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. 

Avoiding an energy deadlock

As Morocco only has limited energy resources, it is currently 97% reliant on an external supply. This strong dependence on energy imports, combined with the upward trend of oil prices, places a heavy burden on the trade balance and on the Government’s budget. This situation has prompted the Moroccan Government to establish a regulatory and institutional framework to promote renewable power generation.
In November 2009, the Moroccan Solar Plan was launched with the aim of developing an environmentally-sound power generation capacity, based on solar power of a minimum of 2,000 MW by 2020. AFD has allocated a EUR 100m loan to the Moroccan Agency for Solar Energy (MASEN) out of a total amount of EUR 630m lent by other co-financiers: European Investment Bank  (EIB), KfW, European Commission (NIF), Clean Technology Fund (CTF) and African Development Bank (AfDB).
This financing will be used to install the Ouarzazate power plant, the first phase of the project to develop a solar power complex. It will have a capacity of 160 MW out of a total of 500 MW. It will be located roughly 10 km to the north-east of Ouarzazate and will be delivered in 2015. The green electricity produced will be for the local market. 

 
Tapping into an exceptional sunshine rate

The first phase of the Ouarzazate program will comprise a parabolic trough power plant with a capacity of 160 MW and a 3-hour thermal storage system. The annual power generation for a 160 MW power plant with 3 hours of storage is estimated at 370 GWh, including 40% at peak times and 60% at off-peak times.
In short, this project will eventually reduce the Kingdom’s energy dependence and strengthen its power generation capacity. It will also reduce the negative impacts of fossil fuel imports on the budget and trade balance, manage a national resource with underexploited potential, promote the creation of a new solar power industry in Morocco and, finally, reduce greenhouse gas emissions. The Solar Plan (2 GW) will avoid the emission of roughly 3.7 million tons of CO2. The carbon balance for the first 160 MW phase can thus be estimated at roughly 270,000 tons of CO2 equivalent avoided every year.
 
  

Solar radiation map of Morocco: the main sites (source: MASEN)
 

Improving energy efficiency and developing low-carbon production industries

The project is in line with the second aspect of AFD’s “energy” strategy, which aims to decarbonize power generation and use it more efficiently.
In this context, AFD is continuing to support clean technologies, such as photovoltaics (PV) and Concentrated Solar Power (CSP), which are not yet financially competitive, although their cost has decreased significantly. These technologies need to benefit from an incentive-based institutional and regulatory framework.
AFD ensures that it structures appropriate financing to help close this financial gap, particularly under public initiatives, such as the Mediterranean Solar Plan, the Renewable Energy Cooperation Programme (RECP) supported by the European Union and the Paris-Nairobi Initiative. AFD’s aim is to support the emergence of these industries in countries which demonstrate a commitment to developing them, with a view to reaching cost parity, in the short or medium term, with conventional power generation industries. In addition, each sector has different specificities and potential depending on the region.

What can we expect from the Doha COP?

It is clear that international negotiations on climate change are struggling to establish a process from the top, whereby countries would pledge to reduce their greenhouse gas (GHG) emissions. Yet this international negotiating framework continues to be important and necessary, including for giving impetus to the action taken by an increasing number of national and international actors in the field. Consequently, the first outcome expected from this COP 18 in Doha [Ed.: which is also hosting the 8th meeting of the parties to the Kyoto Protocol – CMP8] is to get the important commitment to define an international agreement by 2015 to reduce these emissions – which we hope will be ambitious – on the right track, this includes the polluters of yesterday, today and tomorrow.
Beyond this, this international meeting must serve to reinforce the concrete and increasing mobilization of countries, communities and the different international and national actors for the fight against climate change. In this respect, financial actors like Agence Française de Développement are seeking to participate fully in this new international finance framework which, from a much-anticipated Green Fund to a more extensive mobilization of the capacities of both Northern and Southern development banks, must massively, rapidly and effectively leverage “climate” finance.
 
 

What will AFD be doing in Doha?

AFD is very much involved in the international “climate” negotiations on a number of counts. First, it supports and advises our Government and the French delegation, the objective being to share our field experience with them and to finance climate change-development investments.
Indeed, one of the objectives of the negotiations is also to help structure and stimulate activities at very different levels, which range from international financing (a topic in which AFD is very much involved) to countries’ public policies, including more thematic topics such as forests, adaptation, agriculture, technologies… or cross-cutting topics, such as mechanisms for accountability, impact measurement, management, capacity building, financial accounting, etc.
Our second objective is to help strengthen our international position as an international finance institution actively working on climate issues and able to mobilize international mandates and resources. This is an important issue for the Group and highly topical with the current operational implementation of the Green Fund.
Finally, there is the practical objective of exchanging on the practices and strategies of other international funders and development agencies with, for example, the decisions expected in Doha on accounting methods for climate finance and those on measuring the carbon footprint. There is also the aim of gaining a better understanding of the policies and activities conducted by countries for the fight against climate change. 
 
 

What is AFD’s “Climate” Strategy?

For the period 2012-2016, AFD has pledged to implement an ambitious “climate change-development” strategy based on three pillars: i) a target for 50% of our annual financial commitments in developing countries to be earmarked for “climate” projects/programs and for 30% for Proparco’s initiatives to support the private sector, ii) a systematic estimation of the carbon impact of the projects we finance and iii) the inclusion of this impact in all our criteria for operations, as part of an approach which takes account of the level of development of the country in question, our mandate in this country, and the efforts that the country is making to integrate climate change into its development priorities. Consequently, AFD finances projects in the field of renewable energy, both public and private, such as the concentrated solar power plant projects in Morocco and South Africa, which help diversify the energy mix in these countries. It also finances projects for energy efficiency, for example by modernizing street lighting in the City of Phnom Penh, for urban transportation in Egypt and Bangladesh, for water resource preservation and management in Morocco with the National Electricity and Drinking Water Authority (ONEE), or again for the sustainable management of forestry and rural activities in the Central African Republic.
 

Click on the image to download AFD’s 2012-2016 Climate Action Plan:

The Bogota municipality, the French Embassy to Colombia, the French Development Agency, the CAF, the Avina Foundation, the FINDETER Bank and the El Tiempo press group, in partnership with leading Colombian and international institutions, will be holding an International Summit in Bogota on “Cities and Climate Change”, on 19, 20 and 21 November 2012.

The United Nations Rio +20 Conference will host the international launch of the Summit, on 21 June, at a press conference to be held at 18:00 in the French Pavilion.

Side event organised in partnership with: the Bogota Municipality, the French Embassy to Colombia, the CAF, the Avina Foundation, the FINDETER Bank and the El Tiempo press group
 
Speakers:

• Mr Diego Bravo, special representative of the Mayor of Bogota
• Mr Hector Velasco Perroni, Environment Director, Federal District of Mexico
• Mr. Ricardo Jimenez, Ciudad Humana Foundation
• Mr. Jacques Moineville, Deputy Director, AFD
• Representatives of the CAF, the Avina Foundation and the Findeter Bank

Promoting public-private dialogue

Industry leaders, hotel owners and institutional representatives from Réunion and Mauritius gathered to discuss current practical energy efficiency solutions, in the presence of local dignitaries, including the Mauritian Minister of Tertiary Education and Research.

The workshop presented figures on the major savings achieved both for domestic and corporate energy bills. It provided an opportunity to discuss possible options for an action plan in the Energy Demand Management field in Mauritius, as well as possible synergies with Réunion.

Following the presentation of the mapping of energy efficiency potential in industry and in the service sector in Mauritius, the workshop continued with thematic workshops dedicated to case studies and exchanges of good practices on the topics of steam systems, cold production and commercial buildings. Site visits were organized on the following day for the private sector representatives.
 

From left to right: Jérôme Isautier (Pres. ADIR), Laurence Breton-Moyet (Dir. AFD Mauritius), Françoise De Palmas (SG ADIR), Marc Dubernet (Dir. AFD Réunion), Raj Makoon (Dir. JEC), Renganaden Padayachy (economist Mauritius CCI), Maurice Cerisola (Pres. La Réunion Economique), Gilbert Espitalier-Noël (CEO ENL Property), Vincent d’Arifat (Pres. AMN)

 Enhanced cooperation between the sister islands

This initiative is the result of the active exchanges and know-how sharing between operators on the two islands, which have been developing on the topic of energy demand management for the past two years.

The signing of the Inter-governmental Agreement on Sustainable Development and Energy Management between France and Mauritius in January 2011 has led to a growing number of cooperation projects, with support from AFD and the French Global Environment Facility (French GEF).

This agreement is coordinated by ADEME Réunion (Environment and Energy Management Agency) and gathers public and private operators specialized in these issues in Réunion. It allows a transfer of know-how and good practices to partners in Mauritius. The following activities can be mentioned in this context:
 

• EDF’s support to the Central Electricity Board (CEB) for the preparation of bidding documents for photovoltaic development in Mauritius,
• ADIR’s support to JEC for the establishment of a pre-diagnostic of energy in Mauritian industries,
• Support from ADEME and consultants from Réunion in training Mauritian public architects, as well as ARER’s support to the Mauritian Ministry of Energy for the creation of an energy observatory, the Energy Efficiency Management Office (EEMO),
• The provision of a “Volunteer of Progress” from ADIR at the Association of Mauritian Manufacturers (AMM), with support from the Réunion Region, in order to assist the coordination of the energy management process in the industrial sector. 
   

Joint event at Rio+ 20 Conference

More generally, synergies have emerged between the societal projects which are the cornerstone for the sustainable development approach in both Mauritius and Réunion, called Mauritius Sustainable Island (MSI) and GERRI (“Grenelle de l’environnement” climate change protocol in Réunion – Succeeding through Innovation).

During the Rio+20 Conference on Sustainable Development, AFD will be proposing a high level workshop at the French Pavilion conference area on 21 June on the parallel experiences of these two islands and their areas of cooperation. The aim is to illustrate the real opportunities that exist, learn lessons from the constraints and difficulties that mark these processes and identify potential avenues for the future of these islands.

More about AFD and Mauritius sustainable development (in french)

Sustainable bamboo management and carbon credits

Under the French Global Environment Facility (French GEF) “Rural Carbon” project, AFD organized an international seminar on carbon credits and sustainable bamboo management in Phnom Penh (Cambodia) on 26 and 27 April 2012, in partnership with the Administrative Center for China’s Agenda 21 (ACCA21), the implementing agency for international cooperation projects under the supervision of the Chinese Ministry of Science and Technology.

Experts from France, China, India, Vietnam and Cambodia

This meeting, which on the opening day was chaired by Mr. Khong Sam Nuon, Secretary of State of the Cambodian Ministry of the Environment, gathered a number of experts from several countries (China, Cambodia, France, India and Vietnam). Representatives from several international institutions, notably FAO (Food and Agriculture Organization) and INBAR (International Network for Bamboo and Rattan) also attended, along with NGOs such as WWF and GRET, representatives from the academic world and specialized consultants (NEXUS and Carbonium).

Can China’s experience be reproduced?

These technical discussions also focused on China’s experience in promoting the reduction of CO2 emissions at its bamboo plantations, as well as methodologies developed to promote carbon credits under pilot projects supported by AFD and the French GEF in partnership with ACCA21.

Indeed, an initiative to promote carbon credits in China’s rural areas has been developed under the French GEF pilot project entitled “Rural Carbon”, which was approved in July 2010.

This project has established expert centers in Yunnan Province (Yunnan Clean Development Mechanism Service Center), which implement a new accounting methodology for carbon credits generated by bamboo plantations.

This methodology has been developed with technical assistance from the NGO TNC (The Nature Conservancy) and has led to the first carbon credit transaction for bamboo plantations in China. This transaction was conducted in March 2011 and was awarded the first Panda label, a Chinese standard on the voluntary carbon credit market developed by the China Beijing Environment Exchange and the French environmental exchange, Bluenext.

This exemplary and groundbreaking Chinese initiative aroused a great deal of interest from participants from the other countries which were present due to its potential to eventually be reproduced in other Asian countries, or in Africa. 

Photos of the field visit in Cambodia on 27 April 2012