Institution Building and Clean Energy Finance

Transforming existing energy systems to increase the adoption of clean and efficient technologies and practices in each of the Partners’ economies requires the building of those institutions, broadly defined, that are essential to the transformational work which distinguishes the APP from other initiatives. A solid understanding of energy supply and demand challenges and opportunities enables the acceleration of cleaner technologies and better efficiency practices on a regional as well as a national scale. The targeted data collection, professional exchanges, best practice sharing, policy and research reviews, and finance facilitation activities fostered through institution building activities are necessary building blocks in successful efforts to develop and deploy clean technologies.

Whether fostering knowledge-sharing between utility professionals (“Promoting Clean Energy Options in the Electricity Supply and Demand Sector in India for the Asia-Pacific Partnership,” p. 21), expanding the commercial solar PV market into rural areas of India (“Accelerate Commercialization of Renewable Energy for Distributed Generation in India,” p. 23), facilitating a first-ever international effort among Partner country steel industries to inventory GHG emissions and identify best practices and clean technologies (“Data Collection and Analysis to Establish Energy and Environmental Baselines in the Chinese Steel Industry,” p. 37), or developing a landmark energy savings tool for the cement sector in China (“Benchmarking and Energy Savings Tool for the Cement Sector in China,” p. 36), institution building is a tangible benefit of many APP activities.

Beyond the benefits of building capacity and expanding available options within the individual Task Forces, the lessons learned from the specialized analyses and exchanges within individual sectors often reveal larger trends, barriers, and cross-cutting opportunities that transcend sectoral groupings. Perhaps the most pressing of these obstacles is the need for increased availability of financing and investment mechanisms to catalyze clean energy efforts. Key U.S.-supported finance facilitation activities designed to leverage private sector investment in cleaner technologies are presented here as representative institution building sector activities. Since, in a very real sense, many APP projects have an institution building component, APP successes involving personnel exchanges, data collection, and policy and research reviews will be highlighted throughout the energy supply (pp. 13-24) and energy demand (pp. 25-37) chapters.

Accelerating Clean Energy Markets in India The DOS is working with a key NGO partner, the World Resources Institute (WRI), to accelerate the growth of clean energy markets in India through WRI’s comprehensive Local Investment Capacity Building strategy. Over the 2007 – 2010 award period, this project will use its $500,000 U.S. cost share to leverage $125 million in private investment and directed this investment into at least 20 small- and medium-sized enterprises (SMEs) in the clean and renewable energy sector. This project will bring 130 megawatts of renewable power online and eliminate more than 2 million metric tons of CO2 over the three-year project period. Progress to date on this project, which began in late 2007, includes Yes Bank’s announcement of a $50 million fund for sustainable SMEs focused on renewable energy and energy efficiency. Eight SMEs have been identified thus far, and an investment forum conducted due diligence meetings with investors.

Strengthening Credit for Clean and Renewable Energy in Asia Through Loan Guarantees

USAID’s well-established Development Credit Authority (DCA) mitigates the perceived risks of lending to underserved clients. As part of their APP work, USAID and the DOS are building on DCA’s work to launch a loan guarantee facility that will provide partial credit guarantees covering up to 50 percent of a lender's risk on local currency and U.S. dollar denominated debt for clean energy projects. This program will mobilize more than $50 million in private investment for clean energy and will also combine opportunities for subsidized technical assistance, project development financial advisory services and project structuring. USAID’s risk sharing methodology, which covers up to 50 percent of a lender's losses on a particular loan, portfolio of loans or investment, reduces investors’ exposure to loss and effectively mobilizes private capital.

Each DCA guarantee must fit a number of criteria. Primarily, a guarantee must promote private-sector investment in an attempt to capitalize on large reserves of untapped private capital held by banks in developing countries. Guarantees will encourage financial institutions to lend that capital where financing had been previously unavailable or inaccessible. The reduced risk of loss can motivate lenders to expand the loan terms on their existing loan products, create new loans, and lend to new areas. These actions build banks’ capacity to lend into new and potentially profitable markets while making credit available to under-served borrowers. A combination of training and partial guarantees has introduced local financial institutions to new and profitable lending opportunities. As lenders gain experience investing in traditionally underrepresented areas, they may become more comfortable extending financial services to borrowers and be willing to lend on a more continuous basis without further need for a guarantee.
Private Financing Advisory Network Broadens Access to Climate Friendly Financing

The Private Financing Advisory Network (PFAN) is an innovative, clean energy financing network initiated by the Climate Technology Initiative (CTI), a multilateral initiative that brings countries together to foster international cooperation in the accelerated development and diffusion of climate-friendly and environmentally sound technologies and practices, and supported by USAID and the Department of State. With Department of State support, PFAN is being enhanced and expanded to support the goals of the APP by directing targeted technical assistance towards clean energy projects benefiting China and India.

PFAN is an international public-private partnership consisting of private sector companies – investors, advisors, financiers, engineers – all with an interest in providing financing and financing services to climate friendly, clean energy projects in developing and transition countries. PFAN identifies projects that may be suitable for private sector finance at an early stage and then provides step-by-step financial consulting and advisory services to help project developers to fully develop their idea, producing financially viable, bankable project and financing proposals and then guiding these projects to bankability and financial close. The partnership targets their assistance to projects in the US$1-30 million range. With current funding over the next three years, PFAN expects to be involved in up to 125 projects worldwide and to leverage between $500 million and $700 million of private sector investment and financing.

Clean Energy Trade Missions

[INDLUDE IMAGE GUANGZHOU.JPG, Source: iStock, caption "Thanks to the DOC’s Clean Energy Technologies Trade Missions, U.S. clean energy technology is powering public transit to reduce congestion in Guangzhou, China."]

An ongoing series of DOC-led APP Clean Energy and Environment Trade Missions help U.S. clean energy and environmental technology companies identify potential business opportunities in India and China. For example, a September 2008 trade mission that arranged more than 200 business meetings with potential Indian and Chinese partners for 18 U.S. companies has already resulted in one company, Synergics, signing a deal with an Indian partner to provide clean electricity generated from hydropower to more than a million homes. While additional results will develop over the coming month and years, initial U.S. exports resulting from this trade mission have already reached $5 million, a return of $50 for every $1 of U.S. government funds invested.

Such successes build on prior APP clean energy trade missions, including a January 2008 trade mission to China and India and a 2007 mission for Indian businesses that resulted in approximately $100 million in near-term U.S. export opportunities. A highlight of the January 2008 mission, for example, was a signing ceremony announcing the installation of 30 hybrid-powered buses for Guangzhou's municipal city bus company. The buses will run on a diesel-electric hybrid motor manufactured by U.S. mission participant the Eaton Corporation. Less than 4 months later, Eaton announced that the momentum celebrated during the APP Trade Mission in January had led to an agreement by the city to buy 207 additional hybrid power systems from Eaton. Once deployed, this will be the largest single placement of hybrid-powered buses anywhere in China (It is also Eaton’s largest single hybrid power systems order to date).

Accelerating Investment in Coal-Fired Power Plant Rehabilitation in India

More than 30 Gigawatts (GWs) of installed capacity in India, making up nearly 20% of the country’s total power capacity, will need to be rehabilitated within the next 10 years. In most cases, rehabilitation has been proven to be cost-effective and to increase efficiency, leading to fuel savings and emissions reductions. However, persistent barriers to the development of these projects have resulted in abysmal levels of investment. By partnering with some of India’s largest utilities, including the National Thermal Power Corporation (NTPC) and three State Electricity Boards (SEBs), and with support from DOS, the USAID Regional Development Mission for Asia (USAID/RDMA), through its ECO-Asia Clean Development and Climate Program (ECO-Asia CDCP), is helping the Indian power sector to develop strategies and scale up investments that will improve the efficiency of India’s aging coal-fired power plants. The three rehabilitation projects that are being supported by ECO-Asia CDCP will result in clean energy investment of over 20 million dollars and carbon emissions reductions of over 500,000 tons per year. At the policy level, the ECO-Asia CDCP has been working to convene the key stakeholders to develop strategies for scaling up rehabilitation efforts. Key stakeholders include the Central Electricity Authority (CEA), electric utilities, technology and service providers, suppliers, and financial institutions. A national workshop to address barriers was held in Delhi in September, 2008 and the Program has recently helped to review and strengthen a Guidance Manual on Rehabilitation developed by the CEA.

Promoting State Energy Conservation Funds in India

Since March 2008, the ECO-Asia CDCP, with support from DOS, is supporting the Indian states of Kerala and Madhya Pradesh to design and launch State Energy Conservation Funds (SECF) to fulfill the states’ mandate under the Energy Conservation Act of 2001. In addition to helping estimate market potential for energy efficiency investments, the ECO-Asia CDCP is helping to design a framework for the fund, operating rules, models for fund management, and criteria to create a pipeline of projects. The Energy Management Center (EMC) Kerala, which is the state-designated agency mandated to create the SECF , jointly convened a round table discussion in July, 2008 to bring together key stakeholders to review the objectives, structure and scope of the Kerala SECF. ECO-Asia CDCP has completed a draft market potential assessment and preliminary framework and structure for the proposed SECF. The ECO-Asia CDCP has partnered with the Department of Power, Government of Madhya Pradesh (GoPM) and the Asian Development Bank (ADB). The ADB has offered a loan of $5 million and grant of $1.7 million to the GoPM to support the initial management costs and investment pipeline of the SECF.

Commercializing Clean Energy Finance in India

The ECO-Asia CDCP has been developing strategic analyses and showcasing success stories in the area of energy efficiency financing with support from DOS. A report entitled “Financing Energy Efficiency in India” has been finalized and disseminated starting in October 2008. Development of case studies of successful clean energy financing models used in India and the region was initiated in early October, 2008 and will be completed by December 2008.

Supporting the Asia Clean Energy Forum

Following the highly successful Asia Clean Energy Forum (ACEF) held in Manila, Philippines, in June 2007, this year’s event brought together more than 500 energy experts, entrepreneurs, and government officials from 38 countries on June 3-5, 2008. With joint funding from the Asian Development Bank (ADB), APP, and USAID/RDMA, both ADB and the ECO-Asia Clean Development and Climate Program (ECO-Asia CDCP) organized the forum. Participants explored a wide range of topics during the 25 sessions dealing with financing clean energy projects, removing regulatory barriers to investment, accessing clean energy funds and technological innovations. The event featured innovative initiatives promoting small and large-scale clean energy projects and financing and attracted extensive international and business media coverage. Additional co-sponsors included Asia-Pacific Economic Cooperation (APEC), Cities Development Initiatives for Asia, and the Governments of Australia, Japan, Norway and Spain.

Methane Opportunity Analysis

Through the Asia-Pacific Partnership on Clean Development and Climate, the United States is leading an analysis of methane capture and use opportunities in India that could leverage millions of dollars of private sector investment for clean energy projects. The project, which is also being supported under the Methane to Markets Partnership, will include site assessments and pre-feasibility analyses for landfill gas to energy projects, as well as methane emission data collection and site assessments for natural gas and oil systems. When complete, U.S. companies will have key information to guide future investments in methane capture and use projects in India.

Voluntary Program to Promote Ecologically Sustainable Business Growth for Indian Industry

This voluntary project is fostering environmentally friendly business growth in India by drawing on the expertise of EPA’s Climate Leaders Program. The Confederation of Indian Industry (CII) is leading a signature campaign to solicit voluntary commitments from major Indian companies to reduce their environmental impact by signing the “Code for Ecologically Sustainable Business Growth.” The voluntary code, which consists of annual percentage targets such as reductions in energy consumption, reductions in water consumption and waste production, increases in the usage of renewable energy sources, etc., has already been signed by 146 Indian companies, including some of the largest in the nation.

The annual targets, which are developed in consultation with CII to address the specific needs and abilities of each individual firm, last for a period of ten years, creating a culture of environmental awareness that will last far beyond the annual commitments of the companies. CII estimates that the total number of signatories may reach 500 by the time the campaign has completed. In addition to soliciting commitments from major Indian organizations, CII is working to facilitate connections between signatories and service providers which can provide technical assistance with GHG emission inventories, strategies for environmental impact reduction, and other techniques and technologies to help companies reach their annual targets.