Tag Archives: energy efficiency

Powering climate action – the 2016 Fire winners

November 28, 2016 |

 

The Paris Agreement marks the start of a new era in climate policy, with commitments to climate action made by governments, private sector entities, and NGOs around the world. However, for these commitments to be realized and a corresponding transition to a 2-degree pathway achieved, trillions of investment will need to be mobilized – and quickly, with a significant portion coming from private sector sources.

Climate Policy Initiative (CPI) is at the forefront of work to respond to the urgency of the climate challenge by targeting scarce public resources to mobilize significant private finance into low-carbon, climate-resilient development. As part of its climate finance program, CPI serves as Secretariat to The Global Innovation Lab for Climate Finance (The Lab), which convenes public and private stakeholders to design, pilot, and accelerate transformative financial instruments, with the aim to drive billions of dollars of private investment into climate change mitigation and adaptation in developing countries.

The Lab and its initiatives have been endorsed by the G7 and have raised nearly USD 600 million in seed funding for renewable energy, energy efficiency, and climate resilience projects. Currently, the Lab is seeking ideas for its next cycle that can drive finance in India and Brazil. The Lab also presents The Fire Awards, which identify and accelerate powerful, early-stage pilots and businesses that can unlock private finance for clean energy and green growth around the world.

Indeed, in the six months following the Bloomberg New Energy Finance (BNEF) Future of Energy Summit in New York, there have already been several successful outcomes for the 2016 Fire Winners, which kicked-off implementation of work plans to achieve growth goals, with support of Fire Working Groups in May:

  • In September, the team behind Affordable Green Homes, a project to catalyze a market for affordable green housing in Sub-Saharan Africa, was invited to participate in the formal launch of a UN and private sector platform to generate financing solutions for the Sustainable Development Goals. At the launch meeting, led by UN Secretary General Ban Ki Moon, International Housing Solutions (the global private equity firm leading Affordable Green Homes) was recognized for its innovative approach to drive investment in and deliver energy and water efficient housing. The team will continue to help shape the direction of the UNSG platform.
  • The Developing Harmonized Metrics for the PAYG Solar Industry initiative championed by Anna Lerner of the World Bank Group, also moves forward, achieving a major milestone with the recent publishing of a white paper titled, How can Pay-as-you-go Solar be Financed?. The paper, which was one of the main outputs of the Fire Working Group, explores a number of the risks and challenges associated with structured finance solutions for the PAYG sector. On 11th October, the paper was also presented and discussed in a dedicated session at the BNEF Future of Energy EMEA Summit in London. The session was led by Itamar Orlandi (Head of Applied Research, BNEF). Panelists included Fire Working Group Members, David Battley (Director of Structured Finance, SunFunder) and Peter Mockel (Senior Industry Specialist, Climate Business Department, IFC), as well as Giuseppe Artizzu (Head of Global Energy Strategy, Electro Power Systems Group), Mansoor Hamayun (Chief Executive Officer, BBOX), and Manoj Sinha (Co-Founder and CEO, Husk Power Systems). The white paper is available on the BNEF website.
  • An announcement was released on the planned scale-up of the Investor Confidence Project (ICP), an Environmental Defense Fund led initiative to standardize and increase investment in energy efficient buildings. The scale-up plan is founded on a new partnership with the Green Business Certification, Inc. (GBCI), which also administers the LEED, EDGE, PEER, WELL, SITES, GRESB, and Parksmart certification programs. The new partnership aims “to achieve a true, worldwide standard to unlock the potential of energy efficiency.” The Fire Secretariat will host a dedicated 2 hour roundtable in London on 7th December to discuss and build momentum for the new partnership. The roundtable will comprise Fire Working Group Members and key stakeholders in the investment and real estate sectors. If you would like to attend, please let us know at info@financeforresilience.com. More information on the new partnership is available on the ICP and decentralized energy
  • Finally, Grips, which provides reliable, clean energy beyond the world of fossil fuels and public grids, was supported by a Fire Working Group to make connections with over a dozen investors, which will help the initiative move forward. In recognition of its innovative approach to deliver competitive, clean energy to industrials in developing countries, Grips’ CEO, Alexander Voigt, was also invited to participate in the technical workshop to set up a UN-led platform to scale-up finance for the Sustainable Development Goals.

These achievements mark major milestones for the 2016 Fire Winners, as they continue to blaze forward and grow their impact. For those interested in learning more about any of the 2016 Fire Winners or to be involved in upcoming consultations, please contact us at info@financeforresilience.com.

“Getting access to international experts and advice made it possible to accelerate the launch of the KPI framework, grow our partner network and identify new useful applications for the data platform.” –Anna Lerner, World Bank Group

“Winning FiRe has clearly accelerated the implementation of Grips. Through the increased exposure to an international audience of financial and energy experts we have received an increasing number of project leads, partnership requests, and financing offers. We are currently advancing discussions on all sides.”–Arvid Seeberg-Elverfeldt, Grips

The Global Innovation Lab for Climate Finance identifies, develops, and pilots transformative climate finance instruments, with the aim to drive billions of dollars of private investment into climate change mitigation and adaptation in developing countries. Made up of public and private sector members, the Global Lab and its initiatives have been endorsed by the G7 and have raised nearly USD 600 million in seed funding for renewable energy, energy efficiency, and climate resilience projects.

The Fire Awards accelerate powerful, early-stage pilots and businesses that can unlock finance for clean energy and green growth. Climate Policy Initiative serves as the secretariat for the Fire Awards alongside the Global Innovation Lab for Climate Finance (The Lab). The Fire Awards and The Lab are funded in part by Bloomberg Philanthropies, and Bloomberg New Energy Finance provides in-kind support.

Read More

National-level climate finance tracking can help countries meet NDC goals effectively

November 10, 2016 |

 

Around the world, 74% of total global climate finance and over 90% of total private climate finance is raised and spent in the same country. As low-carbon, climate-resilient assets become increasingly attractive to national actors compared to the alternatives, action on climate is largely happening within national contexts.

In fact, the domestic bias of climate finance is likely understated. CPI’s Global Landscape of Climate Finance reports have repeatedly highlighted substantial data gaps around domestic budgets in particular.

In 2014, the majority of global climate finance was raised and spent in the same country. Because domestic investment dominates, it is vital to get policies right. This requires robust national-level climate finance tracking.

The majority of finance was raised and spent in the same country. Because domestic investment dominates, it is vital to get policies right. This requires robust national-level climate finance tracking.

Clearly, understanding how finance flows within countries is key to accelerating countries’ transitions toward low-carbon and climate-resilient economies.
CPI has worked with counterparts in Germany, Indonesia and most recently Côte d’Ivoire to track their climate finance and other organizations are also tracking climate finance at the national level. For example, Institute for Climate Economics (I4CE) used CPI’s approach as a foundation to conduct a similar exercises in France, Trinomics has done similar work in Belgium, and the United Nations Development Programme (UNDP) has worked with seven Asia-Pacific countries to understand climate-related public expenditures in their national budgets.

While these countries have made a start, more work is urgently needed as improved national tracking will critically inform countries’ efforts to implement their Nationally Determined Contributions (NDCs) submitted under the Paris Agreement. The International Energy Agency (IEA) has estimated that, to implement NDCs, energy efficiency and low-carbon technologies require$13.5 trillion in investment over the next 15 years. Ensuring that investment from a range of national and international sources is optimized will help ensure impact and value for money.

There are many benefits to improving national-level climate finance tracking systems

Identifying, tagging, and tracking budget allocations that respond to climate change challenges enhances governments’ ability to allocate appropriate resources at the national and local levels and ensure they are being spent as intended.

Increasing understanding of what different domestic and international, public and private actors are investing, in which climate-relevant activities, and what instruments they are using to deliver finance, can help identify blockages, and highlight opportunities to better coordinate spending and reallocate finance to areas where it will have more impact.

Extending the scope of tracking exercises beyond climate finance can reveal how much public money is flowing to support business-as-usual investments including in fossil fuels, and unsustainable land use. Understanding where public incentives are misaligned with climate goals can highlight opportunities to improve policies and ensure public spending is coherent.

CPI has designed related tools to inform decision makers thinking around this broader question and is applying them in the context of REDD+ related finance in Côte d’Ivoire to support the country’s work to develop a REDD+ strategy.

Ultimately, such tracking provides a basis for decision makers to ensure that limited domestic and international public resources are targeted where and how they are needed most to help countries achieve their goals. Effective tracking provides a starting point to inform discussions about what is happening, and informs the design of more cost-effective policies and financial instruments to mobilize investment.

CPI remains committed to improving understanding of climate finance flows at the national and local levels.

Since 2010, CPI has supported decision makers from the public and private sectors, at international, national and local levels, to define and track how climate finance is flowing from sources and actors, through a range of financial instruments, to recipients and end uses. Providing decision makers with robust and comprehensive information helps them to assess progress against real investment goals and needs. It also improves understanding of how public policy, finance and support interact with, and drive climate-relevant investment from diverse private actors, and where opportunities exist to achieve greater scale and impact.

This blog is part of a series on climate finance tracking challenges. Read more here.

Click here to sign up for updates on this and other aspects of our work.

If you would like our support tracking your climate finance flows, get in touch here.

This article first appeared on Public Finance International.

Read More

Four ways to jumpstart rooftop solar power in India

September 15, 2016 |

 

The Indian government has rightly made rooftop solar power one of its top clean energy priorities – here’s how they can jumpstart the nascent market.

With a bold goal of delivering 100 GW of solar power by 2022 India is helping to create one of the world’s fastest growing solar markets. Impressive strides have been made towards building out the 60 GW of utility-scale solar power necessary to make good on the goal. However, the remaining 40 GW of rooftop solar power needs a boost. Getting this market right can help put a serious dent in the energy poverty suffered by 80 million households currently lacking electricity, and is critical for supporting the country’s growing middle class.

Rooftop solar power has enormous potential in India and has experienced steady growth in recent years. It offers electricity consumers a lower electricity bill (on average 30% savings for businesses and 18% for industry), and a reliable alternative to intermittent electricity from the grid. The problem is, while the market is growing at a “blistering 300% pace”, even more is needed to get from approximately 1 GW today to 40 GW in 2022. A new report from Climate Policy Initiative (CPI) shows a few ways we can unleash even greater growth.

India's rooftop solar power - Solar power generation forecast

Support Third Party Financing

A third party financing model consists of a rooftop solar developer, a third party financier, and a consumer. The developer installs a rooftop solar plant on a consumer’s property and the third party financier invests in the project. The consumer agrees to purchase electricity at a specified price for 15 to 25 years, with no upfront cost except their monthly electricity bill. The third party financing model removes the burden of high upfront installation costs for the consumer, as well as perceived performance risk, or the perception that the technology may not perform as expected over its lifetime.

The third party financing model has been a significant driver of growth in the rooftop solar industry globally, especially in the US where up to 72% of rooftop solar installations in 2014 were third party-owned. The model has also started picking up recently in other countries, including China and Japan.

But in India it only supports 13% of rooftop solar installations under operation or construction. The industry believes that there is potential to increase the total installed capacity under the third party financing model to more than 20 GW by 2022, meaning that it could unlock more than half of the government’s 40 GW target.

The third party financing model is also a good opportunity for investors. With government incentives, all states in India offer internal rates of return (IRR) of at least 14% and as high as 42% for rooftop solar projects financed by third parties. And, as the cost of solar falls, more sectors in Indian states are becoming profitable without these incentives. Over 40% of the opportunities  already offer IRRs of 14%-34% even without government incentives.

Train Banks to Help Unlock Local Debt

It’s no secret the solar business is capital intensive. That means access to debt finance is critical to its long term success. Since the rooftop solar sector is new and transaction costs are high (due to the smaller size of projects), bankers don’t yet feel comfortable lending to projects. The most significant challenge to the third party financing model today is low access to debt finance.

To increase access to debt for rooftop solar power, the Ministry of New and Renewable Energy (MNRE) can work with development banks to provide a system of trainings to bankers in India to increase their understanding and comfort with rooftop solar loans. Trainings can include how to assess rooftop solar projects, how to process solar loans, and the dynamics of the rooftop solar industry and associated risks.

Given the depth and breadth of the local banking system, and the $625 million it now has to solve this problem thanks to the World Bank, high leverage interventions like these can get the money flowing.

Get DISCOMs in the Game

Another important step is addressing consumer credit risk. Consumer credit risk is the second biggest challenge to the third party financing model. Low availability of credit assessment procedures, low enforceability of agreements, and lengthy and costly legal processes in the case of a dispute or payment default all conspire to hold back investment.

One way to reduce consumer credit risk is for MNRE and state governments to include India’s state-level public electricity distribution companies (DISCOMs) as a party to the power purchase agreement between the developer and the consumer. While DISCOM balance sheets don’t exactly inspire confidence, they do have the power to terminate grid supply which can provide an effective ‘stick’ to ensure customer payment.

DISCOMs are also responsible for implementing net metering, which is a policy that has been passed in nearly all states that makes rooftop solar power more viable by enabling consumers to use solar power generated during the day at night. However, at present, there is little incentive for DISCOMs to prioritize net metering implementation which means most rooftop solar companies don’t take advantage of it. One way to overcome DISCOMs’ reluctance would be to incentivize them to fulfill their Renewable Purchase Obligation (RPO) requirement – a government requirement to install solar power – via rooftop solar installations, by providing 30% more credit to rooftop solar power generation compared to utility-scale solar power.

Invest in Financial Innovation

Last but not least it’s clear that financial innovation has been key to unlocking clean energy abroad, and it is likely to be useful inside India as well. The India Innovation Lab for Green Finance, a public-private initiative, administered by CPI and modeled after the successful Global Innovation Lab for Climate Finance, is currently developing several instruments which have the potential to drive significant investment into third party financing for rooftop solar power.

The first, Loans4SME, is a peer-to-peer lending platform that connects investors directly with borrowers and could help improve access to debt financing for the rooftop solar industry. The second, the Rooftop Solar Sector Private Financing Facility backed by the IFC, could increase access to debt financing for the rooftop solar industry by creating a warehouse structure that aggregates and purchases large numbers of small projects helping to inject liquidity into the market. This also enables an aggregate deal size large enough and of sufficient credit quality to attract more attention from investors, especially institutional investors.

Taken together, these policy and financial solutions can jumpstart India’s rooftop solar industry and put it on track to achieve the government’s target of 40 GW of rooftop solar power by 2022, a goal the whole world should get behind.

This post was co-authored by Gireesh Shrimali of CPI and Justin Guay of the David and Lucile Packard Foundation. A version of it first appeared in Greentech Media and also in The Huffington Post.  

 

Read More

Paving the way for emissions reductions in California

July 1, 2014 |

 

California’s budget for the next fiscal year, signed by Governor Brown on June 20, includes $832 million in auction revenues from the Cap and Trade Program, which will go toward high-speed rail, public transportation, energy efficiency, and other projects to support low-carbon, sustainable communities. Where did that money come from? In some cases, from industrial firms like cement producers and food processors, which are responsible for 20% of statewide greenhouse gas emissions and are required to buy allowances to cover some of their emissions.

Our new study, Cap and Trade in Practice: Barriers and Opportunities for Industrial Emissions Reductions in California, explores how those industrial firms are making decisions under the Cap and Trade Program. More specifically, we wanted to know if industrial firms, given their typical decision-making processes, would invest in the emissions reductions options that are most cost-effective on paper — and if not, what are the barriers? We focus on the cement industry, which is a major player in the industrial sector and is also the largest consumer of coal in California.

The carbon price is making a difference

We find that the carbon price is making a difference in how cement firms approach business decisions about actions that would reduce emissions, such as investing in energy efficiency or switching to cleaner fuel. Firms are considering the carbon price when they make investment decisions, and our modeling shows that the carbon price significantly changes the financial attractiveness of several abatement options.

As an example, this graph shows how the carbon price adds to the value of an investment in energy efficiency. The additional savings from reducing the firm’s obligations under the Cap and Trade Program would add around 50% to the value of the investment if the carbon price is near the price floor — or could more than triple the value of the investment if the carbon price is at the top of its target range.

Cap and Trade - Lifetime Value of Energy Efficiency Investment

The Cap and Trade Program magnifies the value of an energy efficiency investment

Read More

The promise and pitfalls of shareholder incentives: Lessons from California’s high-stakes test

February 19, 2014 |

 

This post originally appeared on Intelligent Utility.

How many millions of dollars does it take to change a state’s light bulbs?

This sounds like the start of a joke, but for the last seven years, it’s been anything but to California utilities and regulators. The crux of the dispute, which has had stakes in the hundreds of millions of dollars, has been an ambitious—but controversial—shareholder incentive designed to motivate California utilities toward greater energy efficiency.

The policy, called the Risk/Reward Incentive Mechanism, or RRIM, targeted California utilities. However, the concept of a shareholder incentive is one that 20 other states have adopted in recent years. It’s also under discussion at the federal level as part of President Obama’s proposed Race to the Top Energy Efficiency Initiative.

So what can utilities in other states learn from California’s experience? Climate Policy Initiative’s recent analysis, “Raising the Stakes for Energy Efficiency: California’s Risk/Reward Incentive Mechanism,” draws a few lessons that stand out.

Read More

China’s Path to Low-Carbon Development: A Q&A with Thomas C. Heller

August 14, 2013 |

 

This interview discussing the challenges China faces on its path to low-carbon development  and parallels with other countries’ experiences first appeared in Mandarin in the China Economic Times. In it, our executive director, Thomas C. Heller, references CPI’s recent publication The Policy Climate, which presents 30 years of climate and energy policy in China, Brazil, India, the EU, and the U.S..

Reporter: Why did you undertake this report and what was most surprising about your findings?

Heller: A lot of the attention to date has been on international climate negotiations, but actually, there’s more action at the national level. We wanted to examine climate and energy policies in key regions around the world, and share lessons about their experience. It was interesting to see how much nations had in common. All nations want green growth. And they face the same choices about how to get there. China has a very different governance and economic system from other countries, but like other countries, it faces the same decisions on how to balance national and regional policies, whether to use mandates or incentives, how to target large as well as small enterprises. Our report talks about some of these common challenges.

Read More

In Prop 39 agreement, mixed news for schools and the climate — and some remaining questions

June 27, 2013 |

 

Today, California Governor Jerry Brown signs the state budget for 2013-2014, including a bill that will allocate Proposition 39 funds — an estimated $2.75 billion over five years — for energy-saving projects in schools.

In our analysis of school districts’ resources and needs, we found that Proposition 39 can most effectively drive energy savings in schools if it provides financial assistance that takes into account the wide variation in school districts’ existing resources and needs, and if it also offers technical assistance to help districts identify projects and put together funding. So how did these goals fare in the legislative process?

Read More

Amidst Prop 39 discussions, what do California schools need?

May 21, 2013 |

 

California policymakers are considering how to allocate Proposition 39 funds — an estimated $2.75 billion over five years — to support energy efficiency and clean energy projects in K-12 schools and other public buildings. Proposition 39 presents a substantial opportunity to help school districts save energy and money.

In order to inform these ongoing discussions, CPI recently analyzed existing resources and gaps in financing energy-saving projects in K-12 school districts to try to get a sense of what school districts need.

In interviews with school district officials, we heard that California’s school districts are actively looking to cut energy costs amid intense budget pressures. Interest rates are currently very low, making many energy-saving projects financially viable. But many of the typical funding sources schools use for facility improvements are limited in availability, and districts are reluctant to take on debt to fill the gap. And many districts don’t have the staff resources and technical expertise to sort through sales pitches and figure out what projects to do.

Our analysis suggests that Proposition 39 funds can best drive energy savings in three ways:

Read More

Counting on energy efficiency: climate gains from consistent program data

November 30, 2012 |

 

Most experts agree that one of the most cost-effective places to reduce greenhouse gas emissions is in energy efficiency. Over the years, hundreds of programs have sprung up across the U.S. to encourage businesses and households to use energy more efficiently. These programs — also called demand-side management (DSM) programs — hold real promise for climate mitigation.

It’s good that many, many programs exist. It’s also good that these programs are extensively evaluated. However, as Jeff Deason discusses in more depth, each jurisdiction uses its own measurement and reporting practices, resulting in scattered and inconsistently reported data.

As an organization keen to look across evaluations to find best practices, we find this frustrating. In essence, it’s a classic case of comparing apples to oranges — and sometimes a challenge just to locate those apples and oranges in the first place.

Read More

U.S. energy efficiency programs: Lots of evaluation, little coordination

November 28, 2012 |

 

Suppose you are a regulator in a state or country new to energy efficiency programs and you want to design a set of financial incentives to encourage efficient appliances and equipment.

If you want to design something that generates significant energy and carbon emissions savings in a cost-effective manner, you have a number of decisions to make: What products and efficiency measures should you target? Should you offer incentives for very high-performing, super-efficient devices that may have a smaller market, or for more widely available but somewhat less efficient measures? How large should these incentives be? Should you offer incentives upstream (to manufacturers), midstream (to retailers), or downstream (to consumers)? Should you bundle the incentives with information and advertising, and if so, what is the best allocation of program resources? How do you need to vary your approach in different markets?

The U.S. appears, at first glance, to offer lots of evidence to help you make these choices.  A search of the Database of State Incentives for Renewables and Efficiency yields 1124 separate U.S. programs that offer some form of rebate for energy efficiency measures. Programs have existed since the 1970s, so you have a long history to draw upon. Moreover, utility demand-side management (DSM) programs, which make up the lion’s share of energy efficiency programs, are routinely evaluated. In fact, U.S. efficiency program administrators budgeted at least $181 million for DSM program evaluation in 2011.

Unfortunately, despite the many programs and the many millions of dollars spent evaluating them, there is less evidence on what works and what doesn’t than there could and should be.

Read More