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									Applications of UNEP’s Strategy:
Engaging Local Bank for Lending

    United Nations Environment Programme, DTIE
        Program Manager, Myriem TOUHAMI
            UNEP-DTIE and the Energy Branch
                                   Division of Technology,
                                  Industry and Economics

 Environmental                  Economics
                                and Trade
                                              Consumption      Energy   Ozone Action
                                              & Production

      Policy Unit             Technology             Finance        Transport
                             Transfer Unit                          Policy Unit

Mission: To help overcome market barriers and increase investment
           flows to renewable energy and energy efficiency technologies
Within our Energy branch programme, UNEP helps to:

                                • Overcome market barriers
                                • Increase investment flows
                                to renewable energy
                                and energy efficiency
                                                                   End-User Finance Programmes

                                                                               PV Solar Tunisia       SWH
                                                                                  PROSOL I          Montenegro
                                                                             Residential Tunisia
                                                                               PROSOL Hotels                     Macedonia              Green
                                                                                  Tunisia                                              Villages
                                                                                                             SWH Albania
                                                                              PROSOL Industrial
                                                                                  Tunisia                                                              Financing
                                                                                                                                                       Access to
                                                                                                                                                     Clean Energy
                                       Green                                      EE lighting               EGYSOL                                   Technologies
                                     Mortgage for                                  Morocco                Hotels Egypt                                    Asia
                                       SWH -                                                                                       GSWH India
                                       Mexico                                            GSWH
                                                                                         Algeria                              PV Solar
                                                                                                                                                  Solar Loan
                                                   GSWH Chili                                                                                     Indonesia

Key                                                                       Implementation Stage
SWH: Solar Water Heating Projects
GSWH: Global Solar Water Heating Programme                                         Completed
                                                                                                          SWH Residential
PROSOL: Programme Solaire - Solar Water Heating Programme in Tunisia
EE Lighting: Energy Efficiency Lighting Programme in Morocco                       Operating
                                                                                                            South Africa
EGYSOL: Egyptian Solar Water Heating Programme
PV Solar Loan Programme India                                                      In Development
PV Solar project; Photovoltaic solar project in Tunisia
FACET: Financing Access to Clean Energy Technologies (3 countries Asia)
ISLP: Indonesian Solar Loan Programme
GVC: Green Village Credit China
       Characteristics of UNEP’s Strategy
1. UNEP is not a bank but work to support the banking sector
and other financial players in creating tailored clean energy
finance mechanism.

2. Turning the finance sector into an ally promoting clean
energy by:
        • Supporting decision making, both amongst
          governments and financiers,

       • Implementing financial support mechanisms used to
         reduce the front-end barriers

       • Using several approaches for softening loan
         financing: Interest rate reductions (Tunisia), green
         mortgages (Mexico), guarantee facility (Montenegro)
  Fundamentals of a Bank Engagement

No standard bank engagement strategy
UNEP use a range of support activities and employ
  a variety of approaches and tools:
   – Institutional support from local governments
   – Multi-stakeholder approach (government, banks,
     suppliers, installers, state utility)
   – Technical support for setting up dedicated loan
   – Targeted capacity building, training, communication
     and dissemination to specific financial incentives

 Integrating carbon reduction benefits
What’s Needed to mobilize Scale up?

       Rebalancing Supply and Demand

       Create Demand           Additional
       for finance            Projects are
                              Capital Costs
                             e.g. incremental cost
                           of low carbon or climate
                            resilient infrastructure

                           Business as Usual
                             Is available
                             Capital Costs
                                e.g. cost of
                         conventional infrastructure

Ensure Supply
of finance

   Message : Most emphasis to date has been on ensuring a supply of
   finance. Need to also foster the demand for this finance.
Main features of PROSOL 1
 1. Loans financed through local banks
      repayments made through electricity bills
      interest rates initially softened
       interest subsidy phased out after 18 months

 2. Subsidy equalized between SWH and LPG
    underwritten for a trial period by Italy
        - 20% of system cost = 75$/m² =existing
        gas subsidy
       After successful trial made permanent
        - Change in Tunisian legislation
           PROSOL 1 –
Why did it motivate the demand?
A Quick and Simplified Procedure
• Customer contacts the SWH supplier
   – A list of eligible suppliers is given by the National Agency for
     Energy Conservation (ANME)
   – The debt was on the supplier’s balance sheet (not sustainable)

• Customer fills out the application form at the SWH
  supplier office, presents his latest STEG bill and ID

• The installation is immediate once the application form
  and engagement form are signed
      Financial and Economic Analysis
Investments – Who pays for what
• investment in the overall Program during 2005-2011
  has been estimated at approximately US$ 248
• The Public Sector provided
• 82% was provided by Private
  Capital (end-users and

      1 US$ of public


      5 US$ of private
         Local Economic and social Development

          PROSOL Residential has stimulated the development of the domestic solar
          thermal industrial cluster, with local actors playing a primary role.

       Number of qualified installers                       Number of sale companies
1400                                                  60
                                          1200                                                 50
1200                                                  50
            Installers X 12                           40
 800                                                       Companies X 6
 600                                                  30

 400                       283                        20
 200       100                                                 8               10
       Before PROSOL   During PROSOL   After PROSOL   0
           (2002)          (2006)         (2010)           Before PROSOL   During PROSOL   After PROSOL
                                                               (2002)          (2006)         (2010)

          The industry turnover 2005-2010 has been estimated of about
          120.2 million US$, of which 106.8 million US$ associated to
          manufacture and 13.4 million US$ associated with installers.
  Applications of UNEP’s strategy :
    Lessons learnt /1
• Technologies available; market uptake slow

• But markets scale up quickly once banks start to

• Banks need help to get started - Necessity for
  Capacity Building
     • Assessing technologies,
     • Marketing new loans,
     • Kick-starting demand.

• Capacity Building and Communication are
  mandatory for the development of the solar water
  heating market
   Applications of UNEP’s strategy :
     Lessons learnt /2
• PROSOL a driver for policy change
   – Lending gives feedback signal that technology is
   – 20% capital cost subsidy for SWH was set by law
   – Decree 4/2006 reaffirmed VAT exemption and
     reduced custom duties for SWH

• PROSOL 2 launched in 2007 – Once UNEP funds finished
  – Entirely developed by local actors,
  – Contribution to the creation of a self-sustaining,
    long-term market for solar water heaters
Global Solar Water Heating Initiative - Mexico
Why isn’t solar energy used for water heating in sunny Mexico?

Favourable conditions Challenges
 High solar resource            Lack of standards
                                 Need for awareness raising
 Rising fuel and gas prices     and communication
 Skilled manpower              Bad perception of banks
 Gvt builds households          Subsidized Gas Price
  for low income level
UNEP Strategy
1. Help banks to begin financing Solar Water Heaters
2. Address perverse subsidy

      Develop sustainable SWH market; displace gaz use.
      Propose an integrated approach
Market Analysis- Barriers to investment for stakeholders
in 2007 – Beginning of Green Mortgages Development

             - Budget constraint for public resource
 Mexican     - Fossil fuel (LPG) subsidies distorted the economics
Government   of SWH
             - A change of government priorities could put the
             continuity of the programme at risk

             -Lack of confidence in the technology
Households   -High Upfront cost barrier
             - Not aware of the economic benefits
             -Lack of education in the maintenance of equipment

             -Risk aversion
Commercial   -The request for certification of products
  banks      -Bad perception of the market profitability
   The Green Mortgage Programme
 Upscaling the Market for Residential Solar Water Heaters
                    What is it?
The Green Mortgage:
   √ housing finance scheme implemented by
   INFONAVIT (Institute for the National
   Workers’ Housing Fund) to encourage the use
   of energy efficient systems and SWH for low-
   income households.
   √ An additional ‘green’ mortgage (a credit
   on top of the actual mortgage credit) of up
   to US$1,250, to cover the cost of SWH.
   √ Repayment of this additional green
   mortgage over 20 years
  Green Mortgage - What it does

- Monthly payments are only US$6 more expensive
  than a conventional mortgage, yet families are able
  to save an average of US$17 per month on bills.
- Repayment of loans are taken directly from
  payrolls of beneficiaries, thus reducing the non
  payment risk

Works in partnership with CONAVI, Mexico’s
National Housing Commission and other regulatory
bodies that participate through the certification of
the technologies.
• Between 2007 and August 2012, over 900,000 Green
  Mortgage credits were disbursed.
• Considering the number of mortgage holders plus their
  family members, the programme has benefited over three
  million people.
• The main impact is related to consumption savings for the
  users, thus saving money.
• Between 2009-2011 only, a total of US$12.085.897 has
  been disbursed in mortgages, with an average amount per
  mortgage of US$ 26.456, including the secondary Green
  Mortgage of up to US$1,250.
• Regarding its influence on policy, the Federal District
  government provides tax incentives for those who
  incorporate RE technologies in their homes.
     Thank You
    Myriem TOUHAMI
 Tel: 00 212 661 36 95 14

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