United Nations Environment Programme, DTIE Program Officer, Mario LIONETTI Financial support mechanisms for solar thermal applications

UNEP Energy and Climate Finance Why: Cost of getting on track to meet the climate goal (450 ppm scenario) requires globally additional spending nearly to18 trillion US$ on low-carbon energy technologies in Both business investments and consumer spending IEA – World Energy Outlook 2010

UNEP Energy and Climate Finance Vision: “Catalyse the creation of the sustainable energy finance industry.”  Removing investment barriers and developing markets for renewable energy and energy efficiency is the core focus of UNEP’s energy and climate finance work  Not being a financial institution allows UNEP to work in non-competitive ways with leaders in the banking community.  UNEP’s work is not to provide finance for projects, in contrast to the development banks, but to work directly with the finance industry to make investment happen.

overcome market barriers increase investment flows to renewable energy and energy efficiency technologies Within our End-User Finance programmes, UNEP helps to:

Characteristics of UNEP’s Strategy Turning the finance sector into an ally promoting clean energy: Supporting decision making, both amongst governments and financiers, helping to get policies enacted, and new financial instruments launched; Financial support mechanisms used to reduce the front-end barriers that hinder the development of renewable energy and energy efficiency markets; Approaches for softening loan financing: es. interest rate reductions (Tunisia), etc..

Strengths of UNEP’s Strategy  UNEP climate finance initiatives employ a variety of approaches and tools: –Institutional support for local governments –Multi-stakeholder approach (government, banks, suppliers, installers, state utility) –Technical support for setting up dedicated loan instrument –Targeted capacity building, training, communication and dissemination to specific financial incentives  Integrating carbon reduction benefits

Montenegro SWH Programme - Consumer Finance - Domestic Solar Water Heating Systems - Selection of most competitive banks through a public tendert -Start of Project: March 2011 Tunisian PROSOL ELEC - Consumer Finance - Domestic PV Systems - Loan repayment via the electricity bill - Interest rates subsidized by UNEP - State utility provides the inverter Egyptian Programme: EGYSOL - Solar Water Heating Systems for hotels - Launch of project: March eligible suppliers certified and 6 hotels registered - Banks financing the purchase of the systems Tunisian PROSOL Programme - End-user Consumer Finance - Domestic Solar Water Heating Systems - As Sept 2010, 95,466 systems installed - Banks provided $58 million worth of loans - Consumer Loan repayment via the electricity bill - CERs sold for future programme Indian Solar Loan Programme - Consumer Finance - domestic PV systems - Canara and Syndicate Banks provided training and interest softening incentive - 2,017 bank branches - 19,560 homes financed Morocco Efficient Lighting Programme - Household receives up to 10 Compact Fluorescent Lightbulbs (CFLs) from state utility STEG - Cost of CFLs reimbursed over 2 yrs on electricity bill - Programme financed through KfW - Target of 22 million lamps GSWH Chile GSWH Mexico

The Global Solar Water Heating Project UNEP’s goal: improving the knowledge sharing on which today’s energy planning is done by the public and private sectors, in particular regarding new approaches to accelerate sustainable market transformation of Solar Water Heating. How? UNEP has the responsibility to: - Monitor the implementation of activities undertaken across 6 countries and to manage global knowledge management system - Provide technical assistance for the development of financial instruments.

The Global Solar Water Heating Project Two Project Documents concluded among UNDP, UNEP and the Governments of Chile and Mexico. Outcomes Increased demand of SWH systems based on the availability of attractive end-user financing mechanisms. Possible Options - Green mortgages - Interest rate subsidy - Guarantee Fund

Applications of UNEP’s strategy : ( *Part of the Mediterranean Investment Facility - MIF) PROSOL: A Success Story in Tunisia*

The Tunisian Programme Solaire - PROSOL Upscaling the Market for Residential Solar Water Heaters What is it? PROSOL is a financing support mechanism:  to create credit facilities using the state utility, STEG as a channel for recovering the loan payments through the utility bill;  to help local banks build loan portfolios in RE area by implementing an interest rate subsidy  to provide to the end user a capital cost subsidy to partially reduce the SWH financing (Tunisian government has passed a law to provide 20% subsidy)

PROSOL - How it works UNEP & ANME established a 2.4 m US$ Facility  STEG will promote the use of SWH by recovering the loan via a STEG customer’s utility bill  Banks provide loans to the end users by lowering the interest rates by 5-6 points because the risk of nonpayment is almost non- existent  The end user repays his loan via the STEG utility bill over 5 years to make the monthly payments equal to other conventional energy expenditures  UNEP provides an Interest Rate Subsidy to make a 0% interest loan to the end user.

Main features of the financial scheme A loan mechanism over a 5-year term and repayments through utility bills  A capital cost subsidy for each SWH provided by the Tunisian Govt (20% of system cost = 75 $/m² = existing gas subsidy) Initially as a temporary measure (UNEP funded) Later made permanent in legislation (2005)  Discounted interest rates on the loans Full Interest Rate Subsidy Facility to 0%, full benefit passed on to the customer

PROSOL- What it does Buy CHEAP and Pay SLOWLY SWH Size200 liters300 liters Net Cost of SWH USD 550 USD 700 Monthly payment (5 yrs) USD 9 USD A Quick and Simplified Procedure Customer contacts the SWH supplier 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

PROSOL Results

Applications of UNEP’s strategy : PROSOL Results  363,000m 2 SWH (~120,000 installations) ~ 75 million US$ mobilized ~ 75 million US$ mobilized ( programme cost $2.4 million) ( programme cost $2.4 million) GOVERNMENT Target 2011  480,000m 2 (~160,000 installations)

Evolution of the offer 50 eligible suppliers, ( including 7 manufacturers) vs. 12 suppliers in eligible Installers (Micro companies) against 225 installers in 2005 More than 7000 direct jobs were created

Key success factors in PROSOL Involvement of the Energy State Utility (STEG) offered security to banks A comprehensive communication and awareness raising campaign UNEP interest rate subsidy

Technologies available; market uptake slow But markets scale up quickly once banks start to lend. 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 /1

PROSOL a driver for policy change – Lending gives feedback signal that technology is mature. – 20% capital cost subsidy for SWH was set by law – Decree 4/2006 reaffirmed VAT exemption and reduced custom duties for SWH New target was set for Tunisia: 540,000 m 2 in PROSOL 2 launched in 2007 – Once UNEP funds finished – Entirely developed by local actors, continuity and certainty ensured – Contribution to the creation of a self-sustaining, long- term market for solar water heaters Applications of UNEP’s strategy  Lessons learnt /2

 PROSOL Collective - Hotels  PROSOL industrial - Food and textiles industries  PROSOL ELEC –Photovoltaic for households Three other on-going SWH financial support mechanisms in Tunisia:

Project Officer: Mario LIONETTI Thank You