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Identification of financial sources & supporting bodies

Identification of financial sources & supporting bodies. Socio-economic development in the era of renewable energies: Towards the creation of a research institution for the MENA region based on the DESERTEC concept. 3-4 september 2012, Tunisia. Ass. Prof. Amel Belanès

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Identification of financial sources & supporting bodies

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  1. Identification of financial sources & supporting bodies Socio-economic development in the era of renewable energies:Towards the creation of a research institution for the MENA region based on the DESERTEC concept 3-4 september 2012, Tunisia Ass. Prof. Amel Belanès High Institute of Management of Tunis – Tunisia amel_bns@yahoo.fr

  2. Overview of Session 1. Conventional methods of projects financing 2. What attracts capital to finance renewable energy? 3. What are the renewable energy finance handicaps? 4. Supporting bodies of renewable energy 5.How do financial institutions contribute? 6. What are the factors determining the appropriate financing mechanism? 7. How can we innovate in financing sources and mechanisms? 2

  3. 1. Conventional methods of projects financing • Project financing • Corporate finance • Lease financing • Subsidies 3

  4. 1. Conventional methods of projects financing • Project financing • Limited recourse financing to the cash flows of the project • Corporate finance • Retained earnings otherwise paid to stockholders • Equity financing • Stock issuance • Short-term borrowing from financial institutions • Sale of long-term bonds • Lease financing • Subsidies 4

  5. 2. What attracts capital to finance renewable energy? • Regulatory compliance • Direct business profits • Indirect business benefits • Not-business related benefits 5

  6. 2. What attracts capital to finance renewable energy? • Regulatory compliance • Taxes, fines, polluter-pays principle, Subsidies • Direct business profits • Business opportunities • Secure, sustain or reduce costs of key natural resource inputs required for business operations • Securing license to operate and avoiding losses from protests 6

  7. 2. What attracts capital to finance renewable energy? • Indirect business benefits • “Green” branding, marketing • Improved staff pride and morale and enhanced recruitment • Reflect broader business values of the corporation • Not-business related benefits • Philanthropy / Charity 7

  8. 3. Renewable energy finance handicaps • Several barriers before penetrating the market • Lack of technical capacity • Lack of supportive policy frameworks • Inadequate financing for installations or supporting businesses • Lack of awareness and trust in the technologies by users and utility companies • Benefits accrue on the long run • Appropriate regulatory framework • Provision of the infrastructure to make the local economy viable 8

  9. 4. Supporting bodies of renewable energies • Global Environmental Facility (GEF) • The United Nations Development Programme (UNDP) • The United Nations Environment Programme (UNEP) • The world Bank • Regional development banks • Executing Agencies under the policy of expanded opportunities 9

  10. 4.1 Supporting bodies of renewable energies • Global Environmental Facility (GEF) • Independent financial organization, established in 1991 • Grants to developing countries for projects that benefit the global environment and promote sustainable livelihoods • Removed barriers to developing markets for renewable energies wherever cost-effective • Enabling policy frameworks, capacity for understanding and using the technologies • Financial mechanisms to make renewables more affordable • GEF’s three implementing agencies : UNDP, UNEP and the world Bank 10

  11. 4.2 Supporting bodies of renewable energies • The United Nations Development Programme (UNDP) • UN global development network, funded entirely by voluntary contributions from member nations in 1966 • Solutions to develop local capacity and meet global and national development challenges • Change and exchange of knowledge, experience and resources to help people build a better life • Expert advice, training, and grant support to developing countries, with increasing emphasis on assistance to the least developed countries 11

  12. 4.3 Supporting bodies of renewable energies • The United Nations Environment Programme (UNEP) • Programme rather than an agency of the UN found in 1972 • Developing international environmental conventions, promoting environmental science and information and illustrating the way to be implemented • Funding and implementing environment related development projects • Assisting developing countries in implementing environmentally sound policies and practices 12

  13. 4.4 Supporting bodies of renewable energies • The world Bank • UN agency created in 1944 and focus on economic growth • Since the 1992 Rio Declaration, activities promoting the environment and human rights • “Safeguard” policies: the minimum environmental and social requirements expected of borrowers, developed in the 1980s and gradually updated • 2006, Sustainable Development Network • 2010, a progressive “access to information” policy 13

  14. 4.4 Supporting bodies of renewable energies • Regional development banks • The AsianDevelopment Bank, Inter-American Development Bank, European Bank for Reconstruction and Development, and AfricanDevelopment Bank • Development Business Programme 14

  15. 5. How do Financial Institutions contribute? • Invest directly in projects • Provide direct budget support to government for policy reforms • By injecting money directlyinto the governmenttreasury, full discretion on how to use this money • Leverage further investments • By managingclimate change trust fundsthatattractotherinvestors • Share knowledge • By providing expert advice to governments and companies on sustainabledevelopment best practices 15

  16. 6. Factors determining the appropriate financing mechanism • National level context • Site-specificcontext • Economics practices 16

  17. 6.1 Factors determining the appropriate financing mechanism • National level context • Institutional & Governance (vision + capacity) • Stable political and economic environment • Regulatory framework in place • Environmental awareness • Understanding of social and economic impact of unsustainable land management • Site-specificcontext • Economics practices 17

  18. 6.2 Factors determining the appropriate financing mechanism • National level context • Site-specificcontext • Ecosystem type and use and current use of the land • Capacity to enhance environmental services • Local capacities (social capital, infrastructure, space for discussion) • Land tenure situation • Economics practices 18

  19. 6.3 Factors determining the appropriate financing mechanism • National level context • Site-specificcontext • Economics practices • Demand and supply • Cost and cost-effectiveness • Required time for development and implementation • Amount of resources generated • Synergies with other thematic priorities 19

  20. 7. How can we innovate in financing sources and mechanisms? • Why innovative financing? • Whatisinnovativefinancing? • Innovative financing models for renewable energy 20

  21. 7.1 Why Innovative Financing? • Aim to : • Increase resources availability • Diversify the resource base • Complement traditional funding • Maximize the projects financial profitability • Can provide direct incentives to engage in renewable energy projects 21

  22. 7.2 What is Innovative Financing? • Innovative sources and mechanisms of funding are non-traditional modes of financing • Innovative funding includes resources from internal, external, private or public sources • Innovative funding can be mobilized through financial mechanisms and instruments 22

  23. 7.3 Innovative financing models for renewable energy • Clean Development Mechanism • Dealer-Credit Model • Consumer Credit Model • Supplier Credit Model • Energy Service Company Model • Revolving Fund • Green Venture Capital Fund 23

  24. Clean development Mechanism (CDM) • Developed countries (Annexes-1 ones) • reduce emission in a flexible and cost-effective manner • obtain Certificates of Emissions Reductions • Developing countries (non-Annex I called the “host countries”) • meet sustainable development objectives • benefit in the form of investment, access to better technology, and local sustainable development 24

  25. Energy Service Company Model (ESCM) • Ownership and maintenance of the equipment lies with the energy service company • Customers pay for the energy service that is provided by an energy service company (ESCO) • Energy becomes more affordable • Less long-term risks

  26. Environmental Financial Social Green Venture Capital Fund (GVCF) • Investment model: “socially responsible investing” or “the triple bottom line” • Investments from GVCFs can be in : • Loans:for small and medium enterprises which contribute to sustainable development • Equity financing: to “green” entrepreneurs • Links with supporting bodies

  27. Thankyou for your attention 27

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