EU Sustainable Energy Cooperation and Financing Instruments - - PowerPoint PPT Presentation

EU Sustainable Energy Cooperation and Financing Instruments

European Commission Directorate-General for International Cooperation and Development Felice ZACCHEO Head of Unit Sustainable Energy, Climate Change

Global Vision

Sustainable Energy for All (SE4ALL) initiative - 2011 UN 2030 Agenda for Sustainable Development, SDG7 and SDG 13 - 2015 Paris Agreement on climate change - 2015 Climate COP23 Bonn – 2017 G7 and G20 energy, climate and development groups

SDG 7: universal access to affordable, reliable, sustainable and modern energy by 2030 SDG 13: Take urgent action to combat climate change and its impacts

• The 2030 Agenda for Sustainable Development
• The Paris Agreement
• Addis Ababa Action Agenda (Financing for Development)

International commitments

EU response

• The Africa-EU strategic partnership for energy: 'Energising

Africa'

• Global Strategy on the European Union's Foreign and

Security Policy

• The international dimension of the EU Energy Union
• New European Consensus on Development
• Council conclusions on energy and development
• European External Investment Plan
• Spend at least 20% of EU budget (2014-2020) on climate

change related actions

The three big bets of EU cooperation in sustainable energy

The 3 drivers for sustainable energy

Promoting political

• wnership &

partnerships for implementation

• EU Delegations, policy

dialogue and indicative programmes (NIPs and RIPs)

• Budget support
• Joint Declarations
• EU Energy Initiative (EUEI)
• UN Agenda 2030, SDG7
• G7 and G20
• Memorandum of

Understanding with the USA

• Covenant of Mayors

Improving governance and reforms of the energy sector

• EU's Technical Assistance

Facility (TAF) - EUR 65 million for 48 months

• Africa-EU Renewable Energy

Cooperation Programme

• EU Energy Initiative

Partnership Dialogue Facility

Boosting investment through innovative financial instruments

• For large scale infrastructures:

the regional investment platforms within the context of the EIP

• A specific window dedicated to

'Sustainable Energy and Sustainable Connectivity' in the EIP European Fund for Sustainable Development Guarantee

• ElectriFI for small and medium

scale projects with the private sector.

• EU-EDFI Private Sector

Development Facility

• GEEREF
• Geothermal Risk Mitigation

Facility (GRMF)

Africa-EU Summit: Energising Africa

▪ Joint Communication for a renewed impetus of the Africa-EU Partnership Proposed Flagships for period 2018-2020:

• 1. Deliver the EU contribution to the AREI: 5 GW of renewable energy

generation capacity by 2020, to bring access to sustainable energy to 30 million people in Africa and saving 11 million tons of CO2 per year.

• 2. High Level Platform for dialogue with private sector, to facilitate EU and

Africa public-private cooperation on increased investments in the sustainable energy sector, improve the investment climate, de-risk private investments, facilitate knowledge sharing on innovative business and financing models and best practices on public finance leveraging.

• 3. Launch a new EU-Africa Research and Innovation Partnership on

climate change and sustainable energy focusing on deployment as well as capacity building in energy efficiency and renewables.

Innovative Financial Instruments underlying principles

• Public funding alone cannot solve problems faced > Need for crowding-

in additional funds IFIs and private sector (Financing for Development)

• Grant funding is not sustainable, distorts markets, not to be used when

projects are profitable (short term limited impact versus long term)

• Need for use of grants under reimbursable schemes, recycling of funds

and reuse and/or taking high risks in order to attract other investors

• Smart financing engineering solutions, developing solutions with IFIs,

delegating implementation

• Complex sector problems require multifacetted responses
• Started with public investments (interest rate subsidies, IG, studies) >

moving to support private sector investments

• Projects have issues:

▪ Affordability problems ▪ Poor financial performance ▪ Perceived risk/market failure ▪ Pricing issues ▪ Multi-component And/or

• Countries are:

▪ Too ‘rich’ for all-grant (LMICs, MICs) ▪ Too poor for all-commercial loan (DSF concessionality & limits) And/or

• Actors:

▪ Financiers have constraints and specific policy objectives ▪ Beneficiaries ‘shop’ for best deal ▪ Capital intensity ▪ New technology ▪ Pioneering new approach ▪ Issues beyond sponsor ▪ Public goods

Blending.

DG NEAR: 2 facilities (NIF & WBIF) DG DEVCO:6 facilities (AfIF/ITF, LAIF, CIF, IFCA, AIF, IFP)

Annual grant approvals (in € million) Grant approvals by sector (in %)

100 200 300 400 500 600 700 800 Thematic AfIF IFP CIF AIF IFCA LAIF ITF NIF

All facilities grant approvals to 380

• perations

€ 3.4 billion

Average: € 9 million per

• peration

EFIs financing to approved projects ¹ *

€ 26.2 billion

Total investment amount

€ 57.3 billion

Leverage: 16.8/1

¹ Regional Banks (AfDB, IADB, CDB, ADB ,...) and WB/IFC are NOT included.

41% 22% 17% 12% 3% 3% 1% 1% 1%

Energy Transport Environment Private Sector Social Agriculture Mixed ICT Urban development 0% 10% 20% 30% 40%

2007-2016 Blending Operations

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EIP

Resources from EU and leverage

• Sustainable Energy

and Sustainable Connectivity

• Micro, Small and

Medium Enterprises (MSMEs) Financing

• Sustainable

Agriculture, Rural Entrepreneurs and Agroindustry

• Sustainable Cities
• Digitalisation for

Sustainable Development

Support Pillar 1 Support Pillar 3

Market intelligence, Investment Climate Analysis, Dialogue Government Reforms

Pillar 2

Investment pre- identification phase Investment phase Investment preparation Capacity building and value chains upgrading EIP Pillar 2. Technical Assistance

ElectriFI – global

FMO > EDFIMC

• Operationalised in 2016
• 100M+ EUR from budget (+10M USD Power Africa)
• Close to 50M EUR investment portfolio (end 2018)
• Flagship instrument for S/M scale investments
• Access and new gen capacity, rural focus, decentralised
• Commercial & reimbursable. Ventures/projects that are

financially sustainable with potential to scale

• Early stage, high risk with flexible financing solutions
• Ticket size 500K – 10M EUR, financing of max 50%
• Always additional to other funders
• Strong EU additionality. Deployed where projects are

too risky for commercial banks alone and too small for development banks. SOLAR

• Sigora Haiti
• Mera Gao Power

India

• Azuri Technologies

Kenya

www.electrifi.org

ElectriFI – Country Windows

FMO > EDFIMC (2017)

• First movers: Zambia, Nigeria, Cote d'Ivoire,

Benin (more coming … including Asia and Pacific) - 85M EUR

• Structure

will respond to specific country situation

• Implementation

steps: Market study, Investment strategy … i.e. EU TAF, Get.invest,..

• Dealflow sourcing: country specific approach,

but generally expected through open calls and pro-active sourcing

The streamlined RECP / GET.invest „Toolbox“

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Climate Investor One

FMO > CIM

• 30M EUR EU contribution, total of 1.3BLN USD
• Other co-financiers (NL, USAID …)
• Medium scale projects (50-100 M USD), mainly on-

grid

• 3 funds offering "whole-of-life" financing solutions
• Structured (tier) risk structure (EU first loss, pension

funds lowest risks)

• Regional key, EU contributions for SS Africa
• Technology focus on solar, wind and run-of-river hydro

technologies.

• Contract with FMO signed end of 2017

Africa Renewable Energy Scale-Up Facility (ARESUF)

AFG Group (AFD and Proparco)

• 24M EUR EU contribution
• 12 M EUR > AFD to reinforce public sector actions:

public policy, sector planning, tender preparation for IPP on-grid projects, electrification sector strategies

• 12

M EUR > Proparco to support private sector projects in the

• ff-grid

and mini-grid sub-sectors focussing on solar

• GUARANTEE FACILITY with 50% covered by EU
• Contract signed end of 2016

Transferability and Convertibility Facility

Proparco > EDFIMC

• 30 M€ EU contribution
• Transfer

and convertibility risk mitigation instruments

• 6 to 12 months debt service reserve available for

renewable energy projects

• Where

foreign currencies (EUR/USD) are not readily available by the central bank for IPP investors

• Targeting all SE4ALL countries
• Contract signed end of 2017

Partnering with the EU - Suggestions for the TF

• Make use of our instruments to invest in difficult markets,

prove business models and technologies, enlarge the risk, target vulnerable part of the population.

• Outreach to EUD and to EC Headquarters: joint efforts to

answer to international/EU commitments and partner countries priorities (WS, Seminar,….)

• Exchange information on markets, enabling environments,..
• Invest in and measure development impact – job creation,

women empowerment, energy access, digitalization,….

❖ More information on approved projects: https://ec.europa.eu/europeaid/policies/innovative-financial- instruments-blending/blending-operations_en

❖ Guidelines on blending operations are available on Capacity4dev through this link: http://capacity4dev.ec.europa.eu/t-and-m- series/document/guidelines-eu-blending-operations

The guidelines are complemented by four sector reference documents: Reference document (n°19) "Blending in the Energy Sector" – 2016 Reference document (n°22) "Blending and Support to Private Sector Development" - 2016

❖ EIP website: https://ec.europa.eu/commission/external-investment-

plan_en ❖ ElectriFI website: https://electrifi.org

❖Communication and Visibility Manual

• http://ec.europa.eu/europeaid/sites/devco/files/communication_and_visi

bility_manual_en_0.pdf

❖Communication Strategy for the European Neighborhood Policy and Enlargement Negotiations

• https://myintracomm.ec.europa.eu/dg/near/whatwedo/communicating-

enlargement/Documents/our-activities/NEAR-CommsStrategy.pdf

❖10 Golden Rules to ensure visibility of EU funding

• https://myintracomm.ec.europa.eu/dg/near/whatwedo/communicating-

enlargement/Documents/our-activities/NEAR-CommsStrategy-10- golden-rules.pdf

Communication and visibility plan:

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