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CTI Side Event at UNFCCC COP17 Durban, South Africa December 2 & 8, 2011

The CTI held two side events during the UN Climate Change Conference in Durban, South Africa on 2nd and 8th December 2011 to review the progress of its work on the Private Financing Advisory Network (PFAN), showcasing practical experience of financing technology transfer of clean energy projects in developing countries by leveraging private financing through targeted capacity building interventions.

Agenda and Presentation

December 2, 2011 Side event at the US Center
December 8, 2011 Joint side event with REEEP, the Carbon Disclosure Project and CREIA (PDF)

caption testThe events discussed the outcomes of the successful organization of the Africa Forum for Clean Energy Financing (AFRICEF) and the launch of the second Africa Forum for Clean Energy Financing (AFRICEF-2), and highlighted the scale-up opportunities offered by CTI PFAN program for financing technology transfer activities including those related to adaptation in developing countries. These events brought together over 80 participants from a broad range of prominent stakeholders including national delegates, private sector, and multilateral organizations for panel discussions. In addition, the CTI PFAN was represented by Mr. Peter Storey at a technical side event organized by South African Cities Network (SACN) and REEEP which focused on challenges for renewable energy generation and energy efficiency in cities on 7th December 2011.

At the first side event, following the introduction by Dr. Kit Batten, USAID Global Climate Change Coordinator, to the CTI PFAN programme, Mr. Elmer Holt, the Vice-Chair of CTI Executive Committee and CTI PFAN Manager noted the important role the private sector should play in supplementing the scarce public resources available to finance developing country technology needs in solving climate change challenge. He also noted that the CTI works closely with the UNFCCC Secretariat, the private sector as well as various governmental and intergovernmental agencies such as UNEP and UNDP. He further drew attention to the workshops on innovative ways to finance technology transfer where representative from developing countries, developed countries, international organizations, private business, and the private finance community were brought together to share experiences and exchange views on what one another was looking for to foster more active technology transfer. He emphasized that the key fact that emerged from the workshops was that it is not a shortage of funds for investment and it is not a shortage of good projects, but instead, it was a shortage of good financing proposals capable of adequately communicating the merits of the projects to the international finance community. Based upon this message, the CTI worked with a group of practicing financing professionals who agreed to work with the representatives from developing countries to showcase their efforts and see if their project financing proposals could be enhanced. As a result of these efforts, the CTI Private Financing Advisory Network (CTI PFAN) was founded.

Mr. Peter Storey, CTI PFAN Global Coordinator, outlined the CTI PFAN programme as follows. The programme fills the missing middle between the clean energy businesses and projects seeking financing and the investment sources seeking projects / businesses, pushing the two sides together by providing intensive coaching on project development. The CTI PFAN also has found it useful to feed into policy dialogue to help regulators develop good policy conducive to clean energy project implementation. The project pipeline consists typically of mitigation projects for generation of power or production of biofuels, but the CTI PFAN is also investigating adaptation related projects. CTI PFAN is currently working on 143 projects representing USD 2.6 billion of required investment with over 5.5 million tonnes of CO2 equivalent reduction potential par annum. CTI PFAN has helped 31 projects reach financial closure raising USD 329 million in aggregate. He emphasized that technology transfer and clean energy finance is actually happening regardless of the status of the UNFCCC negotiation. Mr. Storey noted that the funding for the CTI PFAN programme received from the funding partners is not invested directly into the projects, but enables the CTI PFAN network members provide coaching to facilitate the financing of the projects.

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Mr. Kemal Vaz, Verde Azul Lda, presented on the background paper on adaptation which the CTI PFAN was requested to investigate whether its methodology for mitigation financing could be used to raise private sector investment and financing for adaptation-related projects as follows. The objective of the background paper is to identify main issues, barriers and opportunities with respect to the financing of adaptation-related projects, while identifying stakeholders to involve in this initiative. There exists a need to balance between public and private finance for adaptation-related projects, and use public-private partnership model.

Moderated by Mr. Holt, the panelists answered questions and discussed issues further as follows. In response to a question regarding the type of projects that the programme supports, Mr. Vaz pointed out that the policy framework dictates the type of projects that become commercially viable in a given country. Regarding the possible application of the PFAN model to technology development projects, Mr. Storey noted that the expectations of the investor community for technology development projects are slightly different from the ones with which the programme currently works. One way of addressing such market may be to collaborate with other activities and institutions that are already active in technology development. In response to a question regarding the project opportunities in adaptation, Mr. Storey noted that the borderline between adaptation and mitigation projects is sometimes vague and it is difficult to define adaptation while the underlining objective is clear. He pointed out that there are a number of mitigation-type projects that the PFAN programme support, which have adaptation measures already built in. In response to a question regarding the scalability and potential for PFAN-like models to become self-sustaining, Mr. Holt drew attention to the introduction of success fees in the programme that feed back into the system to support more projects while supplementing the advisors’ income. He further noted that there might be two divisions of the programme: self-sustaining one for readily bankable projects and another for projects that require more donor assistance.

The second side event was an official joint event hosted by REEEP, the Carbon Disclosure Project, CTI PFAN and Chinese Renewable Energy Industries Association (CREIA). It highlighted the vital role businesses have to play in low-carbon development, particularly in the emerging markets.

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Moderated by Mr. Binu Parthan, REEEP’s Deputy Director General, the panel included a wide mix of perspectives, ranging from the views of CEOs like Mr. Paul Simpson of the Carbon Disclosure Project and Mr. Peter Xie of GCL Solar Energy Ltd, one of China’s top poly-silicon manufacturers, to those of Mr. Harish Hande, the social entrepreneur and founder of SELCO Solar Lighting in India, to those of Mr. Peter Story, the Global Coordinator of CTI PFAN.

There is actually good news to report, and the pivotal role that the private sector has to play in promoting low carbon energy in the emerging markets was a theme that cut across all presentations. For example, Mr. Simpson noted that 68% of the 500 companies CDP surveys globally are integrating climate change initiatives into their core business strategy. And a full 59% of the emissions reductions activities reported by them have a payback period of three years or less – so cutting emissions can indeed be profitable. With a similar big-company perspective, Mr. Xie pointed out that it’s the private sector that has fuelled the 90% reduction in the cost of PV in recent years, the decisive factor in making it realistically affordable.

Mr. Hande comes at solar technology from a decidedly grassroots perspective. In order to bring solar technologies to the poor in the Indian states of Karnataka and Gujarat, SELCO looks at the entire “ecosystem” of delivery, designed around the poor as asset creators. Their needs are simple: they want a simple solar system that powers two lights and a charger at their home and are actually willing to pay for this. So simple loan models have been created to help them pay for the systems, and once these are repaid, can be followed up with loans for things that support income generation activities. With this model, SELCO has already provided lighting systems to 120,000 households, and aims to reach 200,000 by the end of 2012.

Mr. Storey highlighted another grassroots effort, the CTI Private Financing Advisory Network or CTI PFAN, which screens business plans, selects the most economically viable and environmentally beneficial projects, and provides multiple rounds of coaching and guidance before projects are presented to investors. In last 24 months, the organisation has closed $US 329 million in funding for 31 projects globally. In Africa, these include $US 3.15 million raised for the expansion of Barefoot Power‘s innovative distribution model for solar powered LED and other products targeting consumers at the bottom of the pyramid.

At the end of the event, the moderator asked the panel what they thought should be done in the remaining negotiations at COP17. All panellists shared modest but realistic expectations for the outcome, and re-emphasized the need for concrete steps such as the need for a clear price indicator on CO2, and the urgency of agreeing details on process for the Green Climate Fund.