The role of private sector and financial institutions in energy access – An emergent model...
-
date post
15-Jan-2016 -
Category
Documents
-
view
215 -
download
0
Transcript of The role of private sector and financial institutions in energy access – An emergent model...
![Page 1: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/1.jpg)
The role of private sector and financial institutions in energy access – An emergent model
Enhancing Energy Access in Rural and Peri-urban Settlements:
Knowledge-Based Policy Engagement25 – 27 May, 2009
Cape Town, South Africa
![Page 2: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/2.jpg)
outline• review of: current situation regarding energy access; ‘fundamental
behaviors/motivations’ of the private sector; and investment trends
• defining roles of private sector: SMEs under focus.
• barriers to private SME investment in clean energy products and services in developing countries/regions
• from theory to action: enabling and incentivizing SMEs and financial institutions to function the context of the REED programme
• Lessons and conclusions
![Page 4: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/4.jpg)
energy access expansion: basic rationale…
eliminating energy poverty:
revalorizing agriculture--
improved productivity and
incomes
powering secondary industries, businesses, infrastructure:--economic diversification, growth and sustainability
PROFIT / LOSS
RISKS/
RETURNSUS AGAINST THEM
![Page 5: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/5.jpg)
nevertheless, the private sector (warts and all)…
• generates 86% of global investments – therefore can play a critical role in shaping the evolution of the energy sector in a climate constrained world.
• is projected to provide at least 80% of mitigation finance and a substantial share of adaptation monies.
• in developing countries, has already provided about 80% and 75% respectively of total investments respectively in renewable energy and energy efficiency.
![Page 6: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/6.jpg)
Energy Branch, UNEP
a role for private SMEs…
SME can lead the expansion of energy access (to modern equipment and services) ‘beyond the grid’ because they…
……provide efficiently packaged services for a variety of provide efficiently packaged services for a variety of energy usersenergy users
……provide low cost alternatives to grid extension – provide low cost alternatives to grid extension – services ‘beyond the grid’services ‘beyond the grid’
……can be configured in a wide range of possible business can be configured in a wide range of possible business modelsmodels
……often provide significant net social and environmental often provide significant net social and environmental returnsreturns
![Page 7: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/7.jpg)
population
income levels
$1/day
Rural Areas Urban
Areas
CBOs SMEs Utilities
Poor Wealthy
role of SMEs vis-à-vis utilities and CBOs in energy access expansion
Adapted from: Brew-Hammond, 2005
![Page 8: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/8.jpg)
unleashing the genie – barriers to private SME sector investment: developing countries/EITsgeneral barriers• riskier business environment• smaller transaction sizes higher financing costs• insufficient credit worthiness of project sponsorsbarriers specific to climate investments • higher financial costs + overwhelming uncertainties of
investing in unfamiliar technologies• absence of a clear, durable, consistent, and sufficient price of
carbon• uncertainty regarding eligibility and definition of credits from
carbon avoidance projects
![Page 9: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/9.jpg)
Energy Branch, UNEP
Innovation capital Transaction financeOperating capital
Often secured
Occasionally secured
Supplier credit
Entrepreneur’s equity
Grants Consumer credit
Working capital loans
Finance + capacity gaps
Weak business planning
skills
Insufficient risk capital
(growth and start-
up)
Inadequate experience of Banks
Non-existent end-user finance options
Interventions egs. AREED, MEDREP, ISF
Enterprise development
servicesSeed and
Patient capital funds
Capacity-building and risk sharing with local
banks
User finance, micro-credit, lease/rentals, third party financing:
Target group = Productive users of
REPolicy support for SMEs
SME finance + capacity gaps
![Page 11: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/11.jpg)
start-up + 2nd stagefinancing
enterprisedevelopmentservices
private SMEsEnergy Services
Clients:Rural and/or peri-
urban
initial REED model – services and capitalintermediaries:national/internationalNGOs
short-term: in-house Investment Facilitylong-term: financial institutions
![Page 12: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/12.jpg)
Energy Branch, UNEP
key facts about AREED
• current geographic coverage: Mali, Senegal, Ghana, Tanzania, Zambia.
• donors: UN Foundation ($6.3m), Sida ($2.3m), BMZ ($0.4m), Dutch Government ($0.2m), other: DBSA, Bodyshop, Domini Investments.
• seed fund size: $1.4 m (2000) to $1.8m (today).• enterprise development costs: $0.20 - $0.50 per $1 invested.• impacts: slow to produce direct impacts (job creation, GDP
effects, GHG mitigation, etc) but can be significant over time.
![Page 13: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/13.jpg)
Energy Branch, UNEP
low willingness to pay for improved energy services
Energy
Food
Housing
Transportation
WaterOther
HealthICT 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
![Page 14: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/14.jpg)
start-upstart-upfinancingfinancing
enterpriseenterprisedevelopmentdevelopmentservicesservices
towards a solution low-wtp problem in AREED II
private SMEsEnergy Services
Clients:Primarily rural
commercial customers of
energy enterprises
ThesisThesis::Combine ‘traditional’ AREED SupportCombine ‘traditional’ AREED Support
+ + End User FinanceEnd User Finance
Key Players: MFIs and regular FIs
![Page 15: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/15.jpg)
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
TATA
AREED II end-user financing: roles of FIs
![Page 16: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/16.jpg)
lessons/conclusions• small and medium-sized private enterprises can play a vital
role in expanding energy access in developing countries (proof of concept).
• financing for clean energy access is not a prob …. [wait! reconsider this conclusion in light of global financial crisis!].
• 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.
![Page 17: The role of private sector and financial institutions in energy access – An emergent model Enhancing Energy Access in Rural and Peri- urban Settlements:](https://reader033.fdocuments.us/reader033/viewer/2022051417/56649d235503460f949f9a85/html5/thumbnails/17.jpg)
Thank you!
Lawrence AgbemabieseEnergy Branch, UNEP DTIE, ParisTelephone: +33 (01) 44 37 30 03
Email: [email protected]