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This SEFI/GEF targeted research project examines existing instruments and approaches to financial risk management of renewable energy technologies and suggests potential modalities for new instruments that could be developed in partnership with private and public sector financial institutions.
The project aims to identify risks associated with RE projects which could be effectively mitigated by financial risk management instruments, evaluate existing and emerging instruments, and identify the most promising modalities of such instruments where private sector actors are ready to play an active role.
The second consultation meeting took place at UNEP in Paris on 6-7 December 2007, where the three project working groups (large-scale RE technologies, small-scale RE technologies, geothermal technologies) presented their study results. To access the presentations and reports visit the  main project website.
BASE developed a capacity building program to raise the knowledge and skills of professionals within private financial institutions in order to help banks understand and assess the opportunities and risks, as well as to overcome perception barriers, associated with financing sustainable energy.
The program is focused on Latin America and Africa. The pilot programs are implemented in Mexico, Tunisia, Egypt and Morocco.
This strategy includes the creation of a multisector, local think-tank to create synergies that could strengthen the project and provide a platform for further long-term initiatives that stimulate development of the sustainable energy market. The training programme aims to train financiers as well as insurers on managing sustainable energy financing and risk mitigation, providing in-depth and personalised training through a series of seminars and targeting a specific sector of the market and the most profitable technologies. More information you find on main project website.
With support from the Italian Ministry of Environment and Territory, UNEP has been helping increase investment in the renewable energy sector through the Mediterranean Renewable Energy Programme (MEDREP). In 2004, a loan programme for domestic solar water heating systems was initiated in Tunisia, involving the Ministry of Energy, the national renewable energy agency ANME, the electric utility STEG, and the local banking community. Solar thermal vendors, once qualified, can then send their customers for consumer financing of their products. Repayment is made through the customers electricity bills. By 2006 over 16,000 systems had been financed and a similar programme started in Morocco for the hotels sector, where UNEP is working with the electric utility (ONE) and the local banking community.
A new initiative called the Seed Capital Assistance Facility (SCAF) is being launched in 2007 for implementation in countries of Asia and Africa. The facility is aimed at helping early stage clean energy enterprises and projects access start-up seed capital from commercial energy investors. This GEF supported Facility is being implemented through UNEP, the Asian Development Bank and the African Development Bank.
Through sharing dealflow development and transaction costs and providing a seed capital return enhancement, the facility will help close the gap between what local renewable energy and energy efficiency entrepreneurs are able to offer in terms of returns on investment, and the requirements of the investment community. By bridging this gap, the facility will 1) help provide entrepreneurs with the enterprise development services and early stage risk capital they need to develop sustainable energy businesses and projects; 2) increase the scale and scope of these sorts of clean energy opportunities available to commercial investors; and 3) increase the volume of more commercially oriented capital available to the seed finance sector.
The Rural Energy Enterprise Development (REED) initiative is a flagship UNEP effort focused on enterprise development and seed financing for clean energy entrepreneurs in developing countries. To date, $9 million has been committed to REED programmes in five countries of West and Southern Africa, Northeast Brazil and China's Yunnan Province. This 'energy through enterprise' model has been pioneered by the clean energy investor E+Co and advanced by a partnership between UNEP, E+Co, the UN Foundation, SIDA, BMZ, the W. Alton Jones Foundation and a diverse group of country enterprise development partners. The African programme, AREED, is the most advanced with debt and equity investments in 32 clean energy enterprises. These investments, ranging in scale from $12,000 to $176,000, have seeded businesses in the areas of solar crop drying, sawmill waste charcoal production, efficient cook stove manufacture, wind water pumping, solar water heating, liquefied petroleum gas (LPG) distribution and energy efficiency.
AREED website
B-REED website
C-REED website
A four-year $7.6 million UNEP/bank partnership is now finishing up which has focused on developing a credit market in Southern India for financing solar home systems. Working through the Indian banking groups Canara Bank and Syndicate Bank, the initiative established two consumer loan programmes for solar PV systems that used a form of credit enhancement to bring down the initial financing costs of lending to this sector. Today Indian banks are looking to expand their credit offering, particularly to rural customers, and partnering with UNEP allows them to do so in a rapidly growing clean energy sector. Interest rate softening helps them build solar financing portfolios without distorting the credit risk or the existing cash market for solar home systems. Five solar vendors met the qualification criteria, allowing their customers to access PV system financing from any one of the 2076 participating Canara or Syndicate bank branches. As of 1st quarter 2007, a total of 19,533 loans had been financed in the states of Karnataka and Kerala. The loan subsidy has been phased out and many new banks have started lending for solar. The solar PV credit market, which didn?t exist in 2002, now seems on its way to commercial scale and sustainability.
UNEP Indian Solar website
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