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 SDG 7: universal access to affordable, reliable, sustainable and modern energy by 2030 Climate COP23 Bonn – 2017 SDG 13: Take urgent action to combat climate change and its impacts G7 and G20 energy, climate and development groups
International commitments The 2030 Agenda for Sustainable Development • The Paris Agreement • Addis Ababa Action Agenda (Financing for Development) • 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 Improving governance Boosting investment ownership & through innovative and reforms of the partnerships for financial instruments energy sector implementation • EU's Technical Assistance For large scale infrastructures: • • EU Delegations, policy the regional investment Facility (TAF) - EUR 65 million dialogue and indicative platforms within the context of for 48 months programmes (NIPs and RIPs) the EIP • Africa-EU Renewable Energy • Budget support A specific window dedicated to • Cooperation Programme • Joint Declarations 'Sustainable Energy and • EU Energy Initiative • EU Energy Initiative (EUEI) Sustainable Connectivity' in Partnership Dialogue Facility • UN Agenda 2030, SDG7 the EIP European Fund for • G7 and G20 Sustainable Development • Memorandum of Guarantee Understanding with the USA ElectriFI for small and medium • • Covenant of Mayors 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
Blending. DG NEAR : 2 facilities (NIF & WBIF) DG DEVCO :6 facilities (AfIF/ITF, LAIF, CIF, IFCA, AIF, IFP) • ▪ Projects have issues: Capital intensity ▪ ▪ New technology Affordability problems ▪ ▪ Poor financial performance Pioneering new approach ▪ ▪ Perceived risk/market failure Issues beyond sponsor ▪ ▪ Pricing issues Public goods ▪ 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
2007-2016 Blending Operations Annual grant approvals (in € Grant approvals by 800 million) sector (in %) 700 Thematic Urban development 1% 600 AfIF ICT 1% IFP 500 Mixed 1% CIF 400 Agriculture 3% AIF 300 Social 3% IFCA Private Sector 200 12% LAIF Environment 17% 100 ITF Transport 22% 0 NIF Energy 41% 0% 10% 20% 30% 40% All facilities grant EFIs financing to Total investment approvals to 380 approved projects ¹ amount operations * € 57.3 billion € 3.4 billion € 26.2 Leverage: 16.8/1 Average: € 9 million per billion ¹ Regional Banks (AfDB, IADB, CDB, ADB ,...) and WB/IFC are NOT included. operation
EIP 10
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 3 EIP Pillar 2. Technical Market intelligence, Assistance Investment Climate Analysis, Dialogue Government Reforms Capacity building and value chains upgrading Pillar 2 Investment pre- identification phase Investment preparation Investment phase Support Pillar 1
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 • SOLAR Ticket size 500K – 10M EUR, financing of max 50% • Always additional to other funders • Sigora Haiti • Mera Gao Power • Strong EU additionality. Deployed where projects are • India too risky for commercial banks alone and too small for Azuri Technologies • Kenya development banks. 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“ 15
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 off-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, … .
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