what s working, and how to do moreof it.

Transcription

1 Technical Consultations on Sustainable Small-scale Livelihood-oriented Bioenergy Initiatives 29 October 2009, FAO, Rome small-scale clean energy enterprise development 'beyond the grid': what s working, and how to do moreof it. Lawrence Agbemabiese United Nations Environment Programme, Energy Branch, Division of Technology, Industry and Economics

2 disconnection of modern energy regimes from the situation and needs of majority

3 small-scale energy SMEs can close the gap Empowering local entrepreneurs and enterprises is key to developing the Tier 4 markets (the 4 billion people at the Bottom of the Pyramid) C.K. Prahalad & Stuart L. Hart The Fortune at the Bottom of the Pyramid

4 1 the case for energy SMEs beyond the grid SME can be key players in the delivery of modern energy services --including bioenergy --beyond they grid because they provide efficiently packaged small scale energy services for a variety of energy users provide low cost alternatives to grid extension exist in a wide range of possible business models often provide significant social and environmental returns

5 To successfully deliver energy services, what do SMEs need? yes, Financing. But that alone is insufficient! Information Seed and second-stage stage finance Business systems and tools Customer credit through 3 rd Party institutions Enterprise development assistance

6 What sources of funding currently exist to support SMEs? Gifts and Grants Government Subsidies Development Assistance Guarantees Insurance Concessionary Loans Commercial Loans Concessionary Investment Commercial Investment Supplier Credit Customer Up-front Payments Entrepreneur s capital

7 Finance Spectrum I Development/ Public Sector Commercial/ Private Sector Gifts and Grants Subsidies Development Assistance & Specialized Programs Concessionary Loans & Investments, Micro-credit Entrepreneur s Equity Customer Down Payments & Supplier Credit Commercial Loans, Investment, Insurance etc

8 Finance Spectrum I Development/ Public Sector Commercial/ Private Sector Gifts and Grants Subsidies Gaps: 1. Too few intermediaries. 2. Too little seed capital. 3. Too little reasonably priced growth capital. 4. Insufficient consumer & micro-enterprise finance. Customer Down Payments & Supplier Credit Commercial Loans, Investment, Insurance etc

9 the finance gap in energy SME development terms Upstream Downstream Expansion Concept Business Planning Pilot Roll Out Operations/ Growth Aggregate Investment Seed Capital Asset-based financing Investment Timeline Equity GAP Debt

10 how can these gaps be closed? Expand the number of intermediaries providing services and financing to SMEs. Increase the available seed capital. Increase the available pools of next stage capital. Provide capital at realistic return expectations = 6% to 10% ROI on an IRR basis. Expand access to innovative consumer finance.

11 UNEP response/translation: Rural Energy Enterprise Development (REED) African REED (AREED I and AREED II): 2000 Present in Tanzania, Zambia, Senegal, Ghana, Mali Brazil REED (BREED): China REED (CREED): 2004 present (Yunan Province)

12 Walking the talk in Africa: AREED Energy Branch, UNEP

13 initial REED model services and capital enterprise development services intermediaries: national/international NGOs private SMEs Energy Services Clients: Rural and/or periurban start-up + 2 nd stage financing short-term: in-house Investment Facility long-term: financial institutions

14 a problem: low willingness to pay for improved energy services Transportation Health ICT African rural households Water Energy Other Food spend only a third as much on energy as their urban counterparts on average, the largest such discrepancy among regions. WRI Housing Adapted from: World Resources Institute Energy Branch, UNEP

15 towards a solution in AREED II enterprise development services Thesis: Combine traditional AREED Support + End User Finance private SMEs Energy Services Clients: Primarily rural commercial customers of energy enterprises start-up financing Key Players: MFIs and regular FIs

16 AREED II end-user financing: roles of FIs end-users/borrowers equipment and services private SMEs: clean energy equipment/ services TA Mali Folkecenter UNEP TA vendor finance agreement LRF escrow agreement Program implementation agreement and funding small loans & repayments micro-finance institutions: Nyetaa Finance wholesale loans & repayments wholesale lender: EcoBank escrow function recourse loans international development wholesale lender

17 lessons/conclusions small and medium-sized private enterprises can play a vital role in expanding energy access in developing countries (proof of concept). financing for clean energy access is not a problem [or is it?: the global financial crisis!]. private energy SME support and end-user financing must always go hand-in-hand as part of any energy market transformation strategy. governments must create supportive investment climate, undergirded by good governanceand mainstreaming of integrated resource planning approaches.

18 Thank you! Lawrence Agbemabiese Energy Branch, UNEP DTIE, Paris Telephone: +33 (01)