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The Mediterranean Solar Plan

A Major Euro-Mediterranean Energy Partnership

for the large scale development of renewable energy and energy efficiency

I. The MSP: A Major UfM Initiative

� Launch of the Mediterranean Solar Plan

at the Union for the Mediterranean Summit

in July 2008

� Paris declaration dated 13/07/2008:

The UfM Secretariat has the responsibility

to explore the feasibility, the development

and the creation of the Master Plan

� Developing renewable energies and improving the energy efficiency in the

UfM member states: Build 20 GW of extra production capacities of RE

between now and 2020

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I. The MSP: Political Context

� Negotiations on climate change at the UNFCCC (Copenhagen, Cancun,

Durban…)

� 20-20-20 The objectives of the European Energy-Climate package for 2020:

� reduction of 20-30 % of the CO2 emissions

� reaching 20 % of RE (specific mandatory objectives for

every member state).

� Adoption of national development strategies for the RE in many of the UfM

member states.

� Private sector initiatives (DESERTEC,MEDGRID...)

� Development of new financial tools by the international financial institutions

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I. The MSP: The Secretariat‘s Tasks

� Coordinate and maintain the process under the political control of the

member states

� Create a neutral space to organize the dialog between the different

partners

� Clear principles: transparency, efficiency, mobilization of the necessary

expertise

� Involve all partners by implementing the necessary platforms with

member states, the industry, the financial institutions and NGO’s.

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� Create a consensus on an adequate framework for the large scaledevelopment of renewable energy and energy efficiency : identify mainbarriers and ways to overcome them.

� Five “building blocks”:

1. Policy and regulatory frameworks

2. Funding and support schemes

3. Physical infrastructures

4. Renewable energy as an industrial catalyst

5. Transfer of knowledge and capacity building

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II. The MSP Master Plan

1. Policy and regulatory framework

� National RE and EE political commitments and policy targets

� General regulatory framework linked to RE and EE projects (investment, tax,

accounting, customs, land use, environmental protection issues, spatial

planning,…)

� Specific energy, RE and EE regulatory framework (market and grid access- e.g.

third party access, IPP, auto-producers…-, licencing, RE and EE specific

framework, domestic level and structure price of electricity).

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II. The MSP Master Plan: Building Block 1

� Bridge the transitory “gap” between the production costs of the electricity of

renewable origin and that of the fossil one.

� Combine different tools of different types to launch pilot projects:

concessional financing, mechanisms of support of the renewable energies,

carbon financing… An integrated and structured approach is necessary.

Certain tools are not operational: art. 9 and Carbon Finance

� Allocation of risks and liabilities. The mobilization of private capital involves

dealing with certain risks.

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2. Funding & support schemes

II. The MSP Master Plan: Building Block 2

� No Mediterranean Solar Plan without networks

� Agreement UFM/MEDGRID (27 January 2012)

� Double perspective: economical development of southern countries (meet local electricity

demand) and exportation of RE.

� Working on four different subjects that are closely related:

� Connections between the two rims of the Mediterranean

� The Mediterranean ring

� Access to the European market

� Reinforcement of networks in the Southern countries.

� The Mediterranean projects in the context of the European policy :

� 3 other priority zones at the EU borders

� Infrastructure package , TEN-E and, more generally, the UE energy policy.

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3. Physical infrastructures: Grids

II. The MSP Master Plan: Building Block 3

� Local content clause

� Specific support for SME’s

� Technical structure support

� Technical higher education and training facilities (engineers, technicians)

� Funding applied research

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4. RE as an industrial catalyst

II. The MSP Master Plan: Building Block 4

� Benchmarking and assessment of best practices

� Forms: structured dialogue, targeted training cooperation, formal

cooperation, institutional twinning

� Actors: respective role of research institutions, public funded programs,

technical international cooperation and of the industry in this process

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5. Transfer of knowledge & capacity building

II. The MSP Master Plan: Building Block 5

� Identify and support pilot projects able to serve as significant test cases

and policy drivers;

� Indicative criterias: regional impact, reproducibility, know-how transfer,

demonstration effects, scaling up of potentials, positive impact on host

country economy and employment;

� UfM label: a political support from 43 UfM countries closely connected

to major financial institutions.

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III. The MSP Pilot Projects

� Organize a structured pipeline of pilot projects benefiting from MSP

specific tools

� A first tool: the MSP Project Preparation Facility to be funded in the

framework of the EU Neighbourhood Investment Facility (NIF), will

become operational in the coming weeks.

� Other tools are being studied: MSP risk mitigation facility, MSP project

bonds, an MSP electricity export platform…. If well-structured and

carefully combined, these tools should allow for the realisation of a

carefully chosen set of MSP pilot projects which will serve as test cases

and policy drivers for the process at large.

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III. The MSP Innnovative Tools

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Risks Relevance for REEE investments

MSP projects risks specificities

Project risks

Medium Related to the technological choices and financial terms of a project. These risks include:

► Constructions risks, component breakdowns (e.g. short –circuits), weather damage, Theft/vandalism, wind resource variability…

Policy risks

High Related to adverse changes in the policy context. These risks include:

► Change in the energy policy of the country which may impact projects profitability (change in Feed-in-tariff…)

Legal risks

High Related to uncertainties and inconsistencies at legal and judicial level

► Risks over the legal status of the projet, especially for Public Private Partnerships, Build-Operate-Transfer contracts, Power Purchase Agreements.

Country risks

High Related to the overall setting of the target countries

► Political disturbances and/or breakdowns.

Force majeure

Medium Related to natural disasters or other major incidents:

► Natural disasters such as : storm, flooding, earthquake…

► Major incidents

Financial risks

Medium Related to adverse changes in the overall ecofin parameters:

► Interest, exchange, and inflation rates, public accounts, commodity prices...

A KEY ISSUE TO ATTRACT PRIVATE CAPITAL: ALLOCATION OF RISKS AND MITIGATION TOOLS

II. The MSP Master Plan: Allocation of risks

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Criteria MIGA IDA PRGOPIC (ECA)

UnistratCoface(ECA)

Include a policy risks coverage for change in regulations that may impacts project’s profitability

Include a legal risks coverage for abrogation, repudiation, and/or impairment of contract, including forced renegotiation of contract terms

Include a legal risks coverage for expropriation risks

Include a country risks coverage for war and civil disturbance; or other politically motivated violence

Include a financial risks coverage for currency inconvertibility/ non-transferability

Cover the project for at least 15 years (and possibly up to 20 years)

Not specified

Do not have conditions over the nationality of the investor

II. The MSP Master Plan: Existing Mitigation tools

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Some of the existing guarantee mechanisms (such as the ones provided by MIGA) cover

most of the key risks facing MSP projects but the costs are rather high. Several items

remain to be analyzed in-depth :

� The capacity of existing instruments to respond to the uptake of MSP projects in the

next years,

� The ability of existing instruments to cover both large infrastructure-type projects

and smaller projects (for example in the biomass or energy efficiency sector),

� Whether the establishment of a dedicated window for MSP projects would enable a

better promotion of existing instruments and generally an efficient project sourcing

process.

OPPORTUNITY OF AN MSP RISK SHARING FACILITY

II. The MSP Innovative Tools: Innovative Financial Tools

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� Setting up an ad-hoc risk-sharing facility, funded by interested parties (UfM

member states in particular, the EU…), for which the target size, loss rate,

management organization would need to be defined.

� Partnering with one or several insurance companies to cover part of the premium

required by insurers for a broad risk coverage.

A similar approach is being tested on geothermal risks in Turkey. This approach,

which can have a strong leverage effect, is also being developped under the

ISMED working group, which has proposed an investment guarantee premium

cost-sharing window in the existing Neighbourhood Investment Facility (NIF).

OPPORTUNITY OF AN MSP RISK SHARING FACILITY

II. The MSP Innovative Tools: Innovative Financial Tools

Conclusions

We have now reached a key moment:

� Spread renewable energies on a large scale in the Mediterranean, create a

sustainable economic based on market conditions;

� The actual conditions are favorable:

� High regional potential;

� Fighting against climate change;

� Political will to move onward, on both Mediterranean shores;

� Energy security;

� Post-Fukushima context.

� A great opportunity for the co-development of the two sides of the

Mediterranean.

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Thank you for your attention

msp@ufmsecretariat.org | +34 935 214 171