Friday, May 24, 2013

Scaling-Up Renewable Energy Program for Low Income Countries

Summary

The Scaling-Up Renewable Energy Program in Low Income Countries (SREP) is a targeted program of the Strategic Climate Fund (SCF), which is one of two funds within the Climate Investment Funds (CIF) framework.

The SREP was designed to demonstrate the economic, social and environmental viability of low carbon development pathways in the energy sector in low-income countries. It aims to help low-income countries use new economic opportunities to increase energy access through renewable energy use.
  
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Basic Description

Name of Fund Scaling-Up Renewable Energy Program for Low Income Countries (SREP)
Official Fund Website www.climateinvestmentfunds.org/cif/srep
Date Created Date fund proposed: February 2008.
Date fund made operational: 14 December 2009.
Proposed Life of Fund The SREP is subject to the CIF 'sunset clause' which enables closure of funds once a new financial architecture becomes effective under the UNFCCC regime.  Until such time, donors and recipients operate under the existing framework.  
Administrating Organisation The World Bank is the Trustee and Administrating Unit of the SREP. 
The World Bank Group, the African Development Bank, the Asian Development Bank, the European Development Bank, and the Inter-American Development Bank are the implementing agencies for SREP investments.
Objectives The SREP is designed to demonstrate the economic, social and environmental viability of low carbon development pathways in the energy sector in low-income countries.  It aims to achieve five main objectives:
1.   Assist low income countries foster transformational change to low carbon pathways by exploiting renewable energy potential;
2.   Highlight economic, social and environmental co-benefits of renewable energy programs;
3.   Help scale up private sector investments to achieve SREP objectives;
4.   Enable blended financing from multiple sources to enable scaling up of renewable energy programs; and
5.   Facilitate knowledge sharing and exchange of international experience and lessons.
Activities Supported
SREP provides financing for renewable energy use and generation, specifically for proven “new” renewable energy technologies. For the purposes of SREP, new renewable energy technologies include solar, wind, bioenergy, and geothermal, as well as hydropower with capacities normally not exceeding 10MW per facility.
SREP also supports complementary technical assistance as this is considered essential for transformative and enduring change and country engagement and ownership. Technical assistance includes support for planning and pre-investment studies, policy development, legal and regulatory reform, business development and capacity building (including for knowledge management and monitoring and evaluation).
Conditions & Eligibility

Eligible new renewable energy applications include:
  • Grid and off-grid electricity applications including small hydro or biomass-based power, wind and solar powered systems, and geothermal.
    • Financing available for renewable electricity generation and use, and for transmission and distribution grids;  
  • Cooking and heating applications including sustainable community forests, improved cook stoves, geothermal heating, and biogas or other renewable-based fuels.
Preference is given to projects with strong poverty alleviation benefits.  Economic and/or social development and environmental benefits are key criteria for project selection.
Project proposals should demonstrate the potential to scale-up from lessons learned in pilot and demonstration projects and programs (such as those supported by the GEF). A key criterion will be the potential of the proposal for demonstration and replication, particularly the potential for removing barriers in the enabling environment beyond the immediate project boundary so as to facilitate scaling up through private sector investments.

Country selection criteria

Low income countries are prioritised for the SREP. Proposed criteria for country selection are:
  • Transparent assessment of need, determined by high dependence on conventional fuels for electricity generation, low electricity access, and/or high dependence on traditional use of biomass for thermal applications; 
  • Country’s stated interest in taking a programmatic approach to large scale renewable energy development that could lead towards a low carbon development pathway in the energy sector;
  • Institutional capacity to undertake large scale SREP-funded program;
  • Project distribution across countries and regions (with a special focus on Sub-Saharan Africa). and
  • In-country renewable energy potential and scope including availability or abundance of renewable resources.
For more detailed information on selection criteria: Criteria for Selecting Country and Regional Pilots under SREP (March 2010)
Accessing the Fund Pre-Programming Phase
1.   SREP-SC to agree upon number of country or regional pilots and criteria for country selection;
2.   CIF Administrative Unit, through MDBs to inform countries and invite expression of interest;
3.   Selection of pilots by SREP-SC based on Expert Group Report;
4.   MDB scoping mission at invitation of government to assess readiness and capacity for investment plans; and
5.   If requested, MDBs advance preparation grants and investment plan preparation grants to assist development of investment plans.
 
Programming Phase

6.   SREP-SC endorses Investment Plan;
7.   Investment and financing proposals are developed; and
8.   SREP-SC approves financing for investments and other proposals.
Uptake & Projects Supported Pilot Countries
Six pilot countries have been approved for SREP finance:
  • Ethiopia
  • Honduras
  • Kenya
  • Maldives
  • Mali
  • Nepal
As of 31 March 2012, the SREP Sub-Committee has endorsed five Investment Plans for a total amount of proposed SREP funding of USD 210 million. Possibility of Additional Pilots
Should additional funding become available, a list of six alternate pilots has been prepared for consideration. 

Fund Governance

Decision Making Structure SREP Sub-Committee: 
The SREP Sub-Committee was established to oversee and decide on the operations and activities of the SREP.
Composition of the SREP Sub-Committee
  • Up to six representatives from donor countries to the SREP;  and
  • Six representatives from eligible recipient countries were selected on a regional basis and identified through a consultation with recipient countries.
Decision-making is achieved through consensus. 
Observers
The SREP Sub-Committee invites a number of active observers to attend its meetings, including representatives from:
  • Four Civil society organisations (1 from Asia, LAC, Africa, and Developed Countries respectively);
  • Two Private sector entities (one from a developed country and one from a developing country);
  • The Global Environment Facility (GEF);
  • United Nations Development Program (UNDP); United Nations Environment Program (UNEP);
  • United Nations Framework Convention on Climate Change (UNFCCC), and
  • The Energy for the Poor Initiative (EFPI).
These observers can add items to committee agendas, recommend external experts, and request verbal interventions during discussions. 

Expert Group

An Expert Group was established by the SREP Sub-Committee to make recommendations on the selection of country or regional programs.  The Expert Group recommended six pilot countries for SREP Sub-Committee consideration and a further three countries for consideration should additional funds become available or one of the initial pilots fails.

Consultation with Non-Government Stakeholders

In designing the Climate Investment Funds, consultations took place with potential donors and recipients, the United Nations family, other multilateral development banks (MDBs), civil society organizations, and the private sector. The CIF were created on agreement from some 40 developing and industrialized countries.

Nongovernmental actors have a direct role in the governance of the fund as detailed above. Representatives of NGOs and the private sector were also part of the expert group.

Information Disclosure Pledges, deposits and funding decisions for SCF and its subsidiary funds (PPCR, SREP and FIP) are reported to the Sub Committee in biannual trustee reports.
Disclosure policy
In May 2009, the Trust Fund Committees approved a disclosure policy supporting in-country disclosure of country-owned investment plans and strategies (developed under each of the Trust Funds) prior to their submission to a CIF Committee for approval. Proposed plans are also posted on the CIF website no later than three weeks prior to review of the proposal by a Committee.  In the case of proposed programs and projects, an information document describing the proposal is to be made public at least two weeks prior to a decision on the funding of the proposal.  The policy recognizes that a country or a project proposer may have justifiable reasons for not publicly disclosing all information in an investment plan or project, and in exceptional cases, subject to Committee approval, certain information may be kept confidential.
Issues Raised As the smallest and most recently established of the CIFs, there has been relatively less public commentary on its operations and objectives. Programme implementation remains in its early stages, and in some cases has been slower than anticipated.

Relationship with Official Development Assistance

Inclusion as Official Development Assistance Yes.
The application of all CIF finance (concessional loans, grants, and guarantees through the MDBs) can be classed as ODA by MDBs if:
  • It meets the criterion of promoting economic development and welfare;
  • The grant element is at least 25%; and
  • The funds are to be used in a country included in DAC list of ODA eligible countries.
Financial instrument/ delivery mechanism used (e.g. grant, loan)

SREP offers grant financing, blended with IDA and other concessional financing, to leverage other public and private sector resources. SREP uses a range of financial instruments that are already available in MDBs, including:
  • Output-based aid to increase the affordability of renewable energy services provision by buying down a portion of the capital cost of the investment.
    • The buy-down will be available for renewable energy access investments that are unaffordable for low income consumers. Such assistance should be tied to investments that meet economic and social sustainability criteria, and adhere with economic principles that guide the effective use of subsidies; 
  • Investment finance using quasi-equity financing, capital cost buy-down or other financial instruments to make grid-based renewable energy power, and related transmission and distribution investments financially viable;
      
  • Credit enhancement facilities to leverage trade finance and short-term working capital finance, and to provide partial risk coverage of loans to grid-based renewable energy investments, businesses and rural consumers who may have inadequate credit histories or limited collateral for securitizing the renewable energy loans;
     
  • Financial intermediation grants that can be on-lent as loans through domestic financial institutions, including micro-finance institutions for renewable energy investments; 
  • Incremental budget support for national/regional programs delivering community services such as health care, water supply and education. Incremental support will be available for funding renewable energy hardware and services, including arrangements to assure long term repair and maintenance.
Nature of recipient country involvement

SREP pilots are country-led, build on and draw benefit from, national policies so that renewable energy is fully integrated into national energy plans.  SREP activities are designed and implemented with the full and effective participation and involvement of, and with respect for the rights of, indigenous peoples and local communities.


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