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PART I: PROJECT INFORMATION

Project Title: Market Transformation and Removal of Barriers for Effective Implementation of the State-Level Climate Change Action Plans

Country(ies): India GEF Project ID:1 5361GEF Agency(ies): UNDP GEF Agency Project

ID:4606

Other Executing Partner(s):

Ministry of Environment and Forests (MoEF), GOI

Submission Date:Resubmission Date:

01 April 201328 August 2013

GEF Focal Area (s): Climate Change Project Duration (Months)

48

Name of parent program (if applicable): For SFM/REDD+ For SGP

      Agency Fee ($): 355,722

A. INDICATIVE FOCAL AREA STRATEGY FRAMEWORK2:

Focal Area ObjectivesTrust Fund Indicative

Grant Amount($)

Indicative Co-financing($)

CCM-2 GEFTF 1,497,775 10,000,000CCM-3 GEFTF 2,246,663 15,000,000

Total Project Cost 3,744,438 25,000,000

B. INDICATIVE PROJECT FRAMEWORK

Project Objective: To support the effective implementation of specific energy efficiency and renewable energy related climate change mitigation actions identified in the State Level Action Plans on Climate Change for selected states in India

Project Component

Grant Type Expected

Outcomes Expected Outputs

Trust Fund

Indicative Grant

Amount ($)

Indicative Co-

financing($)

Framework for the implementation of climate change mitigation options in the SAPCCs

TA Successful and sustainable implementation of priority CCM actions on energy generation3 and application of EE & RE technologies in selected states

(i) Prioritized and selected climate change mitigation actions listed in the SAPCCs4

(ii) Designed and implemented common monitoring, reporting and verification (MRV) system for selected climate change mitigation actions of SAPCCs in the selected

GEFTF

1, 071,638 3,013,473

1 Project ID number will be assigned by GEFSEC.2 Refer to the reference attached on the Focal Area Results Framework when completing Table A.3 Energy generation refers to both electricity and thermal energy production.4 These should be technically and economically feasible and contribute to the achievement of the NAPCC objectives

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PROJECT IDENTIFICATION FORM (PIF)

PROJECT TYPE: FULL-SIZED PROJECT TYPE OF TRUST FUND:GEF TRUST FUND

1

states that provide feedback into the SAPCC process

Catalysing investments for the application of feasible CCM measures

Inv. States are fully capable of identifying, designing, planning, financing and implementing CCM actions that are in their SAPCCs

(i) Implemented selected specific priority energy-related climate change mitigation interventions that are scalable and replicable in energy sector(iii) Mobilized public and private sector investments in the application of commercially viable CCM technologies

GEFTF

500,000 17,139,769

TA (ii) Established public-private partnerships in the implementation of feasible energy-related CCM projects(iv) Replicated existing successful policy and financial tools that support the implementation of CCM technologies

GEFTF

1,250,000 1,402,000

Capacity development of relevant state government officials in Madhya Pradesh and Manipur

TA Relevant state departments and other stakeholders are technically capable of (a) integrating climate change within development plans and budgets, and (b) implementation of robust MRV systems to assess implemented actions under the SAPCCs

(i) Developed climate-integrated state budgets in line with the development plans of the states of Madhya Pradesh and Manipur (ii) Completed capacity development programs on the measurement, reporting and verification (MRV) of implemented CCM actions under the SAPCCs (iii) Established institutional mechanism for cross-learning between selected states, including information sharing and technology dissemination to facilitate climate change mitigation actions (iv) Completed inter-state cross-learning exposure/site visits and consultation workshops on priority CCM action implementation for SAPCC implementing agencies and departments, as well interested private sector entities and investors. (v) Prepared, published and disseminated case studies, audio-visual and published lessons learnt, and analysis of results of the implemented priority CCM

GEFTF

756,000 2,844,758

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actions in the SAPCCsSub-Total 3,577,638 24,400,000

Project Management Cost5 GEFTF

166,800 600,000

Total Project Costs 3,744,438 25,000,000

C. INDICATIVE CO-FINANCING FOR THE PROJECT BY SOURCE AND BY NAME IF AVAILABLE, ($)

Sources of Co-financing Name of Co-financier Type of Co-financing Amount ($)GEF Agency UNDP Cash 500,000National Government MoEF Cash 2,000,000National Government MoEF In-kind 22,500,0006

(select) (select)(select) (select)Total Co-financing 25,000,000

D. INDICATIVE TRUST FUND RESOURCES ($) REQUESTED BY AGENCY, FOCAL AREA AND COUNTRY: NA

E. PROJECT PREPARATION GRANT (PPG)7

Please check on the appropriate box for PPG as needed for the project according to the GEF Project Grant: Amount Agency Fee

Requested ($) for PPG ($) 8 No PPG required. ________________ _ ___________ (Up to) $50k for projects up to & including $1 million ___     ________ ___     _____ (Up to)$100k for projects up to & including $3 million _________ _ _____ ______________ (Up to)$150k for projects up to & including $6 million ___150,000______ ____14 ,250 ____ (Up to)$200k for projects up to & including $10 million ________________ _____________ (Up to)$300k for projects above $10 million ___     ________ ___     _____

PPG AMOUNT REQUESTED BY AGENCY(IES), FOCAL AREA(S) AND COUNTRY(IES) FOR MFA AND/OR MTF PROJECT ONLY: N.A.

PART II: PROJECT JUSTIFICATION 9

A. Project Overview

A.1. Project Description:

Global environmental problems, root causes and barriers that need to be addressed:

Problem that the proposed project will address: The National Action Plan on Climate Change (NAPCC) represents the baseline project for GEF purposes. Launched in 2008, the NAPCC represents a multi-pronged, long-term and integrated strategy for achieving key climate change goals: namely, “achieving national growth objectives through a qualitative change in direction that enhances ecological sustainability, leading to further mitigation of greenhouse gas emissions”, and “devising efficient and cost-effective strategies for end-use demand-side management”. The NAPCC encourages planning and coordination at different levels, especially state (sub-national)

5 Same as footnote #3.6 This is for funding the baseline activities that will be supported by ongoing GOI flagship initiatives on renewable energy, which is the large scale solar deployment scheme (Solar Mission), and on energy efficiency, which is the Perform Achieve and Trade (PAT) program.7 On an exceptional basis, PPG amount may differ upon detailed discussion and justification with the GEFSEC.8 PPG fee percentage follows the percentage of the GEF Project Grant amount requested.9 Part II should not be longer than 5 pages.

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level. All states and Union Territories of India10 are preparing their State Level Action Plans on Climate Change (SAPCCs), which define state-level objectives and strategies that are aligned with the objectives of the NAPCC. As of July 2013, the SAPCCs of 9 states (Andhra Pradesh, Arunachal Pradesh, Madhya Pradesh, Manipur, Mizoram, Rajasthan, Sikkim, Tripura, and West Bengal) have been formally cleared by the National Steering Committee (NSC) on Climate Change of the Government of India. The proposed project will support the implementation of SAPCC strategies in two target states, Madhya Pradesh and Manipur. These two states are among the most vulnerable states in India. They have been selected as pilot states in the proposed project so as to (a) build on their approved SAPCCs, which are now ready for implementation, (b) achieve geographical balance in project coverage, and (c) cover diverse climatic conditions, so as to link diverse aspects and cross-learning between neighbouring states. The two states also represent different techno-economic profiles in terms of technology cost, availability and energy mix.

At the national level, the NAPCC has initiated eight “missions” (National Solar Mission, National Mission on Sustainable Habitat, National Mission on Green India, National Mission for Sustaining the Himalayan Ecosystem, National Mission on Enhanced Energy Efficiency, National Water Mission, National Mission for Sustainable Agriculture, and National Mission on Strategic Knowledge on Climate Change). Of these missions the two most relevant in the context of the proposed project are detailed below. These missions will accelerate the implementation of a number of existing Government programmes, such as the Rural Electrification Programme, the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), and the Decentralised Distributed Generation (DDG) Programme.

The Mission on Enhanced Energy Efficiency promotes market-based mechanisms to enhance cost-effective efficiency investments in energy-intensive large industries, accelerates the shift to energy-efficient appliances, and proposes fiscal instruments (for example rebate on energy tariff for incorporating “green” measures) to promote energy efficiency. Demand-side management, especially in municipalities, is one of the priority areas of intervention. Municipalities account for 10% of the total electricity consumed in cities in India and they spend about 60% of their budget on electricity bills. Several studies conducted in India indicate that it is possible to improve the energy efficiency of municipalities by at least 20-25%.

The National Solar Mission aims to deliver 20,000 MW of solar power by 2022. The scale of financing required to achieve NSM targets is enormous, in the order of US$ 90 billion. Mobilising private investments through banks and financial institutions will have a crucial role to play in achieving this target. To date, however, the total installed capacity of solar (PV and thermal) in Madhya Pradesh is just 11.7 MW and 0.26 MW in Manipur. Indeed, in 2012-13 Madhya Pradesh reported an overall power deficit of 11% (availability is only 46,829 GWh against a demand of 51,783 GWh)11. Similarly, Manipur has power availability of 466,000 GWh against a peak demand of 488,000 GWh; a deficit of nearly 5%. While Madhya Pradesh has huge potential for renewable energy-based power generation, the total installed capacity of renewable energy-based power systems is still only 2.5% of the total installed power generation capacity. The total installed electricity generation capacity in Manipur is around 158 MW. The bulk of this is hydro (large and small), which will likely be adversely affected by future climate change. The installed renewable energy capacity (solar, small hydro, wind and biomass) of the state is barely more than 3 MW. Therefore, renewable energy capacity of Manipur is 2% of the state’s total installed power generation capacity. In this context, the two states have prioritized renewable energy (RE)-based power generation projects in their respective SAPCCs as one of the interventions to be supported by appropriate policies and investment promotion.

At the sub-national level, state governments are responsible for developing state-specific action programmes for the power, transport, industry, buildings, and municipal energy efficiency and forestry sectors in line with NAPCC. There is a need to have greater synergy between national priorities and state-specific strategies, as it requires actions in several sectors that are State subjects and have to be implemented in the States. In the preparation of SAPCCs, the required GHG inventory data that are used in the preparation of SAPCCs are sourced from the national inventory management system (NIMS) that was established as part of the National Communications process; inventory estimation and management are not part of the SAPCC preparation process. The Government of India 10 India has 28 States and 7 Union Territories.11 Source: http://www.cea.nic.in/reports/yearly/lgbr_report.pdf (accessed in July 2013).

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will provide some financial support to state governments for the implementation of their SAPCCs. The collective indicative budget of the SAPCCs of the two state governments of Madhya Pradesh and Manipur amounts to US$ 24.5 million.

However, moving from development of a plan/strategy to implementation is a challenge for state governments generally, and for Madhya Pradesh and Manipur specifically, because of a number of barriers: limited institutional capacities, the absence of synergies between policies and incentive structures and limited technical capabilities to design relevant programs and catalyse private sector investments. In Madhya Pradesh and Manipur, implementation of the SAPCCs has not yet started. Effective implementation of the SAPCCs is important and delays can jeopardise the achievement of NAPCC goals.

Type of Barrier Description

Awareness and capacity development barriers

Stakeholders, including government departments (notably the Pollution Control Boards, Department of Environment, Commerce and Industry (State), Power, Energy, Industries, Transports etc.), public enterprises, districts and local bodies such as zilla panchayats, have limited awareness of climate change mitigation technologies and actions, including associated cost-benefits (both technical and economic feasibility).

Limited interest within the private sector for participation in the design, implementation, monitoring, evaluation and review of interventions (e.g. very few Public-Private Partnership (PPP) models/projects at state level in areas such as waste management, demand-side management in municipalities, etc.).

The role of stakeholders is not clearly defined for the implementation of SAPCCs. Limited capacity of state-level institutions to integrate climate change considerations within

their programmes and state budgets (e.g. creating state clean energy funds for deployment of low-carbon technologies, providing soft loans routed through public banks, etc.).

Institutional barriers

There is no formal institutional mechanism for cross-learning between centre and states or for cross-sectoral collaboration.

The absence of effective coordination between institutions, departments and stakeholders at various levels on these issues.

An appropriate institutional and incentive policy framework for adoption of climate change mitigation technologies and strategies does not exist, and is exacerbated by conflicting state priorities, with the result that there is only weak cohesion between institutional and incentive structures for adoption of climate change mitigation technologies and actions.

Technical barriers

Limited information, knowledge and experience in linking climate change-relevant technologies to development and economic planning and programmes at the sub-national level (e.g., building energy security through available RE sources, low-carbon infrastructure in public lighting, waste management, etc.).

Limited capacities of the states to replicate and scale-up established models of climate change mitigation technologies (e.g. linking with the Indian Renewable Energy Certificate (REC) market mechanism).

Financial barriers

Financial institutions, especially at the sub-national level, have limited knowledge of proven climate change mitigation technologies and strategies. Additionally, private investors are not confident about performance-based payments (preferential tariffs).

Inadequate regulatory incentives to encourage private investment through suitable and affordable financing. According to the International Energy Agency, India spent more than US$ 40 billion12 subsidizing fossil-fuels in 2011, which amounted to 3.4% of GDP13. These subsidies are a huge burden on the government budget; they encourage wasteful energy consumption, deter investments in energy efficiency and infrastructure, and reduce incentives for renewable energy technologies.

Proposed alternative scenario with Incremental /Additional cost reasoning:12 Source: International Energy Agency (IEA). World Energy Outlook 2012-Energy Subsidies, IEA/OECD: Paris13 Source: International Energy Agency (IEA). World Energy Outlook 2010, IEA/OECD: Paris.

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The Government of India realises the importance of SAPCC implementation and in this context seeks GEF support to quick start and showcase the actual implementation select high level priorities of SAPCCs in two states, Madhya Pradesh and Manipur. The proposed GEF project will involve the formulation and recommendation for approval and enforcement of a suitable policy/regulatory framework to support the effective implementation of the climate change mitigation actions in the energy sector as specified in the State-Level Climate Change Action Plans. Part of that framework will be the policies and associated implementing rules and regulations to support the identification and design of feasible NAMA quality climate change mitigation actions, and the implementation of the relevant commercially available RE/EE technologies to facilitate these actions and bring about the expected energy savings and the corresponding GHG emission reductions. Support policies and regulations on the application of identified feasible financial instruments for different models of investments (government owned, Public Private Partnership or sole private sector funding), as well as incentive schemes will be developed and be part of the policy/regulatory framework. Also, in support of the institutionalization of a MRV system for the state-level CCM actions that will be implemented, support policies and regulations for the enforcement of the MRV system institutional framework will also be included among the policy/regulatory barrier removal activities.

To achieve the holistic approach envisaged in the NAPCC, it is important to showcase the inter-linkages between the power, transport, industry, municipal energy efficiency and buildings sectors.

In this regard, select strategies to build energy security through renewable energy and energy efficiency of the states will play an instrumental role in development of the state. The Government of India’s ongoing flagship initiatives on renewable energy is large scale solar deployment scheme (Solar Mission) and energy efficiency is Perform Achieve and Trade (PAT) scheme through cap and trade mechanism, will be given particular prominence under the proposed project.

In 2001 Indian Parliament adopted a law on energy efficiency, known as the Energy Conservation Act. The law, required large energy consumers to implement specific actions and so introduced various energy efficiency programmes and performance standards including the flagship programme on emission trading scheme Perform Achieve and Trade (PAT). PAT is a national market mechanism where each designated consumer (defined as per EC Act 2001) will be assigned specific energy consumption (SEC) target to meet over a period of three years. Any additional saving will qualify for issuance of energy saving certificates, which can be traded internally with other designated consumers (short of targets) or through exchanges. In the future, the scope of this scheme may be extended to cover prioritised cities, towns and municipalities. The proposed project will help prepare the ground for such a PAT extension by demonstrating the effectiveness of energy efficiency measures that target municipalities. The scope of complementary regulatory instruments, such as performance-based payments, capital subsidies, soft loans, etc. for renewable energy and energy efficiency will also be explored during the PPG phase.

For renewable energy (RE) interventions in power and industrial sectors, the proposed project will build synergies with the National Solar Mission, where some policy risks are already covered through the provision of fiscal incentives. Particularly on renewable energy, Madhya Pradesh and Manipur are endowed with good solar energy potentials of more than 5.5 kWh/m2/per day and 4.5 kWh/m2/day, respectively. It is estimated that 10% of the solar energy potential of these 2 states can be productively utilized. At the moment, state governments have allocated lands to private investors for the development of solar PV farms without proper due diligence. But private investors are facing challenges in terms of technical and financial feasibility studies and closure of project financials. The proposed project will, therefore, provide investment support for technical and financial feasibility studies.

Further, the project will identify potential private investors, involve them in project development through appropriate PPP arrangements, will ensure projects receive benefits from existing fiscal instruments, and will explore mechanisms to combine and sequence funds at the state level and leverage private sector investment. For large-scale grid-connected solar PV systems, the project will facilitate the installation of 20 MW of solar PV in the two target states through support to on-grid solar PV farms, each with a capacity of 2 MW or greater. The project will also include de-risking of public and private investments in large-scale solar PV (over 2 MW). For municipal energy efficiency, the proposed project will help state governments to identify appropriate technology, fiscal instruments and market mechanisms to leverage public and private finance in the area of municipal street lighting and municipal water pumping.

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In India, monitoring the progress of such efforts and related impacts is a difficult task in absence of uniform Monitoring, Reporting and Verification (MRV) system, and most international/private funding recommends the use of such systems. Therefore, the proposed project will develop and implement MRV system for the two states, so as to measure, monitor and report state level actions and its impact. An MRV system that captures both implementation efforts and effects, would act as a useful tool for the national and sub-national governments to track progress and identify need for international support. The framework will include a verification mechanism that will ensure all data and information pertaining to actions (under renewable energy and energy efficiency) performance indicators are measurable, comparable and can be applied to set of mitigation actions. A robust domestic MRV system would also foster confidence and impart greater credibility to country financing needs through NAMA or any other similar mechanism. However, the states will be responsible for monitoring and verifying the interventions in line with a common protocol, and the proposed project will identify existing applicable standard methodologies such as those applied in CDM (as well as relevant IPCC guidelines) for measuring, monitoring, reporting, and verification of the actions taken by the states. The MRV system that will be developed under the proposed project is intended to be institutionalized by the MoEF through its endorsement and application in the other Indian states for state-level CCM initiatives based on the SAPCCs. With the implementation of the developed system in the 2 target states, any necessary adjustment to the system processes/procedures can be made to ensure applicability of the system in other states.

The following table summarizes the interventions of the proposed project that will contribute to incremental GEF outcomes. Further details such as scenario analyses, identify ongoing and/or planned (and budgeted) projects in the state that are implementing or will be implementing the projects of similar type, which will be clarified during the PPG phase of the project.

Component/Outcome Proposed Project Interventions Details on TA/Inv. of GEF grant and barriers that will be addressed

1. Framework for the implementation of climate change mitigation options in the SAPCCs/Successful and sustainable implementation of priority CCM actions on energy generation and application of EE & RE technologies in selected states

Prioritization of climate change mitigation actions listed in the SAPCCs in terms of feasibility and linkages with the NAPCC objectives, specifically relating to the energy sector with a focus on large-scale solar PV (RE); and energy efficiency in municipalities (EE).

Design and implementation of a common monitoring, reporting and verification (MRV) system for selected climate change mitigation actions of SAPCCs in Madhya Pradesh and Manipur.

GEF TA support is directed mainly towards (a) increasing understanding amongst diverse stakeholders on climate change impacts and related interventions in RE and EE, and (b) development and implementation of MRV system.

Awareness and capacity development barriers: stakeholders at sub-national level are aware of climate change mitigation technologies and actions, including associated cost-benefits.

Subtotal GEF grant US$ 1,071,638 + Co-financing US$ 3,013,473 = US$ 4,085,111 2. Catalysing investments for the application of feasible CCM measures/States are fully capable in identifying, designing, planning, financing and implementing CCM actions that are in their SAPCC

Demonstration of specific climate change mitigation actions in RE (solar PV-based power generation), and EE (energy efficiency and energy conservation measures in municipalities such as efficient street lighting, efficient water distribution, etc.) with a potential for scale up and replication.

The scope of regulatory instruments (for RE - performance based payment, capital subsidies, soft loans; for EE - risk insurance scheme and ESCOs) will also be explored. GEF support will be for the design and operationalization of the mechanisms (i.e. design, establishment and training needs – not for capitalising the instruments).

Lessons learnt through MRV system will

GEF TA is towards the identification of private sector investors; assisting the proponents of the investment projects to avail fiscal incentives; and assisting them in accessing combined public and private sector funding to scale up investments. In this way, states will be fully enabled to identify, design, plan, finance and implemented climate change mitigation interventions. The GEF investment support is for the technical and financial feasibility studies and actions needed to integrate the developed MRV system into the investment projects.

Technical and financial barriers: (a)

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provide feedback into the SAPCC development and implementation process.

Establishment of public-private partnerships and mobilization of public and private sector investments.

Scale-up and replication of policy and financial tools.

replicated and scaled-up established models of climate change mitigation technologies, and (b) financial institutions at the sub-national level fully support the RE and EE investments & increased private sector involvement.

Institutional barriers: adoption of climate change mitigation technologies and strategies through appropriate institutional and incentive policy framework at the sub-national level.

Subtotal GEF grant US$ 1,750,00014+ Co-financing US$ 18,041,769 = US$19,791,7693. Capacity development of relevant state government officials in Madhya Pradesh and Manipur/Relevant state departments and other stakeholders are technically capable in (a) integrating climate change within development plans and budgets, and (b) implementing, monitoring, and verification of SAPCC interventions

Identification of opportunities and establishment of institutional mechanism for cross-learning between selected states including information sharing and technology dissemination to facilitate climate change mitigation actions.

Targeted programmes for different stakeholders to strengthen their capacities for implementation of measurement, monitoring, reporting, and verification related to the SAPCCs.

Inter-state exposure/site visits and consultation workshops held for cross-learning by implementing agencies and departments as well as for increasing private sector and investor interests.

Development of methodology for integrating climate change within development plans and budgets at the state level

TA support is mainly towards (a) facilitation of knowledge sharing mechanism between centre and state, (b) provide a platform for review and discussion on results of climate change planning and implementation to provide policy advice, and (c) document and disseminate good practices/ learning of SAPCC at the state level.

Institutional barriers: cross-learning between selected states and increased information sharing and coordination.

Awareness and capacity development barriers: states are geared to develop climate-integrated state budgets in line with the development plans of the states of Madhya Pradesh and Manipur

Subtotal GEF grant US$ 756,000 + Co-financing US$ 3,344,758 = US$ 4,100,758Grand Total US$ 27,977,638 (excluding project management cost)

Global environmental benefits analysis:

To develop a conservative estimate of the probable “order-of-magnitude” estimate of GHG emission reductions that are attributable to the proposed project, it is considered that the main sources of direct lifetime GHG emission reductions are through catalysing investment activities: (a) solar PV-based power generation (on-grid; with capacities over 2MW); and, (b) energy efficiency and energy conservation measures in municipalities like end-use efficiency of municipal street lighting and municipal water pumping. For waste-to-energy interventions, technologies have not yet been identified by the states. Therefore, related emissions reductions are not included in the analysis here, with the result that the estimates presented here can be considered conservative. The project is also expected to influence and catalyse wider adoption of improved EE and RE technologies, establishing commercial viability of technologies, improving access to finance and increasing investors’ interest.

14 The Government of India (through the MoEF) co-financing is a combination of resources available under the “National Missions” (energy efficiency and solar) as well as resources allocated to the states by the central Government for incentivising the implementation of climate change mitigation actions under the SAPCCs. The state governments are also allocating resources for the implementation of their plans through state clean energy funds. The major portion of the co-financing is towards scaled-up investments by the private sector, which will be tied to very specific types of investments guided by the respective state SAPCCs. The state governments will also contribute to the respective activities through their state budget allocations as outlined in their SAPCCs. It will be ensured that the various types of investment projects that can be supported by the MoEF grant will be determined and established during the project design phase. The stated MoEF co-financing for this project is the level best estimate of the initial grant funds that will be earmarked for supporting state-level CCM projects.

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For EE interventions in three municipalities across the two target states, 15% energy efficiency improvement is considered. Taking the average annual electricity consumption of a municipality as 130,000 MWh/y, assuming an average grid emission factor of 0.93 tCO2/MWh, and assuming a useful life of interventions over 10 years across the three municipalities, possible energy savings will be 585,000 MWh/y (195,000 MWh/y/city) and the potential GHG emission reductions achieved will be 544,050 tCO2.

GEF TA support is directed mainly towards identifying private investors, establishing PPPs, linking the projects to access benefits from existing fiscal instruments, and explore mechanisms to combine and sequence funds at the state level and leverage private sector investment. In this way, states will become fully capable of identifying, designing, planning, financing and implementing climate change mitigation interventions. GEF investment support is for technical and financial feasibility studies and actions needed to integrate the developed MRV system into the interventions piloted. It is estimated that the potential GHG emission reductions achieved from solar PV power generation units with a combined total installed capacity of 20 MW is about 358,459 tCO2 over 10 years of useful lifetime of the project, assuming a capacity factor of 22% and grid emission factor of 0.93 tCO2/MWh.

These figures are rough estimates based on a conservative notion of the possible interventions that will be implemented under the proposed project. However, the actual selection of the interventions will be done through a broad stakeholder consultation process during the PPG phase, with an emphasis on those interventions that have the potential to scale-up and replicate in selected sectors.

Innovativeness, sustainability and potential for scaling up:

The proposed project will facilitate the implementation of climate change mitigation actions stated in the SAPCCs; maximise the benefits through exploring inter-state cooperation; showcase the actual implementation of SAPCCs; demonstrate institutional mechanisms for inter-state networking and cross-learning, including information sharing and technology dissemination; and develop and implement a common monitoring system to assess progress on the SAPCCs in the select states. The SAPCCs are regarded as innovative inasmuch as they are a manifestation of the level of commitment of local governments in India to address climate change, and these also open up opportunities for the private sector in effectively (and gainfully) participating not only in the provision of services (e.g., energy supply) to the states but also in accelerating the uptake of commercially available technologies that are applied to mitigate climate change. However, this innovation will come to naught if these plans are not implemented. Focusing on the effective facilitation and enabling of the implementation of the SAPCCs in the 2 states is expected to result in the achievement of the planned targets. The other Indian states can adjust and implement their SAPCCs based on the experiences and lessons learned from the SAPCC implementations in the 2 states which would lead to the achievement of individual (state) objectives but also the collective (Mission-level) targets at the national level (NAPCC).

One of the criteria for the selection of interventions, as listed in SAPCCs, is the potential to scale-up and replicate. The proposed project will leverage private sector investments through combining existing financial mechanisms such as the PAT, and will also explore mechanisms for combining and sequencing of funds at the state level. In that regard, the proposed project will have high potential for scale-up and sustainability.

A.2. Stakeholders:

Stakeholder RoleMoEF MoEF is responsible for the overall supervision and management of the project preparation

activities. MoEF will be involved in the project preparation as one of the stakeholders, provide required inputs to the project design, CEO endorsement request documentation and its review. It is also the Coordination Unit for the implementation of the NAPCC.

United Nations Development Programme (UNDP)

UNDP will lead the process of project preparation during the PPG phase by involving all the relevant stakeholders in the project design, preparation of required documentation for CEO endorsement and its review. UNDP will serve as the GEF implementing agency for the proposed project. It will carry out monitoring and evaluation of the project preparation activities, facilitating the budgetary provisions and support in implementing the project preparation activities.

State governments of State governments will be involved in the project preparation, implementation and monitoring

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Madhya Pradesh and Manipur

of activities as key stakeholders. They will provide critical inputs for project design, which will require consultation and coordination with different stakeholders. Within the state governments, the nodal agencies for the preparation of the SAPCCs will be the lead partners in the project design stage, and are expected to contribute significantly at the implementation stage as well.

Ministry of New and Renewable Energy Sources (MNRE), Bureau of Energy Efficiency (BEE), Ministry of Power (MoP)

The Ministries will be involved in the project preparation, provide required inputs to the project design, CEO endorsement request documentation and its review. Also, each ministry has a specific agenda and role identified in the NAPCC. The Ministry of New and Renewable Energy (MNRE) and the Bureau of Energy Efficiency (BEE) are responsible for the National Solar Mission and National Mission on Enhanced Energy Efficiency, respectively. Consultations and coordination with these relevant ministries will provide inputs for planning, design and implementation of the project activities.

Financial institutions Financial institutions (including public and private sector banks, venture capitalists, etc.) will be involved in the project preparation as one of the key stakeholder constituencies, provide required inputs to the project design, and CEO endorsement request documentation.

Civil Society Organizations

CSOs (e.g. the CSOs that have been involved in the SAPCC preparation process, such as the Centre for Environment Education, Global Information Earth Survey, etc., will be involved in the project preparation as stakeholders, provide required inputs to the project design, and CEO endorsement request documentation.

Academic Institutions Academic institutions (again those active during the SAPCC preparation, such as IIM Indore, Barkatullah University and Jiwaji University) will be involved in the project preparation as stakeholders, provide required inputs to the project design, and CEO endorsement request documentation. Their role in the project is to provide expert opinion and technical support in the identification of potential appropriate climate change mitigation actions in the energy sector that can be supported under the project.

A.3 Risk:

The following table summarizes the anticipated risks that might prevent the successful implementation of the project and achieving the project objectives, including the proposed climate change mitigation measures:

Risks Risk Rating Mitigation Measure

Lack of active involvement of the relevant private sector entities like private investors, power project developers, manufacturers, ESCOs etc.

L MNRE, MoP and BEE have schemes to encourage the private sector through incentive scheme to promote renewable energy and energy efficiency applications – facilitating the availability of financing for investments in SAPCC implementation as well as availability of capital loans and generation-based incentives to project developers. The project will help designing and operationalizing these aspects and institutional arrangements of the fiscal instruments, and to support interventions in the nascent RE and EE market at state level.

Limited involvement of sector agencies and stakeholders in the climate change mitigation options identified

M One of the prime focuses of the project is strengthening stakeholder capacities and facilitating their involvement in the climate change mitigation actions identified. This will be undertaken largely under the capacity development component of the project. The project will address constraints related to access to finance through market-based frameworks and de-risking the investment environment.

Delay in the adoption of priority actions outlined in the SAPCCs by the state government sectoral departments.

M The MoEF will be monitoring the SAPCC implementation. If states are not active they will not be able to utilize development funds earmarked under different Missions. So, MoEF is encouraging the state governments and monitoring the progress of state plan implementation. The project will provide technical support to the State Nodal Agency (SNA) in influencing the sectoral decisions and the budgetary process for accelerating adoption of priority climate change mitigation actions outlined in the SAPCCs with the relevant departments.

Impact of climate change on the proposed interventions due to change in climate variables including

L Both the states have subtropical  dry climate which is suitable for solar applications. Change in temperature and level precipitation to an extent will not have any significant effect on the solar insolation.

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Risks Risk Rating Mitigation Measure

precipitation, humidity, wind speed and cloudinessLimited institutional capacities to support project implementation and programme continuity at the state level

M The technical and financial support, including the co-financing leveraged through the project, will address this risk by building and retaining the necessary technical, managerial and implementation capacities during the project life and beyond.The project will promote common principles for planning and implementation, but with sufficient flexibility to take account of differences in institutional frameworks and in capacities of the state governments. The planning process will emphasise multi-stakeholder engagement to ensure inter-departmental coordination,

Lack of financial institutions’ sustained commitment for implementation of SAPCC

M Engaging financial institutions at different levels and providing cost-benefit analysis of different technologies. One of the mechanisms could be developing and advocating for regulatory reforms to improve the business environment in the priority areas identified.

A.4. Coordination: Outline the coordination with other relevant GEF financed and other initiatives:

The MoEF, as the nodal Ministry for this GEF project, will coordinate with the relevant institutions and the proponents/implementers of other existing related projects/programs in India to avoid duplication of efforts, and enhance the complementarity and synergy between these projects. The project will build synergies with other on-going national initiatives, GEF and non-GEF projects in the area of energy efficiency and renewable energy. The on-going GEF projects are (a) energy efficiency in buildings, (b) Energy efficiency in steel industries, (c) Solar water heaters, (d) Solar concentrators for thermal applications, (e) Energy efficiency in SMEs, (f) Biomass Energy for Rural India (BERI), (g) Biomass power projects, etc. Some of the completed GEF projects are (a) Hilly Hydel; (b) High-rate Bio-methanation; (c) Energy efficiency in Tea industry; etc. Most of these projects have successfully demonstrated the application of either renewable energy or energy efficiency measures. With regard to to renewable energy generation, some of these projects have provided useful lessons on the importance of preferential tariff support for small-scale power generation through targeted policy measures and financial tools – such as performance-based payment, capital subsidies, soft loans etc. – which will be detailed during PPG and will avoid any potential duplication of efforts and double-counting of GEBs. There is considerable scope for the replication of these successful measures and tools in the proposed project. The proposed project will also coordinate with projects of the World Bank, such as line-of-credit provision to IIFCL (India Infrastructure Finance Company Ltd) for lending to solar power projects in India. On the energy efficiency side, lessons learnt on some of the unsuccessful financial mechanisms, such as the risk insurance scheme and ESCOs in the context of SMEs, is vital. All these experiences will be taken into account while designing and implementing pilot interventions under the SAPCCs and linking possible options for scale-up.

A number of climate change planning initiatives are currently underway by various donor agencies in partnership with the state governments. In particular, GIZ and UNDP are supporting the preparation of climate change action plans in various states. GIZ has also selected some states for longer-term implementation assistance, but in most of the other states the support from UNDP and GIZ has been mostly in terms of preparation of the SAPCCs. The proposed project will complement this support by providing longer-term assistance for the implementation of plans, and investing in knowledge and cross-learning between the states.

B. Description of the consistency of the project with:

B.1 National strategies and plans or reports and assessments under relevant conventions, if applicable, i.e. NAPAS, NAPs, NBSAPs, national communications, TNAs, NCSAs, NIPs, PRSPs, NPFE, Biennial Update Reports, etc.:

The project is directly supportive of, and consistent with, India’s national priorities and policies related to climate change and development, and climate change relevant actions at the domestic level to address climate change more specifically as specified in NAPCC. The 12th Five Year Plan emphasizes the centrality of a low-

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carbon growth strategy at the national and state level for sustainable development. The proposed project will coordinate with the ongoing India TNC project, where MoEF is leading the effort on the establishment of an expert committee on NAMAs. It is proposed that more work will be done during the PPG phase in order to establish baselines and inventories and prioritize a set of pathways that will be selected for the investment portion of the project.

In addition to direct support to the NAPCC and the SAPCCs, the proposed project will support other national policies/legislation/programs that are relevant, such as the National Environment Policy, the Energy Conservation Act, the Rajiv Gandhi Grameen Vidyutkaran Yojna (Rural Electrification Scheme), the Accelerated Power Development and Reforms Programme (APDRP), the National Bio-Gas program, and other schemes such as the Mahatma Gandhi National Rural Employment Guarantee Programme (MNREGA). The approach paper to the 12th Five Year Plan of India also stresses the need to incorporate environmental issues, including climate change considerations, into development planning. Capacity enhancement, technology development and climate change mitigation are identified as priority areas for addressing climate change in the GEF-UNDP supported National Capacity Self-Assessment - Thematic Assessment Report on Climate Change (2007) . The proposed project was discussed at length and endorsed as a priority in the GEF National Dialogue Initiative (NDI)15.

India submitted its Second National Communication (SNC) Report to the UNFCCC on 4 th May 2012 (http://unfccc.int/resource/docs/natc/indnc2.pdf). The share of renewable energy is small when compared to the total installed capacity, and the SNC specifically identifies the need for a significant program to support renewable power, targeting 10% of new capacity additions by 2012. The SNC emphasizes the need for the NAPCC to mandate a rapid increase in the share of renewable power. The SNC also highlights the need to reduce energy intensity by 20% from the period 2007/08 to 2016/17 and initiate action to increase access to cleaner and renewable energy sources. It is stated in the SNC that, in order to meet the goals under the NAPCC, states should play a critical role and emphasizes a change in “direction, enhancement of scope and accelerated implementation” of state-level actions through SAPCCs.

B.2. GEF focal area and/or fund(s) strategies, eligibility criteria and priorities:

The project aims to support the effective implementation of specific energy efficiency and renewable energy climate change mitigation actions identified in the SAPCCs for select states in India. The project is in line with the GEF strategic priorities - specifically, CCM-2 (promote market transformation for energy efficiency in major sectors) and CCM-3 (promote investment in renewable energy technologies).

B.3. The GEF Agency’s comparative advantage for implementing this project:

UNDP is supporting the Government of India for the preparation of the SAPCCs in Andaman and Nicobar Islands, Bihar, Chandigarh, Chhattisgarh, Jharkhand, Kerala, Lakshadweep, Madhya Pradesh, Uttarakhand. UNDP has also facilitated the development of a Common Framework for the Preparation of the SAPCCs, and also provided technical support to ten state governments directly in preparation of their plans. UNDP’s strong partnerships with specific state governments and close involvement with nodal agencies at the state level will enable effective implementation of the proposed project. Following the successful involvement in the preparation of the SAPCCs, UNDP will bring an additional co-financing amount of US$500,000 to the proposed project. UNDP will follow through with its work in enabling and supporting the implementation of the CCM actions that are prioritized in the SAPCCs. The intention is that, with the successful implementation of the investment projects, UNDP will support their promotion to other states to facilitate the financing of the scale up and replication of the successful investment projects in relevant states.

UNDP has also facilitated the NATCOM preparation process, which has led to enhancement of the knowledge base on emission sources and climate vulnerabilities. UNDP is supporting the Government of India, as well as the state governments, in several initiatives aimed at removal of market barriers to energy efficiency improvements in selected energy intensive sectors, including SMEs (such as steel-re-rolling, brick making and tea processing), buildings, transport (including urban transportation and in the railways sector), and adoption of

15 National consultative forum convened by Government of India for each GEF programming cycle to review the GEF portfolio, and prioritize new interventions.

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renewable energy technologies, particularly biomass, solar (solar water heaters and solar concentrators) and hydro. The experience and lessons from these initiatives will directly feed into the state-level approach envisaged in this project. For instance, the GOI-GEF-UNDP initiative on energy efficiency improvements in the commercial buildings sector is aimed at removal of barriers for the adoption of the ECBC (energy conservation building codes), the actual implementation of which will be dependent on actions at the state level.

The proposed project will directly contribute to the realization of the goals of reducing the impact of climate change, increasing access to clean energy and adoption of energy efficient measures under the new CPAP for the period 2013-2017. Under the new CPAP period, UNDP will also specifically support the Government in implementation of the SAPCCs.

The Energy and Environment Unit (EEU) of the UNDP CO has a Head, a Climate Change Advisor and seven programme officers who support implementation of projects related to the different GEF focal areas, including climate change, biodiversity, land degradation and chemical management. Backed up by technical expertise available in the UNDP Asia-Pacific Resource Centre (APRC) based in Bangkok, Thailand, the India Country Office has sufficient staff to effectively supervise the implementation of this project. A professional staff member from the Country Office (EEU) will be responsible for oversight and project assurance, and will represent UNDP in the NSC. Expertise of other professional staff in EEU in climate change renewable energy and energy efficiency will also be utilized, when necessary, to support implementation of the project.

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PART III: APPROVAL/ENDORSEMENT BY GEF OPERATIONAL FOCAL POINT(S) AND GEF AGENCY(IES )

A. RECORD OF ENDORSEMENT OF GEF OPERATIONAL FOCAL POINT (S) ON BEHALF OF THE GOVERNMENT(S):

NAME POSITION MINISTRY DATE Shashi Shekhar Additional Secretary, GEF

Operational Focal Point (a.i.)Ministry of Environment and forests, Government of India

04/23/201316

B. GEF AGENCY(IES) CERTIFICATION

This request has been prepared in accordance with GEF/LDCF/SCCF/NPIF policies and procedures and meets the GEF/LDCF/SCCF/NPIF criteria for project identification and preparation.

Agency Coordinator, Agency name

Signature DATEProject Contact

Person Telephone Email Address

Adriana Dinu UNDP/GEF

Officer-in-Charge

04/01/2013 Butchaiah Gadde, Regional Technical

SpecialistEITT

+66 2304 9100 ext

5048

butchaiah.gadde @undp.org

16 The correct LOE (dated 23 April 2013) is submitted along with this revised version of the PIF.

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