MENA Energized: Regional Challenges to "Green the Power" Sector July 28, 2009

1. Supporting Renewable
Energies
Perspectives of a development bank
Andreas Holtkotte
KfW Bankengruppe
Cairo / Egypt
June 2009

2. Content
Promotion of RE / EE
why?
key challenges / situation analyses
German Development Cooperation
commitments, instruments, activities
main pillars
Financial Cooperation – KfW
financing principles
financing instruments
project examples
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3. Promotion of RE / EE
why?
key challenges / situation analyses
German Development Cooperation
commitments, instruments, activities
main pillars
Financial Cooperation – KfW
financing principles
financing instruments
project examples
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4. Promotion of RE / EE
why ? (1)
Global climate protection, some developing countries are becoming large
GHG-emitters with large reduction possibilities
Technology and know-how transfer. Promote technology development and
local production of climate friendly technology
Support economic growth and
employment generation
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5. Promotion of RE / EE
why ? (2)
Secure energy supply, reduce import dependency and price volatility
Focus: support development of partner countries
But: increased interest of the ”North“ in
diversifying it‘s energy mix
Increase productivity and competitiveness
through energy efficiency
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6. Promotion of RE / EE
key challenges / situation analyses (1)
The developing and emerging countries‘ dilemma
Dependence on primary fuel imports
Rising energy demand
Rising electricity generation costs
Rising budget deficit
Political and social framework
Low energy prices to secure social peace
Low consumer awareness for energy saving or EE measures
Regulation framework for RE / EE still under development (feed-in
systems, etc.)
Still little local production or assembling capacities for RE / EE
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7. Promotion of RE / EE
key challenges / situation analyses (2)
Regulatory framework
Developing countries usually opt for low off-take prices plus subsidies
instead of full cost coverage
No sustainable tariff regime, i.e. highly subsidized energy prices,
therefore little incentives to save energy
Tariffs only sufficient for maintenance and repair coverage
► Level playing field for RE needed
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8. Promotion of RE / EE
why?
key challenges / situation analyses
German Development Cooperation
commitments, instruments, activities
main pillars
Financial Cooperation – KfW
financing principles
financing instruments
project examples
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9. German Development Cooperation
commitments, instruments, activities
ODA-commitment RE / EE:
2003-2007: ~ EUR 1.8 billion
2008-2009: ~ EUR 1.7 billion
MENA portfolio: EUR 850 million
Major activities
Sector framework and policies, regional market integration
Support to green technologies (Hydro, Wind, Solar, etc.)
Energy Efficiency (particular in buildings, construction)
Donor and partner coordination (platforms, think tanks, chairs)
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10. German Development Cooperation
our four main pillars (adaptation/mitigation)
Adaptation to Sustainable City Sustainable Energy Efficient
Climate Change Development Energy Systems Transport Systems
• Drainage, flood • Optimization of
• Energy efficient Efficient energy
routing of highways,
control, storm/flood infra-structure generation,
resistant (water, sanitation, transmission and • Electrification of
infrastructure waste, transport, distribution railway transportation
municipal energy
• Adaptation of supply, energy • Renewable • Emission reduction
agriculture and efficient public energy generation through fuel
forestry buildings etc.) (hydro, wind, solar switching
biomass,
• Pollution geothermal)
abatement (SME
and Industry)
• Energy efficient
housing
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11. Promotion of RE / EE
why?
key challenges / situation analyses
German Development Cooperation
commitments, instruments, activities
main pillars
Financial Cooperation – KfW
financing principles
financing instruments
project examples
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12. Financial Cooperation - KfW
financing principles for RE (1)
Sustainable projects require some minimum conditions, notably:
Financial viability / cost-effectiveness
100% financing assured
costs of installed KW and for grid connection
capacity factor
debt to equity ratio (investment) and return on equity
loan conditions (maturity, grace period, interest rate)
purchase conditions of generated KW/h (amount and term)
Legal and regulatory framework
medium / long term policy for RE
transparent and predictable procedures for clearances / permissions
long term commitment and contract security
guaranteed and permanent access to the grid
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13. Financial Cooperation - KfW
financing principles for RE (2)
Tariff conditions
reliable and consistent tariff policy
electricity tariffs should cover average generation costs
(target: full cost coverage)
purchase conditions of RE need to be clearly defined (e.g. feed-in
tariffs, preferential tariff)
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14. Financial Cooperation - KfW
tailor made financing for every project (1)
Instruments of KfW Bankengruppe
Budget Funds / German KfW Funds
Government
Concessional Finance
Grants: Development Promotional DEG KfW IPEX Bank
Preparation, TA Loans: Loans (private sector) (public / private
below market market sector)
interest interest
10-15 / 3-5 Project finance
Concessional 10-15 / 3-5 Long term loans
Loans: Mezzanine Export finance
Corporate finance
0.75 %, 40 / 10 Equity
Guarantees
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15. Financial Cooperation - KfW
carbon funds (2)
Purchase of carbon credits from projects according to the regulations of the
Clean Development Mechanism (Kyoto Protocol)
Revenue source for many kinds of projects, e.g.:
RE
EE
Landfills (capture and utilization of methane)
KfW runs different purchase programs with a total purchase volume of more
than EUR 300 million
Purchase of carbon credits possible up to 2020
Support for Programs of Activities (PoA) (= small or micro-activities).
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16. Financial Cooperation - KfW
Project Example (1)
Wind Farm „Gulf of el Zayt“ - Egypt
Financing of a large-size wind farm of ca. 200 MW at the Red Sea
Joint EC / EIB / Germany-KfW structured financing package via EU
Neighbourhood Investment Facility (NIF) totalling EUR 271 million
Additional activities to improve sectoral framework and conditions:
Improvement of existing O+M-system for wind parks through
inclusion of private sector (grant)
Development of RE Master Plan Egypt (2030) and feasibility study
for large size CSP (NIF grant)
EIA including ornithological aspects for new wind park sites (grant)
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17. Financial Cooperation - KfW
Project Example (2)
Solar home systems - Morocco
Implementation of reliable, cost efficient and ecologically sound basic
electrification through Solar Home Systems
Financing: development loan, user fees and Office National de l’Electricité
(ONE)
Expected benefits:
Improvement of living conditions
of about 300.000 poor Moroccans
in remote rural areas
Significant reduction of
environmental pollution
(MDG goal No. 7)
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18. Get in touch with us – www.kfw.de
Thanks for your attention !
further information:
www.kfw.de
www.kfw-entwicklungsbank.de
www.deginvest.de
www.kfw.de/carbonfund
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