AFD in the Palestinian Territories
In this respect, AFD expressly supports the Palestinian Authority and is scaling up its assistance for the structuring and capacity building of institutions that provide services to the population. With growing geographical and social fragmentation, AFD’s operations also aim to promote social cohesion.
With the Palestinian Authority’s almost total dependence for its electricity and oil product supply, energy efficiency is seen as a source of energy alongside renewable energy. An initial program financed by AFD and the French GEF, which started in 2009, identified energy saving potential in several sectors. A workshop was organized in Ramallah to report on the conclusions of this program on 24 January 2013.
Striking a balance between financial issues and energy management
Energy efficiency has been a priority for the Palestinian Authority for several years now. It was initially perceived as being one of the main vehicles for energy conservation, but is now central to the energy policy conducted by the Palestinian Energy Authority (PEA).
Indeed, the Palestinian Authority has run up serious debt in the energy sector as it bears the debt of distribution companies and municipalities (due to their arrears) towards the Israeli supplier. This phenomenon, which is called net lending, is one of the major issues for the Palestinian Authority as it is estimated at some USD 300m for 2012, including at least 40% for the energy bill.
Beyond these economic aspects, PEA has become aware of the need to control Palestinian energy demand from outside and therefore to strengthen its own resources. Solar power is, of course, its main resource, particularly with private households (for example, solar water heaters).
Significant potential identified in various economic sectors
Demand management also requires energy efficiency measures.
An initial program financed by AFD and the French GEF, which started in 2009 and is currently reaching completion, identified energy saving potential in several sectors (public buildings, industries…), thanks to the creation of a qualified entity at the PEA to conduct the series of audits required for this initial national diagnostic.
The Palestinian Territories are one of the most proactive Middle Eastern countries on these issues. Moreover, in 2012, they signed a national energy efficiency plan at the instigation of the Arab League, which sets the target of reducing energy consumption by 5% by 2020.
Quite substantial potential has been identified with an average of 18% for the public and industry sectors.
Training in Energy Efficiency
The savings made also make it possible to improve management in distribution companies, anticipate growth in demand in the coming years and thereby improve service quality.
A workshop was organized by the energy efficiency team in Ramallah to report on the conclusions of this program on 24 January 2013.
Innovative financial tools for sustainable implementation
Indeed, building on the results of the initial audits, the PEA energy efficiency team has defined new financing mechanisms along with the AFD Jerusalem Agency. These financial tools, in partnership with both the public and private sectors, aim to promote a long-term investment process to support energy efficiency.
This workshop gave the team the opportunity to present the methods for these financial tools, which provide incentives for investment, to a wide range of economic actors (ministries, universities, industries, banks, electricity distributors, public entities…).
In the public sector, the creation of a fund replenished by beneficiary institutions on the basis of part of the savings made (“revolving fund”) will give the Ministry of Finance both the initial investment needed (led by AFD) and the budgetary autonomy to continue to invest in the entire building stock. The primary target is hospitals and schools, where the most substantial sources of savings have been identified.
In the private sector, while companies are aware of the savings potential from energy efficiency, very few invest due to a lack of liquidity.
It has been suggested to set up investment subsidies to test the interest of companies for an amount equivalent to a reduction in the interest rate on a loan contracted by companies with partner banks (equivalent to an interest-free loan).
The methods for these two innovative financial mechanisms are currently being tested with two pilot projects, prior to being rolled out more extensively under the second program.
This project is expected to provide a model for further energy efficiency projects and encourage investment. It may even eventually create a new market, which would help the Palestinian Authority meet its national targets to reduce energy consumption.