energy sector opportunities blending & other innovative...
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ENERGY SECTOR Opportunities
Blending & other Innovative Instruments
Felice ZACCHEO
Head of Unit
Unit C6 Sustainable Energy and Climate Change
DG DEVCO
3 billion people cook and heat their homes using open fires
and simple stoves burning biomass (wood, animal dung
and crop waste) and coal.
Over 4 million people die prematurely from illness attributable to the
the household air pollution from cooking with solid fuels (WHO,
2016).
Need to increase access to energy and do it with renewables: facts & figures
1.2 billion people without access to electricity (IEA, 2016)
Energy poverty Energy financingAnnual requirement for the period from 2010 to 2030 to achieve the universal access to modern energy services and doubling the share of renewable energy in the global mix :
• $50 billion for energy access (current spending is $9 billion)
• $442-650 billion for renewable energy (current baseline of $258 billion).
Except for Europe all regions need to increase investment to meet targets. The
largest annual funding gap by far is in developing Asia.
• $560 billion for energy efficiency (current spending is $130 billion).
(SE4All Advisory Board’s Finance Committee Report on Scaling Up Finance for
Sustainable Energy Investments, 2015)
Climate change
3 pillars of the EU strategy
1. Increase access to renewable energy
2. Increase renewable energy generationcapacity and energy efficiency
3. Contribute to the fight against climate change
• Council Decision on Climate and Energy 2014
• Council Conclusions on Energy and Development 2016
• New European Consensus for Development 2016
• Council Conclusions on Energy and Climate Diplomacies 2017
• Global vision: Sustainable Energy for All UN initiative–2011, UN 2030 Agenda for Sustainable Development-SDG7-2015, Paris Agreement 2016, COP22 Marrakech 2016, COP23 Bonn–2017, G7 and G20 energy, climate and development groups
• The 2030 Agenda for Sustainable Development
• The Paris Agreement
• Addis Ababa Action Agenda (Financing for Development)
• The Africa-EU strategic partnership for energy: 'Energising Africa'
• Global Strategy on the European Union's Foreign and Security Policy
• The international dimension of the EU Energy Union
• New European Consensus on Development
• Council conclusions on energy and development
• European External Investment Plan
International engagement
Political ownership of reform agenda
23 Joint Declarations
Africa Renewable Energy Initiative (AREI)
Contribution to National/Regional and Global Indicative Programmes with (EUR 2.7 billion to sustainable energy in Sub-Saharan Africa)
Covenant of Mayors in SSA to strengthen the role of local authorities
Capacity building
Technical Assistance Facility (TAF) – supporting Reforms and regulatory frameworks
Investments
Regional Blending facilities
ElectriFI
European External Investment Plan (EIP)
3 drivers of the EU strategy
FINANCIAL ASPECTS
EUR 3.7 billion allocated from EU
development funds to sustainable
energy actions in developing countries
(2014-2020)around EUR 2.7 billion
for Sub-Saharan Africa
30 partner countries have significant
allocations to the energy sector (NIP)17 are located
in Sub-Saharan Africa
+priority area for EU cooperation with
regions: Sub-Saharan African, ACP,
Central Asia and Caribbean
+ Sustainable energy is one of the five
thematic areas under the Development
Cooperation Instrument (DCI) thematic
programme Global Public Goods and
Challenges (GPGC) for 2014-2020
Political ownership
Energy as focal sector: Rwanda
• In 2016, the EU signed a 6-years budget support agreement to support Rwanda’s agenda (EUR 177 M) in the energy sector
So far, the EU support has helped Rwanda to increase by 10% the electricity access rate of its population
• To provide access to modern energy for the population• To contribute to the development of industrial activities Prerequisite for the achievement of Rwanda’s goal: a middle-income country by 2020
Objective:
Political ownership
Energy as focal sector: Cote d'Ivoire
• National Indicative Programme (NIP) (EUR 139 M): o To provide access via strengthening and extending the grid in
Abidjan, Bouake, San Pedro;o For actions aiming to increase the percentage of renewable
energy and promoting energy efficiency actions; o To increase the role of mini-grids and independent systems
• More than six different Technical Assistance Facility (TAF) actions and missions since 2014
Strengthening and extending of the BOUAKE electricity distribution network
Political ownership
• EU strongly supports AREI which is an Africa-led initiative established in COP21 with the objective to accelerate and scale up the harnessing of the continent's huge renewable energy potential.
• Its objectives are to achieve at least 10 gigawatts of new and additional renewable energy generation capacity by 2020, and mobilise the African potential to generate 300 gigawatts by 2030.
• EU commitment: EUR 1.5 billion to support 5GW of new renewable energy by 2020 (half AREI objective by 2020).
• State of Play: 19 projects with an estimated EU support of EUR 315 million adopted. Expected to leverage EUR 3.9 billion of investments, Cover the needs of about 1.3 million families Add 1.8 GW of renewable energy generation.
• Enhanced cooperation through existing instruments.
Africa Renewable Energy Initiative (AREI)
Political ownership
Established in 2007 as one of the partnerships created under the ground-breaking Joint Africa-EU Strategy (JAES), at the 2007 Lisbon Summit, the AEEP’s overall objective is to improve access to secure, affordable and sustainable energy for both continents.
AEEP has served as a long-term framework for strategic dialogue between Africa and the European Union on the key energy issues and challenges in the 21st century, with a focus on:
• sharing knowledge• setting political priorities • developing joint programmes
Political ownership
• AEEP 2nd Stakeholder Forum by EU, AUC and Government of Italy(Milano, May 2016):
o Cross-sectoral exchange between high level policy makers with key private sector, academia and civil society representatives in order to facilitate partnerships for on-the-ground implementation;
o Influence energy policy to provide an enabling framework for stakeholders to contribute to rapid development of sustainable energy in Africa.
• 500+ participants: African and EU Ministers, Commissioners and senior officials from the AU and EU, as well as policy-makers, regional institutions, international organizations, the banking and finance industry, the private sector, academia, civil society, and the media.
• Mix of structured panel discussions, targeted networking and business match-making events, media campaigns, and an exhibition and fair showcasing some new technological innovations.
Political ownership
Phase III
1. Improve planning & monitoring capacities of local authorities
2. Prepare Sustainable Energy Access & Climate Action Plans (SEACAPs)
3. Prepare urban sustainable energy & climate related investments
4. Facilitate dialogue with private sector & finance institutions
5. Foster & support cooperation among local authorities & cooperation
between different levels of government
Covenant of Mayors in Sub-Saharan Africa (CoM SSA)
• CoM SSA is a regional CoM initiative that supports SSA cities• CoM SSA is part of the Global Covenant of Mayors for
Climate and Energy (GCoM)• Launched in 2015 – 105 signatory cities as of May 2018 • In addition, 13 pilot cities• Phase I & II (launch & kick-off) (AAP 2015 & 2016): EUR 16MEnergy AAP 2017
Scaling-up and finance: increase number of cities, access to finance, project preparation, TA, twinning, coordination with blending platforms and other initiatives
Phase III (2019-2022) – EU contribution of EUR 25M:
New approach in line with EIP/innovative financing: enabling environment bring in the private sector boost private investments
Political ownership
Women at the centre of EU-Africa energy cooperation
Main EU priorities:
Sustainable Energy and Gender
New Consensus for Development
Agenda 2030 (SDG 5 & 7)
EU Gender Action Plan II
Women and Sustainable Energy Initiative • CfP 2017: 120 eligible concept notes
• 18 full project proposals
• 3 projects selected: EUR 18.1M over 5 years
WISE - Women Increasing Sustainable Energy Access and Use: EUR 5.5M for 5 years to help women establish sustainable businesses in Sierra Leone, Uganda and Kenya
Breaking the Barriers - Promoting women entrepreneurship in sustainable energy value chains through innovative approaches: EUR 4.9M for 3.5 years in Ethiopia, Honduras, Burkina Faso and Malawi
DESFERS - Economic and Social Development of Women through Renewable Energy in the Sahel: EUR 7.6M for 5 years to facilitate access to women entrepreneurship in the sustainable energy sector in Senegal, Mali and Niger
Political ownership
Making sustainable energy investments a reality
Technical Assistance Facility (TAF)
Three TAF contracts > 40 million EUR
Since December 2013
Duration: 6 years
Geographic coverage:
Central and West Africa
East and Southern Africa
Rest of the World
Covers all partner countries, high quality and expertise and support in:
Policy advice
Capacity building
Identification
Mobilisation of funding
Technology transfer
Supports regulatory & policy reforms in partner countries' energy sectors
Assists in the fine-tuning of policies to create a conducive environment for private sector investments
Capacity building
The EU's TAF has supported the development of a harmonised continental regulatory framework for Africa aiming to
strengthen the electricity industry and attract investment.
Analysis of regional & continental regulations
Identification of gaps
Development of strategy & action plan
Harmonized Regulatory Framework for the Electricity Market in AfricaEU SE4All Technical Assistance Facility (TAF) Eastern & Southern Africa
• Economic Regulatory Framework
• Technical Regulatory Framework
• Enabling market environment
• Enhancing RE Frameworks
• Establishing the norms, standards &
frameworks for energy efficiency
The proposal was adopted in July 2017 by the 55 Heads of State meeting during the 29th African Union Summit.
Key pillars for Regulatory Harmonization:Objectives:
African Union Commission (AUC):
Support the work of AUC for integrated, competitive & harmonized electricity
Capacity building
July 2015 Africa Investment Facility (AfIF)
Regional Blending facilities
7 Investment facilities set up for infrastructures in regions worldwide
40 % of projects are energy-related
Blending: an instrument for achieving EU external policy objectives, complementary to other aid modalities. It combines EU grants with loans or equity from public and private financiers.
Investments
17
Regional Blending facilities
Examples
Through AFIF:
Enhancing Vocational Training delivery for the power sector in Nigeria (NAPTIN)
SUNREF Nigeria
Through ITF:
Africa Energy Guarantee Facility(AEGF)
Clean Cooking Programme for Africa
Environmental Credit Lines for Kenya, Uganda and Tanzania – EngagingBanks in Energy Transition Projects
Geothermal Risk Mitigation Facility for East Africa (GRMF)
Renewable Energy Performance Platform (REPP)
Investments
Technical Assistance Facility – SSA Africa
Niger: Hybrid Power Plant Agadez
• Improve and secure the electricity supply of Agadez at a lower cost• Develop the country's RE potential and reduce CO2 emissions • Train Nigelec engineers and technicians in photovoltaic
technologies to enable them to operate large solar power plants themselves
Very low level of electricity supply to Agadez from the coal production site at Tchirozérine, 75 km from Agadez
50% of the population is connected to a very old grid Increasing electricity demand: historic trend and forecast
Total budget: EUR 34 mEU: EUR 16.4 m (2 m TA)AFD: EUR 16 mBeneficiary: EUR 1.6 m
2017
Low electricity supplyElectricity demand: increasing trendsSignificant RE potentialAgadez: migration flow hub
EU support to design and fund the construction of a new power plant using solar energy
Objectives:
Improve securityEconomic & social conditionsStabilize immigrants
Improve electricity supply for the 200,000 to 500,000 people
Investments
• 147MW run-of-riverhydropower plant.
• Located at the border betweenDRC and Rwanda downstreamof Ruzizi II.
• A rock filled dam will be 30mhigh and 120m long with a227km2 watershed.
• Tunnel of 3.9km and 6.7mdiameter.
• Max flow of 150m3/s.
• 3 Francis turbines of 49MWeach.
• Regional power project undera PPP structure.
The proposed Ruzizi III
EPC Costs M EUR
Civil Works 326
MechanicalEquipment
79
ElectricalEquipment
63
Substation – T-Line
15
TOTAL 483
19
Ruzizi III Investments
Indicative budget: EUR 299 m EU: EUR 44 mEIB: EUR 97 m AFD: EUR 14 m KfW: EUR 27 mAfDB: EUR 117 m
2015
Regional Blending Facilities – Western Neighbourhood
Montenegro Grid Section: Trans-Balkan Electricity Corridor (I)
• Montenegrin power transmission system integrated into the wider European energy market.
• Approximately 165 km long 400 kV overhead transmission line from Lasta to Pljevlja and then to the border with Serbia.
• A new 400kV substation in Lastva and upgraded substation in Pljevlja.
Contributes to the establishment of a Western Balkans regional electricity market through the creation of a 400 kV transmission corridor between Montenegro, Serbia and Bosnia and Herzegovina.
Total cost: EUR 127 mKfW EUR 25 mEBRD EUR 60 mWBIF EUR 28.5Beneficiary EUR 17 m
2015
Results:
Investments
Benefits:
• Social welfare benefits associated with the investment on the Montenegrin part are estimated at EUR 7.5 million in 2018 and EUR 5 million in 2023.
• Reduced transmission losses and additional electricity generators on the grid, leading to lower electricity prices for residents, industry and investors.
• Secure power supply in Montenegro by eliminating overloads in the system and so reducing outages.
Regional Blending Facilities – East Neighbourhood
Georgia: Jvari – Khorga Interconnection (Transmission Line & Substation)
• Eliminate existing bottlenecks in the power transmission network in the western part of Georgia• Increase transmission reliability• Improve the country’s security of supply • Facilitate hydropower development and boost the country’s power export and transit potential• Create new jobs on substations in Jvari and Khorga (50 new jobs for local residents)
Jvari-Khorga region in north western Georgia 68 km of transmission lines and a new 500/220kV substation Extension of the Black Sea Transmission Network (BSTN)
Total cost: EUR 59.85 mKfW EUR 22.15 mEBRD EUR 25.20 mNIF Grant EUR 8.0 mGoG EUR 4.5 m
2012
Untapped hydropower reservesLarge potential for GHG emissions savingsGeographical location
Further development of RE resources by expanding the transmission infrastructure to export clean energy to neighbouring markets
'Energy bridge' in the Neighbourhood: Caucasian countries, Turkey/Western Europe, Caucasian and Middle Asia
Objectives:
Investments
Regional Blending Facilities – South Neighbourhood
Morocco: Integrated Wind Energy Programme
• Boost electricity production while protecting the environment and offering clean energy• Meet growing electricity needs• Create new jobs• Develop high level expertise• Promote R&D in the area of wind power
Three wind farms: Tanger II, Midelt and Jbel al Hadid Capacity of 450 MW structured through PPP Programme in line NIF and the Mediterranean Solar
Total cost: EUR 797 mKfW EUR 130 mEIB EUR 350 mNIF Grant EUR 15 mBeneficiary EUR 74 mPrivate sector EUR 228 m
2013
Heavy reliance in energy importIncreasing energy consumption levelsIncreasing price of oil products
Energy strategy focused in the development of RE
Part of the Energy Strategy that places RE at the epicentre of it
Objectives:
Sustainable economic growth
Investments
E
I
P
Technical assistance
• To help developing bankable projects which could be financed under
pillar 1
• To support activities aimed at enhancing business climate under pillar 3
2Enhanced
Investment Climate
• Political and policy dialogue for economic reforms
• Support legal, institutional and regulatory frameworks
• Engaging with the private sector
3European Fund for
Sustainable Development (EFSD)
Mobilising investments and improving access to finance
EFSD Guarantee Fund(especially for the private sector – EFSD Guarantee)
Regional Investment Platforms (Africa and the EU
Neighbourhood)
1
23
One-stop-shop / web portal
External Investment Plan(EIP)
Investments
ElectriFI – global (with FMO, EDFI)
• 2015, launched Paris COP, operationalised 2016
• 120M+ from budget (+10M Power Africa, +5M Sweden)
• Instrument to reduce investment risks for the private sector
• Flagship instrument for S/M scale investments
• Strong focus on access and with rural focus, decentralised and off
grid solutions
• Projects financially sustainable; potential to scale
• Early stage, high risk with flexible financing
• Ticket size 500K – 10M EUR
Investments
• Financing of max 50%, always additional to other funders
• Deployed where projects are too risky for commercial banks
alone and too small for development banks
• Under blending with FMO, sub-delegated to EDFI Management
Company Synergies & coherence between EDFI operations
• Referrals in both ways
• From initial calls for proposals to open door policy and active
sourcing
ElectriFI – global (with FMO, EDFI)
Investments
26
ElectriFI invests in Azuri Technologies
• Country: First phase in Kenya (subsequent phases will expand to other East African countries, including Tanzania, Uganda and Zambia
• Installed capacity: 0.4 MWh• Technology: Pay-as-you-go Solar Home Systems in Kenya• Business model: ElectriFI was approached to help structuring and funding a
new off-balance-sheet debt-financing facility. The main purpose is to provide working capital for the expansion of off-grid energy and service provision in East Africa.
• Impact: 30,000 households connected, 150,000 of beneficiaries with improved/new access
• Finance amounts (rounded):• Total amount: EUR 3 m (expected to
grow to USD 20 m)• ElectriFI investment: EUR 1.5 m
(leverage 2x)• GHG emissions saved in tons of CO2eq:
3,768
Investments
27
• Country: Haiti
• Installed capacity: 3.5 MW
• Technology: Solar PV with battery storage, diesel genset backup
• Business model: AC Micro-grids - promotor is developing,operating and maintaining solar micro-grids, power provideragreements signed with municipalities. Interconnectivity ofmicro-grids will permit an installed capacity of 3.5 MW.
• Project stage: Micro-grids are running in 1 municipality; 5 townsare being studied.
• Impact: 27.000 households (136.000 people)
• Finance amounts (rounded):
Total project cost: USD 14 m
ElectriFI: USD 2.5 m as convertible debt
• Additionality: Expansion and Bridge financing
Sigora connects 3,420 households to 24/7 renewable electricity in Northern Haiti through support from the EU funded ElectriFI
Investments
28
• Country: India
• Installed capacity: 600kW
• Technology: Solar PV with battery storage
• Business model: DC Micro-grids (Developing, constructing, operating and maintaining). Low consumer payments (USD 0,45/week), roving collectors (potential business opportunity when PAYG arrives in India)
• Company stage: Established in 2010; 1850 hamlets served (~23.000 households)
• Impact: 55.000 new connections (330.000 people)
• Finance amounts (rounded)
Total project cost: USD 2.500.000
ElectriFI: USD 1.000.000 (equity)
• Additionality: Catalyse 2 other investors
Mera Gao Power connects 15.000 households to electricity in off-grid rural hamlets in India - ElectriFI
Investments
• First movers: Zambia, Nigeria, Cote d'Ivoire, Benin (more to
come, incl. Asia and Pacific)
• We can consider anything with the sustainable energy sector,
with private sector interest, from access, to RE generation to
energy efficiency
• Source of funds: NIPs, 85 M EUR
• Structure will respond to specific country situation
• Flexibility on defined and agreed focus through selection criteria
(technology, business model, geographic focus, ticket sizes, focus
on sectors such as agri-production …)
• Implementation as of 2nd sem 2018
ElectriFI – country windows (with FMO, EDFI)
Investments
Climate Investor OneWith FMO
• 30M EUR EU contribution, total of 1.3BLN USD
• 20 RE investments increasing access to 7.1 M people, 1.8 mill
tCO2/year avoided, 1.100 MW additonal capacity
• Other co-financiers (NL, USAID, pension funds …)
• Equity investment facility, medium scale projects (50-100 M
USD), mainly on-grid
• 3 funds offering "whole-of-life" financing solutions
• Structured (tier) risk structure (EU first loss)
• Regional key, EU contributions earmarked for SS Africa
• Technology focus: solar, wind, run-of-river hydro
• Under implementation since end 2017
Investments
31
Country Morocco Morocco Morocco Tanzania Djibouti Vietnam
Technology Solar PV On-Shore Wind Solar PV On-Shore Wind On-Shore Wind Near-shore Wind
Capacity (MW) 85 50 30 70 60 50
Development Costs USD 1.5 m USD 2.8 m USD 1.1 m USD 2.8 m USD 7 m USD 5 m
Development loan from CIO USD 0.7 m USD 1.5 m USD 0.6 m USD 1.4 m USD 1.4 m USD 2.5 m
Construction Costs USD 88 m USD 80 m USD 31 m USD 122 m USD 128 m USD 95 m
Investment opportunity for CEF USD 43 m USD 39 m USD 15 m USD 91 m USD 25 m USD 71 m
Estimated GHG Avoided (tCO2eq/year) 327,000 174,000 171,000 69,000
Estimated Number of People Served 580,000 446,000 530,000 124,000
Climate Investor One: Projects
Project Sites
Tanzania Vietnam Morocco Djibouti
Investments
Africa Renewable Energy Scale-Up Facility AFD Group (AFD and Proparco)
• 24M EUR EU contribution
• 5 projects with 250 MW of increased renewable energy
generation capacity, reducing GHG emissions by 300,000 CO2
tons eq/yr
• 12 M EUR > AFD to reinforce public sector actions: public policy,
sector planning, tender preparation for IPP on-grid projects,
electrification sector strategies
• 12 M EUR > Proparco to support private sector projects in the off-
grid and mini-grid sub-sectors focussing on solar
• GUARANTEE FACILITY with 50% covered by EU
• Implementation started 2nd sem 2017
Investments
The Energy-Digital Nexus: Building electricity networks fit for the future to enable productive uses of energy,
job creation and financial inclusion
How?
Preparatory phase: Exploratory mission under the EU Technical Assistance Facility
(TAF) for Sustainable Energy for All
• Catalyse and accelerate the adoption of digital solutions to increase partner countries’ access toaffordable, reliable, sustainable and modern energy
• Use the energy-digital nexus to boost the quality of project pipeline, while targeting productive uses ofenergy, job creation and financial inclusion
• Ambitious focus on challenging environments (Sahel, fragile states, SIDS)
Boost visibility, awareness and technical assistance at country and regional level to improve quality of project pipeline
Target the scope at micro-grids and off-grid autonomous power systems with RE, innovative digital technologies and business models focused on productive uses of energy
Boost micro-financing and crowdfunding capabilities that energy access projects can draw on and leverage digital technologies in their deployment
Step 1
Step 2
Step 3
Vision for this action: We can’t solve tomorrow’s challenges with tools of the past
NEW! Solving tomorrow's challenges through digitalisation
Investments
34
• Contact the following facilities directly:
EIP one-stop-shop (https://ec.europa.eu/commission/priorities/stronger-global-actor/eu-external-investment-plan/how-you-can-engage-external-investment-plan-one-stop-shop_en)
ElectriFI (http://electrifi.eu/)
Proparco (http://www.proparco.fr/fr)
Climate Fund Managers (http://www.climatefundmanagers.com/nl/)
How to get involved?