United Nations Environment Programme, DTIE Program Officer, Mario LIONETTI

mario.lionetti@unep.org

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 2010-2035

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 2010- 7 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 worksUNEP & 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 SLOWLYSWH Size 200 liters 300 liters

Net Cost of SWH USD 550 USD 700Monthly payment (5 yrs) USD 9 USD 11.50

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

1985-96 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Solar Water Heaters Market Growth in Tunisia1985-2008

m²

of

ins

talle

d S

WH PROSOL 1

Other ProjectPROSOL 2

Applications of UNEP’s strategy :

PROSOL Results 2005-2010 363,000m2 SWH (~120,000 installations) ~ 75 million US$ mobilized (programme cost $2.4 million)

GOVERNMENT Target 2011 480,000m2 (~160,000 installations)

Evolution of the offer

• 50 eligible suppliers, ( including 7 manufacturers) vs. 12 suppliers in 2005

• 1100 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 m2 in 2007-2011

• 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 - HotelsPROSOL industrial - Food and textiles industries PROSOL ELEC –Photovoltaic for households

Three other on-going SWH financial support mechanisms in Tunisia:

Project Officer: Mario LIONETTImario.lionetti@unep.org

http://www.unep.fr/energy/

Thank You