renewable energy and low carbon financing
TRANSCRIPT
Renewable Energy
and Low Carbon Financing
Roberto G. AielloWorld Bank, LAC Energy Sector
Carbon Expo 2009 - Barcelona
May 28, 2009
Climate change “is a development, economic, and
investment challenge.
It offers an opportunity for economic and social
transformation that can lead to an inclusive and
sustainable globalization.
That is why addressing climate change is a critical
pillar of the development agenda.”
World Bank Group President Robert B. Zoellick
BALI, INDONESIA, December 12, 2007
New financing instruments
1- Clean Technology Fund (CTF)
2- Carbon Partnership Facility (CPF)
In addition to GEF, IBRD loans and other existing
financial instruments and guarantees
Synergies in Project Finance
Year
C
a
s
h
F
l
o
w
(-)
(+)
CTF
Concessional investment finance
CF
Cashflow: payment for climate
service
GEF
Grant: subsidy for public good
1- Clean Technology Fund (CTF) Criteria
Promote scaled-up financing for demonstration, deployment, and transfer of low carbon technologies with significant potential for long-term GHG emission reduction
Based on country strategies and programs – Investment Plan
Eligible programs/projects:
Power sector: renewable energy, highly efficient technologies to reduce carbon intensity
Transport sector: efficiency and modal shifts
Energy efficiency: buildings, industry, agriculture
Country access: ODA-eligibility with active MDB country program
Financing: IDA-like terms to be co-financed with MDBs
Combination of climate financing instruments (GEF, CF, CTF possible for larger impact)
CTF Investment Criteria
Significant GHG emissions savings
Cost-effectiveness
Demonstration potential at scale
Development impact
Implementation readiness
Additional cost/risk premium
Private sector projects and programs will adhere
to these principles
CTF Investment Plans
Financing
Est. CTF
($ million)
Est. Co-
financing
($ million)
Est. Total
Investments
( $ million)
Egypt 300 1,560 1,860
Mexico 500 5,700 6,200
Turkey 250 1,850 2,100
TOTAL 1,050 9,110 10,160
First Investment Plans for Egypt, Mexico, and Turkey endorsed by CTF Trust Fund
Committee in January 2009
CTF Investment Plans
Egypt
Wind: Scale up wind power from 1000 MW to 2500 MW
Urban Transport : 6 BRT corridors, 5 Light Rail links, etc
Mexico
Energy Efficiency: Lighting and Appliances replacement program
Wind: IFC provide private sector support for wind power upscale
Urban Transport: 20 BRT corridors
Turkey
Renewable energy and EE: promote private sector development
Smart grid: grid management and control systems for wind integration
CTF Investment Plans
Pipeline
Preparations underway for Morocco, South
Africa, Colombia, Philippines and Ukraine
Discussions on potential joint MDB missions
for Thailand and Kazakhstan.
Major initiative to scale up Concentrated Solar
Power in the Middle East and North Africa
region.
2 – Carbon Partnership Facility (CPF)
Towards a new approach…
Use carbon markets to catalyze a transformation toward low-carbon development
Be more strategic than before, work at the country level: Support long-term investments programs and technologies for transition to low-
carbon economy
Integrate carbon finance into public and private investment decisions
Shift away from a project-by-project approach to programs of investments & sector based approaches
Provide inputs to establishing a long-term regulatory framework post-2012
CPF - Buyers and Sellers in a Partnership
SELLERS(governments, companies)
Emission Reduction
contribution
Willingness to develop
and implement specified
emission reduction
programs and sell ERs
BUYERS
(governments, companies)
Minimum financial
contributions
Willingness to purchase
Emission Reductions
(ERs) generated over
the long term
Program
development
Carbon Asset
Development
Fund (CADF)
ER sale and
purchase
Carbon Fund
Partners (Host Governments, other)
and Donors
Principles of the Pricing
Approach The Pricing Approach needs to safeguard both Buyers and Sellers’
interests in a reasonable manner
Needs to be transparent, reflect the risk profile and the risk allocation between Buyers and Sellers in each transaction
Partnership Committee endorses a Pricing Approach based on Trustee’s proposal
The Pricing Approach is utilized for all Emission Reduction Purchase Agreements (ERPA)
Expected to include at least the following elements: May use both fixed and variable pricing components
Floor and ceiling prices can further reduce price fluctuations in the contract and limit down or upside market risks.
A benchmark/reference representing the asset type transacted
e.g. for primary CER contracts would utilize primary CERs as the benchmark
Appropriate risk adjustments to the benchmark price, reflecting the specifics of any given ER program at the time of ERPA signature
Examples of ER Programs
under development Scaling up of geothermal energy in Indonesia
Country wide waste management programs in Morocco and Brazil
Small hydro roll out in Vietnam
Locomotive electrification in India
Energy efficient lighting and urban bus transport systems in Mexico
Provincial biogas program and high efficiency coal (IGCC, including pilot CCS) in China
All of these with IBRD, GEF or CTF financing, many others being discussed
