CSIR – FORESTRY RESEARCH INSTITUTE OF GHANA

Existing Financial Mechanisms & Opportunities

for Sustainable Wood Energy Value Chains in West

Africa

Beatrice Darko Obiri

FOREST PRODUCTS AND MARKETING DIVISION

CSIR-FORIG,GHANA

ECREE Workshop 9-11/05/16, Cotounu, Benin

CONTENTS

1. Context for financing-what are the key issues?

2. Analysis of selected wood energy financing

mechanisms for cases in west African states

3. Financing opportunities for enhancing wood

energy value chains

4. Lessons or Key messages

MY TASK

Analyze existing finance mechanisms and opportunities

for sustainable wood energy value chains in West Africa

OBJECTIVE

Identify best practice/ innovative financing mechanisms that can be harnessed for sustainable development of wood energy value chains in West Africa

Identify opportunties for financing sustainable wood energy value

chains

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HOW ANALYSIS WAS DONE

Desk review of project cases

Information from documents on donor,

company and other websites

Criteria for analysis Financing goal

Fund sources and values

Partners, contribution and partnership arrangements

Key activities financed

Linkage with communities

Sustainability

Any challenges

Any impacts

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Why need for sustainable wood energy financing?

Percent share of total energy consumption

650 million people expected to use biomass (charcoal and firewood) in

cooking in 2040 in Africa

Wood energy will still play a key role in WA economy over next

one and half decade

IEA energy outlook-Africa 2014

Financing enhancement of wood energy value chain so far

Efforts concentrated on development and promotion of more

efficient end use devices through various financing arrangements including

grants

improved end-use devices for clean cooking to conserve

wood, reduce emissions and health hazards in rural

communities

others

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BUT

Every aspect of the value chain needs financing

intervention for improvement

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CONTEXT OF FINANCING: ISSUES NEEDING ATTENTION

8

98% of domestic producers

extract wood for fuel from

natural stands

Increased pressure on the natural feed stock

All year round production

Uncoordinated inter-sectoral efforts for resource management

Extensive cutting-Volta Poor management-Central

DECLINING VOLUME OF PREFERRED WOODFUEL

SPECIES

70 species reported by producers being extracted for fuel

Most frequently extracted are native hard wood species

High wood density with high calorific values

Anogeissus

Ptericarpus

Mangroves

Celtis

Albizia

Vitellaria paradoxa

Khaya

Etc.

Obiri et al 2014 and 2015

Climate threats from drought on crop production

Declining agricultural incomes

Increased dependency on wood energy resources as Major

alternative and supplementary income source in most farming

areas

RUDIMENTARY TECHNOLOGIES: CHARCOAL

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Earth Mound

95%

Mud brick kiln

2%

Metal kiln

3%

RUDIMENTARYTECHNOLOGY

Drudgery and health hazards

Smoke, heat and dust traditional

earth mound charcoal production

Smoke from firewood for cooking

RUDIMENTARYTECHNOLOGY

No secondary processing of firewood to preserve in storage

Wood left in the open

Termite and fungal decay common

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Key segments of wood energy value chain & needs for

financing

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Feedstock

Wood

Conversion- product development Firewood & charcoal

Packaging

&

distribution

Marketing Consumption

Resource

availability &

Regulation

Technology for efficient conversion

for higher end-use product

Technology for quality packaging,

Product standardization

Distribution mechanisms

Regulation

Pricing

Certification

Supply statistics

Efficient end-use

devices

Demand stats

Waste reduction-value for money processes

Accessibility, Affordability, Sustainability

Wide range of stakeholder engagement: institutions-

policy/ regulatory, financial, health, engineering, research

and academia, communities, market associations,

development, etc.

CASES OF FINANCIAL MECHANISMS

REVIEWED

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Case 1: Ghana: Efficiency Enhancement and Entrepreneurship Development in

Sustainable Biomass Charcoaling

Focus: sustainable forestry together with energy-efficient charcoal production & marketing

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Efficient Charcoal

Kilns

Feed stock

- 19 energy wood

plantations

Charcoal Local market

Traditional land owners

Nordic Partner:

-Pöyry Management Consulting

NORDIC DEVELOPMENT FUND

Climate Finance

EUR 500,000

Finish private investor

African Plantations for Sustainable

Development (APSD), Ghana-system

managers

Local Partner

WWF West Africa Forest Programme

Office (WAFPO)-Liason

Private-Private-NGO-Community Partnership Duration: 24 Months

Total Project Cost: EUR 848,000

Improved packaging

training

Improved transport

training Charcoal artisans

training

Local communities-

plantation workers

Case 2: Senegal

Sustainable and Participatory Energy Management Project (PROGEDE II)

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Efficient

carbonization

Feed stock

-community

managed forests charcoal Local market

Senegal

Ministry of Energy

Partner:

World Bank/IDA

Project period: 2010–2015

Project value: EUR 11.1 million

NORDIC DEVELOPMENT FUND

Climate Finance

EUR 3 million

Sustainable wood fuel supply

Promotion and diversification of

modern household energy

Local communities Charcoal artisans

Public Private Partnership ??

Case 3: Ghana

-Biomass Green Briquette Fuel (GBF) Production (BidiePa) under Kitchen

Efficiency Programme https://youtu.be/wOJwXGQmPI8

Aim : Climate mitigation through conversion of forestry and agricultural bio-waste to briquette fuel to save

forests and emission of Green House Gases

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Briquette plant Feed stock

-Maize cobs, Millet stalks

-Sawdust

Briquette Local market

Local associations -Churches, women’s groups for demonstration

Local Gov’t & NGO

Nordic Partner:

C. F. Nielsen A/S (Briquette

machine manufacturer)

NORDIC DEVELOPMENT FUND

Climate Finance

EUR 494,790

Local Partner

CookClean Ghana Limited

Other Partners

S.m.b.a.

(Business to Africa)

Total Project Cost: EUR 923,403

Duration: 24 Months

Private-Private-Private

Case 4: Benin

Increased access to modern energy:

Sub-Component B 2: modernizing biomass energy services

Goal: improve reliability and access to modern energy services

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Efficient

carbonization

Feed stock

-community managed

forests charcoal Local market

Benin

Ministry of Energy and Water

WORLD BANK/IDA : USD1.3m -Community based wood fuel

management of 300,000 ha forest

Project period: 2010–2014

:

Africa Renewable Energy

Access Trust Fund (AFREA)

USD 2 m

Artisan training in high efficient

carbonization

NORDIC DEVELOPMENT FUND

Climate Finance

EUR 1.5 m

-strengthening community-based

sustainable wood fuel production and

market management systems

Parallel funding

Charcoal

artisans

training

Local

communities

PPP??

Case5 : Ghana: Eucalyptus to electricity

Goal: contribute to availability of national power supply, socio-economic

development of local communities

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600 MW

Co-generation Plant Feed stock

- Eucalypt plantations Bioenergy National grid

Traditional land owners

Norwegian power generation business

African Plantations for Sustainable

Development (APSD), Ghana

Private-Private-Community Partnership

Local communities-

plantation workers

Local partner:

JAK Foundation

Any OPPORTUNITIES for sustainable wood energy value chain

financing? (YES)

Private sector investment in wood energy value chain is increasing

Need to put in place appropriate and stable policy and enabling environment

Loans/Grants from development partners still vital World bank /IBRD

World bank/ GEF

African Development Bank

International Tropical Timber Organization

NDF climate finance

Sustainable Energy Fund for Africa (SEFA)

African Renewable Energy Fund

ECOWAS Renewable Energy Investment Initiative (EREII)

National governments and agencies fund sourcing still vital

Potential to network to pool funds for financing wood energy value

chains 20 May 2016

KEY MESSAGES

For sustainability, every segment of the chain needs financing for

higher efficiency and value

Financial mechanisms for wood energy value chain

Public Private Partnership

Private Private Partnership

Public Private community partnerships

External capital from development partners still key to enhancing value

chain

local commercial banks tend to be risk-averse

Green financing mainly grants provides leverage for capitalizing on topical

issues related to climate mitigation and adaption (forest landscape

restoration, emission reduction, climate vulnerability reduction

Forest for Security window

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KEY MESSAGES

Need for innovative financial mechanism to implement sustainable

wood energy projects in West Africa

Possibility of pooling financial resources for wood energy value chain

development fund for financing with local and external energy sector

stakeholders including private sector

Support with favourable policy environment and institutional framework

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COUNTRY LEVEL: SECTOR DEVELOPMENT FUND TO FINANCE WOOD

ENERGY VALUE CHAINS

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WOOD

ENERGY

SECTOR VC

DEVELOPMENT

FUND????

NATIONAL GOV’T

FUNDS • Sector budgetary allocation

• DP support projects

• Pooling internal revenue from

wood energy transactions

-Charcoal liscence

-DA revenue from wood fuel

-FC permit for wood collection, etc.

GRANTS

Climate finance, ETC.

Multilateral and bilateral

NDF, EU, UNFCC- REDD+, ITTO,

FAO-FLEGT, AREF, AU,

ECOWAS, ETC

LOANS & GRANTS

-World Bank

-AfDB

-ETC

VENTURE

CAPITAL (SME)

Local

communities

Green growth development & research

Private sector & institutions -Value for money projects

Feedstock Conversion- product development Firewood, charcoal, briquette &

electicity Packaging & distribution Marketing

End use devices

Consumption

CONCLUSION: Why need innovative finance for sustainable

wood energy value chains in West Africa?

Wood energy is key to sustainable development in the sub-region Primary fuel source for domestic and industrial use

Renewable and reliable even if all other sources of energy fail we can grow

wood and use for energy possibly at a cheaper cost

For wealth creation

Ensure availability and affordability for enterprise/industry development

to increase local economy growth to reduce poverty

Modernization Reduce DRUDGERY in acquisition and use

CONCLUSION: Why need innovative finance for

sustainable wood energy value chains in West Africa?

Ensure efficiency in resource use (incl. safe

use)

Profit maximization along the value chain with

low transaction costs

Ensure environmental and livelihood

sustainability

20 May 2016