CHALLENGES & RECOMMENDATIONS FOR THE FINANCING OF SUSTAINABLE ENERGY Sandton Convention Centre Thursday, 20 May 2010

Introduction Will present some thoughts on private sector financing challenges. Limit input to solar heaters because case studies looking at this. See this as part of engagement with government to arrive at optimal process for financing of solar heaters. Need to address numerous uncertainties in process. So that certainty is created to enable manufacture of solar heaters and financing.

Prerequisites for lenders Finance is unemotional – It follows opportunities Milestone opportunities (industrial revolution, technology revolution, green revolution!!) – Risk vs return – depositors money (business case) – Enabled environment Legislative framework/recourse to borrowers (law of contract) Planning (ongoing viability/longevity)

Prerequisites for lenders (cont) – Consumer demand Ongoing affordability (product/cashflow/interest rate mismatch) Size Useful life match Economic viability (initial/ongoing ) Certainty Strategic alignment with legislative framework Ongoing planning Simplicity (capacity/costs) Consumer Lender Government

Some Issues Complexity of process, including plethora of institutions – as per Implementation model from Dept of Energy: – SANEDI and its role Understand it will, amongst other things, authorise payments to ESCO’s from financial service providers? – ESCO’s Criteria for establishment Capacity Funding Role Indications are that our water quality will corrode elements of imported heaters, thus reducing life-span. Rebates vs subsidies.

Recommendations Refine the current model – A central body to administer rebates and coordinate funds: Rebate coupon on basis of income, which can be used by consumer to purchase heater. Body coordinates all donor funding and state funds and administers “soft” loans to financial service providers. Inclusive framework (residential (new/retrofits/replacement/ commercial & industrial – alternatives timers/heaters/gas based on circumstances etc) Consumer goes to financial services provider for loan, which must be preferential given access by FSP to “soft” funding. Such funding could also leverage private funding. Involve institutions like UNEP and others to optimise learning's from international examples. Create risk enhancers to promote start-up heater distributors. Education campaign on viability, maintenance and other issues.

Solar heaters critical to energy strategy, so got to get it right. Need to simplify process, rather than complicate it. – Complexity results in increased cost. Empower consumer to negotiate best deal with rebate and engage with FSP’s. Must expedite policy certainty. – Continuing uncertainty and changes to policy and process will delay entry of private sector/consumers. Incentivise manufacturers, and enable policy certainty, to produce locally. Consider central structure. Engage relevant stakeholders to achieve above. Conclusion

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