According to Vienna-based NGO REEEP, piloting innovative finance methods is one of its key priorities in its small-scale project funding, designed to have a "wide ripple effect".
Microfinance facilities are a way to open up access to energy services for the rural poor. REEEP says it aims to work in Uganda to help microfinance institutions (MFIs) to establish small businesses selling solar, biogas and high-efficiency cookstoves, and to provide loans to 5000 consumers who buy them.
In parallel, another REEEP project will help establish a network of retail outlets to sell energy-efficient CFLs, pressure cookers, stoves and solar lanterns in villages of the Indian state of Karnataka, and structure guarantees with MFIs to provide financing to end users.
A successful microfinance mechanism is PFAN (Private Financing Advisory Network), a finance coaching and investor matchmaking service that works well in many developing markets as well as India and China. A new REEEP project will expand PFAN activities to Uganda and Mozambique, and aim to attract between US$10-US$60 million of funding to clean energy projects in those two countries during its first year.
Establishing microfinancing systems on the islands of Fiji, Vanuatu and Samoa over the next 15 months is the aim of the PREM (Pacific Renewable Energy and Microfinance) project. It kicks off with a baseline study on renewables and energy efficiency in these countries, and following this, a set of training tools will be created to assist MFIs in developing their own sustainable loan products.
In Brazil, REEEP will target the agricultural sector in a project combining international and local sources of financing to make solar water pumps for irrigation, solar dryers for fruits, and bio-digestors for agricultural waste available to small farmers.
With microfinancing at one end of the spectrum, other REEEP projects will aim to unlock the potential of large-scale investment in renewables. Institutional investors such as pension funds, insurance companies, and savings and investment banks see high risks associated with the emerging markets and with renewable energy. A REEEP project will seek to develop risk mitigation strategies and financing products through intermediaries such as E+Co, to attract these major players to the renewables market.
In a similar vein, REEEP has also provided funding for the establishment of a Public-Private Mezzanine Finance facility for renewable energy projects in Morocco, Tunisia and Egypt. A shortage of investor equity capital and government subsidies are barriers to project financing renewable energy projects in the region. Mezzanine finance is a ‘quasi-equity’ structure that could help alleviate the current lack of developer equity.
Finally, a REEEP project together with the China Development Bank will develop new financial tools and risk mitigation instruments for renewable energy project finance, and help build a network of market-based banks interested in renewable energy project finance.
“We are convinced that targeted interventions like these will help to mobilise funding for renewables and energy effiency in the emerging markets,” said Marianne Osterkorn, Director General of REEEP.