Carbon Emissions Savings

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CDM PROJECTS AND FINANCING ENERGY INITIATIVES AT
THE LOCAL LEVEL
City Energy Strategies Conference
Cape Town November 2003
Energy for Africa. Forever.
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What is the state of play?

• Over the last two days
• Rationale and motivation for sustainable energy
  is clear
• sustainable development diversify supply
  emissions reductions access to modern,clean,
  affordable energy services lessen reliance on
  fossil/nuclear

• Breakthroughs and viable projects have been
  highlighted, alongside the difficulties faced
  with implementation, both locally
  internationally
• Stockholm (integration closed eco-cycles) to
  community ownership of biogas in Thailand to
  windfarms in the UK
• Green electricity for WSSD City Power, DSM
  green tarriffs Landfills ( CDM) Housing
  Transport solutions

• Solutions exist, barriers challenged but we still
  seem to struggling with implementation, scaling
  up and building an investment case

But where are the investors, banks, financiers
funders?
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Local conditions and barriers 1

• A number of barriers to successful implementation
  persist
• Policy framework
• White Paper on Renewable Energy sending the
  right signals to investors funders is crucial
  to lessen the risk create a market
• Commitment at local government level are we
  convinced of the case?

• Seemingly high cost of sustainable energy
  solutions
• Technology cost initial investment high lower
  operating maintenance costs for certain
  technologies over time with clear benefits
• No level playing field fossil fuels enjoyed
  subsidies over extended period- externalities
  not factored into the true price of
  electricity(to change?)

• Markets opportunities for sustainable energy
  use - but how to finance
• They exist, but who is willing to pay, and what
  level of premium, if any ?

Financing sustainable energy solutions 1
increase in the electricity price in Cape Town
would raise R 30 million per annum for climate
protection projects
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Local conditions and barriers 2

• Perceptions by investorsrisk, uncertainty,
  reward (returns)
• Perception of risk within a changing regulatory
  regime
• Skills and capacity to impement new technologies
  (?)
• Bureacracy and time lag of project initiation to
  implementation

• Behaviour of finance institutions expectations
  (returns) slow to transform
• Short term, high retruns not conducive to
  sustainability
• Need a portfolio of projects from the more
  conventional to the more risky

• Create the right incentives and disincentives
• Treasury 30 rebate on biodiesel as a fist step
• Proposals for environmental fiscal reform
  Treasury (internalise extarnalities)
• Cost of new infrastructure and impact on price -
  long term planning PPAs
• Feed-in laws to guarantee price stability for RE
  producers

Create an environment conducive to attracting
investors Create confidence that we are committed
to implementing these solutions and that the risk
can be lowered and managed adequately
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Finance, funding the CDM

• How do we attract non-donor funding and
  financing?
• Sources?
• Project finance Venture Capital Equity
  Investors
• Sustainability or ethical funds financiers
  (Future Growth, Community Growth Fund)

• New mechanisms to ensure the viability of
  projects
• Are you willing to buy a stake in the projects in
  which you have an interest e.g in a new energy
  generation facility public enterprises or
  limited duration JVs

• New markets, with new products through new
  partnerships
• The food agriculture industry enters a new
  market (fuel for cars) local government works
  with agricultural waste producers to build energy
  plants

• Clean Development Mechanism
• Capacity building in the identification
  implementation of projects
• Overseas buyers of credits not only for big
  projects, so tap into the value that others see
  us as having your own carbon portfolio

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The Role of Local Government where to start

• Local government must take a strong leadership
  role in championing the creation of sustainable
  options
• Champion sustainable development and create the
  right environment
• Developing new kinds of partnerships
  approaches
• Skills and capacity building for informed
  decision making
• Adequate public participation risk
  management!
• Initiate multi-stakeholder dialogue with various
  stakeholders, especially in the finance
  community local investors (equity issues)
• Create your own sustainability blueprint and
  investment framework to create confidence with
  investors, consumers, etc

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Creative Options Opportunities

• Local government are in a position to develop new
  ways of securing financing and funding from
  diverse sources to unlock opportunities
• Create new funds
• Public-private joint initiatives use LG
  financial muscle to leverage funds or create new
  dedicated funds
• Working with trade unions pension funds can be
  accessed through partnerships

• Create new partnerships
• Secure interest of overseas sustainability
  investors and asset managers (e.g. SAM)
• Private sector with Aid Agencies - developing
  new models

• DSM Energy Efficiency
• Rebate schemes in order to secure commitment from
  client base
• Creat new funds financing schemes from savings
  portfolio(refinancing or revolving funds)

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Creative Options Opportunities

• Look at the structure of projects in order to
  secure partners who might not ordinarily seemed
  to be players
• Approaching old problems in a new way

Sees long term value in the market sees Munic
can secure the investment
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Sees long term value in the market

• Buys a stake to sell at later date
• Puts money in fund for other RE projects

Raise own capital from the community
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Genesis Eco-EnergyDr A. van der Linde
(CEO) 27-82-825 0985es.enersys_at_mweb.co.za
Davin Chown 27-83-460 3898 PO Box 363 Newlands
7725 davinc_at_icon.co.za
Dr L. de Lange 27-82-481 0522 Louis.delange_at_sudor
eco.com
Energy for Africa. Forever.