GET FiT Programme: Leveraging private investments in renewable energy. Bank aus Verantwortung

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1 GET FiT Programme: Leveraging private investments in renewable energy Bank aus Verantwortung

2 Index 1 Background and Challenges for Private Investments in RE in Africa 2 GET FiT An Innovative Approach to Energy Financing Hydropower 2

3 African power markets are in transition Legal and regulatory frameworks for promotion of renewable energy are also increasingly common Many African governments have made renewable energy promotion a centerpiece of their energy policy This has resulted in experimentation with a wide range of legal and regulatory tools to foster investment in renewables, including fiscal incentives (grants, tax breaks, etc.), energy portfolio targets, energy quotas and, most prominently, feed-tariffs Countries that have introduced (or are about to introduce) feed-in tariffs include Algeria, Ethiopia, Ghana, Namibia, Nigeria, Kenya, Mauritius, Mozambique, Rwanda, South Africa, Tanzania, Uganda, and Zambia 3

4 African power markets are in transition Challenges for private investment in renewable energy Incomplete/ incoherent reform Political and commercial risks Inadequate incentives/ RE regimes Technical/ Engineering issues Weak design and faulty implementation of sector unbundling and renewable energy promotion programs (including standard documentation) Detrimental country risk profiles and weak offtaker structures RE promotion programs (such as FiTs) offer inadequate commercial incentives especially for early-movers Grid integration of renewables requires significant investment in transmission infrastructure Long-term debt finance and equity are hard to come by, terms and conditions are generally punitive Few renewable deals have come to close/ gone into implementation

5 Index 1 Background and Challenges for Private Investments in RE in Africa 2 GET FiT Programme An Innovative Approach to Energy Financing Biomass 5

6 GET Fit Zambia Objectives Objective: bringing about 150 MW of RE on the grid by 2020! Mitigating the supply shortfall: increases generation capacity by 20% Reducing CO2 emissions by 10 million tons (over 20 years project lifespan) Facilitating or improving access for at least additional consumers Leveraging approximately USD 520 million in private capital with EUR 90 million grant funding Solar PV 6

7 GET FiT addresses challenges for private investments comprehensively Technical Assistance, Guarantee Framework, Incentive Mechanism 1 Technical Assistance Targeted assistance regulator, standardized contract documentation, etc. 2 Guarantee Framework Political and commercial risk insurance products 3 Incentive Mechanism Results-based premium payment on top of REFiT to incentivize developers/ financiers to enter the market 4 Interconnection/ Grants and concessional loans to allow public side to ensure timely and Grid Integration reliable grid integration and interconnection of small RE Remove legal and regulatory hurdles for private investment Mitigate political and commercial risks Provide an attractive risk-adjusted return for early mover investors Unlock commercial finance for renewable energy deals 7

8 GET FiT Premium Payment Mechanism Competitive mechanism to leverage early-movers into power market Transparent and competitive selection process Consecutive Request-for-Proposals for REFiT Technologies/ Competitive tender for solar (reverse auction) Ultimate decision-making by independent Investment Committee Selection criteria 1) Financial/ economic viability 2) Technical viability of project and competence of developer 3) Compliance with IFC Performance Standards 4) Completion of legal due diligence Results-based disbursement Payment of premium after commissioning (50%) and then annually for five years against electricity delivered to the grid 8

9 Example Uganda: GET FIT Solar Facility Reverse auction instead of fixed REFiT plus Premium Gap to bidder s tariff End User contribution (set by Regulator): 11 USDc/kWh 20 years 50% Total GET FiT premium on COD discounted, payment over 5 years GET FiT Mechanism 11 USDc/kWh under PPA 20 years

10 GET FiT Uganda A successful track record Achievements Requests for Proposal launched in March and November projects selected: 108 MW or 560 GWh/ p.a. of clean, renewable energy First bagasse projects started commercial operations in Q First hydro projects to reached financial close/ started construction early 2015 Third (and last) Request for Proposal ongoing 18 hydro (total 90 MW) projects applied for support, investment decision in June 2015 GET FiT Solar Facility Tender launched in January 2014, projects selected end of October 4*5 MWp or 34 GWh selected for support Implementation timeline about 1 year 10

11 GET FiT Zambia currently in preparation GET FiT Zambia Feasibility Study Phase I (May Oct 2015):Assessment of the potential for a Get Fit Program in Zambia and definition of its scope and components. Decision of GRZ on GET FiT Zambia Programme (Nov 2015) Phase II (Dec April. 2016) : Development of the contents and structure of a Get Fit Program Zambia. Consultants: Fieldstone/Trinity/Woley Parsons GET FiT Zambia Programme: Start of Implementation: Mid

12 Thank you for your attention! Bank aus Verantwortung