'The Regional Dimension – Financing Energy Projects in Rural Areas'

8:00-12:00 - 27 June 2013 – The House of the Dutch Provinces

Carlos Miró, Policy Officer

Source: Phaesun

1. The off-grid market: a land of opportunities

"We are proud to be a member of the Alliance, which brings together energy professionals since 2006 to address a

fundamentally important global issue, especially in this year of ‘Sustainable Energy for All’. There is a great deal of talk about

rural electrification, but ARE is doing something about it.”

Ernesto Macías, CEO, WonderEnergy, President of ARE

2. Leveraging impact through synergies

• We are the international business association in the world representing off-grid renewable energies technologies for rural electrification.

• It is our objective to better position the private sector and to enable business development in developing countries and emerging markets

• We serve as a global platform for sharing knowledge and best practices to enhance energy access (e.g. hydro, solar, wind) and services (e.g. light).

• We enjoy more than 70 members from industry, academia and public sector.

• We promote members’ interests by three service lines:• Business & Intelligence Support• Public Affairs Support• Administration Support

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ARE Background

3. Benefitting from access to sector intelligence worldwide

4

4. Rural power markets in developing countries

Big niche: ~1.1 bn people

Demand•Remote•Geographically scattered •Low and irregular income•Low demand needs

Supply:• Low local content• Lack of feasibility info

Finance related challenges: •Poor access to financing •No risk mitigation schemes

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5. Off-grid RETs essential to tackle energy poverty

Grid extension: Often unviable

Off-grid diesel: •Higher LCOEs due to high OPEX•Important for backup

Off grid RETs:•Cheapest over the system’s lifetime•Technologies ready to be deployed•Bus. and fin. models ready

Applications of off-grid RETs:•1: basic service x isol. households•2: ~grid-tied service x isol. comms

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Additional 952 TWh needed to achieve universal electricity access by 2030

1. Individual

2. Mini- grids

Source: U

NF, E

AP

N, June 2012

Source: Tram

a TecnoAm

biental

42%

18%

20%

20% Mini-grid

Individual systems

Rural grid

Urban grid

6. Triggers to enhance business

• Leveraging impacts by blending resources and reducing transaction costs through upscaling • Need for risk mitigation mechanisms and credit lines

• Coherent approach of public & private sector interests from the start• Need for smart regulatory framework

• Applying proven best practices and available business cases • Need for training and awareness creation schemes

• Making use of existing business opportunities to enhance further business options• Need for more donor-driven market intelligence

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The better way forward towards upscaling & replication

7. Financial & Business models

Tariff model (cost-reflective)•Economically viable•Financially viable

Subsidy (Ensure tariff affordability)•One-off subsidies (CAPEX)•Transitional or Ongoing subsidies (OPEX)

Public support to financing: • Risk mitigation• Public finance (credit lines at lower

rates)• Support to commercial banks

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Business models CAPEX OPEX Service

Operator

UtilityPublic

Tariffs (subsidized)

Public

Private Private

Community Public Community

Source: Universitat Politècnica de Catalunya, October 2012

8. EU Funding instruments

Energy access very high on the EU agenda, mainly due to UN SE4ALL•European Commission, Agenda For Change•European Parliament, Resolution on Energy Access (strong focus on off-grid RETs)•EUMS also very involved: Germany, France, Austria, UK

Two main EU funding instruments managed by DG DEVCO•ACP-EU Energy Facility•DCI ENRTP

Challenges: •Need for more NSS consultation•Focus remains on large scale (e.g. Africa-EU ITF, GEEREF, EU Del. funds)•Need for more involvement from the EU public finance sector (EIB)

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Conclusions

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• Big potential for off-grid RETs in rural areas of developing countries

• However, in many countries, rural power markets are inexistent

• Technologies, financial and business models ready to be upscaled

• Principle for project success: special tariff scheme (normally subsidised)

• Thus, public sector is crucial (tariff + subsidy + ease access to finance)

• International (EU) donors key at providing funds for the mentioned programmes

Alliance for Rural Electrification

Photo (appropriate to topic)

Rue d’Arlon 63-67 - Renewable Energy House – 1040, Brussels, Belgium0032 2 400 10 53 - are@ruralelec.org - www.ruralelec.org

Source: Phaesun

Feel free to visit us at our ARE new office in the Renewable Energy House as of 1st July 2013

Thank you for your attention!!!