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Rood science policy works international_t2 society_111210

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  • 1. Financing: Technology Transfer’s Next ChallengeCreating certainty & consistency for financing renewable energy (RE) projects: Lessons from international models Sally A. Rood, Ph.D.Technology Transfer Society Annual Conference Washington, DC November 12, 2010
  • 2. International Finance Corporation (IFC)• Loans, equity investments in private companies & projects – Commercial-like projects, market-based solutions• 2004 – World Bank Group made commitment to climate change, developed road map – Climate change & sustainability – a strategic focus• IFC increased clean energy lending 20% per year, 2005-2010• New finance instruments & special funds for RE – Clean Technology Fund, Global Environment Facility – 2009, $1B in RE & Energy Efficiency• New emphasis on streamlining project approvals, portfolio management, clean production assessments, energy strategy advisory services, risk mitigation 2
  • 3. IFC Financing Principles & Practices• IFC does not finance R&D or risky technologies …rather works with companies facing emerging market risks in commercialization• IFC targets tech transfer from government or university -- or locally-grown intellectual property• Companies/projects must provide environmental metrics & promise local economic development• IFC catalyzes co-investments & “networks” client companies from multiple sectors• IFC offers follow-on debt financing to client companies as they mature 3
  • 4. Creating more certainty & consistency for RE finance(1) Sustainable Energy Finance Program – support for local banks • IFC helps the staff of local banks understand the RE sector & educates them on the risks associated with financing RE projects • Have risk-sharing agreements with the banks which helps them build their portfolios • Helps local banks implement the RE project loans • Loans combined advice from technical experts to the client companies(2) Portfolio Approach to Distributed Generation Opportunity (“PADGO”)Goal: Diversify energy in emerging regions & markets outside urban centers through distributed generation near the load (vs. large central power generation facilities with transmission networks)Distributed generation allows for new technologies to be added into the portfolio as they come close to being commercially-viable – Amenable technologies are, for example, solar, wind, hydro, biomass, biogasDiversifying increases energy security & reliability 4
  • 5. Portfolio Process Project Step Related BenefitsExpert advisors help research market entrytechnical specifications Technical advice helps support market entry by •Grid connection fees & specs newcomers •Environmental, safety regsEstablish performance benchmarks •For the technology Ensures quality & access •For energy efficiency •For reliability & servicing •Creates replicable models, providing familiarityStandardize contracts & agreements •Provides a more simplified process for •Power purchasing agreements negotiating with utilities - helps clients not •Operation & maintenance contracts familiar with this process •Lowers transaction costs for all stakeholders, particularly for scaling up smaller projectsStructure risk-sharing agreement with thelocal bank •Facilitates initial lending •IFC supplements local risk-taking by •Makes lending sustainable over time sharing in potential loss from non- payment 5
  • 6. 6
  • 7. International Biogas Example Deqingyuan Egg - IFC poultry client in China• Agribusiness project >> RE Egg company is converting a renewable resource (manure) into both energy and a business opportunity• Installed anaerobic digesters which convert the methane from chicken waste into electricityResults• First 6 months of operation, >4 million kw hours generated , enough power to provide 100 families with electricity for 13 years• Company sells the electricity into the state power grid, and purchases it back at a 40% discount• Produces enough heat to keep 3 million chickens warm through the winter• The company provides methane to 300 local homes for cooking• Projections - will reduce carbon emissions by 84,000 tons/year• Company gets carbon credits, which IFC is helping them sell 7
  • 8. Summary Review• Sustainable Energy Financing Program is working hand-in-hand with local banks to help & support them – Providing experts, sharing risks• Portfolio Approach to Distributed Generation Opportunity is developing model agreements – Increases number of transactions, reduces transaction costs – Facilitates market entry, scale-up of smaller projects – Builds institutional capacity, makes the lending sustainable• General IFC financing principles & practices include networking, tech transfer, local IP, local economic development, co-investments, pipeline approach, market-based solutionsIFC has created new business models for working with the private sector in RE, and these new business models are becoming mainstream 8
  • 9. Toward more certainty & consistency for RE finance in the U.S.• “[RE] project developers in the U.S. are failing to obtain project financing” (PG&E briefing , June 2010)• Possible interim steps for state & local governments – Bring together stakeholders, including banks, into networks to promote strategic alliances – Develop RE Strategic Plans including targets (roadmaps) – Share example agreements, best practices, models, and lessons learned by others – Identify barriers to commercialization and policies 9