- The 7th Asia Forum for Clean Energy Financing (AFCEF-7) was held on 10 Feb 2017 in Singapore
- PFAN events at the COP 22 in Marrakesh
- CTI PFAN Organized the AFCEF-7 Project Development & Financing Workshop
- International climate community discusses how to unlock the Paris Agreement’s potential for market-based approaches
- CTI side event at UNFCCC Forty-fourth meeting of the Subsidiary Bodies – SB44 Bonn, Germany May 26, 2016
CTI Side Event at UNFCCC SB38 Bonn, Germany: June 7, 2013
The side event held at the UNFCCC, SB38 meetings in Bonn, Germany, was well attended by over 20 participants from a broad range of stakeholders including national delegates, private sector, international organizations, and NGO representatives. The event explored a possible new funding approach and cooperation that are being explored between CTI PFAN and REEEP, that may offer an integrated funding and advisory package to support the scaling up of clean energy projects across the complete development value chain from concept to implementation and how this approach might be harnessed in support of the CTCN.
Mr. Elmer Holt, the Chair of CTI Executive Committee and the CTI PFAN Manager opened the side event by welcoming the participants and provided an introduction and overview of the CTI, CTI PFAN and REEEP. Mr. Holt began by stating that the CTI is an Implementing Agreement under the IEA in support of the UNFCCC objectives, and promotes more rapid development and diffusion of climate friendly and environmentally sound technologies and practices. In 2004 and 2005, the CTI held workshops which concluded that the issue in implementing projects in developing countries was not a shortage of funds for investment or 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. CTI PFAN was formed to address this issue and has become the largest activity within the CTI. The basic concept of CTI PFAN is to facilitate private sector financing to clean energy projects in developing countries for implementation. REEEP was originated at the World Summit on Sustainable Development in Johannesburg in 2002, with its mission being to accelerate the market for clean energy in developing countries and emerging markets. REEEP also operates reeegle.info, the leading open access portal for clean energy information, which had about 2.5 million visitors in 2012. REEEP has over 385 partners, of which 45 are governmental bodies and others include business and academia.
Mr. Peter Storey, CTI PFAN Global Coordinator, introduced the elements of a possible CTI PFAN and REEEP cooperation. Presently, CTI PFAN has 164 projects in its project development pipeline, worth roughly USD 5 billion of investment. CTI PFAN has so far helped raise USD 500 million of investment for 40 projects. REEEP provides grants to 185 clean energy projects, totalling around EUR 25 million. REEEP and CTI PFAN have the potential to contribute to the project development value chain at the two separate critical funding points. In the value chain, the early stages from project idea / concept through to the technical feasibility are where REEEP can provide the intervention of funding to buy down the early stage risk. Whereas in the case of CTI PFAN, it gets involved in the later stage from the technical feasibility stage to financial closure in investment, assisting with bringing the investors / banks into the process at the due diligence tipping point where an investment is required to enable the implementation. Through the coordination between CTI PFAN and REEEP, each step within the project development value chain can be addressed in an integrated approach. Such coordination also attempts to address one of the challenges in securing investment in project development, which is, many projects starting as pilot projects are too small to attract private investment.
Mr. Martin Hiller, Director General of REEEP, continued the presentation on how the two organizations might cooperate to enable the further scaling up of clean energy projects. The possible cooperation between CTI PFAN and REEEP could allow for the:
- identification of successful business models;
- engaging with entrepreneurs;
- scale-up of the projects including organic growth and replication;
- investment structure to fit the needs;
- lowering the risks;
- addressing the investment gap by providing for around EUR 0.5 to 40 million requirements that are below limits of large institutional investors; and,
- monitoring and evaluation (M&E) to provide feedback into policy and investment.
Mr. Hiller went on to state that the two organizations’ common characteristics are that they are lean and low cost, have high impact track record, are respected and known, have government / funder support, and recognize need for mainstreaming investment into clean energy. The possible financing facility resulting from this cooperation would start from the REEEP project call, followed by CTI PFAN coaching and matchmaking, REEEP tipping point technical assistance (TA), financial closure, and M&E analysis. Mr. Hiller expressed optimism in the approach, indicating that the cooperation could potentially facilitate clean energy projects that would otherwise not be implemented. To make the business case, he gave as examples a currently unprofitable biogas projects from the organic waste of small scale tofu production in Indonesia which could be restructured to turn a profit and the establishment of assembly factories of energy efficiency electrical appliances in West African countries where the energy efficiency standards are being established.
Mr. Storey added another example of the soon to be finished first grid-connected commercial-scale biogas project in Southern Africa, to which CTI PFAN injected funds at the due diligence tipping point. Mr. Storey called attention to the point that nearly all project development requires similar amount of funds irrespective to the project scale but it is difficult to obtain the required funds from investors without having the scale with promising returns. The possible cooperation between CTI PFAN and REEEP is aimed to identify the model projects, provide phased financing facilities to enable the project scale-up, and match with large funders and investors. The expected outcomes include further leverage, mobilized private investment, increase in scale, M&E analytics, communication system to funders, and feedback to policy.
Mr. Zitouni Ould-Dada, Head of Technology Unit of UNEP introduced CTCN and how it might be linked to CTI PFAN and REEEP cooperation. The mission of the CTCN is to stimulate technology cooperation and to enhance the development and transfer of technologies and to assist developing country Parties at their request. There are 13 organizations in CTCN consortium, which together are involved in over 150 countries in projects of technology development and diffusion. The CTCN structure includes: COP, TEC and the Advisory Board that provide strategic guidance at the top of the tiers; CTCN at the second tier responsible for operation with the inputs from Nationally Designated Entities (NDE) assigned to convey each country’s needs; and the Network at the third tier, where CTI PFAN and REEEP may take a part, would deliver the work. The main functions of CTCN are to: manage requests from developing countries NDE and deliver responses; foster collaboration and access to information and knowledge; and strengthen networks, partnerships and capacity building. The functions will be supported by broad outreach and awareness activities. The CTCN services include: capacity building and technical assistance; technical support and advice for the identification of technology needs for requested climate technologies; facilitate technology cooperation; catalyze private and public investments, where organizations with the experience of such as CTI PFAN and REEEP would be the key; and disseminate best practices on technology deployment and adoption. In terms of knowledge management, CTCN will: serve as a comprehensive library of information on technology availability, costs, performance, policies, and financing; capture experiences and results of technology cooperation activities; collect, analyze, and communicate CTCN results and lessons learned and continuously gather external feedback from CTCN stakeholders and partners; and facilitate on-line training, peer-to-peer exchange, and expert advice. NDE is a critical component of the CTCN process and nominations are underway. The two functions within the CTCN structure that the players are not in place yet are NDE and Network. The Network is where the organizations like CTI PFAN and REEEP can cooperate to deliver the services facilitating private capital flow. The next steps to CTCN are to continue staffing, outreaching and awareness including regional dialogues, NDE dialogues and the Advisory Board meeting in September 2013. CTCN is willing to work with existing organizations with experiences and knowledge rather than creating new organizations.
Presentations were followed by a questions and discussion session led by Mr. Holt. As the portfolios of CTI PFAN and REEEP are very different, with REEEP projects with the leverage of 1:2 and CTI PFAN projects with 1:100, a question was asked as to what kind of projects the cooperation will focus. Mr. Storey responded that the details of cooperation is still being developed, but it is intended that the CTI PFAN involvement will make some of the heavily subsidized projects supported by REEEP to be less subsidized by enabling access to private funding.
To a question on how the programmes of two different organizations could merge under the cooperation, Mr. Storey explained that this cooperation is still very much under discussion and is not attempting to merge the programmes of two organizations but taking resources to undertake certain activities. Both organizations still have their stand-alone activities with different targets.
To a question on whether the scale up will be horizontal or vertical, Mr. Hiller responded that the focus is not necessarily to spread across different sectors or regions. The focus will be specifically on scalability of profits. Mr. Storey commented that the scale up is likely to be vertical. Mr. Storey further added that the solution they see is not technology driven like in most of other processes, but business model driven. For deployment of technologies, making a business model in an environment is more important than investigating whether the technology works or not in the environment.
To a question on how projects can be executed, Mr. Storey answered that all projects must have a business model with a system that is tested in place so that it can attract the private investment. Mr. Hiller added that what REEEP and CTI PFAN’s possible cooperation might do is to pick the entrepreneurs who have the drives and goals and let them grow to make a business case. Mt. Holt further added that when considering providing support to projects, they would always consider whether the projects have commercial elements and have the potential to bring in positive cash flow.
In response to a question raised on how developing countries can afford the technology to enable the technology transfer, Mr. Holt responded as follows. There are not sufficient public fund for implementing all projects because of the large number of projects associated with the vast needs of developing countries. To mitigate this situation, CTI PFAN has been established to assist some of the projects to access the private investment.
A question was raised on the definition, function and characteristics of NDE of CTCN. Mr. Ould-Dada responded as follows. NDEs are being recruited without a job description because there is no outcome established through the UNFCCC process regarding what the NDE roles entail. UNEP will draft the guidance on the roles NDEs should fulfill, which is to be refined with the assistance of the Advisory Board. UNEP will take into consideration the fact that there are different levels of expectation and knowledge in different regions. UNEP is willing to listen to different opinions from different Parties.
A suggestion was made for the CTI PFAN and REEEP cooperation to work with Technology Needs Assessment (TNA), as many countries already have the project ideas which are waiting to be implemented as a result of TNA process, and CTI PFAN and REEEP may be able to move them forward. Mr. Storey responded that CTI PFAN has an ongoing cooperation with UNEP under Poznan strategic programme, which brings projects into CTI PFAN process and match with investors. It is not possible to support all projects but will assist some of the projects to raise private finance, which will contribute to the optimization of the public sector funding capabilities. Mr. Ould-Dada commented that as countries invest a lot of money and time on their TNA processes, it would be great if CTCN can facilitate such initiatives like CTI PFAN’s to support the projects that come out from the TNA process. Mr. Ould-Dada also added that one of the actions that CTCN could take in response to countries’ needs is to refine the TNA processes that are currently in different qualities. Mr. Holt briefly introduced with a diagram the filtering role that CTI PFAN is considering taking part under practices such as CTCN to separate the projects that can be funded privately and those need public support.
To a question on whether there is any link between CTI PFAN and REEEP and Sustainable Energy for All, Mr. Hiller responded that REEEP is in discussion with Sustainable Energy for All on how to cooperate.
Mr. Ould-Dada added that there must be a link, as there are so many initiatives that can benefit from Sustainable Energy for All, which however also make it difficult to track all the initiatives. The establishment of collaboration between organizations would be very helpful.
In response to a question that asked whether adaptation technology projects can be implemented with the support from private financing and if so which sector, Mr. Storey responded as follows. CTI PFAN has been taking an initiative to apply the CTI PFAN methodology to adaptation related projects. A research was conducted and a background paper is downloadable from the CTI PFAN website. A workshop was conducted in order to understand the issues relating to financing adaptation related projects. A number of sectors identified as having great potential to gain private funding are water and sanitation, access to energy, tourism, agriculture and agribusiness, forestry and eco-system services, micro-insurance and micro-finance, and adaptation products and services. A call for proposals was recently run and proposals are now being reviewed, and the selected projects will receive support to working with investors. The REEEP and CTI PFAN cooperation is paying more attention to adaptation and looking to bring into the process.
Mr. Holt closed the meeting with appreciation to the speakers and participants for their contribution to the useful discussion.