INNOVATIVE FINANCING MECHANISMS FOR ACCESS TO CLEAN ENERGY IN SOUTHEAST ASIA Workshop on Financial and Institutional Challenges Facing Energy Access Karim Tarraf, Leicester 2012
Agenda 1. Introduction 2. FS-UNEP Collaborating Centre 3. Finance for Access to Clean Energy Technologies (FACET) i. Background ii. Objectives & Overriding Target 4. The FACET approach i. Country selection ii. iii. Bank selection Technology selection iv. Financial support mechanism 5. FACET current status 6. Discussion
Frankfurt School: Origins / History In 1957, Frankfurt School of Finance & Management was founded as Bankakademie e.v. Since 1966 it has been funded by the regional associations of the private banking sector, the Bundesverband der deutschen Volksbanken und Raiffeisenbanken e. V. and the Bankenfach-verband e. V. It was renamed Frankfurt School of Finance & Management on 17 January 2007.
Frankfurt School: Organization Frankfurt School of Finance & Management Foundation Board of Trustees Frankfurt School of Finance & Management non for profit limited Media-House Frankfurt School Verlag GmbH efiport AG ConCap International Advisory Services Frankfurt School UNEP Collaborating Centre Academic Programmes Research Executive and Professional Education Professional & Certificate Programs Corporate Programs & Seminars Educational and professional programs, Advisory, Research etc.
Frankfurt School: Services Our products and services include: University bachelor-, master-, and PhD programmes Executive Education programmes Research financial economics, practical quantitative finance, management, international health management, and development/climate finance Consulting International Advisory Services for development finance
Sustainable Energy Finance Why are access to finance and providing access to energy greatly intertwined? Clean energies are affordable with proper financing schemes Many financial institutions have not yet realised these new credit opportunities $37 billion spent each year on low-quality energy solutions represents a largely untapped market opportunity for the private sector. (IFC 2012)
FS-UNEP Collaborating Centre Concept Strategic collaboration between the UNEP and the Frankfurt School UNEP s main knowledge hub for sustainable energy and climate finance Research of the highest caliber with an orientation towards practical application Implementing findings and instruments in the field
FS-UNEP Collaborating Centre WORKING with financial institutions to develop technical know-how, innovative financing approaches and new forms of entrepreneurial and end-user finance.
FS-UNEP Collaborating Centre Projects Climate Finance Innovation Facility (CFIF) Finance for Access to Clean Energy Technologies (FACET) Seed Capital Assistance Facility (SCAF) Indonesia Solar Loan Programme (ISL) National Climate Finance Institutions Support Programme (NCFISP) Microfinance for Ecosystem-Based Adaptation to Climate Change (MEbA)
What is Clean Energy?
What is Clean Energy?
End-User Finance for Access to Clean Energy Technologies (FACET) Background In Asia and the Pacific, over 800 million people have no access to electricity About 1.8 billion people still use wood, dung, crop waste, and other traditional biomass for cooking and heating (Source: ADB, Energy for All Initiative) The majority cannot purchase clean technologies upfront but require alternate financing options.
End-User Finance for Access to Clean Energy Technologies (FACET) Objectives Mobilizing financial access to clean energy in Vietnam and Indonesia Initial disbursements of around 10,000 loans per country Overriding target Initiate and scale up domestic bank lending to end-users of small-scale energy technologies in South and South-East Asia
The FACET Approach i) Technical Assistance BANK Credit line PU ii) Financial support mechanism Purchase VENDOR Maintenance End-Users
The FACET Approach Relevant determinants for country selection Impact and visibility of FACET Favourable framework conditions, i.e. government support, EE/RE laws and action plans (electrification, EE labelling), low/decreasing fossil fuel subsidies, etc. Sound financial sector
The FACET Approach Relevant determinants for partner bank selection Client portfolio (i.e. low/medium income population) Geographical area of operations (e.g. rural areas for biogas, sunny area for solar) Experience with or at least knowledge of clean energy technologies Motivation to participate under FACET, top management support
The FACET Approach Relevant determinants for technology selection
The FACET Approach Financial support mechanisms Partial guarantee scheme - Share credit risk to mobilize funds for development projects Interest rate softening: - Method to buy down interest rates - Needs to be tailored in accordance to each setting - Example: India Solar Loan Programme; PROSOL Tunisia
Key benefits Foster market-based solutions Mobilize private and financial sector funding Exploit the potential of decentralized, off-grid grid solutions Establish local structures and procedures using local resources Decrease dependency on donor funding
FACET Current Status I. Project preparation II. Project implementation Pre-selection of countries and technologies Desk studies: Short-list of partner countries and appropriate technologies Financial Support Mechanisms: Interest rate softening, partial guarantees Technical Support & Capacity Building Current phase Concept papers: basis for stakeholder consultation Stakeholder consultations: Vietnam, Indonesia, Philippines Final goal: Disbursement of 10,000 20,000 microloans for clean energy technologies Design of Individual country programmes: Selection of technologies, local partners, and support mechanisms
FACET Current Status Targets 4 or more financial institutions involved 4 or more countries 10.000 loans distributed Emission reduction by 70.200 CO2/year Current State Negotiating with 4 FIs 2 countries involved Loan disbursement will commence in 2013
Global Trends Report 2012 Download at: www.fs-unep-centre.org
Thank you. Contact: Karim Tarraf, Frankfurt School of Finance & Management, k.tarraf@fs.de
Any questions?