Interactive Panel: Financing Issues

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Interactive Panel Financing Issues Dilemmas
Chair Eric BrittonManaging Director,
EcoPlan InternationalPanelists Jan-Olas
WillumsBoard Member, Renewable Energy
CorporationEric UsherUNEP Energy
PracticeKeri-Lynn HauckManager Financial
Advisory, Climate Change Capital
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Sustainable Energy FinanceCreating the climate
for Change
Division of Technology, Industry and Economics

• Eric Usher
• Lead, Sustainable Energy Finance
• United Nations Environment Programme
• World Energy Technology Summit
• February 10th, 2004

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Energy Sector Context Macro View

• Global energy investment needs are significant
• US16 trillion over 30 years, 60 for electricity
  sector
• raising capital for this new infrastructure is a
  daunting challenge, esp. in developing countries
• investment impeded by poorly developed financial
  markets, products, institutions...high commercial
  and credit risks...lack of infrastructure to
  deliver capital and services
• while increasing environmental impacts create the
  imperative to shift new investment towards
  greener energy options.
• eg. Localised air pollution gt 4-5 of global
  burden of disease and costs 0.5-2.5 of world GNP
  

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Energy Sector Context Micro View The Costs of
Being a Clean Energy Innovator
HUGE
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Specifics of Financing Renewable Energy Systems

• Financing RE is new to financiers.
• Compounding the lack of information are the
  issues of financial structure and scale.
• Developers of clean energy projects are often
  under-financed and have limited track records.
• Financiers perceive many RE technologies as being
  commercially unproven.
• Fuel supply risk can be a concern for RE although
  the true risks of conventional power projects are
  sometimes understated

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• Transaction Finance
• Indian Solar Loan Programme using finance
  subsidies to help banks build PV credit
  portfolios.
• UNEP/WB Energy Efficiency lending (India, China,
  Brazil) applying ESCO approaches to
  energy efficiency lending
• MEDREP Interest Rate Subsidy Facility
  working with local banks to build solar thermal
  credit portfolios
• Transaction Support
• RE/EE Investment Advisory Facility buying
  down transaction costs by helping investment
  proposals through a financiers evaluation
  and due diligence process.

• Start-Up Capital
• Rural Energy Enterprise Development (REED)
  Programmes operating in 5 countries Africa,
  Brazil, China
• shifting from grant based technology
  demonstrations to the seed capital business.
  
• African Rift Geothermal Development Facility
  public/private sharing of exploration risks

• Operating Capital
• REED Growth Capital Funds
• blending donor and commercial capital in
  patient growth capital funds.
• African Rift Geothermal Development Facility
  public/private sharing of exploration risks
• MEDREP Working Capital Guarantee Facility
  dedicated guarantee lines for Moroccan PV
  concessionaires

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Successful public interventions are those that

• 1. Address specific market barriers or failures
• 2. Do not overly distort existing markets
• 3. Are removable ? do not create dependence
• 4. Reward innovation ? bring costs down, not up
• 5. Are cost effective ? leverage, catalytic, etc

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• Launched Oct. 21st at UNEP FI Tokyo Roundtable
• Joint initiative of UNEP Energy, UNEP FI and
  BASE

• Activity Areas1. Provide Information2.
  Facilitate Networks3. Develop Partnerships

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• The challenge of supplying rural energy services
• is NOT a lack of technology, business models,
  capital or the ability to pay
• it is the MISMATCH between the needs of the
  enterprise and the types of financing currently
  available.
• P. Larocco, ECo

• For info on UNEP Energy programmes
• www.uneptie.org/energy

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