CDM PROJECTS AND FINANCING ENERGY INITIATIVES AT THE
LOCAL LEVEL
City Energy Strategies Conference
Cape TownNovember 2003
Energy for Africa. Forever.
Energy for Africa. Forever City Energy Strategies Conference
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
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
But where are the investors, banks, financiers & funders?
But where are the investors, banks, financiers & funders?
What is the state of play?
• Solutions exist, barriers challenged but we still seem to struggling with implementation, scaling up and building an investment case
• Solutions exist, barriers challenged but we still seem to struggling with implementation, scaling up and building an investment case
• 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
• 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
Energy for Africa. Forever City Energy Strategies Conference
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?
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?
Financing sustainable energy solutions1% increase in the electricity price in Cape Town would raise R 30
million per annum for climate protection projects
Financing sustainable energy solutions1% increase in the electricity price in Cape Town would raise R 30
million per annum for climate protection projects
Local conditions and barriers 1
• 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?)
• 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 ?
• 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 ?
Energy for Africa. Forever City Energy Strategies Conference
Perceptions by investors…risk, 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
Perceptions by investors…risk, 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
Create an environment conducive to attracting investorsCreate confidence that we are committed to implementing these
solutions and that the risk can be lowered and managed adequately
Create an environment conducive to attracting investorsCreate confidence that we are committed to implementing these
solutions and that the risk can be lowered and managed adequately
Local conditions and barriers 2
• 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
• 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 & PPA’s• Feed-in laws to guarantee price stability for RE producers
• 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 & PPA’s• Feed-in laws to guarantee price stability for RE producers
Energy for Africa. Forever City Energy Strategies Conference
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)
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)
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
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
• 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 JV’s
• 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 JV’s
• 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
• 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
Energy for Africa. Forever City Energy Strategies Conference
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
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
Energy for Africa. Forever City Energy Strategies Conference
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
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
• 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)
• 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)
Energy for Africa. Forever City Energy Strategies Conference
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
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
The Project
Public Sector Funder
Local Authority
10%
Private Financier – loan capital
Equity Partner
Community Empowerme
nt TrustRaise own capital from the
community
Sees long term value
in the market
Sees long term value in the market – sees Munic can secure the
investment
CDM
• Buys a stake to sell at later date
• Puts money in fund for other RE projects
Davin Chown+27-83-460 3898
PO Box 363 Newlands [email protected]
Energy for Africa. Forever.
Genesis Eco-EnergyDr A. van der Linde (CEO)
+27-82-825 [email protected]
Dr L. de Lange+27-82-481 0522