Transcript GEF Experience and Lessons with Renewable Energy

GEF Experience
with Renewable Energy
Dr. Yasemin Biro
Program Manager
Climate Change
Global Environment Facility
What is the Global Environment
Facility?
 An intergovernmental
grant-making entity
created out of 1992 Rio
Earth Summit to address
sustainable development.
 A financial mechanism
of the UNFCCC, the
Climate Change
Convention.
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How does the GEF work?
 GEF is governed by a 32-member Council of
representatives from both developed and developing
country governments.
 In general, GEF funds cover the incremental costs of
projects with global benefits related to climate change,
ozone, biodiversity, land and water management and
international waters.
 GEF also provides Project Development Funds to eligible
project concepts. GEF Secretariat reviews project proposals
according to GEF project criteria. The Council approves the
entry of projects into GEF’s work program.
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 Full projects vs. Medium-sized projects (up to US $1
million in GEF funds).
 “Implementing agencies” prepare and execute GEF funded
projects: World Bank and IFC, UN Development
Program, UN Environment Program, Regional
Development Banks.
 Private firms participate as manufacturers, dealers, project
developers, financial intermediaries, technical assistance
recipients, suppliers, contractors and project executors.
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GEF Beneficiaries
 GEF projects are required to be country-driven.
 Projects are developed by recipient countries in a
participatory manner with attention to national priorities,
development and social goals.
 Direct project beneficiaries and participants include
government agencies, private sector firms, utilities, NGOs,
community organizations and households.
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GEF’s Climate Change
Related Operational Programs
– OP 5: Removal of barriers to energy efficiency and
energy conservation
– OP 6: Promoting the adoption of renewable energy
by removing barriers and reducing implementing
costs
– OP 7: Reducing the long-term costs of greenhouse
gas emitting technologies
– OP 11: Promoting environmentally sustainable
transport
– OP 12: Integrated eco-system management
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GEF Grants for Climate Change
and Renewable Energy
 During 1991-2000, GEF allocated US $1.1 billion to
275 climate change projects, with additional $5 billion
in co-financing from governments, multi-laterals and
private sector.
 During 1991-2000, GEF allocated US $570 million to
48 renewable energy projects in 47 developing and
transition countries. These projects have leveraged US
$2.5 billion in co-financing.
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GEF Funding for
Renewable Energy
 GEF renewable energy projects tend to fall into two
categories:
– “Cost reduction” projects which conduct research,
demonstration and commercialization activities to lower
long-term technology costs. (OP 7, OP11)
– “Barrier removal” projects which develop and promote
markets for commercial and near commercial
technologies. (OP6, OP11)
 The ultimate goal is to promote the development of markets
for renewable energy.
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Market Development for
Renewable Energy
 Projects support private firms by providing financing,
technical and business assistance, and marketing support.
 Projects build capacities of government agencies and
NGOs, in conjunction with studies, resource assessments
and market characterization.
 Projects create new financing vehicles like revolving
funds, credit lines, and contingent business loans that are
forgivable under specified conditions.
 Projects develop or strengthen regulatory frameworks for
grid-based IPPs, transparent power-purchase tariffs, and
off-grid utility concessions for rural energy provision.
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Business Friendly GEF Support for
Renewable Energy
 GEF and the International Finance Corporation (IFC), the
private sector affiliate of the World Bank Group, are
increasing accessibility to resources for private sector
investments in renewable energy in developing countries.
– Renewable Energy and Energy Efficiency Fund
• First global private equity fund devoted to renewable energy
and energy efficiency in emerging markets.
– Solar Development Group
• Development and investment program for rural solar PV
industry in developing countries.
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GEF Projects for
Long-term Cost Reduction
 Solar thermal power plants (4 projects)
– Demonstration plants expected to total 400-450 MW in
Egypt, Morocco, India and Mexico (integrated solar
thermal/gas turbine)
 Biomass integrated gasification/gas turbine power plants
(3 projects)
– 30MW demonstration plant in Brazil
– Research on fuel supply markets and plant technologies
 Distributed grid-connected PV (1 project)
– Demonstration of 10 MW conjunctive use with hydro
power on distribution system
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GEF Projects for Barrier Removal
 Goal: Develop and promote markets for commercial or
near-commercial technologies by sustainable removal
of barriers (and not by subsidizing equipment)
 Applications:
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PV home systems for rural off-grid markets (23 projects)
Mini-grids from PV, wind, mini-hydro, biogas (12 projects)
Wind farms for utility markets (9 projects)
Commercial, public and agricultural off-grid PV (8 projects)
Biomass and bagasse for utility markets (6 projects)
Mini-hydro for utility markets (5 projects)
Geothermal for utility markets (1 project)
Solar thermal hot water for home and public uses (3 projects)
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Emerging Lessons:
Off-grid Solar PV

Viable business models must be demonstrated to sustain
development of a PV market.

Delivery/business model development, evolution and testing require
time and flexibility.

Institutional arrangements for project implementation can greatly
influence demonstration of viable business models.

Projects must explicitly recognize and account for high transactions
costs associated with marketing, service, and credit collections.

Consumer credit can be effectively provided by micro-finance
organizations, depending upon historical and/or cultural conditions.
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Emerging Lessons:
Off-grid Solar PV

Projects have not produced adequate experience on the viability of
dealer-supplied credit under a sales model.

Rural electrification policies and planning influence project
outcomes and sustainability, and must be explicitly addressed in
projects.

Establishing reasonable equipment standards and certification
procedures for quality service with affordability is not difficult.

Substantial implementation experience is still needed before the
success of the service approach can be judged.

Post-project sustainability of market gains achieved during projects
has not yet been demonstrated in any GEF project.
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Emerging Lessons:
Grid-Connected Wind, Biomass, Small Hydro
 Many unused options exist to promote clean energy with power
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sector reform.
Financing mechanisms and financier technology acceptance are
important for going beyond direct project impacts.
GEF can effectively assist with regulatory frameworks for
independent power producers, but has only done so in two
countries so far (Mauritius, Sri Lanka).
Problems of allocating the cost difference between wind and
conventional power can seriously hinder progress if not explicitly
addressed.
Two key forms of support go together: creating favorable
investment climate for power projects and establishing regulatory
frameworks for IPPs.
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Measure of Success
 GEF projects will be successful if the firms,
business models, capacities, financing mechanisms,
and/or regulatory frameworks developed remain
sustainable after project completion and are
replicated on larger scales.
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GEF Climate Change Projects
in Mexico
 Since 1991, GEF has approved 6 climate change projects
in Mexico.
 Mexico is also participating in 2 global/regional climate
change projects.
 3 out of these 8 projects have been completed; 3 projects
have not yet started; so only 2 are in implementation.
 One of the 2 in implementation is a renewable energy
project implemented by the World Bank:
– Renewable Energy for Agriculture
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Renewable Energy for Agriculture
in Mexico
 Approx. 1230 renewable energy systems will be installed in
all 28 states as demonstration units, including solarpowered pumps, wind-powered pumps and solar-powered
refrigerated milk storage tanks.
 Project components include promotion, institutional
strengthening, market development, equipment
specifications and certification, demonstration, technical
assistance and vendor financing.
 Total estimated project cost: US $31.5 million
– GEF contribution: US $8.9 million
– Alianza: US $13.9 million
– FIRCO: US $1.8 million
– Farmers: US $6.9 million
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Example of Productive Use of Renewable
Energy in Rural Areas
 Applications of renewable energy that generate income or
other productive social benefits for rural populations are an
important aspect of the GEF’s efforts.
 They go beyond the provision of lighting with solar home
systems and provide development benefits, while offering
large replication potential.
 Productive-use applications are seriously underrepresented
in the GEF’s current portfolio.
 There is a strong potential role for the GEF to support rural
renewable energy projects that explicitly target productive
uses.
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 Methane Gas Capture at a Landfill Demonstration Project (World
Bank/GEF)
– Total cost: $13.25 million
– GEF allocation: $6.27 million
 Hybrid Solar Thermal Power Plant (???)
– Hybrid of 300 MW capacity combining 271 MW of conventional
fossil fuel portion with an input from solar sources of 29MW.
– Total Cost: $178 million
– GEF allocation: $49.70 million
 GEF has recently included a renewable energy project concept
from Mexico in its pipeline (May 2001).
– Plan of Action for Removing Barriers for the Full Scale
Commercial Implementation of Wind Power (UNDP)
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 Much more can be done:
– A Programmatic Approach based on a long term
vision that is in line with Mexico’s priorities and needs
as determined by Mexico with the participation of key
stakeholders.
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Uganda Renewable Energy
Partnership (World Bank/GEF)
 Based on a long term programmatic approach
 Integrates policy, financing, capacity building, institutional
development, and adaptation/learning with flexible targets
and monitoring
 Phased implementation with each phase learning from and
building on prior activities
 Duration: 2000-2010
 GEF support: $30 million
 Co-financing: $345 million ($150 million from IDA and
$195 million from private sector, government and other
donors)
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Uganda Renewable Energy
Partnership (World Bank/GEF)
 Objectives/Outputs:
– Increase rural electrification using renewable energy
– Construct 70 MW of biomass, hydro, and solar
renewable energy capacity over 10 years in a
commercial, private sector orientation
– Install 7,000-10,000 solar home systems
– Integrate renewable energy into rural authorities
activities (i.e., health, education, water, sanitation).
– Reduce prices in the domestic solar PV product
market, increase product availability and quality.
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Uganda Renewable Energy
Partnership (World Bank/GEF)
 Components:
– Grid-based power generation: policy support,
training, international best practice.
– Residential, community, and institutional solar PV
systems: support entrepreneurship and private
finance through private sector, with limited GEF persystem subsidies.
– Productive-use pilot projects for potential replication
on larger scales: drinking water services,
telecommunications and other productive uses.
– Small mini-grids.
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MUCHAS GRACIAS!!!