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Final Project Document “Preparatory Phase for the establishment of a potential ECO lean Energy Centre (CECECO) – A SDG-7 Centre of Excellence” 1. Background and Overall Objective Introduction: In the context of the Global Network of Regional Sustainable Energy Centers (GN-SEC) Program,1 the United Nations Industrial Development Organization (UNIDO) and the Economic Cooperation Organization (ECO), with financial support of the Austrian Development Agency (ADA) and the Government of China (GoC), are assisting the ECO Member States in the establishment of the ECO Clean Energy Centre (hereinafter CECECO).2 ECO Member States include: Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyz Republic, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan. The CECECO process is closely linked to the other centers operating under the umbrella of the GN-SEC. The GN-SEC is an official SDG Partnership and comprises a sub-network of centers for the African and the Arab region (in cooperation with the EAC, SADC, ECOWAS, and the Arab League), as well as a sub-network of centers for Small Island Developing States (in cooperation with SIDS DOCK, CARICOM, and SPC). It is currently expanding to Central America and the Himalaya-Hindukush region. CECECO would complement and potentially interconnect the Regional Centre for Renewable Energy and Energy Efficiency (RCREEE) for Arab countries with its seat in Egypt3, as well as the Himalaya-Hindukush Centre for Renewable Energy and Energy Center (HCREEE).4 The process of the centre is part of the ECO efforts to promote sub-regional trade regimes and infrastructure development (e.g. railway, gas pipelines). The main fields of cooperation are trade and investment, transport and telecommunications, energy, minerals and environment, agriculture, industry and tourism, human resources, statistics, as well as culture. The process of the centre will also contribute to the integration efforts of the Belt and Road Initiative (BRI). Central Asian states have joined the initiative and various corridor projects are in the planning or implementation stage, such as the China Pakistan Economic Corridor (CPEC). ECO states were part of old Silk Route, the ancient trade route which was one of the oldest and historically important trade route slinking the regions of the ancient world stretching from China through Indian subcontinent, Asia Minor, Mesopotamia to the African Continent and Europe. Apart from its economic and commercial significance, the greatest value of Silk Route lies also in exchange of culture, science and technology. In this context, the partners have agreed to undertake a comprehensive consultative preparatory process, which will determine the added value, feasibility as well as technical and institutional design of the center. The process includes broad stakeholder consultations, consultative workshops, a needs assessment, feasibility study and a project document which will define the institutional and technical design of the center during the first operational phase. The following project document is based on the lessons learned from other centers and provides an overview on the preparatory results and activities. Background: UNIDO received an official request of the ECO Secretariat on 22nd June 2017. The idea for such a center was also presented by UNIDO at the meeting of the bilateral energy working group Austria-Iran on 4 July 2017 in Vienna. Further consultations will be held at the upcoming Iran Renewable Energy Conference which will take place from 31 October to 2 November 2017. The technical center is expected to support the ECO Member States in the implementation of the regional and national sustainable energy commitments and the up-scaling of sustainable energy markets, industries and innovation. 1www.se4allnetwork.org 2 Name to be defined in the preparatory phase 3 RCREEE Member States: Algeria, Bahrain, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Palestine, Somalia, Sudan, Syria, Tunisia, and Yemen; 4 HCREEE will deal exclusively with the rural energy issues of the mountain population in Afghanistan and Pakistan but not with the wider energy issues

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The proposal to establish such a center is fully in line with recent regional and domestic energy and climate policies. Most countries of the region have set targets to increase the use of renewable energy and energy efficiency. Energy is one of the priority areas of cooperation within ECO. The ECO Energy Ministers proclaimed 2013-2022 as the “ECO Decade for enhanced Energy Cooperation”. The ECO Vision 2025 Implementation Framework stipulates the establishment of an ECO Clean Energy Centre up to 2025 by the ECO Secretariat/Member States, which leverages the argument for launching these preparatory activities throughout 2017. Moreover, in July 2017 the Central Asian countries adopted the “Astana Communiqué on Accelerating the Uptake of Renewables in Central Asia” at the Astana Expo 2017. The Communiqué lays strong emphasis on scaling up regional cooperation. So far, such regional cooperation was rather limited. Therefore, such a centre could trigger further integration benefits. The joint endeavour is also a result of UNIDO’s long-lasting cooperative relationship with ECO, based on a 1994 Agreement5. Since then, UNIDO implemented regional projects on trade capacity building for the ECO Member States in the areas of standardization, metrology, testing and quality (SMTQ) infrastructure. Later on, in 2014, UNIDO and ECO launched a new project on good governance and sustainability through quality policy formulation in the ECO Region with the objective of developing a Regional Quality Policy. Moreover, UNIDO is a long-standing partner of ECO countries regarding the promotion of cleaner and resource efficient production practices, as well as renewable energy and industrial energy efficiency. Meanwhile, the 69th session of the UN General Assembly adopted its Resolution A/RES/69/111 (10 December 2014) on Cooperation between UN and ECO, which welcomes the idea of the development of a joint programme by UN and ECO for sustainable energy and, as its outcome, the establishment of a regional energy centre, and calls upon the relevant UN agencies and international financial institutions to consider extending their financial and technical support for the development and implementation stages of this programme (Para 18). Sustainable energy and climate technology are important aspects of the UNIDO south-south and triangular industrial cooperation, as well as the UNIDO contribution to the Belt and Road Initiative (BRI) in the ECO region. Developing green economies for cities was an important focus of the 2nd Bridge for Cities BRI conference organized by UNIDO in Vienna in September 2017. The center will also play a role in linking to the Programme for Country Partnership (PCP) in Kirgizstan. Development, energy and climate issues to be addressed: The proposal for the creation of an ECO Clean Energy Centre ( CECECO) responds to the development, climate and energy challenges of the ECO Member States. The heterogeneous region is home for around 465 million people in an area of 7,940,000 km2. In the recent years, population growth, economic and industrial development, as well as climate change have begun to pose a challenge to traditional development strategies and coping mechanisms of the ECO countries. The developments have had an immense impact on both the environment and the people. The success of social, economic and industrial development strategies is highly dependent on future investments in energy infrastructure and services. 5UNIDO, Inclusive and Sustainable Development in Europe and Central Asia https://www.unido.org/fileadmin/user_upload/BROCHURE_UNIDO_in_EUR_CA_Region_2014_.pdf

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In the ECO Region, the already very high dependence on hydrocarbons to satisfy the rapidly growing demand for electricity, heating and transport services is ever growing. The volatile prices for fossil fuels remain an energy security concern for both the countries with high import dependency and net hydrocarbon exporters. The energy-intensive industries across the region highly depend on the evolution of energy prices. Financing decisions to be taken in the energy sector in this region will highly impact global climate change mitigation and adaptation efforts. The region is an increasing emitter of GHG and will play an important role to achieve the commitments of the Paris Climate Agreement. Due to its geographical location, the region is also vulnerable to climate change impacts. In recent decades there has been an incidence of extreme weather events, which have been affecting the life of people, property and overall development of the countries; leading to people moving across borders due to climate-related consequences, giving place to the terms “Climate-migrants” or “Climate-refugees”. Apart from the vast fossil fuel resources (e.g. oil, natural gas, coal), the region has also significant sustainable energy potentials. By developing their renewable energy sources and putting in place energy efficiency measures, many of the countries would have opportunities to reduce their overall fossil fuel consumption and GHG emissions, meanwhile promoting clean economic growth. Fossil-fuel exporting countries see renewable energy and energy efficiency as means to increase their oil and gas exports, whereas import dependent countries see it as strategy to reduce their dependence. Numerous studies give evidence of the enormous untapped potential for power generation from sun, wind, biogas and small hydro in ECO countries. In ECO Region, the downstream Iran, Kazakhstan, Azerbaijan, Uzbekistan and Turkmenistan are rich in fossil fuels, whereas hydropower resources are concentrated in the mountainous upstream Tajikistan and Kyrgyzstan. Wind power in Kazakhstan and Azerbaijan, solar and biogas energy in Turkey and Uzbekistan, the energy of small rivers in Kyrgyzstan and Tajikistan, and solar power in Iran, Pakistan, Afghanistan, Tajikistan and Turkmenistan have high prospects for electricity generation. Solar water heating and decentralized off-grid power generation from renewable energy sources makes especially strong case in the distant rural areas of the region with limited access to the grid and conventional energy sources. Access to energy services is still a challenge for some rural and remote population groups (particularly of mountain populations in the Hindukush). In the past decades, the region succeeded in expanding the access to modern, reliable and sustainable energy services. As of now, the region has practically full electric coverage6: Afghanistan 89%, Azerbaijan 100%, Iran 99%, Kazakhstan 100%, Kyrgyz Republic 99%, Pakistan 97%, Tajikistan 100%, Turkey 100%, Turkmenistan 100%, and Uzbekistan 100%; Moreover, there is also significant potential for EE improvements with regard to lighting, appliances, buildings, transmission and distribution and industrial processes. The sustainable energy sector can be also considered as a future growth sector, which offers business and employment opportunities particularly for Small and Medium Sized Enterprises (SMEs). Most of the ECO countries have adopted to some extend renewable energy and energy efficiency policies and incentives (e.g. tax exemptions, feed-in tariffs) or are in the process to do so. Iran is currently defining its regulatory and incentive framework for renewable energy. Also, at the regional level, the ECO Member States related objectives, under the Treaty of Izmir, are7: To intensify mobilization and utilization of the ECO Region’s natural resources, in particular energy resources; To facilitate cooperation in the fields of ecology and environmental protection within the region; To promote mutually beneficial interaction and cooperation between ECO and other regional and international organizations as well as financial institutions. The growing interest for RE&EE is also made explicit in ECO’s overall energy mandate qualified as one of the priority areas of cooperation and the continuous efforts to leverage the energy efficiency cooperation of ECO.. Below can be found the detailed chart with the ambitious Renewable Energy Targets8 that ECO Member States have set: Country Sector Target

Afghanistan Electricity 100% share of RES in power generation by 2050 6https://data.worldbank.org/indicator/EG.ELC.ACCS.ZS 7 http://www.eco.int/general_content/85515-Directorate-for-Energy-Minerals-and-Environment.html?t=General-content 8Global Status Report by Renewable Energy Policy Network for the 21st Century (REN21)

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Azerbaijan Electricity 1 GW by 2020 20% share of RES in power generation by 2020

Iran Solar and wind power 5 GW by 2020

Kazakhstan Electricity Bio-power Hydropower Solar power Wind power Primary energy mix

1.04 GW by 2020 15 MW by 2020 539 MW by 2020 713 MW by 2020 1.8 MW by 2020 50% share of RES in power generation by

2030 Kyrgyzstan Renewables 100 MW by 2025

Pakistan Electricity Primary energy mix

10,000 MW by 2030 10% share by 2015

Tajikistan Hydropower (small-scale) 100 MW by 2020

Turkey Bio-power from solid biomass Geothermal Hydropower Solar Wind

1 GW by 2023 1 GW by 2023 34 GW by 2023 5 GW by 2023 20 GW by 2023 30% share of RES in power generation by 2023 Despite the ongoing efforts, the actual deployment of renewable energy (excl. large hydro) and energy efficiency across ECO countries remains very low. In a number of areas, the implementation of policy commitments is still in the initial stages and has not been transformed into economies of scale and vibrant markets for sustainable energy technologies and services. Currently, the share of renewable energy in electricity generation varies from less than one per cent in Kazakhstan and Turkmenistan to about three per cent in Uzbekistan. . The introduction of sustainable energy solutions continues to face a broad range of policy and regulatory, financial, economic, technical, knowledge, awareness and capacity barriers. Due to high fossil fuel subsidies in some ECO Member States and low electricity prices, on-grid power generation from renewable energy remains largely uncompetitive. For the same reason energy efficiency often does not get significant attention. In 2012, Uzbekistan (61 per cent), Turkmenistan (49 per cent) and Kazakhstan (29 per cent) had the highest energy subsidy rates in Europe and the CIS (IEA, 2013). No ECO country yet has in place a comprehensive, streamlined policy mix to support the transition to a sustainable energy system that makes full use of the available resources and technologies, considers alternative socioeconomic scenarios, and aims at creating an attractive investment climate based on the effective use of market forces. Potential investors in the region have either limited or no access to affordable bank loans and often cannot afford relatively high initial investment costs. Furthermore, the number of local technology providers and specialists on sustainable energy as well as reliable renewable energy feasibility studies in Central Asia are limited. Renewable energy baseline: The share of renewable energy in total final energy consumption (TFEC) varies widely across the 10 countries, with an average under 20%, in 2014. For instance, the Kyrgyz Republic and Tajikistan have achieved high shares of renewable energy (above 25% of TFEC), whereas Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan have low shares (less than 3%)9. There is an existent need to ramp up the regional co-operation activities to increase the renewable energy uptake by exploiting untapped potential in these countries. 9REN21 UNECE Renewable Energy Status Report 2017; http://www.ren21.net/wp-content/uploads/2017/06/REN21_UNECE_Renewable_Energy_Status_Report_2017_Report_FINAL.pdf

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Share of Renewable Energy in Total Final Energy Consumption (TFEC), by country: Table: own creation, data from REN21, UNECE 2017, data from 2014 During 2015 and 2016, the region continued to build on its substantial renewable energy resource, with new developments arising in the power, heat and transport sectors. The most prominent growth was in the renewable power sector, where further developments beyond traditional technologies (such as hydropower) are occurring. Players with nascent renewable energy markets continue to mature and utility-scale projects are being commissioned in several countries in the region (such as Kazakhstan and Azerbaijan). However, challenges to the uptake of renewable energy technologies remain, particularly in the heating and cooling, and transport sectors10. Below can be found a snapshot of the Renewable Energy sector of each ECO Member State: AFGHANISTAN Solar PV Wind Biomass Geother-mal Small Hydro Installed Renewable Electricity Capacity (MW) - - - - - Technical Potential for Installed Renewable Electricity Capacity (MW) 222,000 68,000 4,000 70 spots 4-100 23,000Renewable energy resources could play a vital role in the sustainable economic, social, and environmental development of Afghanistan. Heavy reliance of rural households on firewood, rising costs of fossil fuels, outdoor and indoor air pollution, and climate change are some of the challenges that can be addressed by diversifying its power production fuel inputs and adopting renewable energy technologies. Renewable energy resources such as hydro, wind, solar, and to some extent biomass and geothermal resources are abundant in Afghanistan. Hydro resources have considerable potential to be utilized for power generation. In order to deploy and scale up renewable energy technologies and improve access to sustainable energy, clear policies, targets and dedicated institutions are crucial. In that regard, the Afghan Government with the support of the international community is setting ambitious targets for the renewable energy sector and is encouraging national and international investors to take part in the generation, transmission, and distribution of renewable energy especially electricity through Power Purchase Agreements or very cheap land leases11. AZERBAIJAN Solar PV Wind Biomass Geother-mal Small Hydro 10CIA – The World Fact Book https://www.cia.gov/library/publications/the-world-factbook/geos/kz.html 11Journal of Renewable Energy, Hindawi, 2016 https://www.hindawi.com/journals/jre/2017/5723152/

0.0%5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%

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Installed Renewable Electricity Capacity (MW) 35 67 2 - - Technical Potential for Installed Renewable Electricity Capacity (MW) 115,200 4,500 1,500 800 400Azerbaijan’s utilization of renewable energy, especially compared to its technical wind and solar potential, is just 1 percent. Although there are feed-in tariffs for wind and small hydropower plants, recent years have seen only a small amount of private investment, with the exception of some pilot wind power plants. The lack of investment in renewable energy is mainly due to the limited tariffs, when all investment, operation costs and allowance for a fair investor return are taken into account. Another factor is the electricity market conditions, since the vertical integrated state-owned Azerenerji owns most power generation capacity12. But the country is working towards the privatization of the energy sector and the creation of a favourable environment for private investment. The usage of renewable energy is expected to reduce the use of hydrocarbons in the country, which in turn will make it possible to redirect them to overseas markets, increasing the export potential and revenues. IRAN Solar PV Wind Biomass Geother-mal Small Hydro Installed Renewable Electricity Capacity (MW) 35 125 9 - 59 Technical Potential for Installed Renewable Electricity Capacity (MW) 10,000,000 50,000 800 250 674 Iran is a resource rich country that holds the world’s fourth-largest proved crude oil reserves and the world’s second-largest natural gas reserves, of which it is a net exporter of crude oil and natural gas. Iran’s energy is highly subsidized. Iran’s high level of energy consumption and CO2 emissions, and costly electricity production by fossil fuels which are highly subsidized by the government, are just some of the reasons why Iran’s policymakers are keen to utilize these natural conditions to attract private sector investments in the renewable energy market. Iran’s starting trend towards renewable energy is caused by a high potential of resources and the increasing energy demand as well as an inefficient use of cheap fossil energy sources. In terms of installed capacity of renewable energy, Iran is the leader in the MENA region; being the majority of its capacity hydro13. KAZAKHSTAN Solar PV Wind Biomass Geother-mal Small Hydro Installed Renewable Electricity Capacity (MW) 1 2 - - 115 Technical Potential for Installed Renewable Electricity Capacity (MW) 3,760,000 354,000 300 - 4,800 More than 70% of Kazakhstan’s electricity is produced in ageing coal-fired plants, served by the large volumes of cheap local coal in the north-east of the country. Consequently the energy sector, in particular power and heat generation, accounts for 80% of the country’s carbon’s emissions. In order to overcome its electricity challenges (i.e. meeting the rising demand for electricity), the country policy is now based on promoting a more decentralized, balanced and environmentally friendly energy supply system, which will include a range of renewable resources. This recognizes not only the country’s abundant fossil sources, but the highly favourable landscape for renewable energy development. Hydropower is the major contribution to the electric power generation in Kazakhstan; 50% of the country’s territory has average wind speeds of 4 to 6 meters per second, suitable for wind energy generation and its solar power is estimated around 5% of annual power consumption14. KYRGYZTAN Solar PV Wind Biomass Geother-mal Small Hydro Installed Renewable Electricity Capacity (MW) - - - - 47 Technical Potential for Installed Renewable Electricity Capacity (MW) 267,000 1,500 200 - 1,800The renewable energy potential for Kyrgyzstan, one of the poorest countries in the region, remains mainly untapped. If large hydropower plants are defined as renewable energy sources, the share of installed renewable energy electricity capacity would be 12UNDP, Renewable Energy Snaphsot http://www.undp.org/content/dam/rbec/docs/Azerbaijan.pdf 13Watson Farley & Williams, 2016 http://www.wfw.com/wp-content/uploads/2016/05/WFW-Briefing-Renewable-Energy-in-Iran.pdf 14UNDP, Renewable Energy Snapshot http://www.undp.org/content/dam/rbec/docs/Kazakhstan.pdf

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around 80 percent. But if only small hydropower plants are defined as renewable energy sources, the installed renewable energy capacity falls to 1.1 percent. The Law of the Kyrgyz Republic on Renewable Energy Sources, which was adopted in 2009, created a legislative framework for renewable energy feed-in tariffs. However, the law is yet to be fully implemented, and several laws, for example the definition of tariff calculation and determination, are still under development15. PAKISTAN Solar PV Wind Biomass Geother-mal Small Hydro Installed Renewable Electricity Capacity (MW) - 106 - - 195 Technical Potential for Installed Renewable Electricity Capacity (MW) 2,900 000 350,000 2,000 550 2,000 Pakistan is a power deficit country that heavily relies on oil and diesel based electricity generation, which accounts for 40% of the total installed capacity. The generation cost is therefore correlated with the oil prices, and vulnerable to volatility and high costs. To eliminate this vulnerability, the Government of Pakistan expects almost 90% of the money for renewable energy projects to come in the form of foreign direct investments, with a major share coming from China. The Government is also keen on privatisation of country’s energy infrastructure and is speedily issuing licences to private sector players in generation, transmission and distribution. The State Bank of Pakistan directed commercial and development banks to provide project loans to renewable power plants of less than 10MW with fixed interest rates for up to 10 years16. To diversify the energy mix and ensure energy security, the Government of Pakistan has mandated the Alternative Energy Development Board (AEDB) to act as a central agency for development and promotion of renewable energy technologies in the country and to facilitate the private sector investment in this sector. They are currently developing projects on wind and solar power, as well as on biomass/waste-to-energy17. TAJIKISTAN Solar PV Wind Biomass Geother-mal Small Hydro Installed Renewable Electricity Capacity (MW) 1 - - - 132 Technical Potential for Installed Renewable Electricity Capacity (MW) 195,000 2,000 300 17,2 23,000 Only around 2% of Tajikistan’s total generation capacity comes from renewable energy sources, although the technical potential for electricity from small hydropower plants is the highest in the region. The significant potential of SHP can increase the quality of life of remote populations who often face energy shortages. The Government of Tajikistan promotes renewable energy with project-specific feed-in tariffs. Electricity produced form wind, solar, geothermal, biomass and hydropower (up to 30MW) plants are eligible when plant operators receive approval from the government’s Antimonopoly Service18. TURKEY Solar PV Wind Biomass Geother-mal Small Hydro Installed Renewable Electricity Capacity (MW) 25 3,380 263 2,000 1,490 Technical Potential for Installed Renewable Electricity Capacity (MW) 3,871,500 114,000 16,000 31,500 6,800 Turkey’s economic and social development has led to a massive increase in demand for electricity over the last decade. Since the country has no major oil or gas reserves, it is highly dependent on energy imports and is exposed to energy insecurity in the future. Turkey’s increasing energy consumption also raises the importance of energy efficiency due to costly imports in the energy supply. To promote energy efficiency investments, the Government is introducing complementary legislation and action plans. Turkey does have huge potential for renewable energy exploitation. There has been a huge growth in the construction of wind power plants and small hydropower plants in recent years. To meet the growing energy demand, the Turkish Government has adopted a feed-in tariff, which is available for 10 years from commissioning of the plant19. 15UNDP, Renewable Energy Snapshot http://www.eurasia.undp.org/content/dam/rbec/docs/Kyrgyzstan.pdf 16Climate Scope, 2016 http://global-climatescope.org/en/country/pakistan/#/details 17Government of Pakistan http://www.finance.gov.pk/survey/chapters_17/14-Energy.pdf 18UNDP Tajikistan snapshot http://www.undp.org/content/dam/rbec/docs/Tajikistan.pdf 19UNDP TurkeyRenewable Energy snapshot http://www.undp.org/content/dam/rbec/docs/Turkey.pdf

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TURKMENISTAN Solar PV Wind Biomass Geother-mal Small Hydro Installed Renewable Electricity Capacity (MW) - - - - 5 Technical Potential for Installed Renewable Electricity Capacity (MW) 655,000 10,000 - - 1,300 Turkmenistan’s continental and dry desert climate offers tremendous potential for solar power plants. Especially in the regions Kuli, Gasan and the capital, Ashgabat, the surface receives the most usable sunlight in the CIS region. In 2010, Turkmenistan had the world’s fourth largest proven gas reserves, giving it the region’s second largest GDP per capita and foreign direct investment. Due to natural gas being almost the only source for power generation, very low subsidized retail electricity tariffs and the absence of a legislative framework, the share of renewable energy in the overall installed capacity is only 0.18 percent – the lowest in the region. The electricity market is managed by the vertically integrated and state-owned Turkmenenergo, which owns and operates the grid. Turkmenenergo also generates the electricity and distributes the electricity to the end consumers20. UZBEKISTAN21 Solar PV Wind Biomass Geother-mal Small Hydro Installed Renewable Electricity Capacity (MW) 1 1 1,5 - 384 Technical Potential for Installed Renewable Electricity Capacity (MW) 593,000 1,600 800 2,000 1,800With its abundance of natural gas and oil resources, the energy sector of Uzbekistan is heavily dependent on non-renewable resources. Although the technical potential for renewable energy sources, particularly solar power, is very high, dependence on non-renewable sources, along with very low energy tariffs, aggravates the process of energy diversification. The high upfront capital investment required for renewable energy projects and an absence of a legislative support scheme make renewable energy unfavourable compared to investments in oil or gas. The Law on Rational Energy Utilization introduces project-specific feed-in tariffs by allowing a sufficient return on the capital invested, the future operation costs and other technical costs for renewable energy facilities. But the vertically integrated, state-owned electricity company UzbekEnergo generates 97.5 percent of the country’s electricity. The remaining 2.5 percent is the entire installed small hydropower capacity, of which 2.1 percent is operated by state owned Uzsuvenergo and 0.4 percent is operated by small block-stations enterprises. The law has not yet been applied to private investors. Around half of Uzbekistan’s population lives in rural areas that experience significant problems with electricity shortages and cut-offs due to high distribution losses, illegal energy tapping and the poor condition of the infrastructure in remote areas generally. There exists a high degree of acceptance and interest in renewable energy by rural populations. This makes investment in off-grid renewable energy power plants in remote areas interesting.22 Rationale for the creation of ECOCEC: At this background the creation of the ECO Clean Energy Centre (CECECO) is proposed. Stronger cross-border cooperation and coordination can be an effective tool to accelerate the uptake of renewable energy and energy efficiency in the entire region. Regional cooperation has so far not been used systematically to strengthen national efforts to address the barriers for sustainable energy markets, industries and innovation. In this context, the technical center is expected to strengthen the capacities of ECO to assist its Member States more effectively in the implementation of the ECO Plan of Action for Energy/Petroleum Cooperation and set sustainable energy and climate mitigation targets. It will also contribute to better technical coordination, donor harmonization and the assurance of long-term sustainability of project interventions, as well as the documentation of lessons learned. The current regional support framework and the ongoing regional programs are not sufficient. So far, ECO has very limited expertise in the sustainable energy sector. Apart from UNIDO, other major development partners are supporting renewable energy and energy efficiency projects in Central Asia, including the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the Eurasian Development Bank (EDB), the International Finance Corporation (IFC), the World Bank and the Global Environment Facility (GEF). The country offices of the UNDP and the Gesellschaft für Internationale Zusammenarbeit (GIZ), the Regional Environmental Centre for Central Asia (CAREC) and local nongovernmental organizations often act as implementing agencies on the ground. The creation of 20UNDP Turkmenistan Renewable Energy snapshothttp://www.eurasia.undp.org/content/dam/rbec/docs/Turkmenistan.pdf 21 Available Renewable Energy Status of the ECO Member States (2012-14); Concept Paper on the establishment of the ECO Regional Centre for Renewable Energy and Energy Efficiency. 22UNDP Uzbekistan Renewable Energy snapshot http://www.eurasia.undp.org/content/dam/rbec/docs/Uzbekistan.pdf

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the new center will strengthen the UNIDO efforts to create a Global Network of Regional Sustainable Energy Centers (GN-SEC) which is expected to play an important role in the implementation of SDG-7 and the Paris Climate Targets. The centre is also expected to address major regional thematic gaps in the areas of capacity development, knowledge management, awareness raising as well as investment and business promotion. Leveraging sustainable energy investments and the introduction of appropriate regulations and standards go hand in hand with the need for local institutional capacities and qualified human resources. There is the impression that the local private sector and industry do not take full advantage of the growing sustainable energy market and job opportunities. There is a common understanding that some ‘soft’ barriers for RE&EE can be addressed more effectively and at a lower cost through regional approaches and methodologies. Objectives, Outcomes and Activities of the CECECO: The first CECECO concept note was prepared. However, the objectives, outcomes and activities of CECECO will considerably change during the preparatory phase. They will be defined by the ECO Member countries during the consultative process. The regional centre could aim at the following overall objective: Contribute towards increased access to modern, affordable, reliable and sustainable energy services, energy security and mitigation of negative externalities of the energy system (e.g. local pollution and GHG emissions) by creating an enabling environment for renewable energy and energy efficiency markets and investments. The centre would act as regional hub and think-tank for sustainable energy issues in ECO Member States and will execute programs, projects and activities in five outcome areas (specific objectives): 1. Effective regional sustainable energy promotion agency created and efficiently managed; 2. Enabling policy, legal and incentive frameworks are created and under implementation; 3. Effective sustainable energy qualification, innovation, certification and accreditation frameworks for sustainable energy are created and implemented; 4. Effective knowledge and data management, as well as awareness raising and advocacy; 5. Investments in sustainable energy infrastructure, and manufacturing and servicing industries mobilized. The result framework of the project document will ? be developed during the preparatory phase. It will provide a comprehensive planning, implementation and monitoring framework for the envisaged key objectives, outcomes and outputs for the start-up and first operational phase of the centre. At this initial stage, the activity matrix will be more indicative. The prioritisation and detailed budgeting of the activities will be done once the centre and its governance structure is fully operational. The Centre will apply an interrelated short-term and long-term planning, implementation and monitoring framework. The Executive Director will develop the business plan of the centre and the annual work plans in cooperation with the National Focal Institutions (NFIs) and under the guidance of the Technical Committee and Executive Board: The CECECO Business Plan will be based on the project document and provide a long-term strategic framework for the first and second operational phase of the centre. The Business plan will include a strategic environmental assessment. The centre will adopt an internal quality appraisal framework which will screen undertaken activities with regard to environmental, social and economic sustainability aspects. In the annual work plans the partners will agree on the priority activities to be implemented by the centre in the given year and in accordance with the available budget. The work plans are subject to review and approval by the Technical Committee and Executive Board. The annual work plans shall include a matrix of proposed activities, their estimated costs, as well as the indication from which partner contribution costs will be covered. For transparency purposes, the matrix shall include all received donor contributions by CECECO. The annual status reports to be prepared by the Executive Director will monitor the implementation of the work plans and report on the achievements in the different project components. Design of Preparatory Process (maximum of 16 months): The preparatory process will include the following activities (see logical framework): Development of TORs for a consultant company to execute the needs and baseline assessment as well as feasibility study; Tendering, selection and contracting of international consultancy company;

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Development of the needs and baseline assessment (incl. survey, interviews) as well as feasibility study in cooperation with consultant and in consultation with national and international key stakeholders; Organization of the first regional workshop to validate the needs assessment report and feasibility study (incl. flight bookings, per diem payments). The preparatory phase will only be continued if the results are positive; Development of the project document on the technical and institutional design of CECECO throughout the first operational phase; Organization of the validation workshop on the project document on the first operational phase of the centre (incl. flight bookings, per diem payments) and submission to ECO decision-making bodies for approval; Fund raising and signing of funding agreements; The overall scope of the tasks for developing a detailed needs assessment and project document (incl. feasibility assessment) will focus particularly on the technical program and institutional design of the centre. On technical program design, some key aspects to be addressed may include among others: identification of existing RE&EE market segments, trends regional/national policies, technical capacities, business environment, mapping of the most important public and private RE&EE stakeholders including key donors in the sector and possible fields of cooperation and the comparative advantage where the CECECO can create regional impact and added value with high potential for scaling-up or regional replication. On institutional set-up and design, suitable options need to be identified for a feasible and effective design and governance structure of the Centre by considering the principles of ownership, effectiveness, efficiency, impact and sustainability through the preparatory consultative process. The preparatory process will be guided by the following UNIDO principles in coordination with ECO: The centre will (...): be created in the framework of already existing regional institutions and build on regional experiences have a strong local ownership and fund raising abilities based on a transparent institutional set-up work closely with already existing regional and national institutions address renewable energy and energy efficiency equally and holistically not compete with private sector services avoid duplication of other ongoing initiatives but build synergies be action and implementation oriented rather than political bridge the gap between sustainable energy policy commitments and lack of implementation and investments on the ground influence policy for energy security of poor mountain communities be a strong link between international climate finance and implementation on the ground employ local experts and a few international experts promote South-South and North-South knowledge cooperation and technology transfer Mainstreaming of gender and other cross-cutting issues: Recognizing that gender equality and the empowerment of women have a significant positive impact on sustained economic growth and inclusive industrial development, in alignment with the UNIDO Gender Guidelines (UNIDO policy on Gender Equality and the Empowerment of Women from March 2015) following elements will be mainstreamed throughout the preparatory and implementation phase of the Centre: Guiding principle of the project will be to ensure that both women and men are provided equal opportunities to access participation in and benefitting from the project, without compromising the technical quality of the project results. To mainstream gender into the project, a gender analysis is planned during the preparatory phase to identify entry points for defining gender aware project outcomes, outputs as well as activities that will be reflected in the project log-frame. The gender analysis (including specific gender-disaggregated data) will be integrated in the needs assessment. The roles of women as energy consumers as well as producers, and their involvement

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throughout the energy value chain (including female decision-makers in private and public sector, female entrepreneurs, female technical and administrative employees, female STEM graduates), will be analysed to identify entry points for specific interventions in the technical program of the Centre. Local Civil Society Organizations (CSOs) and Non-Governmental Organizations (NGOs) promoting gender equality issues and advocating women’s empowerment as well as gender focal points from stakeholders will be invited to the regional workshops. The consultants in cooperation with the UNIDO experts will include particular gender mainstreaming elements in the institutional set-up and technical program of the Centre. Gender indicators will be included in the logical framework of the Centre. They will become a steering element for the Director of the Centre. The inclusion of minimum gender clauses will ensure a sufficient representation of gender views in the Governance Structure (Executive Board and Technical Committee) and the recruitment policies of the Centre (minimum of female professional staff). Gender-sensitive recruitment will be practiced at all levels where possible, especially in selection of project staff. Gender responsive TORs will be used to mainstream gender in the activities of consultants and experts. In cases where the project does not have direct influence, gender-sensitive recruitment will be encouraged. Furthermore, whenever possible existing staff will be trained and their awareness raised regarding gender issues. A gender focal point will be nominated by the Director of the Centre. Gender, as well as other important cross-cutting issues such as poverty reduction and conflict prevention will be included into the quality and appraisal framework of the Centre. Specific projects, programs and activities with focus on “gender and sustainable energy” will be included in the technical program of the Centre (e.g. workshops, conferences). The project document and its budgetary provisions will reflect this focus area. Gender will be mainstreamed throughout the activities of the Centre in general. This involves efforts to promote gender balance, for instance, the participation of women in training activities, both at managerial and technical levels, as participants and trainers (e.g. minimum participation of women in workshops, conferences, trainings with particular focus on gender and energy, train the trainers approaches). All decision-making processes will consider gender dimensions. At project management level, Project Steering Committee meetings will invite observers to ensure that gender dimensions are represented. Also, at the level of project activity implementation, effort will be made to consult with stakeholders focusing on gender equality and women’s empowerment issues. This is especially relevant in policy review and formulation. When data-collection or assessments are conducted as part of project implementation, gender dimensions will be considered. This can include sex-disaggregated data collection, performing gender analysis as part of ESIAs, etc. Besides the gender aspects the following cross-cutting issues will be also considered: The issue of minorities and indigenous people will be particularly addressed throughout the needs assessment and project document. These groups are particularly concerned by energy poverty but also by decentralized renewable energy systems as solution. The issue of climate change adaptation and resilience will be mainstreamed throughout the needs assessment and development of the project document. It has to be considered throughout the project cycle of sustainable energy activities of the centre (e.g. climate resilient planning and infrastructure, impact on hydro power projects). Potential negative environmental and social impacts throughout the life-cycle of sustainable energy projects (e.g. dismantling, recycling, impacts on biodiversity or water, biofuels) Potential risk and mitigation measures: Usually, no major risks are expected. However, one of the biggest risks is that ECO or the driving Member Countries lose interest in such a centre. Another risk is that other international partners could consider the centre as an overlapping to their existing activities. These risks will be mitigated through a very transparent and open preparatory process which will include all major stakeholders. 2. Logical Framework and Time Schedule

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Expected outcome Indicators Source of verification/deliverables Regional agreement on the institutional structure, scope and technical design, implementation schedule and financing modalities for CECECO is reached. Approval by ECO decision-making bodies Validated needs assessment, feasibility study and project document Minutes of the consultative and validation workshop ECO’s PPT letter of approval Main outputs Indicators Source of verification/deliverables Outputs:

Finalized and validated needs assessment report and feasibility study on CECECO Finalized concept note and project document on the institutional set-up and technical program of the centre Successful and effective execution of two regional validation workshops on the needs assessment, feasibility study and project document of the centre Various consultative meetings with regional organizations, donor partners and other key stakeholders are successfully executed; Presentation of the ECOSEC process as important initiative in several key events

Common agreement on the need and added value of such a centre Common agreement on the design of the institutional set-up and technical program based on the needs assessment Number of participating countries of the region and key stakeholders in the validation workshops Approval by ECO’s decision-making bodies Number of received expressions of interest of international partners to support CECECO and its activities CECECO cited in documents

Needs assessment Feasibility study Concept Note Project Document Agendas Minutes of the workshop and stakeholder meetings including lists of participants Presentations Press releases and photo collection of each meeting Activities (to be executed over a maximum of 12 months) Responsibility (lead agency marked bold) Timeframe (M = month) Comments

Development of TORs for a consultant company to execute the needs assessment and feasibility study UNIDO in consultation with ECO and donors M1 UNIDO develops and shares the draft TORs; Tendering, selection and contracting of international consultancy company UNIDO in consultation with ECO and donors M1 to M2 Consultancy company requires energy experience in the Central Asian region and shall offer a team of int. and national key experts; Development of the needs assessment report (incl. survey, interviews) and feasibility study UNIDO and ECO in cooperation with consultancy company M2 to M6

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in cooperation with consultant and in consultation with stakeholders in each country and on international level. Organization of the regional workshop to validate the needs assessment, and feasibility study (incl. flight bookings, per diem payments) ECO in cooperation with UNIDO M7 Development of the project document on the technical and institutional design of ESEC based on the findings in the needs assessment and feasibility study (activity will be undertaken in case the validation of the needs assessment and feasibility study shows positive results) UNIDO in close consultation with ECO M7 to M12 Organization of the validation workshop on the project document on the first operational phase of the centre (incl. flight bookings, per diem payments) and submission to ECO and countries for consideration ECO in cooperation with UNIDO M12 Preparation of background documents and information materials and fund raising UNIDO and ECO M1 to M12 3. Direct and Final beneficiaries The consultative preparatory process will raise awareness and knowledge on sustainable energy issues and the benefits of regional cooperation in the sector. The following target groups will benefit from the preparatory phase on CECECO directly or indirectly: 1. At least 100 energy policy makers of ECO countries (e.g. ministries, provincial governments) 2. At least 20 national institutions of ECO countries in charge of promoting sustainable energy and rural energy 3. At least 10 educational and training institutions (e.g. universities, training centres) 4. At least 10 national utilities and regulators 5. At least 20 energy manufacturing and service companies and/or associations representing ECO countries (e.g. consulting, suppliers, equipment producers, installers, IPPs) 6. At least 20 civil society groups representing ECO countries (e.g. sustainable energy advocacy groups, women groups) 7. Ultimately, the greater population of the ECO Region, local industry and public institutions will benefit from increased access to modern, affordable and reliable energy services. 4. Project Team

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Mr. Martin LUGMAYR (m.lugmayr@unido.org), Sustainable Energy Expert, Coordinator of the GN-SEC, Climate Policy and Networks Division, Department of Energy, UNIDO Mr. Djalynbek TURGUMBAEV (turgumbaev@eco.int), Programme Officer (Energy), ECO Secretariat Donor 1, to be nominated 5. Project Monitoring UNIDO will deliver the following reports: 1. Final report including minutes and photo documentation 2. Final Needs Assessment and feasibility study 3. Project Document on the technical and institutional design of the Centre 6. Indicative Budget ECO is expected to provide in-kind support for the organisation of the meetings, political process, technical inputs, sharing knowledge, providing regional platforms and others. Synergies to the other Regional Centres of the Global Network of Sustainable Energy Centres will be created. UNIDO will have the full possibility and flexibility to shift budget between the indicated budget lines below (classified as flexible grant). Table 1: Indicative Budget for the CECECO Preparatory Phase (in EUR) Activity UNIDO co-funding contribution (in EUR) Austrian Development Agency (ADA) (in EUR) Potential EU contribution (in EUR) ECO in-kind contribution (in EUR) 21-00 Consultancy Company / Contractual services 30.000 20.000 11-00 Other consultancy services 5.000 10.000 20.000 15-00 Local travel 10.000 5.000 5.000 10.000 16-00 International travel 5.000 5.000 5.000 35-00 Consultative and validation workshop 25.000 20.000 20.000 51-00 Other costs 10.000 Total 50.000 50.000 50.000 50.000 Table 2: Donor funding commitments to UNIDO (incl. support costs) Donor Commitments in EUR 13% support costs (in EUR) Total contribution to UNIDO Austrian Development Agency (ADA) 50.000 6.500 56.500 Government of China 50..000 6.500 56.500 Total 100.000 13.000 113.000 7. List of references Request of ECO to UNIDO UNIDO response to ECO

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Co-Financing letter of ADA