and CTI PFAN] can offer a one-stop service across the whole project development chain, thereby reducing complexity and time and accelerate the development process. Certainly, expertise and capability of REEEP and CTI PFAN are highly complementary. It is likely that the planned cooperation on the Facility will make both more attractive to their respective clients as well as donors. Presumably, this will mean an additional supply of quality-enhanced projects, through the initial granting processes. (Chapter 9) This Facility aims to identify promising business ventures, attract private investment to build scale, and extract broader market and policy insights from the projects to enhance replication of successful business models. The Review noted that main concerns of the cooperation are the management of potential reputational risk for REEEP, and the maintenance of day-to-day operational efficiency between the two partners. REEEP RESPONSE: REEEP is encouraged by the positive evaluation of the Phased Financing Facility, and takes note of the potential reputational risk. REEEP will investigate this issue further and discuss it with the Governing Board; at the same time, REEEP is already taking steps to plan for and localize potential reputational and operational risks through under- or non-performance of CTI PFAN. REEEP and CTI PFAN are putting the Facility into implementation through the 10 th Project Call (supported by donors Austria and OFID). The 10 th Call will finance up to eight projects, and serve as a prototype for the Phased Financing Facility, allowing both REEEP and CTI PFAN to establish and adapt working procedures and processes, and prepare for larger calls. REEEP management response to the Review of Renewable Energy and Energy Efficiency Partnership 8

10 6 How REEEP is addressing the Review s recommendations In view of the observations made, the Review makes the following recommendations (order of bullet points adjusted by REEEP to avoid repetitions). As mentioned above, many of these recommendations have already been recognised by REEEP as requiring action and have been initiated during in developing 10 th call and beyond. Strive to establish a balance between its traditional window of addressing public policy and regulation issues in developing countries, and the new window of running the Phased Financing Facility. REEEP s Board and donors should clearly state their expectation of the degree to which the organization aims at identifying projects for CTI PFAN up-scaling, or work on issues aimed at the public sector only. In reviewing REEEP s Business Plan , the Governing Board sees as a priority to continue supporting enabling environment activities in addition to the Phased Financing Facility. Specifically, the Board has asked the team to ensure that current focal areas on Open Data and Transport and on Affordable Efficient Housing are included in the REEEP Calls under the Enabling Environment window. Such reviews are planned for ongoing Board meetings REEEP s Governing Board and donors should have an active role in verifying that monitoring and evaluation systems are developed for projects to be run as part of the Phased Financing Facility or separately by REEEP. Seek further to develop project proposals according to its preferences, in close cooperation, especially with regional partners. REEEP activities, including those on developing the enhanced M&E system and regional cooperation, are a regular feature at the Governing Board meetings and will continue to be so in the future. REEEP is actively seeking to enhance its collaborative relationships with regional partners, including Regional Secretariats, and has established ongoing review and response processes to handle adaptations or changes to the monitoring and evaluation procedures in both windows. Further develop its monitoring and evaluation procedures and manuals for projects within both windows. The acquisition of projects is no doubt critical to the future of REEEP. Therefore, we recommend improving the proposal evaluation system done by the external experts and making it more rigorous, and improving the appraisal of fully developed proposals. As outlined in Section 3, REEEP response 1, REEEP has taken significant steps over the past year to vastly improve and enhance not only its proposal evaluation and appraisal system, but also its preproposal activities country intelligence gathering and outreach; networking and liaising with local multipliers; and sector-specific scouting which are equally critical to discovering and acquiring high-impact projects that further REEEP and donor objectives. The appraisal system for full REEEP management response to the Review of Renewable Energy and Energy Efficiency Partnership 9

11 applications has also been enhanced with clearer guidance on selection criteria appraisal and emphasis on mandatory narrative in support of awarding a specific value against the criteria. It is also recommended to make the call for proposals process more meaningful in terms of target country definition, technology orientation and implementer characteristics with the aim of addressing weaknesses, in particular in the 9 th call. REEEP RESPONSE: As touched on in Section 3 and in the response immediately preceding this one, REEEP has taken steps to significantly augment the Project Facility system to allow for better market intelligence, increased scrutiny, additional early contact with developers, and especially a clearer focus on specific energy services to be delivered. This improved process will allow REEEP to better target its Call, and receive a smaller number of higher-quality proposals. It is recommended to initiate and support entrepreneurial capacity development at the local level to overcome the shortfall of local expertise in the medium term. This could be done outside the calls for proposals with selected partners. Of crucial importance is to use top-class coaches. REEEP RESPONSE: The high quality of CTI PFAN coaches was a key element in REEEP s decision to partner with them for the Phased Financing Facility. REEEP understands, however, that capacity building is a serious need in many of our target regions, and REEEP is taking steps to partner not only on business coaching, but on other types of entrepreneurship and technology-related capacity building with institutions active in the field, including UN agencies and NGOs. The Review notes that the discipline of implementers with regard to project completion reporting is not very good. 20 projects have not delivered a final report or are late with one or several reports. The recommendation is to be more insistent that grantees deliver final reports and more promptly submit the interim progress reports. Note is taken of the fact that final payments are actually being held back until the reports due are received. REEEP fully agrees with this point, although the reasons for unsatisfactory reporting vary dramatically among projects. Reporting standards are sometimes seen as a purely administrative requirement by project implementers, particularly those from the business environment. REEEP has taken steps to better understand the needs and concerns of project implementers, and designed the new M&E framework to facilitate better communication with project implementers, allowing them to understand the importance and impact of their contributions to the project portfolio, while making reporting more straightforward and less bureaucratic. The Review recommends REEEP make the PIMS format more reader-friendly (portrait versus landscape format). REEEP has upgraded PMIS (Project Management Information System) to integrate the new enhanced M&E framework and overhauled its design and user interface. The views on design REEEP management response to the Review of Renewable Energy and Energy Efficiency Partnership 10

12 features received from implementers have been taken into account, though not all of them can be taken care of. With regard to external audits, the review recommends to change the auditing firm from time to time. Currently, there is no dissatisfaction whatsoever with the auditors but it is a good practice to change, in particular in organizations handling donor money. REEEP RESPONSE: REEEP will discuss this item at the next Governing Board meeting, on 18 November Contact: Martin Hiller, Director General, REEEP, martin.hiller@reeep.org, REEEP 2014 REEEP management response to the Review of Renewable Energy and Energy Efficiency Partnership 11