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GEF Experience with Renewable Energy

GEF Experience with Renewable Energy. Dr. Yasemin Biro Program Manager Climate Change Global Environment Facility. An intergovernmental grant-making entity created out of 1992 Rio Earth Summit to address sustainable development.

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GEF Experience with Renewable Energy

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  1. GEF Experience with Renewable Energy Dr. Yasemin Biro Program Manager Climate Change Global Environment Facility

  2. An intergovernmental grant-making entity created out of 1992 Rio Earth Summit to address sustainable development. A financial mechanism of the UNFCCC, the Climate Change Convention. What is the Global Environment Facility?

  3. How does the GEF work? • GEF is governed by a 32-member Council of representatives from both developed and developing country governments. • In general, GEF funds cover the incremental costs of projects with global benefits related to climate change, ozone, biodiversity, land and water management and international waters. • GEF also provides Project Development Funds to eligible project concepts. GEF Secretariat reviews project proposals according to GEF project criteria. The Council approves the entry of projects into GEF’s work program.

  4. Full projects vs. Medium-sized projects (up to US $1 million in GEF funds). • “Implementing agencies” prepare and execute GEF funded projects: World Bank and IFC, UN Development Program, UN Environment Program, Regional Development Banks. • Private firms participate as manufacturers, dealers, project developers, financial intermediaries, technical assistance recipients, suppliers, contractors and project executors.

  5. GEF Beneficiaries • GEF projects are required to be country-driven. • Projects are developed by recipient countries in a participatory manner with attention to national priorities, development and social goals. • Direct project beneficiaries and participants include government agencies, private sector firms, utilities, NGOs, community organizations and households.

  6. GEF’s Climate Change Related Operational Programs • OP 5: Removal of barriers to energy efficiency and energy conservation • OP 6: Promoting the adoption of renewable energy by removing barriers and reducing implementing costs • OP 7: Reducing the long-term costs of greenhouse gas emitting technologies • OP 11: Promoting environmentally sustainable transport • OP 12: Integrated eco-system management

  7. GEF Grants for Climate Change and Renewable Energy • During 1991-2000, GEF allocated US $1.1 billion to 275 climate change projects, with additional $5 billion in co-financing from governments, multi-laterals and private sector. • During 1991-2000, GEF allocated US $570 million to 48 renewable energy projects in 47 developing and transition countries. These projects have leveraged US $2.5 billion in co-financing.

  8. GEF Funding for Renewable Energy • GEF renewable energy projects tend to fall into two categories: • “Cost reduction” projects which conduct research, demonstration and commercialization activities to lower long-term technology costs. (OP 7, OP11) • “Barrier removal” projects which develop and promote markets for commercial and near commercial technologies. (OP6, OP11) • The ultimate goal is to promote the development of markets for renewable energy.

  9. Market Development for Renewable Energy • Projects support private firms by providing financing, technical and business assistance, and marketing support. • Projects build capacities of government agencies and NGOs, in conjunction with studies, resource assessments and market characterization. • Projects create new financing vehicles like revolving funds, credit lines, and contingent business loans that are forgivable under specified conditions. • Projects develop or strengthen regulatory frameworks for grid-based IPPs, transparent power-purchase tariffs, and off-grid utility concessions for rural energy provision.

  10. Business Friendly GEF Support for Renewable Energy • GEF and the International Finance Corporation (IFC), the private sector affiliate of the World Bank Group, are increasing accessibility to resources for private sector investments in renewable energy in developing countries. • Renewable Energy and Energy Efficiency Fund • First global private equity fund devoted to renewable energy and energy efficiency in emerging markets. • Solar Development Group • Development and investment program for rural solar PV industry in developing countries.

  11. GEF Projects for Long-term Cost Reduction • Solar thermal power plants (4 projects) • Demonstration plants expected to total 400-450 MW in Egypt, Morocco, India and Mexico (integrated solar thermal/gas turbine) • Biomass integrated gasification/gas turbine power plants (3 projects) • 30MW demonstration plant in Brazil • Research on fuel supply markets and plant technologies • Distributed grid-connected PV (1 project) • Demonstration of 10 MW conjunctive use with hydro power on distribution system

  12. GEF Projects for Barrier Removal • Goal: Develop and promote markets for commercial or near-commercial technologies by sustainable removal of barriers (and not by subsidizing equipment) • Applications: • PV home systems for rural off-grid markets (23 projects) • Mini-grids from PV, wind, mini-hydro, biogas (12 projects) • Wind farms for utility markets (9 projects) • Commercial, public and agricultural off-grid PV (8 projects) • Biomass and bagasse for utility markets (6 projects) • Mini-hydro for utility markets (5 projects) • Geothermal for utility markets (1 project) • Solar thermal hot water for home and public uses (3 projects)

  13. Emerging Lessons: Off-grid Solar PV • Viable business models must be demonstrated to sustain development of a PV market. • Delivery/business model development, evolution and testing require time and flexibility. • Institutional arrangements for project implementation can greatly influence demonstration of viable business models. • Projects must explicitly recognize and account for high transactions costs associated with marketing, service, and credit collections. • Consumer credit can be effectively provided by micro-finance organizations, depending upon historical and/or cultural conditions.

  14. Emerging Lessons: Off-grid Solar PV • Projects have not produced adequate experience on the viability of dealer-supplied credit under a sales model. • Rural electrification policies and planning influence project outcomes and sustainability, and must be explicitly addressed in projects. • Establishing reasonable equipment standards and certification procedures for quality service with affordability is not difficult. • Substantial implementation experience is still needed before the success of the service approach can be judged. • Post-project sustainability of market gains achieved during projects has not yet been demonstrated in any GEF project.

  15. Emerging Lessons: Grid-Connected Wind, Biomass, Small Hydro • Many unused options exist to promote clean energy with power sector reform. • Financing mechanisms and financier technology acceptance are important for going beyond direct project impacts. • GEF can effectively assist with regulatory frameworks for independent power producers, but has only done so in two countries so far (Mauritius, Sri Lanka). • Problems of allocating the cost difference between wind and conventional power can seriously hinder progress if not explicitly addressed. • Two key forms of support go together: creating favorable investment climate for power projects and establishing regulatory frameworks for IPPs.

  16. Measure of Success • GEF projects will be successful if the firms, business models, capacities, financing mechanisms, and/or regulatory frameworks developed remain sustainable after project completion and are replicated on larger scales.

  17. GEF Climate Change Projects in Mexico • Since 1991, GEF has approved 6 climate change projects in Mexico. • Mexico is also participating in 2 global/regional climate change projects. • 3 out of these 8 projects have been completed; 3 projects have not yet started; so only 2 are in implementation. • One of the 2 in implementation is a renewable energy project implemented by the World Bank: • Renewable Energy for Agriculture

  18. Renewable Energy for Agriculture in Mexico • Approx. 1230 renewable energy systems will be installed in all 28 states as demonstration units, including solar-powered pumps, wind-powered pumps and solar-powered refrigerated milk storage tanks. • Project components include promotion, institutional strengthening, market development, equipment specifications and certification, demonstration, technical assistance and vendor financing. • Total estimated project cost: US $31.5 million • GEF contribution: US $8.9 million • Alianza: US $13.9 million • FIRCO: US $1.8 million • Farmers: US $6.9 million

  19. Example of Productive Use of Renewable Energy in Rural Areas • Applications of renewable energy that generate income or other productive social benefits for rural populations are an important aspect of the GEF’s efforts. • They go beyond the provision of lighting with solar home systems and provide development benefits, while offering large replication potential. • Productive-use applications are seriously underrepresented in the GEF’s current portfolio. • There is a strong potential role for the GEF to support rural renewable energy projects that explicitly target productive uses.

  20. Methane Gas Capture at a Landfill Demonstration Project (World Bank/GEF) • Total cost: $13.25 million • GEF allocation: $6.27 million • Hybrid Solar Thermal Power Plant (???) • Hybrid of 300 MW capacity combining 271 MW of conventional fossil fuel portion with an input from solar sources of 29MW. • Total Cost: $178 million • GEF allocation: $49.70 million • GEF has recently included a renewable energy project concept from Mexico in its pipeline (May 2001). • Plan of Action for Removing Barriers for the Full Scale Commercial Implementation of Wind Power (UNDP)

  21. Much more can be done: • A Programmatic Approach based on a long term vision that is in line with Mexico’s priorities and needs as determined by Mexico with the participation of key stakeholders.

  22. Uganda Renewable Energy Partnership (World Bank/GEF) • Based on a long term programmatic approach • Integrates policy, financing, capacity building, institutional development, and adaptation/learning with flexible targets and monitoring • Phased implementation with each phase learning from and building on prior activities • Duration: 2000-2010 • GEF support: $30 million • Co-financing: $345 million ($150 million from IDA and $195 million from private sector, government and other donors)

  23. Uganda Renewable Energy Partnership (World Bank/GEF) • Objectives/Outputs: • Increase rural electrification using renewable energy • Construct 70 MW of biomass, hydro, and solar renewable energy capacity over 10 years in a commercial, private sector orientation • Install 7,000-10,000 solar home systems • Integrate renewable energy into rural authorities activities (i.e., health, education, water, sanitation). • Reduce prices in the domestic solar PV product market, increase product availability and quality.

  24. Uganda Renewable Energy Partnership (World Bank/GEF) • Components: • Grid-based power generation: policy support, training, international best practice. • Residential, community, and institutional solar PV systems: support entrepreneurship and private finance through private sector, with limited GEF per-system subsidies. • Productive-use pilot projects for potential replication on larger scales: drinking water services, telecommunications and other productive uses. • Small mini-grids.

  25. www.gefweb.org MUCHAS GRACIAS!!!

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