Mobilizing Finance for Private Sector Clean Energy Innovation in LAC
GREGORY WATSON
Head, Strategic Planning and Partnerships Team Leader, Environment and Clean Energy www.fomin.org
Tufts University
March 8
th, 2014 Medford
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RELATION WITH THE IDB GROUP
The main source of x technical assistance
for micro-to- medium enterprises, MFIs
and NGOs in LAC The main source of
development finance for Governments in
Latin America and the Caribbean (LAC)
Private sector window of the IDB Group, provides financing for the development
of medium-sized private enterprises in
LAC
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THE MULTILATERAL INVESTMENT FUND
The largest provider of technical
assistance to the private sector in LAC An innovation laboratory, testing and scaling new business models
Flexible with tools including technical assistance (grants), loans, and equity investments.
Committed to rigorously measuring and evaluating results and impact, and to disseminating knowledge.
Leverage. In 2012, every 1$ of MIF
investment was matched with 3$ from partners
Grants 70%
Loans 10%
Equity 19%
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1. ENGAGING THE PRIVATE SECTOR
2. UNLOCKING PRIVATE ACTIVITY
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ENGAGING THE PRIVATE SECTOR
The MIF plays a key role in facilitating access to green finance in LAC…
– From international climate investment funds: FIP, SREP, CTF – Providing TA and loans to green
anchor companies’ supply chain – Developing green (micro)finance
for MSMEs and low-income households
– Creating green technology funds that provide equity to green MSMEs
– Works in: Clean and Efficient Energy, Adaptation, Leveraging Natural Capital
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Context
Global emissions: SMEs account for 60%
Anchor firm emissions: supply chain accounts for up to 86%
Investor and shareholder pressure, CSR, cost/competitiveness, and government compliance are key motives for greening supply chains Customers in Latin America and the Caribbean increasingly want green products: 63% would pay 10% premium
Greening the supply chains of FEMSA and Walmart in Mexico
COMPETITIVENESS: GREENING SME VALUE CHAINS
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COMPETITIVENESS: GREENING SME VALUE CHAINS
3: ANCHOR FIRMS
2: EXECUTING AGENCY
1. FUNDER: funds platform for training efficiency experts.
2. EXECUTING AGENCY:
develops online tools;
provides SME training; hires energy use auditors.
3. ANCHOR FIRMS: encourages SMEs in their value chains to participate in training.
4. SMEs: receive training;
identify energy savings to obtain credit.
5. FINANCIAL INSTITUTION:
analyzes cases; provides SME credit.
4: SMEs
5: FINANCIAL INSTITUTION
$
1: FUNDER
$
GREEN TECH PROVIDERS
FINANCING MIF $2.3 M Others $2.2 M
MAIN EXPECTED RESULTS 3,000 MSMEs implement sustainable practices
Reduced energy, water use Reduced CO2 emissions
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ECOMICRO: GREEN FINANCE FOR ALL
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The Program is a US$ 7 M TA co-financed by MIF and NDF
Demand-driven projects to reach
sustainable business models: 12 projects selected in a 3 round competitive process
Merging Adaptation/Mitigation concepts in practice:
• Three module approach: (i) greening the institution, (ii) analysis of MFI portfolio risks to climate change, (iii) developing green finance products
• Green finance includes: clean energy, energy efficiency or adaptation
Second Round Results
• 64 applications from 17 different countries
• Highest interest: Colombia and Peru, increased participation of Caribbean
• Selected entities :
•Bancamia (Colombia)
•El Comercio (Paraguay)
•Apoyo Integral (El Salvador)
•Surfuturo (Republica Dominicana)
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First Round Results
• 54 applications from 15 different countries
• Highest interest: Mexico and Peru
• Selected entities :
• Te Creemos (Mexico)
• Caja Arequipa (Peru)
• Diaconia(Bolivia)
• FDL (Nicaragua)
ECOMICRO: GREEN FINANCE FOR ALL
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Interest per category of green finance product
• Interest in renewable energy finance products:
• 30% in individual credits
• 50% in productive credits
• 20% in both
• Interest in energy efficiency finance products:
• 70% in productive credits
• 15% in individual credits
• 15% in both
• Interest in adaptation products:
• 50% in loans to support clients’
adjustments to new climate condition
• 42% in microinsurance for crops
• 8% in both
Interest in adaptation
• 12% of eligible participants in 2012 were interested in adaptation, in 2013 this number increased to 28%
Interest in adaptation per country
• Dominican Republic, Colombia and Bolivia presented almost the majority of eligible applications with interest in adaptation
Interest in adaptation per type of institution
ECOMICRO: GREEN FINANCE FOR ALL
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ENGAGING THE PRIVATE SECTOR
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CLEAN ENERGY: LUZ EN CASA
In isolated areas, micro-grids and individual systems are more cost effective than
traditional grids
In Cajamarca, Peru, 22% of people are below the poverty line, and there is little access to electricity.
Acciona Microenergy created a PPP program that creates community
photovoltaic electrification committees, trains locals to be technicians, and
implements a cross-subsidy where families pay according to their income, and the government subsidizes the remainder of the cost of the system.
Uses a pay-for-service model where families pay a lease that covers system, consumption, maintenance, depreciation.
Pilot reaches 3,000 families, which is the level at which this social enterprise
becomes sustainable.
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CLEAN ENERGY: QUETSOL
18% of Guatemalan population outside of range of grid. 2.5M without access to lighting or electricity.
Consumers cannot access credit to purchase clean technology solutions.
Quetsol installs solar systems and charges only for the electricity used, allowing
customers to buy electricity in hourly, daily, or weekly increments.
Quetsol’s clients currently spend more than US$15.75 a month on candles and phone charging. Quetsol charges US$11.43 for a monthly PAYG code, a savings of 27.4%.
Pilot reaches 1,500 families, which is the level at which this social enterprise
becomes sustainable.
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CLEAN ENERGY: SOGEXPRESS AND ARC FINANCE
10% of Haitians do not have access to energy.
35% of Haitians receive remittances, use funds for kerosene, candles.
Arc Finance and SogExpress teamed to substitute purchases of solar lanterns and home systems for kerosene. Use
distribution network of remittance
company to overcome logistical challenges.
Diaspora can purchase product to send, or local family can purchase.
10,708 systems sold at market rate as of 12/31/13, benefitting 53,540 people.
99% customer satisfaction.
US$220,390 energy cost savings in first year,
$759,000 projected by April 2014.
489 tons CO2 reduced in year 1, 1,221 tons projected by April 2014.
Significant productive, safety, education benefits.
http://www.youtube.com/watch?v=4D _JohMQ1U8
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1. ENGAGING THE PRIVATE SECTOR
2. UNLOCKING PRIVATE ACTIVITY
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WHAT IS CLIMATESCOPE?
Climatescope: Report, Index and Interactive Online Tool providing comprehensive information for low-carbon clean energy
stakeholders across respective value chains
Developed by Multilateral Investment Fund (MIF) and Bloomberg New Energy Finance Second edition: top 5 countries in 2012 in LAC: Brazil, Chile,
Nicaragua, Peru, Mexico
www.climatescope.fomin.orgwww.climatescope.fomin.org
WHAT DOES CLIMATESCOPE MEASURE?
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CLIMATESCOPE 2013: RANKING AND SCORES
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LATIN AMERICA AND CARIBBEAN TOTAL RENEWABLE CAPACITY ADDITIONS, 2007-2012 (GW)
Source: Climatescope 2013
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In 2007, LAC added 1.5GW of renewable capacity. Since then, 19 countries in the region have introduced government-sponsored reverse auctions, tax incentives, renewable energy targets, feed-in tariffs and other policies. These have led to a 296% compound annual growth rate for installed renewable capacity, which jumped from 11.3GW in 2006 to 26.6GW in 2012
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CLIMATESCOPE 2013: RANKING AND SCORES, INVESTMENT & CREDIT
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LAC: -3.8%, Global: -11% (First significant drop BNEF has
recorded since it began tracking figures in 2004)
Uncertain subsidy environment in key markets, e.g. US, India, Spain, Italy
Falling unit costs for solar, wind equipment
Green Microcredit: 63 MFIs in LAC have disbursed close to $400 M in green microloans (Peru, Chile, leaders)
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LATIN AMERICA AND CARIBBEAN TOTAL INVESTMENT BY COUNTRY, 2006-2012 ($BN)
Source: Climatescope 2013 Note: Caribbean includes Bahamas, Barbados, Dominican Republic, Guyana, Haiti, Jamaica, Suriname and Trinidad and Tobago. Other Central America includes Belize, Costa Rica, El Salvador, Guatemala and Honduras. Other South America includes Argentina, Bolivia, Colombia, Ecuador, Paraguay, Uruguay and Venezuela
Investment in non-BR LAC: +45%:
More policy incentives &
declining system costs for solar and wind
Investment rose in 20 countries, top performers in 2012: ME (+450%), DR (+431%), UR (+327%), PE (+325%), CH (+314%)
BR alone -36%, due to slowing
economy & long disbursement cycles tied to BNDES
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LATIN AMERICA AND CARIBBEAN TOTAL INVESTMENT BY SECTOR, 2006-2012 ($BN)
Source: Climatescope 2013
Wind and solar now over 50% and 7%, respectively, of total LAC
investment
Biofuel market share now smaller than solar:
Shrinking Brazilian ethanol industry (ethanol became economically uncompetitive with gasoline)
Concerns in global demand markets over sustainability of second generation biofuels
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CLIMATESCOPE 2013: RANKING AND SCORES, VALUE CHAINS
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Value Chains: A total of 35 out of 40 value chain segments from six renewable sectors are fulfilled in LAC
Biofuels, biomass & waste, small hydro sectors all have complete value chains in at least one country
Larger economies (Brazil,
Argentina, Chile, Mexico) leaders in this area
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CLIMATESCOPE 2013: RANKING AND SCORES, GHG MANAGEMENT
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Project registrations: 927 GHG projects registered under four protocols in LAC
790 CDM projects
More than 50% focused on generation
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CLIMATESCOPE 2014 GOES GLOBAL
Together with UK’s DFID and USAID, the MIF and BNEF will expand the Climatescope 2014 to Africa and Asia
The global index will cover, in addition to the 26 countries in LAC, 29 more countries, thereby expanding the coverage of Climatescope 2014 to a total of 55 countries
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Latin America Africa Asia
Argentina Botswana Bangladesh
Bahamas Cameroon China
Barbados Cote d'Ivoire 15 Chinese
provinces Belize Democratic Republic of
Congo
India
Bolivia Ethiopia 10 Indian provinces
Brazil Ghana Indonesia
Chile Kenya Nepal
Colombia Liberia Pakistan
Costa Rica Malawi Sri Lanka
Dominican Republic Mozambique Tajikistan
Ecuador Nigeria Vietnam
El Salvador Rwanda
Guatemala Sierra Leone
Guyana South Sudan
Haiti South Africa
Honduras Tanzania
Jamaica Uganda
Mexico Zambia
Nicaragua Zimbabwe
Panama Senegal
Paraguay Peru Suriname Trinidad and Tobago
Uruguay Venezuela
