The African Development Bank has approved a multinational financing programme for Distributed Energy Service Companies, which have seen extensive growth in Africa due to the rapid proliferation of mobile banking and pay-as you-go technologies.
The Asian Infrastructure Investment Bank will increase India’s renewable energy supply by mobilizing private capital through a USD 100 million loan, the proceeds of which will be used for wind and solar power infrastructure projects.
The World Bank’s Board of Executive Directors approved USD 22.7 million to help Mali improve access to modern services and promote the deployment of renewable energy in rural areas.
A USD 40 million financing agreement will support the construction and development of two wind farms in Peru.
A ‘Manual of Financing Mechanisms and Business Models for Energy Efficiency’ provides an overview of innovative financing mechanisms and business models that have led to new investments in energy efficiency.
8 August 2019: Renewable energy generation is continuing to expand in developing countries with increasing investment, decreasing cost and better technology. International financial institutions and the private sector see renewables, such as wind and solar, as worthwhile investments that, in addition to providing economic returns, can also help countries achieve their climate goals.
This mitigation finance Update provides an overview of efforts undertaken to increase renewable energy generation in Africa, Asia, Europe, Middle East and South America over the summer months. The Update also highlights a publication that shines spotlight on financing mechanisms for energy efficiency.
World Bank Supports Ethiopia’s Efforts to Achieve Climate Resilience, Mitigation Goals
The World Bank Group is helping to increase renewable energy generation capacity through private sector participation in Ethiopia. The first phase of the Renewable Energy Guarantees Program consists of International Development Association (IDA) support to the Metehara Solar independent power producer, which is expected to be operational by 2021. Under the project, a consortium led by Enel Green Power, will invest approximately USD 120 million in the solar plant’s construction, with an estimated USD 35 million in private capital. The facility will generate around 280 gigawatt hours (GWh) per year that will be sold under a 20-year purchase power agreement to Ethiopian Electric Power. The power plant is located in the Oromia region, an area with high solar radiation levels. The US Agency for International Development’s (USAID) Power Africa Transactions and Reform Program provided transaction advisory assistance to the Government of Ethiopia. [World Bank Press Release]
Also in Ethiopia, a USD 500 million IDA grant was approved by the World Bank’s Board of Executive Directors to help the country meet its climate goals and sustainably manage its natural resources by financing its sustainable land management (SLM) initiatives. The Climate Action Through Landscape Management Program for Results (CALM) addresses the intersection of land management, rights and use in Ethiopia. It will help strengthen institutions to maintain restored landscapes over the long term and ensure the scaling up of SLM interventions, and lead to more sustainable and resilient livelihoods. In addition to reducing land degradation, CALM will also increase carbon sequestration. [World Bank News Story]
Wind Energy Projects in Egypt, Spain, Peru Receive International Support
The International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) signed an agreement to support the development of a 250-megawatt (MW) wind farm in Egypt’s Red Sea region. The IFC and MIGA will provide USD 84 million and USD 122 million in financing, respectively, for financial guarantees to help manage non-commercial risk and assist in the production of clean energy, lower generation costs, and diversify the country’s energy mix. The European Bank for Reconstruction and Development (EBRD) and the Overseas Private Investment Corporation (OPIC) are also providing support.
The wind farm in the Gulf of Suez, West Bakr Wind, will produce over 1,000 GWh per year, providing power to more than 350,000 homes and avoiding more than 550,000 tons of carbon dioxide (CO2) emissions annually. [IFC Press Release] [EBRD News Story]
The European Investment Bank (EIB) is financing the construction of 21 wind farms in six autonomous communities in Spain, namely Andalusia, Asturias, Castilla-La Mancha, Castilla León, Galicia and Navarra. These facilities will have a total installed capacity of 547 MW and will generate approximately 1.491 GWh of energy per year, which is equivalent to the power used by 360,000 Spanish homes. The construction phase will employ 1,900 people, with 170 people to permanently operate the wind farms.
The EIB will provide loans to Alanfar, a renewable energy developer, totaling EUR 385 million for construction and implementation. The project will not receive any public sector support. [EIB Press Release]
The Development Bank of Latin America (CAF) and the Official Credit Institute (ICO) signed a USD 40 million financing agreement for the construction and development of two wind farms in Peru’s Cajamarca province with Grenergy, a Spanish renewable energy company. The Duna and Huambos wind farms will have an installed capacity of 36.8 MW, and sell the power produced over a 20-year period to Peru’s Ministry of Energy and Mines, at a price between USD 37.7 and USD 36.8 per megawatt hour (MWh), for an estimated annual production of more than 165,000 MWh. [CAF News Story]
Distributed Energy Service Companies Advance Solar in Sub-Saharan Africa
The African Development Bank (AfDB) has approved a multinational financing programme for Distributed Energy Service Companies (DESCOs), in which 900,000 households in sub-Saharan Africa, or around 4.5 million people, would gain access to solar power by 2025. The DESCOs Financing Program seeks to address barriers to accessing finance for DESCOs, while supporting their growth and expansion into existing and new markets. It will facilitate local currency financing for DESCOs, and provide local lenders with risk mitigation instruments.
More specifically, the Program will, inter alia: contribute to the installation of an estimated 45 MW of distributed solar photovoltaic (PV); create approximately 6,000 new jobs, mainly for youth; and help avoid around 37 kilotons of CO2 equivalent emissions per year. It will also help build capacity within DESCOs and local financial intermediaries to establish securitization structures and other innovative frameworks for accessing finance, and make financing available to customers in rural areas by building credit history and encouraging mobile payment solutions.
DESCOs have seen extensive growth in Africa due to the rapid proliferation of mobile banking and pay-as you-go technologies that enable low-income customers to pay off their purchases over an extended period of time. [AfDB Press Release]
Solar Projects in Mali, Jordan, India Receive MDB Support
The World Bank’s Board of Executive Directors approved USD 22.7 million in financing to help Mali improve access to modern services and promote the deployment of renewable energy in rural areas. The financing package is composed of a USD 20 million equivalent credit from IDA and a USD 2.7 million grant from the Japan Policy and Human Resources Development Fund, which is additional financing that will be added to the Mali Rural Electrification Hybrid System Project, approved by the World Bank’s Board of Executive Directors in 2013.
The overall project is expected to benefit approximately 760,000 people who are connected to the mini-grids and consumers who access electricity through solar home systems and portable solar lanterns. The additional grant will support the installation of solar home systems in households not living near a mini-grid, the deployment of solar lanterns, and communication and awareness-raising campaigns. [World Bank Press Release]
The Climate Investment Funds (CIF), EBRD and other partners are financing the largest private-to-private solar complex in Jordan, which is expected to produce 70 GWh of energy and reduce carbon emissions by 41,500 tons each year. The project, with up to USD 35 million in financing, will enable the telecoms operator Orange Jordan to cover part of its demand with energy generated in solar plants.
The project’s three solar plants, with total capacity is 37 megawatt peak (MWp), are located in the King Hussein Bin Talal Development Area, the Mafraq governorate and the Amman governorate. The investment will benefit from new regulations that enable consumers to establish their own energy facilities under a process that transports electricity from within the grid to facilities outside the grid’s boundaries (also known as “wheeling”). [CIF Press Release] [EBRD Press Release]
The Asian Infrastructure Investment Bank (AIIB) will increase India’s renewable energy supply by mobilizing private capital through a USD 100 million loan to L&T Infrastructure Finance Company Limited (LTIF), a leading non-bank financier of renewable energy in India. The financing marks AIIB’s first loan to a non-banking finance company. The loan will be used for wind and solar power infrastructure projects throughout India, which aims to reduce its carbon intensity by 30-35% based on 2005 levels by 2030. LTIF’s collaboration with AIIB will also help the company develop its environmental and social capabilities, enabling it to tap the international market for green finance in the future. [AIIB Press Release]
Feature Publication: Manual of Financing Mechanisms and Business Models for Energy Efficiency
A ‘Manual of Financing Mechanisms and Business Models for Energy Efficiency’ provides an overview of innovative financing mechanisms and business models that have led to new investments in energy efficiency. Published by the Basel Agency for Sustainable Energy (BASE), for the UN Environment Programme (UNEP), the manual focuses on technologies covered by the United for Efficiency initiative, namely air conditioners, lighting, electric motor systems, refrigeration and power distribution transformers, which together consume over half of the world’s electricity.
The publication highlights barriers that inhibit energy efficiency investments, including high upfront costs, lack of access to finance, high perceived risk, lack of trust in new technologies, competing investment priorities, lack of knowledge and awareness, and split incentives. It also details ways to overcome them, including through well-designed financing mechanisms, incentives and business models, along with complementary measures, such as policies, regulations, awareness-raising activities and behavior change initiatives.
The manual is a component of the ‘Pilot Asia-Pacific Climate Technology Network and Finance Centre’ pilot project, an initiative of UNEP and the Asian Development Bank (ADB). [CTCN Press Release]
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The SDG Knowledge Hub publishes monthly climate finance updates, which largely focus on multilateral financing and cover, inter alia, mitigation and adaptation project financing news and lessons, institutional events and news, and latest developments in carbon markets and pricing. Past climate finance updates can be found under the tags: Finance Update: Climate Change and Finance Update: Sustainable Energy.