Financing Mechanism for Clean Energy

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12 Νοε 2013 (πριν από 3 χρόνια και 5 μήνες)

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Lawrence Agbemabiese

United Nations Environment Programme, Energy Branch,
Division of Technology, Industry and Economics

Regional Workshop on Access to Modern Energy in Urban and Peri
-
Urban Areas: Policies and Knowledge Sharing


3
-
5 November, Senegal, Dakar


Financing Mechanism for Clean Energy
Access: The AREED Programme

disconnection of modern energy regimes from
the situation and needs of majority

Inspiration: D. Adams

“Empowering local entrepreneurs and enterprises is key
to developing the Tier 4 markets” (the 4 billion people at
the Bottom of the Pyramid)

small
-
scale energy SMEs can close the gap

C.K. Prahalad & Stuart L. Hart

The Fortune at the Bottom of the
Pyramid

the case for energy SMEs beyond the grid

…provide efficiently packaged small scale energy services
for a variety of energy users

1

…provide low cost alternatives to grid
extension

2

…exist in a wide range of possible business models

3

…often provide significant social and environmental returns

4

SME can be key players in the delivery of modern energy
services
--

including bioenergy
--

beyond they grid because
they…

To successfully deliver energy services, what do
SMEs need?…

…yes, “Financing.”
But that alone is insufficient!

1

Information

2

Seed and “second
-
stage” finance

3

Business systems and tools

4

Customer credit through 3
rd

Party institutions

5

Enterprise development assistance

6


Gifts and Grants


Government Subsidies


Development Assistance


Guarantees


Insurance


Concessionary Loans


Commercial Loans


Concessionary Investment


Commercial Investment


Supplier Credit


Customer Up
-
front
Payments


Entrepreneur’s capital

What sources of funding currently exist to
support SMEs?…




Gifts and Grants



卵bs楤楥s


Deve汯p浥m琠䅳獩st慮捥… 印e捩慬czed 偲潧o慭a


Concessionary Loans & Investments, Micro
-
credit


Entrepreneur’s Equity


Customer Down Payments & Supplier Credit


Commercial Loans, Investment, Insurance etc


Public Sector

Private Sector

Development/

Commercial/

Finance Spectrum I




Gifts and Grants



卵bs楤楥s


Customer Down Payments & Supplier Credit


Commercial Loans, Investment, Insurance etc


Public Sector

Private Sector

Development/

Commercial/

Finance Spectrum I

Gaps:

1. Too few intermediaries.

2. Too little seed capital.

3. Too little reasonably priced growth capital.

4. Insufficient consumer & micro
-
enterprise finance.

Operations/

Growth

Business

Planning

Roll

Out

Concept

Aggregate

Investment

Investment

Timeline

Expansion

Pilot



Asset
-
based
financing

Seed

Capital

Equity

Debt

GAP

the finance gap in energy SME
development terms

Upstream

Downstream


Expand the number of intermediaries providing
services and financing to SMEs.


Increase the available seed capital.


Increase the available pools of next stage capital.


Provide capital at realistic return expectations =
6% to 10% ROI on an IRR basis.


Expand access to innovative consumer finance.

how can these gaps be closed?

UNEP response/translation: Rural Energy
Enterprise Development (REED)


African REED (AREED I and AREED II):


2000


Present in Tanzania, Zambia, Senegal, Ghana, Mali


Brazil REED (BREED):


2002


2005


China REED (CREED):


2004


present (Yunan Province)

Energy Branch, UNEP

Walking the talk in Africa: AREED

start
-
up + 2
nd

stage

financing

enterprise

development

services

private SMEs

Energy
Services

Clients
:

Rural and/or
peri
-
urban


initial REED model


services and capital

intermediaries:

national/international

NGOs

short
-
term: in
-
house Investment Facility

long
-
term:
financial institutions

Energy Branch, UNEP

a problem: low willingness to pay for improved
energy services

Energy

Food

Housing

Transportation

Water

Other

Health

ICT

African rural households
“spend only a third as
much on energy as their
urban counterparts on
average, the largest such
discrepancy among
regions.” WRI

Adapted from: World Resources Institute

start
-
up

financing

enterprise

development

services

towards a solution in AREED II

private SMEs

Energy
Services

Clients
:

Primarily rural
commercial
customers of
energy enterprises

Thesis
:

Combine ‘traditional’ AREED Support

+

End User Finance

Key Players:

MFIs

and regular
FIs

“The vast majority of
Africa’s 600 million +
people who lack
modern energy and
the opportunities
these represent”

Exactly who are these “end
-
users”?

Often
s
tereotyped

as being:

-
Too poor to be taken seriously

-

Reluctant to adopt innovations

-

U
nwilling

to pay for modern amenities


The BOP = “those with
annual incomes up to and
including $3,000 per capita
per year (2002 PPP).”

World Resources Institute

Energy Branch, UNEP

Too poor to be taken seriously?

Source: World Resources Institute

Energy Branch, UNEP

BOP spending on energy: US$433.4 billion

So, are clean energy end
-
users...

-
Too poor to be taken seriously?

-

Reluctant to adopt innovations?

-

U
nwilling

to pay for modern energy?


NO

Source: World Resources Institute

Energy Branch, UNEP

Are they reluctant to adopt innovations?

Consider:



The phenomenal rise in the adoption of cell
-
phones by
people at the BOP



The rapid proliferation of innovative applications, often
discovered and popularized at the BOP



In Africa today, BOP spending on ICT
-
related services,
mainly mobile phone use exceeds US$ 5 billion



So, are clean energy end
-
users...

-
Too poor to be taken seriously?

-

Reluctant to adopt innovations?

-

U
nwilling

to pay for modern energy?


NO

NO

NO

Energy Branch, UNEP

Low ability to pay for improved energy
services?

Energy

Food

Housing

Transportation

Water

Other

Health

ICT

In Africa, yes:


African rural households “spend
only a third as much on energy as
their urban counterparts on
average, the largest such
discrepancy among regions.” WRI

Adapted from: World Resources Institute

UNEP

Mali
Folkecenter

escrow
function

wholesale
lender:
EcoBank

international
development
wholesale
lender

micro
-
finance
institutions:

Nyetaa

Finance…

private SMEs:

clean energy
equipment/

services

end
-
users/borrowers

equipment
and services

small loans & repayments

vendor
finance
agreement

wholesale loans
& repayments

recourse
loans

LRF escrow
agreement

Program
implementation
agreement and funding

TA

TA

AREED II end
-
user financing: roles of FIs

lessons/conclusions


small and medium
-
sized private enterprises can play a vital
role in expanding energy access in developing countries (
proof
of concept
).


governments must create supportive investment climate,
undergirded by
good governance

and mainstreaming of
integrated resource planning
approaches.


private energy SME support and end
-
user financing must
always go hand
-
in
-
hand as part of any energy market
transformation strategy.



Thank you!

Lawrence Agbemabiese

Energy Branch, UNEP DTIE, Paris

Telephone: +33 (01) 44 37 30 03

Email:
lagbemabiese@unep.fr