Financing Renewable Energy for Village Power Applications Grace S. Yeneza Managing Director, Preferred Energy, Inc. APEC Village Power Workshop Hanmer Springs, Canterbury, New Zealand November 7-9, 2004

Introducing PEI Filipino non-profit organization committed to the promotion and development of renewable and clean energy resources for power and other applications A pplies innovative and flexible solutions in development of projects, whether commercial or community-based Uniquely placed in the energy sector, as an organization with both policy and project development experience

Our Strategic Concept Flexibility–Sustainability–Enterprise Development T hinking “outside the box” has proven to be more effective: Development company approach Investments in “high risk” local communities and NGOs Hand-holding of stakeholders Extensive consultation and community participation processes Holistic approach to project development (energy+livelihood) enhances sustainability and increases economic impact Flexible financing mechanisms and appropriate mix of grant+ loans

Financing Challenge Remoteness of sites Non-commercial nature of potential business – disperse, low load potential, low capacity to pay Informal nature of community organizations – no “bankable structure” Reliance on grants and “dole-outs”

PEI’s Village Power Fund Model

Specific Objectives Establish a pilot revolving fund for development and financing of commercially viable/sustainable energy project in remote/off-grid communities; Assist communities via financing of livelihood and other income-enhancing activities arising or in conjunction with energy project Attract investors to the business opportunities in off- grid areas either as project sponsors/funders or as eligible project proponents

Development Approach  Integration of Energy and Productive Uses to enhance livelihood and income generation in the rural communities.  Capacity-building to allow the people to own and operate their project in a sustainable manner

Key Players A Community/individual local entreprenuer that has identified a need and willing to invest own local resources to implement project An experienced local NGO or similar organization with capacity to assist community in project preparation – highly consultative/participatory – and help implement capacity building/skills training A Fund Manager knowledgeable and familiar with community-based project development to manage the VPF.

Site Selection Social Acceptability Resource Availability Project Viability Presence of Suitable Local NGO Partner

Project Structure Energy and livelihood from project inception Project designed for the people and by the people Clear ownership Project financed by mix of grants + loan

Financing issues and concerns Right mix of resources and players hard to find/develop Extensive community preparation required Enterprise approach not easy to develop among local NGOs Holistic “energy + livelihood” approach required multiple funding sources Without “Village Power Fund”, it takes time to pull financing together With multiple funding source there is problem in terms of control in project implementation. i.e.,  donors have diverse rules and standards  donors normally want to individually take credit for a project

Some Development Principles We Have Learned People know what they need. Consult them. People have skills and resources. Utilize them. Ownership is key issue. Define it. Sustainability is a Must. If people invest, they will make the most of the project. Enterprise development is key to sustainability. Communities must be trained to think like entrepreneurs.

I L A W (Light) I L A W (Light) I – ncome generation increased, L– eadership and capabilities enhanced, A– ssets and infrastructure acquired, and a W–ealth of opportunities for social and economic growth “Power to the People”

Food for Thought (1) Community-based projects can be sustainable. PEI has developed a sustainable model that is replicable in other developing countries Energy + Livelihood structure Participatory development approach Flexible financing mechanism

Food for Thought (2) How to scale-up? Government must provide enabling environment for project developers, NGOs/Private sector, i.e., right mix of incentives, rationalized subsidy policy, information, training, etc. NGOs, private sector, and other developmental organizations should adopt an enterprise development perspective (if people invest they will value and make the most of the project) Financing should be made available  For project incubation and implementation  For both energy and productive uses

Food for Thought (3) How to scale-up? Donor funding will go a long way if channeled to flexible financing mechanisms such as a Village Power Fund managed by experienced fund managers Donors can agree to have “unified but flexible enough” rules and standards geared toward small- scale application

Thank You Preferred Energy Inc. Unit 1703 The Centerpoint Building, Garnet Road cor. Julia Vargas Avenue, Ortigas Center, Pasig City 1605 Philippines Telephone Nos. (632) ; Fax No. (632) Website: