Republic of Lebanon Ministry of Energy and Water Lebanese Center for Energy Conservation

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Republic of Lebanon Ministry of Energy and Water Lebanese Center for Energy Conservation LARGE SCALE SOLAR WATER HEATER MARKET DEVELOPMENT PROGRAM IN LEBANON ( REPORT PREPARED UNDER A WORLD BANK-SUPPORTED ACTIVITY WITH THE LEBANESE MINISTRY OF ENERGY AND WATER AND THE LEBANESE CENTER FOR ENERGY CONSERVATION) DRAFT World Bank June

2 Large Scale Solar Water Heater Market Development Program in Lebanon TABLE OF CONTENTS Executive Summary 5 1. Introduction Electricity Supply and Demand Situation Role and Importance of Hot Waters Heaters Solar Radiation Market Availability of SWH Technical and Commercial Potential for SWHs Solar Water Heater Technologies Type of Solar Water Heaters Systems Direct and Indirect Systems Passive and Active Systems Passive Direct Systems: ICS and CHS Active Indirect Systems: Drain back and Antifreeze Residential and Tertiary Sectors Assessment of resources for local manufacture, imports, costs and installation practices for SWHs LCEC s and Other Donor Funded Initiatives in the area of SWHs SWH Standards in Lebanon Implementation Mechanisms for SWH Standards and Associated Regulatory Approaches To Strengthen Compliance Review of Financial Incentives Available for SWHs in the Lebanese Market Proposed Programmatic Framework for Large Scale Deployment of Individual 28 SWH Systems in the Residential Sector Short-term and Long-term Goals Phase 1 Program ( ) for Short-term Goals Phase 2 Program ( ) for Long-term Goals Conditions of Eligibility of Suppliers, Installers and Products Supporting Financial Incentives and Innovative Mechanisms Mechanics of the BDL/ NEEREA Financial Incentive Scheme 12.4 Institutional Coordination and Management for the Implementation of the SWH Scale Up Programs Role of Ministry of Energy and Water Role of Lebanese Center for Energy Conservation 35 1

3 Role of Project Management Unit within LCEC Role of BDL through commercial Banks Role of others Stakeholders Role of Suppliers of SWHs Role of Clients Financial and Economic Analysis: Economic rate of return of SWH Cost of Proposed Program (Phase 1: ) Financing Scheme of the Proposed Program Benefits to Consumers and Utility Environmental benefits Proposed Programmatic Framework for Large Scale Deployment of Collective SWH systems in residential and tertiary sectors in urban areas Short and long term-goals Structure of the Program (eligibility of suppliers, installers, products, etc,) Financial Mechanism Institutional and Stakeholder Responsibilities Financial and Economic Analysis Benefits to Consumers and Utility Environmental Benefits CDM/Carbon Finance Potential Benefits, Methodologies, and Approaches CDM and Evolution of Carbon Markets CDM Strategies and Approaches Post-2012 Carbon Markets CDM Methodology for Solar Water Heaters Capacity Building and Dissemination Capacity Building Promotion, communication and awareness program Monitoring and Evaluation Approaches Conclusions 56 2

4 Annexes: Annex 1: Tables of calculation Annex 2: List of Contact Persons Annex 3: Eligibility of Suppliers, Installers and Products Annex 4: Technical Specification of Eligible Products Annex 5: Copy of Intermediate Circular No 236 Annex 6: List of Lebanese SWH companies Annex 7: SWH Presentation at the Workshop (to be added) Figures Figure 1: Electrical consumption per sector Figure 2: Electrical consumption per end user Figure 3: Climatic zones and solar radiation in Lebanon Figure 4: Evacuated tube solar collector Figure 5: Flat plate collector Figure 6: Projected progress of the Program- Phase 1 ( ) Figure 7: Potential of SWH installed (m2) and energy saved (TOE): Figure 8: Environmental Impacts of the Program Figure 9: Institutional structure of management the Proposed Program Figure 10: Economic impact of phase 1 Figure 11: Total potential of energy saved and CO2 avoided ( ) Figure 12: Interaction between main stakeholders for Collective SWH Systems Figure 13: Total potential of energy saved and CO2 avoided Collective sector Figure 14: Concept of the CDM Figure 15: CERs issued by sector Figure 16: Steps in the CDM project cycle Figure 17: Approximate time line to CDM activity registration Tables Table 1: Electricity Tariff Table 2: Global Radiation Data for Lebanon Table 3: Market shares of Solar Panels in Lebanon in 2008 Table 4: Economic rate of return calculation Table 5: Cost of the Proposed Program (US$ 000) 3

5 ABL: ALMEE : AUB: BDL: CDM: CO2: CRES: EDL: EU: GEF: GHG: GIZ : GoL: IRI: KW: KWh: LCEC: LIBNOR: LSES: LU: MEDEREC: MEW: MW: MWE: MWh: NEEAP: NEEREA: SWH: TOE: UNDP: US$: ACRONYMS Association of Banks in Lebanon. Association Libanaise pour la Maitrise de l Energie et l Environnement. American University of Beirut Banque Du Liban (Central Bank of Lebanon). Clean Development Mechanism. Carbon Dioxide Center of Research of Solar Energy of Greece Electricité Du Liban (Lebanese Electric Utility). European Union. Global Environment Facility. Greenhouse gas German Technical Cooperation (formerly GTZ) Government of Lebanon. Industrial Research Institute. Kilo Watt = power Kilo Watt hour =energy. Lebanese Centre for Energy Conservation Lebanese Standards Institution. Lebanese Solar Energy Society. Lebanese University Mediterranean Renewable Energy Centre (Italy). Ministry of Energy and Water (of Lebanon). Mega Watt (power); Mega Watt electric Mega Watt hour (energy=1,000 KWh) National Energy Efficiency Action Plan for Lebanon National Energy Efficiency and Renewable Energy Action Solar Water Heater Tons Oil Equivalent United Nations Development Program American Dollar 4

6 Large Scale Solar Water Heater Market Development Program in Lebanon (Prepared under a World Bank-supported activity with the Lebanese Ministry of Energy and Water and the Lebanese Center for Energy Conservation) EXECUTIVE SUMMARY 1. This Report has been prepared by a World Bank team 1 working under the Lebanon Energy Efficiency Standards and Regulations for Buildings Project (P113858), which is providing support to the Lebanese Ministry of Energy and Water (MEW) and Lebanese Center for Energy Conservation (LCEC), a national energy organization for Lebanon which is affiliated to the MEW to help design and implement national level projects and programs in the areas of end-use energy conservation and renewable energy. 2 One of the activities of this World Bank-funded project was focused on solar water heaters (SWH). This SWHrelated activity was to provide support to LCEC in the following aspects: (i) Review the existing SWH standards and regulations with regard to the quality of available local manufactured systems, imported systems and installation practices and compare them with best practices; (ii) Assess the potential financial and economic benefits through the use of SWHs compared with conventional electrical heating in the context of a market where electricity prices are subsidized and a parallel large scale private-sector managed back-up generation market exists; (iii) Identify gaps in the existing standards and develop mechanisms to enforce the standards; (iv) Develop a framework for scaling up the large scale deployment of SWHs in the residential sector; and (v) Propose financial mechanisms including specific incentives and potential carbon/climate financing, and propose regulations that are appropriate to the Lebanese context, that will support the scaling up of the installation of SWHs on either a voluntary or mandatory basis. 2. The Report draws mainly from findings of a World Bank mission to Lebanon in February 2011, which met with LCEC and several other relevant stakeholders (a complete list is provided in Annex 2), and review of existing reports published by LCEC and other institutions and development partners in Lebanon. In this context, the February The World Bank team which conducted this work and prepared this Report comprises of Simon Stolp (Senior Energy Specialist and Task Team Leader, World Bank Lebanon Country Office), Ashok Sarkar (Senior Energy Specialist, World Bank, Washington DC), and Naceur Hammami (Senior Energy Efficiency and Renewable Energy Consultant, World Bank). For questions and more information, please contact Simon Stolp at <sstolp@worldbank.org> 2 LCEC supports the Government of Lebanon to develop and implement national strategies that promote the development of efficient and rational uses of energy and the wide spread application of renewable energy at the consumer level. LCEC is a financially and administratively independent body, and operates under the direct supervision of the Minister of Energy and Water. LCEC is also legally registered at the Ministry of Interior. 5

7 mission had focused mainly on further developing the understanding of the SWH sector, and examining the practical and technical issues and constraints, barriers that exist specifically in the Lebanese market, with respect to the large scale SWH market development in Lebanon. The work presented in this report also draws from international experiences with different approaches for increasing the deployment of SWHs, and the financial incentives and mechanisms used therein. The overall objective of this Report is to develop a practically implementable large scale SWH program in Lebanon, taking into account the Lebanese market context and drawing upon international best practices and adapting them accordingly The benefits of large scale installation of SWHs in Lebanon are many. First, it will help reduce consumer energy bills, which is especially important when consumers rely on expensive back-up generation (due to unreliable grid supply) and it will improve the reliability/availability of hot water supply. Second, from the utility Electricity du Liban (EDL) s perspective, large scale implementation of SWHs will reduce electricity demand and thus decrease the pressure on EDL s power system to supply. Reduced energy demand will lead to fuel savings and a reduction in electricity generation operating costs, which EDL is unable to recover from consumers due to subsidized tariffs and high technical and commercial losses (>30% average). Finally, the fuel savings from the reduction in energy demand on the grid will lead to lowered import bills and less fiscal pressure on the Government on Lebanon. 4. Under the directions of MEW, and with support from United Nations Development Program (UNDP) and other partner and stakeholders, LCEC has led the demonstration of pilot level efforts to promote the use and installation of SWHs in Lebanon over the past several years. Existing reports and studies estimate the total potential for SWH in the residential sector to be 1.6 million sq. meters (m2). 4 The Government of Lebanon through MEW, and in cooperation with the Banque du Liban (Central Bank of Lebanon, BDL) has embarked on a national energy efficiency program in 2009 to provide financial support to various measures, including a solar thermal component for households and institutions (hotels, hospitals, apartment buildings, others). The LCEC is responsible for coordinating this program with BDL, and other stakeholders including private banks, associations, the private sector and NGOs. In this context, several pilot schemes have been developed with the help of development partners from several countries such as Greece, China, Spain, and 3 The main findings of the Report are being presented to LCEC and other stakeholders at a Workshop on Energy Efficiency Study in Lebanon: Opportunities and Investments, on June 27, 2011 at World Bank Office in Beirut, Lebanon. The presentation is attached in Annex XX of this Report. 4 Source: ALMEE 6

8 international, and national organizations and institutions such as the European Union, GTZ, and ADEME, in addition to the continued support from UNDP In Lebanon a commercial market for both domestically manufactured as well as imported SWHs has developed over the years, as the uptake of SWHs have been particularly good in the case of large institutional end-users such as hospitals, hotels, etc. The SWH market has grown at the annual rate of 15%, and the total number of SWH manufacturers, importers and installers has increased from only seven in 2007 to about 70 in The Lebanese Standards Institution (LIBNOR) has elaborated mandatory energy performance standards for SWHs (mandatory standards for energy efficiency in appliances also extend to other end-use appliances such as compact fluorescent lamps). However, the overall cumulative uptake in individual residential households remains low. This is due to the relatively lower level of awareness about the benefits of SWH amongst residential consumers, the high initial cost of SWHs (average cost of US$1,300 for 200 liter SWH including installation), and the absence of substantial financial incentives available so far. To address the latter barrier, the European Union (EU)-funded incentive program, managed by LCEC through the National Energy Efficiency and Renewable Energy Action (NEEREA), set up through BDL, provides some grants and limited subsidies through two major existing financial incentive mechanisms to support the growing market for SWHs in residential households and also in the institutional sector. First is the credit at subsidized rates (interest rate: 0%), and the second scheme is a grant of US$ 200 for residential SWH installations (only for first 7,500 units) and of 15% of the capital cost for community facilities and institutions. With the existing incentive programs and EU funding of Euros 15 million, the overall target for scaling up SWH installations in the residential sector is 190,000 m2 for an estimated 50,000 households by year UNDP continues to play a important role as it provides support to the LCEC and its programs. 6. The number of residential households in Lebanon is estimated to be 1.2 million, out of which more than 70% live in high rise apartment buildings in urban areas. Only about 30% are estimated to live in individual houses in non-urban areas. The majority of residential apartment buildings in urban areas (such as in Beirut) accommodate a large number of individual households (could be up to 50 individual households in a 10-storey building) which results in a situation that, in each building, the available flat roof space required for the installation of SWHs per household is very limited. Based on the analysis and discussions with various stakeholders during the mission, the space available for SWH installations is estimated to be up to 30% of the existing flat roof area only, because of other competing needs on the roof space (for instance, parabolic antennas for television receivers, advertisement billboards, roof-top air conditioning units and other equipments, which are 5 LCEC was created in 2002 as a project financed by the Global Environment Facility (GEF) and the Lebanese Ministry of Energy Water, under the management of the United Nations Development Program (UNDP). Since then, LCEC has gradually established itself as an independent technical national center of expertise in energy efficiency and renewable energy, although it continues to be supported by UNDP, as indicated in the Memorandum of Understanding signed between MEW and UNDP on June 18,

9 also considered as valuable assets). In addition, the number of individual solar SWHs, in the existing buildings in particular, will also be constrained by the structural quality of roofs to be able to withstand extra loads and also by the orientation and height of buildings (where the roof of a lower building may be shaded by an adjacent taller building). This roof space limitation can be overcome to some extent by using high quality SWHs with much higher conversion efficiencies (due to better materials and insulation). However these are even more expensive and go beyond the existing SWH standards established by LIBNOR. 7. Taking into consideration the technical aspects and constraints, the realistic and commercial market potential for individual SWH systems in the residential sector is estimated to be 700,000 m2, for about a total of 200,000 households across Lebanon. This potential is quite significant given the energy deficit situation in a country which is a net importer of petroleum products which is used to generate electricity and meet its electricity demand. Attaining 100% saturation of this market of 700,000 m2 of SWH installation in 200,000 residential households would require an estimated investment of US$ 300 million. Much of these investments would have to be incentivized through grants and subsidies. In addition, there will be GHG emission reductions which can potentially be monetized and realized through the Clean Development Mechanism (CDM) based revenues in the global carbon finance market which, in turn, could be used as incentives to individual residential households. The estimated annual energy savings will be about 70,000 tons of oil equivalent (toe). 6 Based on an oil price of US$ 100 per barrel, the payback period for this investment is around five (5) years. 8. While on one hand, the incentives and promotion will assist to realize a maximum potential for individual residential household based SWH systems in 200,000 households, the emphasis should also be put on further promoting the implementation of collective SWH systems. The collective SWH systems could target an additional 300,000 m2 in institutional buildings, hotels, hospitals, colleges, universities, etc. Most institutional consumers such as hotels, hospitals and universities will be able to install SWHs even without much financial incentives, by using their own funds or through financial incentive programs available for large consumers through the various schemes of BDL. However, in case of the residential sector, a collective system could be more complex in terms of financing, and more in terms of implementation due to the constraints of limited roof space and rights, as well as structural challenges of existing buildings. In residential sector, collective SWH systems could be targeted for new buildings. This approach could be implemented through intermediary service provider (similar to an energy service company- ESCO) which could bundle the individual household s hot water needs and set up community or apartment buildings- level collective SWH systems to provide guaranteed hot water service to a group of individual households. This latter approach would be especially relevant for new high rise residential buildings yet to be built. 6 Which results in an estimated savings of 1.4 million toe over a 20-year period, as the minimum average life of SWHs is considered to be 20 years. 8

10 9. Based on the analysis in the Report, it is estimated that 200,000 households (700,000 m2 of SWH) and another 300,000 m2 for collective SWH systems is the practically achievable potential in Lebanon. To achieve this potential, however, efforts will be required on strengthening the implementation approach which could be led by LCEC (on behalf of MEW). Actions will be required on multiple fronts in order to tap into the enormous untapped potential for large scale SWH deployment across Lebanon. Additional financial incentives accompanied by a strong quality assurance (in line with the minimum energy performance standards of SWHs) and extensive consumer awareness program will be the keys to successfully realize this potential for SWHs in Lebanon. 10. For the program to develop a large-scale SWH market in Lebanon (referred to as the proposed program throughout the Report), which would lead to the practical realization of the large potential of 1 million m2 of SWH installation (considering for both collective SWH systems and individual residential household SWH systems) in Lebanon, several steps and a multi-pronged efforts will be required. These efforts should be implemented under the overall directions of MEW and leadership of LCEC, and with continued support from the main local stakeholders through a Technical Committee (comprising of stakeholders such as LIBNOR, BDL, IRI, ALMEE, private sector and NGOs) along with both financial and technical assistance from various development partners (such as UNDP, EU, World Bank, and bilateral donors). The actions and interventions under the proposed program, at several levels, are summarized in the following paragraphs. 7 (i) Institutional Coordination and Leadership: LCEC, as an affiliated institution to the MEW and with initial support from UNDP and the EU, has effectively initiated the efforts to systematically promote SWHs in Lebanon, with many successful pilot scale efforts. LCEC has also received support from LIBNOR in establishing minimum energy performance standards for SWHs and from BDL in designing and implementing financial incentive programs (with funding from EU, etc.). As a national energy agency under the MEW, LCEC is in an ideal position to lead and coordinate the proposed program. However, strengthening the institutional role of LCEC, with additional resources and capacity building, to help coordinate and lead the implementation of the proposed program would be critical for successful deployment of SWHs on a larger scale in Lebanon. There are many government and private sector stakeholders in the SWH sector in Lebanon, and LCEC s proposed role to lead the coordination should involve them. LCEC has to transition from its current technical advisory role limited to pilot and demonstration projects to a much bigger and proactive coordinating and implementation role, in the overall context of the large scale implementation challenges in the SWH sector. Under the proposed program, it is suggested that LCEC should continue to strengthen its active stakeholder engagement and consultations, that would lead to increased ownership of the program by all relevant entities. Financing schemes would have to be coordinated mainly by BDL along with the local commercial banks under its purview, even as funds may become available for additional 7 These actions are described in detail in various sections of the main Report. 9

11 financial incentives needed to achieve the full potential under the proposed program. As a part of this proposed program, the Project Management Unit located within LCEC could be supported through a Technical Committee, comprised of the key local stakeholders like the BDL, LIBNOR, ALMEE, IRI and with representation from the private and NGO sectors. (ii) Technical Standards and their Implementation: In addition to minimum energy performance standards for SWH developed by LIBNOR, technical specifications for high quality SWHs should be developed and made available to all stakeholders. This would help in easy understanding of the minimum quality requirements for SWHs. The establishment of a compliance system, infrastructure, and procedures for quality control, monitoring and evaluation and a control system to reduce the risk of leaks and fraud has to be established, along with the efforts. This should be accompanied by the establishment of standard and transparent procedures for the evaluation of the eligibility of products, suppliers and installers. (iii) Capacity Building and Dissemination: One of the key factors of the proposed program is to strengthen of human resources and their capacity within LCEC and amongst other key stakeholders (at strategic and operational levels) for enabling a large scale successful deployment of SWHs across various sectors in Lebanon. An assessment of the capacity building needs is required as a first step. Next step would be to add more dedicated program staff in LCEC who will be responsible for managing and implementing the proposed program, running the Project Management Unit, and for coordination with all stakeholders. Finally, the national strategy for the dissemination of SWHs to be implemented by LCEC should be shared with and supported by all relevant stakeholders. Finally, a comprehensive training program for technicians and installers and a consumer promotion and awareness program are required. The dissemination program should be not only focused on the technology and benefits, but also include information about institutional and financial mechanisms for individual and collective SWH systems. 10

12 Large Scale Solar Water Heater Market Development Program in Lebanon Main Report (Prepared under a World Bank-supported activity with the Lebanese Ministry of Energy and Water and the Lebanese Center for Energy Conservation) 1. Introduction Lebanon is a net importer of oil. Its electricity supply mainly depends on imported fossil fuels (mainly from Algeria and Kuwait): approximately 2 million tons of fuel oil and 1.2 million tons of diesel per year are imported. This represents approximately 76% of all oil imported. In 2009 the total installed electricity capacity was 2,312 MW (2038MW thermal production and 274 MW hydropower plant production) out of which only 1,875 MW were available (1685 MW thermal plants and 190 MW hydropower plants).. The electricity generation is fueled mainly by heavy fuel oil and combined cycle gas turbine units. The available generation capacity is insufficient to meet the national electricity demand which is MW in Unreliable grid based electricity supply leads to widespread power outages, resulting in load shedding, blackouts and brownouts which has in turn spurred the widespread use of back-up generators, based on diesel. These diesel generators are very inefficient and contribute to increase in imports of petroleum products, local air pollution and global green house gas emissions. The utility Electricity du Liban (EDL) is unable to recover its electricity supply costs and is running into financial losses. The recent study concluded by the World Bank 8 found that the introduction of solar water heating in residential buildings in Lebanon would have significant benefit in terms of saving on household energy demand, with corresponding benefits in Government savings on the cost of supplying electricity. That study estimated that through the use of an individual residential solar water heater (SWH), a household's total annual energy consumption can be reduced by up to 42%. The implementation of 290,000 individual residential SWHs could potentially reduce the electricity demand in Lebanon by about 100 MW, regardless of the grid's technical and commercial losses. Installation of SWHs in residential buildings is so far voluntary, and its further dissemination is hindered by the relatively low quality of SWHs available on the Lebanese market; the lack of awareness, high initial cost (US$1,300 for a 200 liter SWH system) and only limited number of financial incentives and mechanisms and the lack of effective implementation mechanisms. The Lebanon Center for Energy Conservation (LCEC) is currently leading the efforts in the area of SWHs in Lebanon, 8 World Bank: Energy Efficiency Study in Lebanon (December 2009) 11

13 including supervising the execution of two pilot projects that will install 600 SWHs provided by the Chinese Government, and a further 350 residential SWHs provided by the Greek Government, in a pilot project village. More widespread installation of SWHs will, however, have to rely on the introduction of appropriate regulation, the systematic development of a market for SWHs, and the introduction of a compliance system for standards for SWHs to ensure appropriate levels of quality control in SWH installation, accompanied by financial incentive and innovative implementation mechanisms. Over the years, LCEC has also developed potential financing mechanisms for SWHs through the Bank du Liban (Central Bank of Lebanon, BDL), with a subsidy of US$ 1.5 million from the Ministry of Energy and Water (MEW) and with the financial support of the European Union (EU), and continued technical support and grants from the United Nations Development Program (UNDP). The implementation of standards and regulations remain weak and the system needs to be strengthened. Better enforcement of norms and standards for SWHs developed by the Lebanese Standards Institution (LIBNOR), along with effective financial mechanisms can help scale up the penetration of SWHs on a large scale are necessary. In this context, it is also critical to have a robust and effective institutional structure and governance mechanism that would make the implementation of policies and programs more effective. In this context, it will also be crucial to review the organization and definition of roles and responsibilities of different stakeholders, to refine the analysis of the economic and financial impact of the solar program, to identify the capacity building needs and to develop promotion, awareness generation and information dissemination strategies. This Report is prepared on the basis of a study that was conducted by the World Bank team, 9 working under the Lebanon Energy Efficiency Standards and Regulations for Buildings Project (P113858), which is providing support to the MEW and LCEC, a national energy organization for Lebanon which is affiliated to the MEW to help design and implement national level projects and programs in the areas of end-use energy conservation and renewable energy. 10 This SWH-related activity was to provide support to LCEC in the following aspects: (i) Review the existing SWH standards and regulations with regard to the quality of available local manufactured systems, imported systems and installation practices and compare them with best practices; (ii) Assess the potential financial and economic 9 The World Bank team which conducted this work and prepared this Report comprises of Simon Stolp (Senior Energy Specialist and Task Team Leader, World Bank Lebanon Country Office), Ashok Sarkar (Senior Energy Specialist, World Bank, Washington DC), and Naceur Hammami (Senior Energy Efficiency and Renewable Energy Consultant, World Bank). For questions and more information, please contact Simon Stolp at <sstolp@worldbank.org> 10 LCEC supports the Government of Lebanon to develop and implement national strategies that promote the development of efficient and rational uses of energy and the wide spread application of renewable energy at the consumer level. LCEC is a financially and administratively independent body, and operates under the direct supervision of the Minister of Energy and Water. LCEC is also legally registered at the Ministry of Interior. 12

14 benefits through the use of SWHs compared with conventional electrical heating in the context of a market where electricity prices are subsidized and a parallel large scale privatesector managed back-up generation market exists; (iii) Identify gaps in the existing standards and develop mechanisms to enforce the standards; (iv) Develop a framework for scaling up the large scale deployment of SWHs in the residential sector; and (v) Propose financial mechanisms including specific incentives and potential carbon/climate financing, and propose regulations that are appropriate to the Lebanese context, that will support the scaling up of the installation of SWHs on either a voluntary or mandatory basis. The main findings of the Report are being presented to LCEC and other stakeholders at a Workshop on Energy Efficiency Study in Lebanon: Opportunities and Investments, on June 27, 2011 at World Bank Office in Beirut, Lebanon. The presentation is attached in Annex XX of this Report. 2. Electricity Supply and Demand Situation Lebanon is a net importer of oil, with 98% of its primary energy being imported. The total supply of primary energy was million tons oil equivalent (TOE) in 2009 with an annual average increase of primary energy demand of 3.5%. 11 The share of energy sources are as follows: 26% of gasoline, 42% of diesel and 20% of fuel oil. The remainder of energy comes from LPG, hydro power, wood energy, coal and others. Beyond biomass energy, mainly in the form of fuel wood and charcoal, the contribution of renewable energies such as solar thermal and photovoltaic, wind and hydropower to the national energy balance is limited to less than 2 % in the overall energy balance. In terms of the share of total demand for gasoline, the transport sector alone accounted for 45% gasoline demand, residential and service sector 30% and the industrial sector consumed 25% mainly in the form of diesel in The total electricity generation is 15,000 GWh, of which independent power producers generate 3000 GWh or 30% of the total electricity production, the rest being produced by EDL (12,000 GWh). The national electrification rate exceeds 98% but electricity generation only accounts for 18% of the final energy consumption. The grid-based electricity from EDL costs about 12.5 US cents per KWh to generate. However, the average electricity tariff for consumers is 9.4US cents per kwh. Due to poor reliability of supply and insufficient generation capacity of EDL, Lebanese consumers depend largely on alternative sources of electricity supply provided by independent, private sector owned small generation systems. The tariff charged by the latter is much higher, with an average of 18 US cents per kwh. Electricity billing is done in tranches of 100 KWh, the first three tranches are billed at prices still lower than the marginal cost of electricity generation. 11 Source: ALMEE Solar Energy in Lebanon. 13

15 Table 1: Electricity tariffs in Lebanon (2010) Electricity tariff (LV) Cosumption Tariff (LL/kWh) Tariff ( /kwh) (kwh/month) < > Small industry Agriculture Public Electricity tariff (MV) Industry 320 Pic demand Hotel 112 Normal Night Source: EDL(2010) The electricity generation mix of EDL in 2009 consisted of 85% from thermal power plants with the generation efficiency below 35%. Of the remaining generation by EDL, 5.1% came from hydro sources, and 4.9% and 4.3% were imported from Syria and Egypt respectively. 3. Role and Importance of Hot Water Heaters 3.1. Electrical consumption per sector The electricity generated by EDL is consumed by the following sectors: residential 29.2%, industrial 26%, commercial 8.8%, governmental 16.1%, technical losses and others 19.1% 12 Electrical consumption per sector Industrial 26% Residential 29% Governmental 17% Figure1:Electrical consumption per sector Commercial 9% Technical losses and others 19% 12 Understanding energy use in the industrial sector of Lebanon, a preliminary of the ALI/LCEC survey result

16 According to the United Nations framework Convention on Climate Change (UNFCCC), in Lebanon, the electricity consumption of the residential sector represents 30% of the total electrical energy consumption. The following figure shows the electricity consumption per end user in the residential sector Lighting (9%) Heating (30%) Water heating (21%) Refrigerator &freezers (8%) Cooling (14%) Television (3%) Cooking (2%) Others (13%) Figure 2: Electrical consumption per end user Water heating in households and in the service sector (hospitals, hotels and services) consume more than 25% of the total electricity consumed by these sectors. Based on a study by the engineering department of Saint Joseph University, 70% of residential households use electricity to heat their water, while 25% use diesel and 5% use gas, wood, solar or other sources of energy. Another study conducted by the American University of Beirut (AUB) shows that 60% of households use electric water heaters, 31% use diesel powered water heaters and 9% use natural gas, wood and solar energy (1%) to heat water. (Chedid, 2002). A more substantial urban sample covering more than 500 households indicated that 2.8% of households use solar thermal collectors for water heating, either alone or with a backup system while 82% were found to use electricity (Houri & Korfali, 2003).For a typical household, with a 200 litre water heater the yearly electricity consumption for water heating amounts to around 3,200 kwh. Residential water heating water using electricity is sub-optimal in Lebanon for several reasons: Frequent power cuts from grid based electricity from EDL cause interruptions in hot water supply The cost of producing and supplying electricity for the utility (EDL) is high (average of about 12 US cents per kwh) while the tariff recovery is low (see table on tariff). Low quality of electric water heaters with regard to insulation and hot water storage makes the water heating process highly energy inefficient; 15

17 Most of the existing electric water heaters being used in households have poor performance in terms of energy efficiency due to the following reasons: Inadequate or low quality insulation of water tanks, Absence of any system of temperature regulation to maintain water temperature (i.e. the temperature is usually above 70 C), Absence of programming to optimize electricity use during off-peak hours. Considering the fact that the useful lifetime of a standard electric water heater is quite high that is, 10 to 13 years it is necessary to find ways to improve the use of the existing electric water heating equipment, through the following means to reduce heat loss and improve energy efficiency:. A possibility for programming and limited temperature storage, adapted device distribution and implementation through professional electricians should be mandatory. Electric water heaters being sold in Lebanon should comply with high standards specifically with regard to better insulation - applicable for any kind of hot water storage The high insulated tanks are more expensive in terms of initial costs, but pays back in the long run, with the energy saved by avoided heat losses. A compulsory label/certification should be introduced to promote high quality hot water tanks. According to a study conducted by ALMEE also, the high marginal cost of electricity production through thermal generation by EDL favors SWHs. 4. Solar radiation Lebanon belongs to a geographical area with a high solar potential where the average annual number of hours of sunshine is 3000 hours with an annual average potential of kwh / m 2 and daily global radiation varying from 4 to 6 kwh/m 2. The information provided by three meteorological stations located in different regions shows that the monthly average of global horizontal radiation is hardly different in these zones while it varies significantly over the course of the year.. Table 2: Global Radiation Data for Lebanon (in Wh/m 2, 3 years means based on Lebanese Climatic Atlas) Station Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual Abde Ksara Beirut

18 Figure 3 : Climatic zones and solar radiations in Lebanon (source CEDRO Xavier Vallvé published by UNDP, report on Thermal Standards for Buildings) This solar potential should be sufficient to cover all (or at least 80%) of domestic and collective demand of hot water. The use of electricity as energy to heat water is not justifiable economically. Direct production of thermal hot water from fuel might reach >66%. With a free fuel alternative such as the sun it makes sense to support the installation of SWH, at least for economic reasons, as this will: Reduce the electricity demand and therefore decrease the need for installed capacity and/or improve day-to-day supply Reduce EDL s deficit by reducing electricity consumption This is because the cost of using solar energy for hot water heating comes an equivalent of 2.5 US cents per kwh, which is much lower compared with 12.5US cents for electric water heaters operated on grid electricity from EDL and even more expensive, if supplied by privately-operated generators. The payback period for the investment into a high quality SWH is estimated at 2.5 years when compared to electric water heating using electricity supplied by a privately-owned generator, and about 7 years when compared to electric water heating using electricity supplied by EDL. 5. Market Availability of SWH Lebanon already has experience with renewable energy and energy efficiency projects. Several studies were conducted and pilot projects undertaken for the promotion of renewable energy technologies and energy efficiency measures and devices. 17

19 To date several studies have addressed issues related to the estimation of the potential for renewable energy and energy efficiency, the energy situation, the environment and sustainable development, treatment and recovery of waste, energy and climate change, energy saving in transportation and the industry, etc.. Pilot projects mainly focused on solar photovoltaic systems, solar thermal energy, wind energy, energy efficient lighting, SWHs, and small scale hydropower. The Lebanese SWHs market grows by 15% per year since Five installers/ manufacturers/ importers were active in Lebanon in 1988, 40 in 2008 and about 83 in Table3: Market shares of solar panels in Lebanon in 2008 % Lebanon Australia China France Germany Greece Italy Turkey UK Flat plate collectors Evacuated tube collectors Source: LCEC Solar Thermal Market Survey 2010 Turkish imports (flat plate) and Chinese imports (evacuated tube) are big competitors to Lebanese manufacturers as they offer more competitive prices. A testing facility for SWHs is already operational at the IRI/LU. SWHs will have to comply with the required standards before being sold on the market. Figure 4 : Evacuated tube solar collector Figure 5 : Flat plate collector The certification /quality label for SWH devices and their installation is key success factors to avoid bad references, under performances and in worst case rip off. The list of solar thermal companies (SWH) compiled by LCEC (February 2011) is attached in Annex 1 of the present report. 6. Technical and Commercial Potential for SWHs 6.1. Solar Water Heater Technologies 18

20 Hot water heated by the sun is used in many ways. While perhaps best known in a residential setting to provide domestic hot water, solar hot water also has industrial applications, e.g. to generate electricity. Designs suitable for hot climates can be much simpler and cheaper, and can be considered an appropriate technology for these places. The global solar thermal market is dominated by China, Europe, Japan and India. In order to heat water using solar energy, a collector, often fastened to a roof or a wall facing the sun, heats working fluid that is either pumped (active system) or driven by natural convection (passive system) through it. The collector could be made of a simple glass topped insulated box with a flat solar absorber made of sheet metal attached to copper pipes and painted black, or a set of metal tubes surrounded by an evacuated (near vacuum) glass cylinder. Heat is stored in a hot water storage tank. The volume of this tank needs to be larger with solar heating systems in order to allow for bad weather, and because the optimum final temperature for the solar collector is lower than a typical immersion or combustion heater. The heat transfer fluid (HTF) for the absorber may be the hot water from the tank, but more commonly (at least in active systems) is a separate loop of fluid containing anti-freeze and a corrosion inhibitor which delivers heat to the tank through a heat exchanger (commonly a coil of copper tubing within the tank). Residential solar thermal installations fall into two groups: passive (sometimes called "compact") and active (sometimes called "pumped") systems. Both typically include an auxiliary energy source (electric heating element or connection to a gas or fuel oil central heating system) that is activated when the water in the tank falls below a minimum temperature setting such as 55 C. Hence, hot water is always available. Therefore, solar water heating for washing and bathing is often a better application than central heating because supply and demand are better matched. In many climates, a solar hot water system can provide up to 85% of domestic hot water energy Types of Solar Water Heating Systems Solar Water Heating systems have been used around the world for a long time. However, technologies have evolved as the designs have gone through technical innovations in several different countries. SWH have been used widely in Greece, Turkey, Tunisia, Australia, Japan, Austria and China Direct and indirect systems a) Direct ('open loop') passive systems use water from the main household water supply to circulate between the collector and the storage tank. When the water in the collector becomes warm, convection causes it to rise and flow towards the water storage 19

21 tank. They are often not suitable for cold climates since, at night, the water in the collector can freeze and damage the panels. Direct systems: (A) Passive CHS system with tank above collector. (B) Active system with pump and controller driven by a photovoltaic panel In a "close-coupled" SWH system design, the water storage tank is horizontally fixed just above the solar collectors on the roof. No pumping is required as the hot water naturally rises into the tank through thermosiphon flow. Principle of operation: 1. Hot water outlet., 2. Hot water storage (Boiler). 3. Entry of water heated in the boiler. 4. Solar panel 5. Cold water inlet In a "pump-circulated" system the storage tank is fixed on the ground below the level of the collectors. A circulating pump moves water between the tank and the collectors. b) Indirect ('closed loop') passive systems use a non-toxic antifreeze heat transfer fluid (HTF) in the collector. When this fluid is heated, convection causes it to flow to the tank where a passive heat exchanger transfers the heat of the HTF to the water in the tank. SWH systems are typically designed to deliver a maximum amount of hot water throughout the year. However, in winter weather, when temperatures fall below 30 deg. C, solar insulation may not always be sufficient to deliver enough hot water. Then a gas-powered or electric booster is used as a back-up system to provide the required hot water supply. 20

22 Indirect active systems: (C) Indirect system with heat exchanger in tank; (D) Drain back system with drain back reservoir. In these schematics the controller and pump are driven by mains electricity Passive and Active Systems a) Passive systems rely on heat-driven convection or heat pipes to circulate water or heating fluid in the system. Passive solar water heating systems cost less and have extremely low or no maintenance, but the efficiency of a passive system is significantly lower than that of an active system, and overheating and freezing are major concerns. b) Active systems use one or more pumps to circulate water and/or heating fluid in the system. Though slightly more expensive, active systems offer several advantages: The storage tank can be situated lower than the collectors, allowing increased freedom in system design and allowing pre-existing storage tanks to be used. The storage tank can always be hidden from view. The storage tank can be placed in conditioned or semi-conditioned space, reducing heat loss. Drain back tanks can be used. Superior efficiency. Increased control over the system. Modern active solar water systems have electronic controllers that offer a wide-range of functionality, such as the modification of settings that control the system, interaction with a backup electric or gas-driven water heater, calculation and logging of the energy saved by a SHW system, safety functions, remote access, and various informative displays, such as temperature readings. 21

23 Passive Direct Systems: ICS and CHS a) An Integrated Collector Storage (ICS or Batch Heater) system uses a tank that acts as both storage and solar collector. Batch heaters are basically thin rectilinear tanks with a glass side, facing south. They are simple and less costly than plate and tube collectors, but they sometimes require extra bracing if installed on a roof (since they are heavy when filled with water suffer from significant heat loss at night since the side facing the sun is largely uninsulated, and are only suitable in moderate climates. An integrated collector storage (ICS) system b) A Convection Heat Storage unit (CHS) system is similar to an ICS system, except the storage tank and collector are physically separated and transfer between the two is driven by convection. CHS systems typically use standard flat-plate type or evacuated tube collectors, and the storage tank must be located above the collectors for convection to work properly. The main benefit of a CHS systems over an ICS system is that heat loss is largely avoided since (1) the storage tank can be better insulated, and (2) since the panels are location below the storage tank, heat loss in the panels will not cause convection, as the cold water will prefer to stay at the lowest part of the system Active Indirect Systems: Drain back and Antifreeze a) Pressurized antifreeze or pressurized glycol systems use a mix of antifreeze (almost always non-toxic propylene glycol) and water mix for HTF in order to prevent freeze damage. Though effective at preventing freeze damage, antifreeze systems have many drawbacks: If the HTF gets too hot (for example, when the homeowner is on vacation,) the glycol degrades into acid. After degradation, the glycol not only fails to provide freeze protection, but also begins to eat away at the solar loop's components: the collectors, the pipes, the pump, etc. Due to the acid and excessive heat, the longevity of parts within the solar loop is greatly reduced. 22

24 Most do not feature drainback tanks, so the system must circulate the HTF -- regardless of the temperature of the storage tank -- in order to prevent the HTF from degrading. Excessive temperatures in the tank cause increased scale and sediment build-up, possible severe burns if a tempering valve is not installed, and, if a water heater is being used for storage, possible failure of the water heater's thermostat. The glycol/water HTF must be replaced every 3-8 years, depending on the temperatures it has experienced. Some jurisdictions require double-walled heat exchangers even though propylene glycol is non-toxic. Even though the HTF contains glycol to prevent freezing, it will still circulate hot water from the storage tank into the collectors at low temperatures (e.g. below 40 degrees Fahrenheit), causing substantial heat loss. b) A drain back system is an indirect active system where the HTF (almost always pure water) circulates through the collector, being driven by a pump. The collector piping is not pressurized and includes an open drain back reservoir that is contained in conditioned or semi-conditioned space. If the pump is switched off, the HTF drains into the drainback reservoir and none remains in the collector. Since the system relies upon being able to drain properly, all piping above the drain back tank, including the collectors, must slope downward in the direction of the drain back tank. Installed properly, the collector cannot be damaged by freezing or overheating. Drain back systems require no maintenance other than the replacement of failed system components Residential and tertiary Sectors. The number of households in Lebanon is estimated at 1.2 million out of which over 70% live in apartment buildings, mostly in big and small cities, and about 30% live in detached houses, in particular in rural areas of the country. The majority of apartment buildings have flat roofs, but most of the roof space is occupied by other equipment like satellite dishes, billboards, air conditioning units, etc.. Given these space limitations and competing uses, it is estimated that the available space to accommodate installation of SWHs is only 20% to 30% of the total roof surface. Furthermore, the number of individual SWHs that can potentially be installed is also limited by the quality, structural strength, and durability of roofs to withstand the additional weight of the water tank for SWHs. Taking into consideration structure and modalities of residential housing sector in Lebanon, the potential market for SWHs for the residential sector is estimated to be around 700,000 m2 13, or about 200,000 households 14. This translates into a saving of electricity of 576 GWh per year required for hot water heating. This potential is relatively high given the energy 13 Based on SWH (200 l model) with collector area m 2 /SWH and SWH (300 l model) with m 2 /SWH. 14 Base on the available technical potential is 20 to 30% of the total roof surface or of the total number of households 23

25 situation of the country as a net importer of oil to produce electricity. Switching to solar water heating could not only enhance Lebanon s energy security but also reduce the GHG emissions from the electricity sector and local air pollution, in addition to monetary savings for the consumers in the long run.. 7. Assessment of Resources for Local Manufacture, Imports, Costs and Installation Practices for SWHs Although SWHs are currently available in limited quantities and are being used by less than 5% of the consumers, the market has evolved over the years. However, the widespread penetration of SWHs faces many barriers. LCEC and MEW have institutionalized programs for promoting the use of SWHs in Lebanon with some success. However, in addition to the scope for strengthening effective implementation of standards and regulations (issued by IRI) for maintaining the quality of SWHs in the Lebanese market, there is a room for improving the institutional framework and governance mechanism, and expand the financial incentives program of BDL and LCEC. Many pilot projects have been implemented for demonstrating the usefulness and impact of solar water heating, but most use imported SWHs with not buildup of local capacity. In addition, several consumer awareness campaigns have been conducted by LCEC and MEW. These need to be continued to provide more consumer awareness and information campaigns for consumers, and training and capacity building opportunities for SWH system installers and other industry stakeholders. In addition to the pilot programs based on grants, a limited number of SWHs have been sold to few relatively affluent customers. In Lebanon, several providers exist for SWHs. However, for most of these suppliers and distributors, selling SWHs is not the core business but just one of the several areas of focus. These entities depend entirely on imported stocks of SWHs with no local manufacturing. As a result, there is also little emphasis on high quality installation and after-sales servicing and maintenance. Annex1 provides a list of suppliers of SWHs. The proposed Large Scale Solar Water Heater Market Development Program (referred to as the Program hereinafter) therefore suggests emphasis on the propagation and deployment of high quality, locally manufactured or imported and well installed solar equipment that comply with standards. This will require a multi-pronged effort relying on technical assistance, certification of local suppliers and installers, accompanied by a comprehensive consumer awareness campaign. The development of a large market for SWHs in Lebanon would be strongly dependent on the success of these activities and the regulatory actions and efforts described in this document. 8. LCEC s and Other Donor Funded Initiatives in the Area of SWHs Even though there are barriers to the market development for residential SWHs on a large scale in Lebanon, the realization of the potential is critical for reducing energy costs to consumers, enhancing Lebanon s energy security by reducing its dependence on imported fossil fuels, and reducing its contribution to greenhouse gas emissions. 24

26 The Government of Lebanon through the Ministry of Energy and Water and the Central Bank of Lebanon has undertaken since 2009, a national energy efficiency program that includes a solar thermal component for households and institutions (hotels, hospitals, apartment buildings, others). The LCEC is responsible for coordinating this program, along with other stakeholders such as domestic private banks, associations, private sector firms and NGOs. In this context, several pilot schemes have been developed in the context of cooperation with several countries such as Greece, China, Spain and international and national organizations such as, the European Union, UNDP, GIZ, ADEME, etc. In 2010, the LCEC launched an initiative to develop a SWH market in Lebanon with UNDP- GEF support, with ambitious goals. Lebanon is one of the six countries supported by the GEF program called Global solar water heater market transformation and strengthening initiative which targets 1,050,000 m² of SWH by 2020 in Lebanon, i.e. 867,000 MWh electrical energy saved per year, which would have been generated through fossil fuels and resulting in 2,600,000 tons CO2 emissions avoided. Under this GEF effort, the Government s goal is to deploy SWHs in the majority of buildings, supported by two main activities, to be promoted by LCEC: Improvement and development of new minimum energy performance standards, and system of energy efficiency labels for solar hot water heaters. Introduction of appropriate financing mechanism(s) to support the installation of SWH through NEEREA. The National Energy Efficiency and Renewable Energy Action (NEEREA) is a national vehicle/mechanism/platform built on Circular 236 of the Central Bank of Lebanon (BdL) issued on November 25, NEEREA is dedicated to support the financing of energy efficiency and renewable energy projects all over Lebanon and aims at the effective implementation of these projects by Lebanese commercial banks through offering both financial and technical support. The United Nations Development Program (UNDP), in cooperation with the BDL and the European Union Fund, through the NEEREA offers interest-free long-term loans to energy efficiency and renewable energy projects with full risk guarantee. Under the direct guidance of the MEW and the BDL, the development of the new financing mechanisms for SWHs and the NEEREA has been conducted This mechanism is a brand name for the circular n 236 with a main slogan: Finance your energy efficiency renewable energy or green building project through Lebanese banks with 0% interest rate and a repayment period of 5 years. LCEC believes that NEEREA will leverage investments of around 100 Million USD in the coming 5 years, resulting in: - Direct money savings to the energy bill of beneficiaries (plants, facilities, houses) - Direct money savings to the EDL, national treasury - Direct environmental benefits to Lebanon - Creation of new jobs in the business 25

27 - Creation of a national momentum in a new market (positive economic activity) NEEREA Beneficiaries are: houses, residential building, hospitals, hotels, commercial office, mall and industrial plant. Systems: Energy efficiency: (lighting, motors, heating, cooling,) and Renewable energy (solar, wind, hydro, geothermal). The specific milestones accomplished and proposed steps under the National Energy Efficiency Action Plan (NEEAP) include promotion of SWHs. The accomplishments and plans are as follows: UNDP and LCEC have conducted an assessment of the use of SWHs and analyzed the market performance. The UNDP, in cooperation with the Central Bank of Lebanon and the European Union Fund, the NEEREA have offered interest-free long-term loans to energy efficiency and renewable energy projects with full risk guarantee. 400 SWHs distributed through a pilot project in SWHs installed in beginning of Subsidies provided for 7,500 SWHs of US$200 each, with a total subsidy financing of US$1.5 million. Provision made available of 0% interest rate 5-year loans for purchase and installation of SWHs, with a total funding of US$ 20 Million available. A testing facility for SWHs established, in cooperation with the Industrial Research Institute (IRI). The testing facility is already operational from the beginning of Market survey conducted on the use and barriers for use of SWHs to support the market transformation in the country by the beginning in Establishment of a web-based information clearinghouse for solar water heating, That will be updated regularly to become a central reference. Launch of a nationwide awareness campaign based on A solar heater for each household initiative. Awareness campaigns and promotion campaigns to educate consumers and dealers. Organization of a SWHs trade seminar by the end Provision of technical support to SWH manufacturers and suppliers to improve their product quality in Coordination with the Ministry of Finance for the implementation of financial incentives for the import of SWHs by mid Submission of the draft law incorporated into the building code to the Government of Lebanon (Adoption targeted by 2012). Promotion of solar water heating systems for collective use and water heating in big facilities. 26

28 9. SWH Standards in Lebanon The Lebanese Standards Institution (LIBNOR) adopted European standards that are already approved by the European Committee for Standardization for solar systems: a. Solar Energy Vocabulary: BS EN ISO Solar Vocabulary.pdf b. Thermal Solar Systems and components- Custom built systems Part1: General requirements: DD ENV Thermal solar systems and components Custom Built Systems 1.pdf c. Thermal Solar Systems and components- Custom built systems Part2: Test methods : DD ENV Thermal solar systems and components Custom Built Systems 2.pdf d. Thermal Solar Systems and components- Custom built systems Part3: Performance characterization of stores for solar heating systems: DD ENV Thermal solar systems and components Custom Built Systems 3.pdf 10. Implementation Mechanisms for SWH Standards and Associated Regulatory Approaches to Strengthen Compliance LIBNOR is responsible for the formulation of standards for the SWHs. However, the effective implementation of these standards will require systems and infrastructure in place with capacity building and training of various participating stakeholders. : 1. Lebanese standardization of solar equipment; 2. Qualified human resources to ensure application of and compliance with the standards; 3. A specialized laboratory for testing and verifying the technical specifications of the equipment; 4. Technical specifications and design parameters that are in accordance with the minimum program requirements laid out in the standards. These technical specifications should be available within the management unit of the Program in LCEC and shall include Technical Specifications and criteria for eligibility of solar collectors and SWH under the Program and a technical file for Solar Collectors and SWH. 11. Review of Financial Incentives available for SWHs in the Lebanese Market 27

29 Among the 14 actions listed in NEEAP to improve and promote energy efficiency and renewable energies, one of the initiative focuses on SWHs for Buildings and Institutions. Two major financial mechanisms are put in place by the Central Bank of Lebanon to support the growing market for SWHs in households and in the institutional sector, to be implemented in coordination with the domestic private sector banks. First one is a program of providing credit at subsidized rate (rate: 0%) for the purchase of individual and collective SWH systems the second initiative is for a grant of US$ 200 per individual SWHs. This subsidy is limited to 7,500 SWH units. The SWH program for the residential sector aims at the installation of 190,000 m2 by This program is jointly managed by LCEC, BDL, private banks, suppliers of SWHs and consumers. UNDP and EU funding is available (15 million Euro) at the BDL to finance energy efficiency projects. The collective solar installations are eligible for this funding. The Intermediate Circular No 236 sent by the Governor of the Bank of Lebanon to other banks about the decision No 10572, of November 25, 2010 relating to the amendment of the basic Decision No 7835, of June 2, 2001 (statutory reserve) attached to the basic Circular No 84. Copy of Intermediate Circular No 236 (Annex2). 12. Proposed Programmatic Framework for Large Scale Deployment of Individual SWH systems in the Residential Sector Short-term and Long-term goals As discussed in earlier sections of this Report, given the roof space limitations and competing uses, it is estimated that the available space to accommodate installation of SWHs is only 20% to 30% of the total roof surface in the case of residential sector. Furthermore, the number of individual SWHs that can potentially be installed is also limited by the quality, structural strength, and durability of roofs to withstand the additional weight of the water tank for SWHs Phase 1 Program ( ) for Short term Goals The objective of the proposed Program is to enable the widespread deployment of high quality SWHs in the residential and institutional sector (hotels, hospitals, schools, etc) of Lebanon. The program will be implemented in two phases. Phase 1 will adopt an approach driven primarily by financial incentives that relies on grant and credit schemes and which would enable the consumers to purchase and install solar water heating systems for households and the institutions (hotels, hospitals, schools etc). The Phase 1 initiative will also include the strengthening of standards for SWHs and establishment of implementation mechanisms required for quality control procedures to ensure the availability of high quality SWHs in Lebanese market which would foster and promote trust between the equipment suppliers and consumers. 28

30 The Phase 1 of the proposed Program will support the long-term development of the SWH sector in Lebanon in a sustainable manner through: a) The establishment of appropriate financing mechanisms for the sustainable development of SWHs; b) Market Promotion of SWHs through local commercial banks ; c) Encouraging financial institutions to support operators in the sector (suppliers, manufacturers, installers, importers, etc.), d) The establishment of a monitoring and evaluation system e) The establishment of a compliance mechanism for adherence to minimum technical requirements to ensure the quality of products on the market, as per the standards established by LIBNOR. It is expected that by the end of Phase 1, SWHs market transformation would have taken place. Phase 2 will be market-driven wherein a larger number of high quality SWHs will be deployed by consumers on their own. The Phase 1 of the proposed Program is targeted to achieve the deployment of 190,000 m 2 of SWH in the residential sector by This program is expected to produce primary energy savings of 19,000 of TOE per year (or 220,000MWh /year). Figure 1 illustrates the gradual deployment of SWHs during the period By the end of the Phase 1 program period, that is, by 2014, a total of 190,000 m2 would be installed Figure 6: Projected progress of the Program- Phase 1 ( ) Num of Households Total m2 installed Primary Energy Saved per year (TOE) Cumulated primary energy saved(toe) Phase 2 Program ( ) for Long term Goals As discussed earlier in the Report, out of the total number of 1.2 million households in Lebanon of which 70% live in apartment buildings, only 20 to 30% of the roof space is 29

31 estimated to be available for the installation of SWHs. This accounts to about 700,000 m2 of SWH, which could serve the hot water needs of about 200,000 individual households. The associated annual energy savings are estimated to be 70,000 TOE. As shown in Figure 7, the deployment of about 500,000 m2 of SWHs is expected to be rolled out between 2015 and By the end of 2020, cumulative energy savings is estimated to be 489,240 TOE. Considering the average useful lifetime of the SWHs, the energy savings is estimated to be 1.4 million toe during the lifetime of the equipment. Figure 7: Potential of SWH installed (m2) and energy saved (TOE): (a) SWH installed (m 2 ) Num of Households Total m2 installed (b) Potential of energy saved per year (TOE) Total m2 installed Primary Energy Saved per year (TOE) (c) Cumulated primary energy saved ( ) 30

32 Cumulated primary energy saved (TOE) Cumulated primary energy saved(toe) The environmental impact of this program is significant, it could exceed 1.5 million tons of CO2 avoided cumulative over Figure8: Environmental Impacts of the Program Tons of CO2 avoided/year Tons of CO2 avoided/year

33 12.2 Conditions of Eligibility of Suppliers, Installers and Products The key success elements of the sustainability of the proposed Program are the quality of the SWHs, and various stakeholders ranging from equipment suppliers to installers to inspectors have specific roles to play. To ensure that the quality of SWHs is high the following provisions are proposed to be incorporated into the Phase 1 of the program. To be eligible for the proposed Program, all transactions must involve products and participants that are previously approved by the program, and must be conducted by participating operators that are also pre-approved. Eligible Products: To be eligible, the products must appear on the list of certified products previously approved by the program. Eligible products are solar collectors and unitary systems of heating hot water. These products must meet the provisions of the "specifications on the eligibility of products" which will be consistent with the minimum energy performance standards established by LIBNOR. Eligible Operators: Suppliers of SWHs must meet the stipulations of the "specifications on the eligibility of suppliers to the proposed Program to supply the SWHs to the individual residential households. The eligible operators will also be able to obtain the available financial incentives, on behalf of the residential households. These participating suppliers can be local or foreign manufacturers, or assemblers or distributors, with offices established in Lebanon (under national laws and procedures) or have authorized national representatives in case of imported products. Installers of individual and collective systems. Installers must meet the provisions of the "specifications on the eligibility of installers. Supervisors and technical controllers for collective solar systems must meet the provisions of "specifications on the eligibility of supervisors and technical inspectors. The eligibility criteria for the suppliers, installers and products is described in Annex Supporting Financial Incentives and Innovative Mechanisms In order to encourage the uptake of SWHs in Lebanon, the Government has already implemented several recommendations that provides financial incentives for the development of this sector. These include: the removal of import tax and customs duties for solar technologies and the establishment of financing mechanisms to support the adoption of new technologies. The latter was described briefly in an earlier section of this report. The proposed Program aims to further remove barriers to the development of a SWH market such as its high initial costs compared to electric and gas water heaters and the long (and potentially 32

34 unattractive) payback periods for such investments. The financing mechanisms in proposed program phase 1 will support all eligible beneficiaries in the target sectors intending to purchase and deploy SWHs. The realization of the total estimated potential of 700,000 m2 for SWH installation by 2020 (Phase 1 and 2) requires an estimated total investment of $ 300 million. The total energy savings are estimated at about 70,000 tons of oil equivalent (toe) per year or 1.4 million toe during the lifetime of the equipment. Based on a price of $ 100 $ US per barrel, the payback of investment is around 5 years. The phase 1 of the proposed program which targets 200,000 m2 of solar water heating, will be supported partly by financial incentives already in existence such as through the NEEREA and BDL. As a part of NEEREA, dedicated funds of US$1.5 M has been mobilized by the GoL, to be added to US$3 M from other donors to promote the installation of 190,000 m² SWHs by 2014 (50,000 m²/year). Based on the request of the Ministry of Energy and Water, the Government of Lebanon committed to invest 1.5 million USD to implement a financing mechanism to subsidize residential SWHs and offer no-interest loans (Council of Ministers decision No. 59, on March 10, 2010). The specific financing mechanism includes a grant of USD 200 per SWH installation combined with a 5-year tenured, zero interest loan. This loan is distributed by four participating commercial banks under the auspices of the BDL. The private sector commercial bank is a free access one and half time the amount of equity borrowed to the customers. The US$200 grant is given as a deduction of the last reimbursement. The MEW, in cooperation with the Central Bank of Lebanon, offers to the concerned bank a grant of US$ provided that the supplier is among the eligible companies specialized in selling and installing solar water heating systems and approved by LCEC. In return, the statutory reserve of any participating private sector bank is reduced by 150% of the balances of loans granted to finance the purchasing of solar water heating systems, provided that the interest equals 0% and that the overall purchasing value is settled in monthly installments extending over five years. 15 The consumer awareness campaign about this financial incentive program includes advertisement through media (TV spots, newspapers, etc.), and through billboards and posters in/on public transportation (buses) and was co-financed by several participating local private sector banks such as Fransa Bank, Banque Libano-Francaise and Credit Libanais. 16 Three new banks have joined the program recently, to use the new financing mechanism. These are Banque Audi, Byblos Bank and Intercontinental Bank of Lebanon (IBL). 15 Refer article n 18 of Intermediate Circular No 236 Addressed by la Banque De Liban to Banks Attached is a copy of Intermediate Decision No 10572, of November 25, 2010 relating to the amendment of Basic Decision No 7835, of June 2, 2001 (statutory reserve) attached to Basic Circular No 84.) 16 Fransa Bank and Banque Libano-Francaise took immediate advantage of the newly developed mechanism while Credit Libanais has not offered it so far. 33

35 LCEC has developed a list of eligible SWHs, and any customers is eligible to participate in this financial incenetive program and apply for a grant as long as the SWH model to be installed is certified and labeled by LCEC (cf. Solar Water Heaters report). Since its launch by the LCEC in 2010, the operation US$ 200 grant subsidy scheme has been quite successful. As of 31 January 2011, more than 2,000 candidates applied at commercial banks to benefit from this financial incentive scheme Mechanics of the BDL/ NEEREA Financial Incentive Scheme The financial incentive systems supported by NEEREA through BDL are based around two types of mechanisms tailored to different category of consumers, which intend to purchase and install SWHs: 1. For individual SWHs A grant of U.S. $ 200 for the 7,500 first individual SWHs installed (total funds corresponds to US$ 1.5 M). A credit for 80% of the SWH value with an interest rate of 0%, and 5-years loan tenure, to end use customers. 2. For collective solar water heating facilities in buildings, hospitals, hotels, schools, etc. The BDL, with support from the European Union, offers a grant through participating banks to subsidize the loans to end-use consumers, for projects with value of loan not exceeding LBP 1.5 billion (equivalent of US$ 1 million). This grant is targeted to finance small and medium-enterprises to support environmentally-friendly projects in the energy sector (including large collective solar water systems), the maturity of which shall not exceed ten years, along the following lines: 15% of the value of the loan granted to non-productive sectors, whose interest rates are not subsidized by the Lebanese State. 5% of the value of the loan granted to productive sectors, whose interest rates are subsidized by the Lebanese State. The Central Bank of Lebanon benchmarks, upon request, the value of the grant for the concerned project following the technical investigation of the project performed by a specialized institution, in coordination with LCEC in case of energy efficiency projects. The grant amounts allocated to the project are disbursed through the participating bank, the provider of the loan, upon a request submitted following the completion of the works 34

36 pertaining to saving energy, renewable energy, and green buildings, etc., and based on documents proving the good execution of these works Institutional Coordination and Management for the Implementation of the SWH Scale Up Programs The first phase of the proposed program is scheduled to last for four years ( ). During this period, the program will be supported by BDL through their participation in financing the subsidy to end users for the purchase of SWHs, as described above. At the institutional level the program involves the participation of all relevant actors, such as: Role of Ministry of Energy and Water Ministry of Energy and Water: which is in charge of the national policy development and formulating strategies for the energy sector. Its role in the proposed Program will mainly be to provide overall directions, and support at the national and international level, in order to ensure that all economic, social and environmental objectives are met Role of Lebanese Center for Energy Conservation The LCEC is the central and lead stakeholder in the proposed program, with overall coordination responsibility of its design, implementation, monitoring and evaluation. In this context, LCEC has a much broader role to play in terms of a national-level agency, whose mandate shall be to implement the Government s policy and facilitate its implementation with regard to energy efficiency and renewable energy sources through the study, design, promotion and coordination of programs, including the proposed program. As part of the broad-based mandate, the LCEC shall have the responsibility to: (i) (ii) Coordinate all programs aimed to promote and exploit energy resources in the country (conventional energy, renewable energy sources, substitute energy sources, energy saving equipment, etc); Conduct studies on energy supply and demand, evaluation and programming of actions for energy harnessing (rational use of energy and new and renewable energy sources) and more generally any studies in line with its mandate; 17 Participating private sector banks in this scheme shall obtain the consent of the BDL over any amendment of the loan, the value of which exceeds LBP 30 million (equivalent of US$20,000), granted to the financing of environmentally friendly projects, of the maturity, the ceiling, the currency or the settlement table of loan. They shall also notify the BDL of any other amendments on the loan. 35

37 (iii) Promote and implement projects to demonstrate innovative techniques and processes in the area of energy, rational use of energy, new and renewable energy sources for central administration, local public communities or others; (iv) Promote training actions in the area of energy, rational use of energy, new and renewable energy sources; (v) Organize sensitization campaigns for consumers of energy in all its forms; (vi) Contribute to technical and scientific development in the area of rational use of energy, renewable and substitute energy sources; (vii) Collaborate with relevant national organizations to set up standards of energy efficiency for equipments and materials using energy as well as products contributing to energy saving; (viii) Identify investment projects requiring profit and incentive measures granted by Government and aimed at developing the energy sector, rational use of energy, use of renewable and substitute energy sources prior to their use; (ix) Make proposals to the supervising Ministry on policies relating to rational use of energy sources, use of renewable and substitute energy sources; (x) Centralize and disseminate data and information on production, processing, distribution and energy consumption through: design, orientation and coordination of works relating to collection of statistical data on production, processing, distribution and consumption of energy; Role of Project Management Unit within LCEC In the proposed program, a dedicated Project Management Unit will be in charge of managing and coordinating the program. It will be established within LCEC, and with endorsement from the MEW, will provide the interface between the different actors involved in this program. This Unit will also facilitate and supervise the proposed program s progress. The major activities to be implemented by this Unit are detailed below. (i) Providing necessary inputs and support to all stakeholders represented in the Technical Committee for its smooth functioning, including the Committee s help to the Project Management Unit within LCEC to review of applications submitted by suppliers and installers to become associated with the proposed program and work 36

38 under the initiative. It is anticipated that the Chairman of the Committee will oversee the proposed Program Management Unit in LCEC. The Committee will be responsible for ensuring all approved suppliers and installers are compliant with the standards required by the proposed program. 18 (ii) Planning activities related to achieving optimal performance of the program, including facilitation of the program within government through awareness raising, training of installers and information exchange between all stakeholders of the program (iii) Organizing training for installers and technicians for maintenance of the installed systems and developing a promotion and awareness campaign for the proposed program and SWH technology to increase consumer awareness. (iv) Maintaining complete records of all grant applications submitted by suppliers including type of system, products used and type of grant applied for. (v) Monitoring and evaluation of the program progress. (vi) Management of disputes due to non compliance with the technical specifications, granting certificates of eligibility to suppliers, installers and products. (vii) The establishment of a real time computer system to manage the grants to providers and the collection of funds from customers, ensuring their transfer to suppliers within the proposed program. (viii) Forwarding information about SWH customers (name, meter number, address, other references) to the relevant suppliers. Holding regular meetings with stakeholders on the assessment of the progress of the solar program. (ix) Developing proposals and requests for funding in cooperation with the Ministry of Finance to be submitted to donors and development partners Role of BDL through commercial banks (i) To award grants and loans to suppliers and recover loans made to customers through the commercial, private sector banks; (ii) To be represented in the Technical Committee for granting licenses to suppliers and installers, monitoring the status of program development Role of Others stakeholders (LIBNOR, IRI, LSES, GBC, ALMEE, NGOs) 18 The Committee may invite any other institution to provide support to the work. 37

39 The other stakeholders will support the proposed program in many ways. (i) To contribute for the development of proposed program (ii) To provide training and information to staff involved in this program, (iii) To provide suppliers with necessary information about technology, standards, clients (customers), Role of Suppliers of SWHs: manufacturers, importers with networks of installers In addition to these stakeholders there are numerous additional stakeholders who will be involved in the program including banks, consulting firms and consulting engineers, Role of Clients: Are households or consumers (hotels, hospitals,..) who are eligible for the proposed program. Figure 9: Institutional structure of management of the proposed program MEW LCEC Technical Committee BDL +Banks Grant Eligibilities Suppliers Installers Product Others specific dossiers Management of the Program Studies Planning Approval Capacity building Promotion M&E Others 38

40 12.5. Financial and Economic Analysis: Economic rate of return of SWH As shown below in Table 1, the average prices of SWHs with a capacity of 200 liters and 300 liters are $ 1,200 and $ 1,800 respectively. Without the subsidies, the payback period for the acquisition of a SWH (in place of conventional electric water heater) remains high, with payback period of 6.75 years for 200 liters model and 5 years for 300 liters. This is due to the high cost of primary energy saved in Lebanon. Using the funding mechanism (credit + subsidy) through the BDL scheme with participating local banks, the payback periods are estimated to be approximately 5.6 years for the 200 liters and 4.5 years for 300 liters SWH models. This is bound to attract customers to join the program and install their own SWHs. Two ways to calculate SWH economic rate of return. a. Based on primary energy saved (tons of oil equivalent) and the international price per barrel Table 4 : Economic rate of return calculation SWH(200 L) SWH(300 L) Cost ($) Area (m2) Energy Saving per m2/year (TOE) Energy Saving per SWH (TOE/year ) Cost of TOE(based on barrel cost 100$ ) Cost of quantity of energy saved (TOE) per year ($) Payback period (Years) Cost with subsidy ( 200$/SWH for 7500 first SWH sold) Payback period with subsidy(year) b. The substitution of electricity as compared with an electric water heater and based on the price of local kwh (Lebanon) Average solar radiation: 5 kwh/m 2 /day Annual solar radiation: 1825 kwh/ m 2 /year Family (2 to 3 persons) needs of hot water: 200 l/day Efficiency of SWH: 40% Energy production of SWH: 730 kwh/ m 2 /year SWH area (200 l model): 2.4 m 2 Final energy production of SWH (200l): 1752 kwh/ year Primary energy substituted (Electric water heater η=90%): 1946 kwh Cost of energy saved (substituted): 1946 kwh *0.094$= 183 $/year Payback period: 1200 $/183$/year= 6.6 years 39

41 Cost of Proposed Program (Phase 1: ) The National Energy Efficiency Action Plan intends to improve and promote energy efficiency and renewable energies over a period of four years. One of the initiatives of this Plan aims at promoting the use of SWHs, mainly in the residential sector, with the aim to facilitate the installation of 190,000 m2 of solar collectors by The number of households benefiting from this program is estimated to be 52,000 or 25% of the estimated potential market. The total number of SWHs to be installed during this period is estimated at 52,000 units. It is estimated that the size (capacity) of SWH units will be split evenly between the two standard sizes: 200 liters and 300 liters capacity. Figure 10: economic impact of phase Num of Households Total m2 installed Primary Energy Saved per year (TOE) Cumulated primary energy saved(toe) The SWH units will be deployed in a phased manner over the Phase 1 period, with 52,000 households. 40

42 Table 5: Cost of the Proposed Program (US$,000) Year Total (2015) Number of Households Number of SWH ( Average m2/swh based on 50% of SWH 200 L and 50% SWH 300 L) 3,6 3,6 3,6 3,6 3,6 Total m2 installed Final Energy saved MWh/m2/year 0,55 0,55 0,55 0,55 0,55 MWh saved Cumulated saved MWh Primary energy saved: TOE/m 2 /year 0,15 0,15 0,15 0,15 0,15 Primary Energy Saved per year (TOE) Cumulated primary energy saved(toe) Average cost of SWH 1000 $US 1,5 1,5 1,5 1,5 1,5 Investment 1000 US $ Cost of TOE 1000 $ 0,73 0,73 0,73 0,73 0,73 Cost of cumulated Energy Saving 1000$ , , , Financing Scheme of the Proposed Program Benefits to Consumers and Utility Based on an the average estimated cost of $1200 and $1800 respectively per installed 200 liter or 300 liter SWH respectively, the investment required to implement the proposed program over 4 years is estimated at US$78 million, including the budget for providing loans to the beneficiaries of approximately US$ 62.4 million, as described below. The cumulative primary energy savings during this period is estimated at 37,260 TOE, and the cumulated final energy savings is 136,620 MWh. a. For the end use consumer, cost effectiveness and viability of solar systems is calculated on the basis of the following assumptions: The price per KWh sold by EDL at 9.4 US cents.. The price of SWHs is $ 1,200 for 200 liter systems and $1,800 for 300 liter capacity, Annual production (saving) of final energy is 550 KWh per m2 of SWH. The lifetime of the SWH is 20 years; The interest rate for credits for the purchase of a SWH is 0%. Maintenance costs are negligible. The payback period is quite high is around 5-7 years 41

43 b. For institutions, banks and the government, profitability of the program is calculated based on the following assumptions: Energy conversion efficiency of thermal plants is around 35% Conversion efficiency of electric water heaters is around 80%; The price of oil is at an average of $ 100 per barrel; The amount of primary energy is 3 times larger than the minimum amount of final energy used for heating water Price of kwh produced by EDL is around 12.5 US cents The price per m2 of SWHs installed is around $ 500. The payback of the investment is 5 to 7 years During the Phase 1 (first four years), the proposed program would allow EDL to achieve cumulative energy savings equivalent to 300 GWh (primary energy) or TOE a saving in foreign currency of $ 21 million and a reduction in its budget deficit Environmental benefits As mentioned above, Lebanon is generating the bulk of its electricity from imported oil through thermal power plants. This import is growing continuously due to the growing electricity demand. This contributes significantly to the costs of supply of EDL. This program will contribute to achieve significant cumulative energy savings of about TOE and tons of CO2 avoided. in first 4 years (upto 2014). Based solely on the proposed program about (190,000m2) 187,200 m2 of SWHs installed in Phase 1, it would achieve annual savings in primary energy of about 28,000 TOE up to 2014 and prevent the emission of 84,000 tons of CO2 into the atmosphere annually. 13. Proposed Programmatic Framework for Large Scale Deployment of Collective SWH systems in residential and tertiary sectors in urban areas Collective solar water heating in public institutions, including hotels, is widespread on a global level. Lebanon has some experience with these collective solar systems, through a few pilot operations. Large scale collective SWH systems should be promoted on a larger scale for collective housing (apartment buildings) and institutions such as hotels, hospitals, clinics and health centers, university campuses, colleges and schools, sports centers, etc.. Hot water needs are estimated to be more than 40 million cubic meters in these buildings and institutions per year. It is estimated that many of the of collective systems can be applied to new residential buildings. However, most institutional consumers such as hotels, hospitals and universities will be able to install SWHs even without much financial incentives, by using their own funds or through financial incentive programs available for large consumers through the various 42

44 schemes of BDL. However, in case of the residential sector, a collective system could be more complex in terms of financing, and more in terms of implementation due to the constraints of limited roof space and rights, as well as structural challenges of existing buildings. In residential sector, collective SWH systems could be targeted for new buildings. This approach could be implemented through intermediary service provider (similar to an energy service company-esco) which could bundle the individual household s hot water needs and set up community or apartment buildings- level collective SWH systems to provide guaranteed hot water service to a group of individual households. This latter approach would be especially relevant for new high rise residential buildings yet to be built. There is only limited amount of available space for installation of solar collectors and water heaters on residential buildings and their roofs, as described in the Report. It is estimated the SWH collective installations will require a surface area of around 300,000 m2. The realization of the collective program will require financial and institutional mechanisms slightly different from the one related to individual SWHs Short and long term goals The dissemination of large scale solar systems requires the several steps including: (i) (ii) (iii) (iv) (v) (vi) (vii) Collecting information on hot water needs and available surface area; Conducting an energy audit of the institution to be equipped with solar water heaters; The completion of a technical and economic pre-feasibility study to make an offer to the client. Conducting a study for the execution of the installation; Mobilization of funding since the initial investment is generally much higher than individual SWHs; Obtaining the consent of all residents for apartment buildings who represent more than 70% of the available technical potential. Implementing the project Structure of the Program (eligibility of suppliers, installers, products, etc.) The eligibility of suppliers, installers and the product is similar to the mechanisms described above for the eligibility of individual SWHs. However, in addition to the described procedures, a technical and economic feasibility study will have to be carried out by a specialized consulting firm and approved by LCEC before the installation of the system, because such systems will not be of standard design and specifications which can be generalized Financial Mechanism 43

45 The total cost of this program is estimated to be around US$ 100 million to be invested over a period of 10 years. It requires tailor made financial and regulatory incentives and additional incentives including exemption from customs duties and VAT on imported equipment, local products and services. Under the NEEREA program, the Circular 236 that is related to energy corresponds with the line of credit managed by the BDL and companies involved in energy conservation and renewable energy are eligible for loans. For new projects dealing with collective SWH systems, loans of value greater than $ 20,000 could be granted by the BDL after the approval of the LCEC. The repayment period could extend over a period of 10 years from the end of the grace period ranging from 6 months to 4 years. Loans smaller than $20,000, or equivalent, need approval from the Board of the Central Bank Loans with values of more than $20,000 need individual approval from the Governor of the Central Bank Institutional and Stakeholder Responsibilities The implementation of the program for collective SWH systems requires several steps to be undertaken: 1. Technical study 2. Financial analysis 3. Proof of creditworthiness of the beneficiary customer 4. Eligibility of the product, supplier and installer 5. Credit approval 6. Project approval 7. Project implementation 8. Monitoring and evaluation 9. Disbursement of credit 10. Credit recovery These activities must be performed by different key actors, namely: the beneficiaries, consultancy companies, commercial banks, BDL, LCEC and other stakeholders. LCEC has a critical role in the implementation of the program and its success. MEW shall support and strengthen LCEC in its mission of coordinating the program so that all stakeholders can be integrated fully into the proposed program. 44

46 Figure 12: Interaction between main stakeholders for collective SWH systems Consultancy Office Financial Analysis + Technical study of the project Final approval of Credit and Credit Granting BDL BENEFICIARIES Service Companies ESCO Review and contract preparation, Approval the Technical Review and Eligibility LCEC BDL Commercial Bank Review the clie file + agreemen formulating of application Financial review and compliance with criteria for granting credit Financial and Economic Analysis Taking into account all these elements already mentioned above and with the support of promotional campaigns, the objective of establishing m2 of SWH up to 2020 could be achievable. The estimated required investment is million USD, and the cumulative energy savings achieved during the period ( ) are in the order of 137,700 TOE. 45

47 Based on a price of U.S. $ 100 per barrel, the monetary savings are estimated at U.S. $ million, at a payback time of 10 years Benefits to Consumers and Utility From consumer s standpoint, considering the cost of electricity of 12.5 US cents per KWh, and the benefits of tax exemptions for equipment and services (for both imports and local production), the payback time of 10 years is quite long. However, considering the other benefits, such as the quality and reliability of service of hot water supply will be improved (since power cuts will no longer affect the availability and reliability of hot water service). The benefit of this project to EDL is substantial. With regard to electricity demand, is estimated to produce more than 1,500 GWh cumulative energy savings during the period This translates into reduction of greenhouse gas emissions by an amount equivalent to 1, tons of CO2 over the lifetime of the project Environmental Benefits Figure 13: Total potential of energy saved and CO2 avoided for Collective SWHs Years Cumulated primary energy saved(toe) Cumulated CO2 avoided(tons) 19 Based on during period ( ) cumulated CO2 avoided is Tons. Beyond 2020, the quantity of CO2 avoided per year is tons for 10 years more (life time of the project: 20 years) 46

48 14. CDM/Carbon Finance Potential Benefits, Methodologies, and Approaches 14.1 CDM and Evolution of Carbon Markets The Clean Development Mechanism (CDM) provides the opportunity for developing countries to participate in the global carbon market, and is currently the only option under the Kyoto Protocol for developing countries to attract climate-friendly investment. The CDM is also a source of climate finance for countries in the Middle East and North Africa region 20, as illustrated by a growing number of projects under development in this region 21. The rules and regulations of the UN climate regime will change after 2012, when the first commitment period of the Kyoto Protocol comes to an end. Whether there is another commitment period of the Kyoto Protocol, and if so, what rules will apply, is yet to be agreed. New mechanisms to support climate financing in developing countries are being discussed within the context of the international negotiations on a post-2012 agreement on the mitigation of climate change. Many countries are exploring opportunities to understand and engage with these emerging climate finance mechanisms. Figure 14 - Concept of the CDM Source: IGES, CDM in Charts (2011) The concept of the CDM is illustrated in Figure 14. A project located in a non-annex I country like Lebanon reduces greenhouse gas emissions more than would be the case in 20 The majority of current CDM projects are located in India and China (UNEP Risø Centre, CDM Pipeline CDM projects located in the Middle-East have to date been submitted for validation, 56 of which in 2008 or later. UNEP Risø Centre, CDM Pipeline. 47

49 the business-as-usual scenario (e.g. SWH replaces grid based electricity which would generate GHG emissions). If registered as a CDM project, one 1 carbon credit, called a Certified Emission Reduction (CER), is issued for each 1 ton of carbon dioxide equivalent (1 tco2eq). This CER can then be traded on the international carbon market, also called the global compliance market. Approximately than 3000 CDM projects have reached the stage of registration with the UNFCCC, while around 7000 projects are in the CDM pipeline, as of April Around 576 million CERs have been issued by the UNFCCC. Figure 15: CERs issued by sector Source (April 2011) 14.2 CDM Strategies and Approaches With regard to eligibility of CDM projects, it is important to keep in mind that: The emission reductions have to be additional to the emissions in the baseline or business-asusual scenario; Participation in a CDM projects is voluntary; The CDM host country has to confirm that the project contributes to sustainable development of the country; Emission reductions from nuclear facilities are not allowed; Only afforestation and reforestation are eligible sequestration activities. Before being able to generate carbon credits, CDM projects have to follow a range of steps within a pre-determined project cycle. Figure 16 shows the main steps in the CDM process. 48

50 Registration Figure 16 : Steps in the CDM project cycle Pr o ject de si gn M etho d o lo gy PD D D e v e l opm en t V a li da tion Lette r of A ppr o v a l Is su ance o f credi ts Verifica tio n Moni to ri n g I m pl e m en ta ti o n The process of preparing a CDM project for approval by the country s Designated National Authority (DNA) and for validation and registration is rigorous and time consuming. Figure 16 shows the different steps involved and the estimated duration of each step. The lead time is highly dependent on: The Letter of Approval issuance process of the DNA; The quality of the Project Design Document (PDD); Independent accredited auditor (Designated Operational Entity) involved. In general, the more carefully and better prepared the CDM documents are, the faster the project will proceed through the registration process. In the figure below the average times for each step are indicated. The total duration of the registration process depends on the quality of the PDD, capacity of the project sponsor and the processing speed of the DOE and the CDM secretariat. In 2010, the average CDM project took over 600 days to progress from validation to registration. Figure 17: Approximate time line to CDM activity registration Preparing Document Validation Request Registration CDM Registration 4-6 Months 4-12 Months 4-6 Months Total:

51 14.3 Post Carbon Markets The parties to the UNFCCC are discussing a follow-up of the GHG emission reduction commitments under the current commitment period of the Kyoto Protocol. The CDM is dependent on the Kyoto structure and without an extension of the existing commitments, the carbon market will change, altering the value of investments in CDM projects. The European Union (EU) will continue to accept some CERs in the EU emission trading scheme (EU-ETS) also post This is the largest compliance carbon market, reaching a trading volume of billion US$ in The EU-ETS largely determines the price of the carbon credits until 2020, for projects that: Are registered by 31 December 2012; Are located in a Least Developed Country (LDC). As Lebanon is not an LDC, Lebanon CDM projects need to be registered with the UNFCCC by 31 st December, Considering the lengthy lead times for registration, this effectively means that the validation of CDM project documentation should start in the summer of Therefore, the preparation of the PDD should start in the first half of CDM Methodology for Solar Water Heaters In April 2011, a new small-scale CDM methodology for SWH, AMS I.J, was approved by the UNFCCC s CDM Executive Board. 24 This category comprises the installation of residential SWH systems and commercial SWH systems for hot water production. The SWH systems displace electricity or fossil fuel that would otherwise have been used to produce hot water. There are two types of projects included in the new CDM methodology AMS I.J: retrofits and new construction. For the purposes of defining baselines and other requirements the following definitions apply: (a) Retrofit projects are SWH project(s) that replace existing electric or fossil fuel based water heating system(s) in existing facility(ies); (b) New construction projects are: (i) SWH project(s) installed in new facility(ies); (ii) SWH project(s) installed in existing facility(ies) that, prior to the project implementation, do not have installed water heating systems; (iii) SWH project(s) installed in existing facility(ies) which require water heating capacity expansions; or (iv) Replacement of failed solar water heating system(s). For retrofit projects, the baseline system(s) are the operating water heating system(s) and fuel source (fossil fuel or electricity) that existed immediately prior to the start of the SWH project activity. For new construction projects, the baseline system and fuel source (fossil fuel or electricity) assumed to be used for water heating is one that is demonstrated to be typical of new construction, for the given project activity as defined in paragraph 2 (b), in the region of the project activity at the time of the start of the project activity. Such demonstration shall include that typical water heating systems in the project 22 State and Trends of the Carbon Market, Article 11a of the DIRECTIVE 2009/29/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL, of 23 April 2009, amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community 24 For the detailed CDM methodology, see UNFCCC CDM website <cdm.unfccc.int>. 50

52 region are not solar water heating systems. Emission reductions are calculated as the energy savings that result from the project implementation multiplied by an emission factor for the electricity and/or fossil fuel displaced. 25 Energy savings that result from the project implementation of SWH CDM project shall be determined using one of following methods and the choice of a method shall be made ex ante and specified in the PDD and cannot be changed during the crediting period. These three are not presented in order of preference. Project developers shall select one of these methods based on the following guidelines: (a) Model based method; (b) System metering method; (c) Stipulated energy savings method. 15. Capacity Building and Dissemination 15.1 Capacity Building Standards for SWH Systems: The standards established by LIBNOR are comprehensive and consist of documents which are divided into several volumes covering solar energy vocabulary, solar thermal systems, components, and custom built systems. Part1contains: General requirements; Part2 contains: Test methods; and Part3 contains: Performance specifications for water storage tanks for solar water heating systems. The documents contain specific information and definitions and the application of standards can lead to more effective implementation only when the users and beneficiaries (suppliers of solar systems, installers) are trained well to be able to understand the requirements for certificates or approvals. The smooth implementation of the standards also requires training of operating personnel of LIBNOR, LCEC, etc. This training will be organized during the program establishment phase and shall be conducted by the organization who developed the relevant standards, or ouside specialized agencies. Program Management Unit of the Proposed Program at LCEC: The staff of the Program Management Unit (within LCEC) will consist primarily of engineers, planners and financial managers. It will be essential that staff be involved in targeted training sessions held in other countries with more experience in this field. The solar programs in these countries are managed by national institutions like LCEC and collaboration should be sought from some of these countries in sharing implementation experiences and building capacity in Lebanon. 26 Personnel responsible 25 For calculating the emission factor for displaced fossil fuels, reliable local or national data shall be used. IPCC default values shall be used only when country or project specific data are documented to be either not available or not reliable. 26 Similar programs are developed in several countries, including France, Greece, Tunisia and Morocco. 51

53 for managing the program specially in LCEC could benefit from visits to and targeted training within similar agencies like the Agency for the Environment and Energy Saving (ADEME, France), the National Agency for Energy Saving (ANME -Tunisia), the Center for Renewable Energy Sources (CRES, Greece), or the Agency for Renewable Energy and Energy Efficiency and Moroccan Agency for solar energy (Morocco). An exchange of experiences, best practices, management and planning tools, and monitoring and evaluation approaches could also be implemented within the framework of partnership agreements with these institutions. Training of suppliers and installers of SWHs, engineering firms, architects and other stakeholders. This training must be practical and provided by installers of SWHs already experienced in other programs, by experts from consulting firms and architecture firms operating in similar programs. During the first two years of the proposed program, it will be necessary for LCEC (Program Management Unit) to organize training sessions for suppliers, installers and local consultants. These sessions should be taught by expert trainers in: a. Project feasibility studies Equipment sizing Development of technical specifications Control and performance testing of SWHs Installation of SWHs Maintenance of equipment and facilities b. Technical and economic evaluation of a facilities, projects and programs. c. Awareness, promotion and communication techniques. Assisting research institutions to equip themselves with performance and quality testing equipment for SWHs, solar panels and tanks Although the proposed program sets strict specifications for the importation of SWHs, solar panels and tanks, it is envisaged that laboratories (IRI, AUB, etc.) will be equipped to test all components of SWH. The laboratories can also provide facilities for tests of locally produced products. Supporting a training center provide professional training modules targeted for installers, service technicians, plumbers and electricians. 52

54 Market development of SWHs in Lebanon requires the development of a specialized local labour pool with the necessary skills to provide sustainable and high quality customer service. This objective can only be achieved through the establishment of a specialized training centre for renewable energies with a specific focus on solar products and systems. One of the existing training centers could be strengthened through training modules and by hiring trainers with extensive experience. It is recommended that the first two training sessions are geared towards the training of trainers who will then go on to provide further training for technicians in electricity, plumbing and equipment installation. Organizing two training workshops for engineering offices and architects for the design of facilities, technical and economic studies for collective solar water heating systems. The first phase of the proposed program will focus primarily on the residential sector (households). But the tertiary sector (hotels, hospitals, etc.) with collective solar water heating systems is another important area for development. Provision of collective solar water heating systems for the tertiary sector is more complicated than individual SWHs for the residential sector because, in the case of former, each installation requires a detailed individual study before implementation. In order to undertake this study, it will be necessary to train engineers and architects in the design of small solar water heating systems, in conducting technical and economic feasibility studies and in monitoring and evaluation. In this respect at least two comprehensive training sessions will be organized by LCEC with the assistance of international consulting firms Promotion, communication and awareness program Promotion and awareness campaigns are aimed to provide the different stakeholders with information on the proposed program: Its objectives, specific conditions, eligibility for the program, its impact on the level of the consumers and the government and its institutional and financial mechanisms. The target group are: commercial banks, representatives of concerned institutions, NGOs, the private sector, the big consumers, the donors and development partners. The promotion campaigns is intended to: promote the financial mechanism specific to individual SWHs and collective SWH systems ; promote solar equipment and demonstrate their economic and environmental benefits; provide procedural information about the steps involved, and the main stakeholders, who can provide guidance, information, finance, supply and installation of equipment, These campaigns shall include radio and TV spots, brochures and posters and the organization of one or more debates on local television channels. 53

55 Organization of a conference in Lebanon with representatives of public institutions and private companies of other Mediterranean Countries who have successfully developed national and regional markets for SWHs. During this event similar programs will be presented along with the funding mechanisms and sources, the institutional arrangements and roles of different stakeholders, objectives and outcomes and the encountered barriers and identified solutions. This conference could be organized in the middle of the first year of the proposed program.. Events for the various stakeholders to present the proposed program: Organization of conferences and workshops to inform the public, policymakers, and professionals about the institutional and financial mechanisms for the proposed program (objectives, characteristics, conditions of eligibility) and its micro and macroeconomic, social and environmental impacts. The target group: commercial banks, representatives of relevant institutions, NGOs, private sector, large customers, donors and development partners. Elaboration of program content (TV spot, radio, spot, posters, stickers, newspaper articles, conferences). LCEC is in the process of sensitizing the general public on the importance of energy efficiency, ways to achieve energy savings and reducing wastage.. To support the broad-based effort for SWHs under the proposed program, the MEW along with LCEC, will launch a dedicated campaign to promote the use of SWH. Promotion and awareness raising will be critical toward success of the proposed program, and to help establish a positive image for SWHs, and to trigger effective behavioral change in energy savings and managing consumption without waste. Target audience: The general public, institutions (building owners, hotels, hospitals, etc.) policy and decision makers, SWH and component suppliers and installers, etc. Strategy: Create awareness through advertisements that clearly state the benefits of using SWH. As explained previously in the paper, there are clear benefits of large scale use of SWHs to the consumers and to the electric utility, EDL and at country level. People should be able to see that they are assisting the country in addressing the energy crisis while at the same time, the actions are, directly beneficial to an individual by lowering the household spending on electricity bills, and for getting more reliable supply for meetnig the individual s hot water needs. Media strategy: All forms of media are necessary to obtain the best outcomes from the communication campaign. Press strategy: Press is effective in building visibility and is particularly relevant to reach the middle class. 54

56 Radio: Radio will be a key media to ensure that the message reaches the target market sectors. LCEC should design appropriate and innovative programs Television: A creative TV spot will reinforce the message and create widespread awareness amongst the target group across the country. Outdoor media: Use of outdoor media creates synergies across the media, building recognition and consolidation of the advertising message. It is proposed that a more innovative branding of street signs be undertaken in urban centers across the country. Design and development of a website for the proposed program. In order to facilitate promotion and increase visibility, it is important to develop a web site, updated on a regular basis (at least once a quarter). This site will be hosted within the LCEC and BDL websites. 16. Monitoring and Evaluation Approaches Monitoring all activities of the proposed program will help to track and measure the success as well as impacts of the program. In this context, specific studies should be carried out at the end of the first two years, to help measure the impacts and to analyze the following: Comparison of the achievements made in relation to planned activities; Structure and evolution of the application for SWHs by consumers and suppliers (number and types of beneficiaries, etc.). Industrial dynamics created: number of suppliers and their capabilities, number of installers, jobs created, integration and local manufacture, export; Economic, environmental and social impacts :energy savings at the household level and macroeconomic level, contribution to household savings (financial) and comfort created, reduction of greenhouse gas emissions, improved quality of life Conducting a prospective study on the development of a SWH sector in the medium and long term. o Organizing periodic meetings with the private sector (suppliers, installers and banks) to discuss the behavior of SWH markets, problems, solutions and improvements There are three categories of stakeholders in the SWH sector in Lebanon: 1. Direct beneficiaries: beneficiary households and institutions (individual residential houses, apartment buildings, hotels, hospitals, etc). 2. Indirect beneficiaries: Government (MEW, LCEC, BDL, Banks), research institutions, training centers etc. 55

57 3. Market stakeholders: Equipment suppliers, equipment installers, etc. To promote the development of this market, regular meetings are planned between these various stakeholders to discuss: The progress of the program, Problems and barriers : institutional, financial, technical and regulatory Possible solutions and types of mid-course intervention required, if any; o Conduct consumer satisfaction surveys with beneficiaries of SWHs (technical behavior / satisfaction, economic and social impact) Two household surveys will be conducted during the first two years At the end of the first year: the first household survey will test the impact of the awareness campaign, the degree of information received regarding the proposed program, benefits, and the benefits of SWHs, the degree of acceptance of new technology, the ability of households to repay loans, potential barriers, the procurement of SWHs, the quality of services provided, their opinions; At the end of the second year, conduct the second survey to evaluate the impacts of adjustments made as a result of the first survey.. The survey results will be presented at regular meetings with stakeholders to consider how to improve services, procedures, benefits and quality of products and general market development. o Management and updating of the database for the proposed program. (The status of budget consumption (subsidies and credits, number of beneficiary households and institutions (hotels, hospitals, health centers, schools, prisons, youth clubs, etc.)., number of suppliers, installers, etc. The implementation of the loans and subsidies program will be monitored jointly by BDL, Commercial Banks and LCEC. Monitoring will be based on quarterly reports from LCEC and on joint missions. A mid-term review will be arranged towards the end of the second year to evaluate the program and to assess eventual needs for changes. 17. Conclusions There are multiple benefits of large scale deployment of SWHs in Lebanon. In addition to helping reduce consumer energy bills, EDL will benefit due to reduction in electricity demand in a power system which is plagued by supply-demand imbalance and which entails unreliable electricity supply. Reduced energy demand for grid based power generation due to the large scale application of SWHs will also lead to fuel savings and lowered import bills for the Government on Lebanon. Under the directions of MEW, and with support from UNDP and 56

58 other partner and stakeholders, LCEC has led the demonstration of pilot level efforts to promote the use and installation of SWHs in Lebanon over the past several years. The Government of Lebanon through MEW, and in cooperation with the BDL has also embarked on a national energy efficiency program in 2009 to provide financial support to various measures, including a solar thermal component for households and institutions (hotels, hospitals, apartment buildings, others). As a result, a commercial market for both domestically manufactured as well as imported SWHs has developed over the years, as the uptake of SWHs have been particularly good in the case of large institutional end-users such as hospitals, hotels, etc. The SWH market has grown at the annual rate of 15%, and the total number of SWH manufacturers, importers and installers has increased from only seven in 2007 to about 70 in LIBNOR has also elaborated mandatory energy performance standards for SWHs. Compared to the total potential for SWHs, the overall cumulative uptake of SWHs in individual residential households remains low, due to lower level of awareness about the benefits of SWH amongst residential consumers, the high initial cost of SWHs and the absence of wide-scale and substantial financial incentives available so far. Taking into consideration the technical aspects and constraints of applicator of SWHs, the realistic and commercial market potential for individual SWH systems in the residential sector is estimated to be 700,000 m2, for about a total of 200,000 households across Lebanon. This is the focus of the proposed program a large-scale SWH market in Lebanon elaborated in the Report. As discussed, attaining 100% saturation of this market of 700,000 m2 of SWH installation in 200,000 residential households would require an estimated investment of US$ 300 million, and much of these investments would have to be incentivized through grants and subsidies. In addition, there will be another 300,000 m2 of SWH to be targeted through collective SWH systems for institutions (hotels, hospitals, universities, etc.). The associated GHG emission reductions are substantial, and can potentially be monetized and realized through the CDM based revenues in the global carbon finance market which, in turn, could be used as incentives to individual residential households. The estimated annual energy savings will be about 70,000 toe in case of the residential SWHs alone. For the program to develop a large-scale SWH market in Lebanon, which would lead to the practical realization of the large potential of 1 million m2 of SWH installation (considering for both collective SWH systems and individual residential household SWH systems) in Lebanon, several steps and a multi-pronged efforts will be required. These efforts should be implemented under the overall directions of MEW and leadership of LCEC, and with continued support from the main local stakeholders (such as LIBNOR, BDL, IRI, private sector and NGOs) along with both financial and technical assistance from various development partners (such as UNDP, EU, World Bank, and bilateral donors). The actions and interventions under the proposed program will have to be taken at several levels. The key steps in a large scale deployment programs will require: (i) Strengthening the institutional and coordinating role of LCEC to help develop the relevant implementation framework, in collaboration with other stakeholders who could support LCEC s Project Management Unit though participation in a Technical Committee; The specific modalities of this institutional mechanism should be developed and the roles of different 57

59 stakeholders clearly defined and adopted by all stakeholders; (iii) In addition to standards developed by LIBNOR, technical specifications for high quality SWHs should be used by all stakeholders. The establishment of a system of quality control equipment, monitoring and evaluation and a control system for awarding grants and loans, and a system to reduce the risk of fraud are essential and therefore, the procedures for approval process of products, suppliers and installers have to be made clear and transparent. (iii) Implementation of the needs of LCEC for capacity building and strengthening its human resources which are currently limited are important. A training program for stakeholders and installers and a promotion and sensitization program is required. In addition, organization of consumer awareness events are necessary. 58

60 ANNEXES 59

61 Annex 1: Tables of Calculation Annex : Projected growth of SWH in the residential sector ( ) f Households f SWH ge m2/swh based on 50% of 00 L and 50% SWH 300 L) 3,6 3,6 3,6 3,6 3,6 3,6 3,6 3,6 3,6 3,6 2 installed nergy saved MWh/m2/year 0,55 0,55 0,55 0,55 0,55 0,55 0,55 0,55 0,55 0,55 aved ated saved MWh y energy saved: TOE/m 2 /year 0,15 0,15 0,15 0,15 0,15 0,15 0,15 0,15 0,15 0,15 y Energy Saved per year ated primary energy OE) e cost of SWH 1000 $US 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 ent 1000 US $ TOE 1000 $ 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 cumulated Energy Saving , , , ,2 OE (3) f CO2 avoided/year

62 Years Num of SWH plants Average m2/swh plant Total m2 installed Final Energy saved MWh/m2/year 0,55 0,55 0,55 0,55 0,55 0,55 0,55 0,55 0,55 0,55 MWh saved Cumulated saved MWh Primary energy saved: TOE/m 2 /year 0,15 0,15 0,15 0,15 0,15 0,15 0,15 0,15 0,15 0,15 Primary Energy Saved per year (TOE) Cumulated primary energy saved(toe) Average cost of m2 installed 1000 $US 0,35 0,35 0,35 0,35 0,35 0,35 0,35 0,35 0,35 0,35 Investment 1000 US $ Cost of TOE 1000 $ 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 Cost of cumulated Energy Saving 1000$ 109,5 328,

63 Num of Households Num of SWH ( Average m2/swh based on 50% of SWH 200 L and 50% SWH 300 L) 3,6 3,6 3,6 3,6 3,6 3,6 3,6 3,6 3,6 3,6 Total m2 installed Final Energy saved MWh/m2/year 0,55 0,55 0,55 0,55 0,55 0,55 0,55 0,55 0,55 0,55 MWh saved Cumulated saved MWh Primary energy saved: TOE/m 2 /year 0,15 0,15 0,15 0,15 0,15 0,15 0,15 0,15 0,15 0,15 Primary Energy Saved per year (TOE) Cumulated primary energy saved(toe) Average cost of SWH 1000 $US 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 Investment 1000 US $ Cost of TOE 1000 $ 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 Cost of cumulated Energy Saving 1000$ , , ,

64 Table 4: Residential sector - proposed program ( ) Num of Households Num of SWH ( Average m2/swh based on 50% of SWH 200 L and 50% SWH 300 L) 3,6 3,6 3,6 3,6 3,6 3,6 3,6 3,6 3,6 3,6 Total m2 installed Final Energy saved 0,55 0,55 0,55 0,55 0,55 0,55 0,55 0,55 0,55 0,55 MWh/m2/year MWh saved Cumulated saved MWh Primary energy saved: TOE/m 2 /year Primary Energy Saved per year (TOE) Cumulated primary energy saved(toe) 0,15 0,15 0,15 0,15 0,15 0,15 0,15 0,15 0,15 0, Average cost of SWH ,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 1,5 $US Investment 1000 US $ Cost of TOE 1000 $ 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 0,73 Cost of cumulated Energy Saving 1000$ , , , ,2 63

65 Total potential of Energy saved and CO2 avoided ( ) Years Cumulated primary energy saved(toe) For Households sector Cumulated CO2 avoided(tons) For Households sector Cumulated primary energy saved(toe) For collective sector: hotels+hospitals,etc. Cumulated CO2 avoided(tons) Total Cumulated primary energy saved (TOE) Total CO2 avoided (Tons)

66 Total m2 installed Num of Households Primary Energy Saved per year (TOE) Total m2 installed Cumulated primary energy saved(toe) Num of Households Total m2 installed Cumulated primary energy saved(toe)

67 Annex 2: List of contact persons Pierre El Khoury Manager Solar Water Heaters Market Transformation and Strengthening Initiative, LCEC Tel/Fax: / Mobile: pierre.khoury@lcecp.org.ib Ministry of Energy and Water Corniche du fleuve 1 st Floor, Room 303 Beirut-Lebanon Rani Al Achkar Site Engineer Solar Water Heaters Market Transformation and Strengthening Initiative, LCEC Tel/Fax: / Mobile: rani.alachkar@lcecp.org.ib Ministry of Energy and Water Corniche du fleuve 1 st Floor, Room 303 ; Beirut-Lebanon Dr. Adel Mourtada Board Member LGBC- Lebanon Green Building Council ECOTECH; P.O.Box: 113/6359 Beirut- Lebanon Tel/Fax: Mob: P.O.Box: Riad El Solh Beirut-Lebanon ecotch@inco.com.lb Nader Hajj Shehadeh Energy Engineer Solar Water Heaters Market Transformation and Strengthening Initiative, LCEC Tel/Fax: / Mobile: nader.hajjshehadeh@lecep.org.ib Ministry of Energy and Water Corniche du fleuve 1 st Floor, Room 303 Beirut-Lebanon Dr. Raymond Ghajar Advisor to the Minister Ministry of Energy and Water Republic of Lebanon Tel/Fax : rghajar@lau.edu.lb Mohammad Tassi AUB-American University of Beirut BME,MEM,LEED Accredited Professional Project Manager; Facilities Planning & Design Unit P.O.Box , Riad El-Solh, Beirut Lebanon Tel: (Ext:2080), Fax: m42@aub.edu.ib 66

68 Lena Dergham Acting Director General Republic of Lebanon Ministry of industry Lebanese Standards Institution-Libnor Sin-el-Fil, City Rama Street, LIBNOR Bldg, P.O.BOX: Beirut, Lebanon Tel: Fax: libnor@libnor.orgwebsite: Bernard Ammoun CEO, GREENFUTURE 65 Rmeil St, Rmeil, Beirut-Lebanon Cell : Tel : (01) / 722 Fax Ext : bammoun@rationalfinancial.com Isabella E. Ruble, Ph.D. Economist Team Leader- LCEC project (EU-Funded) i-elisabeth@hotmail.com economics@walzer.net Phone : Ing. El Sheikh Mohamad Alaya Director Electricity of Lebanon Beirut, Lebanon Tel/Fax : / Mobile : mohammad_alaya@yahoo.com Samir R.Traboulsi Board Member LGBC- Lebanon Green Building Council Thermotrade P.O.Box: Beirut- Lebanon Tel/Fax: Mob: P.O.Box: Riad El Solh Beirut-Lebanon thermotr@dm.net.lb Bernard Champanhet Team Leader- LCEC project (EU-Funded) CUB Engineering Mobile: champanhet.beirut@gmail.com Mazem A. Halawi Governor s office Banque du Liban Masraf Loubnan Street, PO Box , Beirut Tel/Fax: ext 6568 / mahalawi@bdl.gov.lb Riad Assaf, mme,mic ASHRAE LEBANESE CHAPTER-162 Secretary Business Development Consultant P.O.Box : 391-Zouk Mikael Lebanon Tel : Mob : ridassaf@hotmail.com 67

69 Annex 3 Eligibility of Suppliers, Installers and Products Eligibility of suppliers : Steps for granting eligibility to suppliers This section defines the procedures of establishing a list of eligible suppliers who can receive the benefits and incentives granted under the proposed Program. Eligibility will be assessed by a Technical Committee which will be established within the Ministry of Energy and Water, coordinated by LCEC (which will also operate the Project Management Unit) and comprising of representatives from LCEC/ BDL/ LIBNOR/ IRI/ LSES/ GBC/ ALMEE. Documents required: Any supplier wishing to participate in the proposed Program must provide a complete file containing the following documents: - Specification forms (obtained from MEW/LCEC) completed and signed by a senior employee of the company and notarized. - A completed application form requesting approval as a supplier under the proposed Program. - A description of how each of the proposed products meet the specification criteria required. - Certificates or test reports provided by the laboratories demonstrating product performance in accordance with the proposed standards. - Copies of sample performance guarantee certificates for each product offered. - Manuals for installation and maintenance for each product. - A list of installers (installing companies) with details of the team composition including - CVs signed by team members. - Copies of contracts between suppliers and installers - Certificate of tax status. - Certificate of membership of the Social Security Fund. - Commercial registration number The Technical Committee will meet on a quarterly basis to review the application and supporting materials from prospective suppliers. The Committee will provide a written response with regard to the eligibility of the supplier, products and installers. 68

70 Eligible Companies or enterprises: To be eligible for participation in the proposed Program, the Supplier shall act for and on behalf of a corporation or company established by Lebanon company law and national procedures including: - Local manufacturers, or national authorized representatives of foreign manufacturers of SWHs; - Local companies that provide installation; Human and material resources The supplier (local manufacturer, assembler, national authorized representatives of foreign manufacturers and foreign brands made in Lebanon) must have the necessary human and material resources for the duration of the program and for after sales service. Regional Representation In order to practice at the regional level, each supplier is required to maintain a physical presence in the area of intervention. Eligible installers Any supplier working in the proposed Program is expected to have installers available to carry out installation and after sales service. All installers must be approved by the Technical Committee. Example1: Template Letter of Commitment for Suppliers 69

71 LETTER OF COMMITMENT SUPPLIER I the undersigned: Acting as: On behalf of the company: ; Company Address : ; Under registration number: Understanding the specifications on the eligibility of suppliers, I agree to abide by all its recommendations, under which the Corporation will become eligible for benefits under the proposed Program Company Stamp: Name:. Signature: President of the Commission: Done at Beirut on Eligibility of installers Installers must be pre-approved by the suppliers on the basis of their qualifications and their ability to carry out the required tasks. Each supplier shall submit a list of installers whom it intends to use as sub-contractors to install their SWHs. The Program Management Unit of the Technical Committee will keep all records of suppliers and associated installers in an information database that will be publicly available.. Example2: Template Letter of Commitment Installer Enterprise LETTER OF COMMITMENT INSTALLER ENTERPRISE I the undersigned: Acting as: On behalf of the company: Company Address: Under registration number: Understanding the specifications on the eligibility of products (individual and collective facilities for heating of domestic hot water), for qualification of eligible installers for the program I agree to comply with all of the recommendations, under which the installer becomes eligible for inclusion on the list of eligible installers operating within the framework of support mechanisms under the proposed Program. 70

72 Company Stamp: Authenticated signature: Done at Beirut on Eligibility of Products Specifications relating to the eligibility of products: Solar Collectors and SWHs under the proposed Program are laid out in NL Norms. The eligibility could be determined through a pre-defined set of procedures for inclusion in the list of eligible products for benefits granted under the proposed Program. Eligible products are solar collectors and individual SWH systems. The eligibility of the proposed products under the proposed Program will depend on the review and approval by the Technical Committee, after assessing all documentation submitted by an eligible supplier. b) Products covered: The following products can be submitted by suppliers for approval as an eligible product under the proposed Program: Solar circulating liquid collectors; SWHs, supplied as a complete kit (factory prefabricated systems) c) Suppliers authorized to submit a dossier: Suppliers with the following attributes may submit an application to be approved as an official supplier under the proposed program: Local manufacturers or assemblers; Foreign manufacturers established in Lebanon under national laws and procedures; Local representatives of trademark goods manufactured abroad (supported by the manufacturer) d) Formulation of the application for product eligibility: Any eligible supplier wishing to register their products for official inclusion under the proposed Program must submit the following documentation to the Committee: Complete technical specifications per the required standards Completed application form (available inside the technical specification manual for each product to be included in the list of eligible products) Descriptions of the specific products being submitted for approval. Copy of the ISO9001: 2000 certificate of manufacture. For products manufactured or assembled locally, for which the manufacturer has not yet been certified as ISO9001: 2000, a certificate of ISO9001: 2000 for the components imported by 71

73 the local company should be included, together with documentation demonstrating that certification for ISO 9001:2000 has been applied for and is in progress. The manufacturer should be able to provide proof of certification within one year from the date of submitting the complete dossier (two years for newly established companies). The supplier shall submit documents containing detailed descriptions of the current quality management system used by the manufacturer and or assembler. A valid test report, presented by an approved/ recognized laboratory, for each product or its components, specifying technical characteristics and information on the thermal performance of solar collectors and / or storage tanks shall also be provided. e) Granting a certificate of product eligibility To be admitted to the list of eligible products, a solar collector or a SWH must comply with the technical specifications for eligibility. After considering the submitted complete file, the Technical Committee will assess all documents and shall provide written notice of their decision with regard to eligibility of the products to the supplier/representative. Once approved, products will be included in the list of eligible products under the proposed Program, to be made publicly available. Approval is given for an indefinite period but suppliers must notify the Committee, if there are any technical changes that have been made in the eligible products, after they were approved and included in the list of eligible products. Even in case of improved performance, the supplier must elaborate on how the proposed changes may affect eligibility and which impacts on the performance are to be expected, before any altered product can be accepted and sold. (Annex 3: Technical Specification of SWH) f) Warranty and availability of spare parts Equipment Warranty Suppliers will provide warrantees for all equipment provided that shall cover: defects due to design or the used materials as well as damage inflicted during normal use (for conditions in Lebanon) The minimum warranty shall be: Ten years for solar collectors, Five years for SWHs. This warranty must be issued by all suppliers and installers working under the proposed Program. As in a normal warranty, the coverage shall begin from the date of provisional acceptance of the fully installed system by the client. Availability of spare parts: The supplier will have to agree to make adequate quantity of spare parts available to the installers to ensure the effective functioning of the equipment during the warranty period, and to make the required repairs therein. g) Duration of eligibility of a solar collector or SWH 72

74 The eligibility of a solar collector product or a SWH will be for an indefinite period unless explicitly stated by the Technical Committee or following a change of rules and regulations. At any time, the Committee can suspend, temporarily or permanently, the eligibility of a solar collector or SWH under the proposed Program in accordance with the terms and conditions set out in advance. In this case, the Committee will formally announce the decision to suspend a supplier or products and their installers, if necessary. 27 h) Letter of Commitment Each supplier is required to sign a letter of commitment at the time of submitting his/her application which confirms that he has read and understood the rules and requirements in order to ensure his compliance with the technical specification. Example3: Example Letter of Commitment for product eligibility LETTER OF COMMITMENT I the undersigned: Acting as: On behalf of the company: ; Company Address: Trade registration number: After having read the specifications on the eligibility of products (Solar collectors and SWH) for the classification of eligible products for the proposed Program, I commit to comply with a of its recommendations, through which the products manufactured / assembled/supplied by the company become eligible for the proposed Program support mechanisms. Supplier s Signature: Done at Beirut on././.. 27 The Committee reserves the right to revise parts or all of this report at any time. Notification will be given to suppliers in writing and all changes will come into effect six months after the date of notification. 73

75 Annex 4: Technical Specifications for Eligible Products SPECIFICATIONS FOR ELIGIBILITY OF PRODUCTS: SOLAR SYSTEMS AND SOLAR WATER HEATER UNIT UNDER THE PROPOSED PROGRAM These define the set of provisions governing the conditions and procedures for the products offered for inclusion in the list of products eligible for benefits granted under the proposed program. The affected products are solar collectors and individual SWH systems. The eligibility of the proposed products under the proposed program depends on the advice (agreement) of a Technical Committee established within MEW (to support LCEC), composed of representatives of both institutions, after assessing all documentation submitted by a supplier. ELIGIBILITY OF THE PRODUCT Products covered: The following products can be submitted by suppliers for approval as an eligible product under the proposed program: Solar circulating liquid collectors; SWHs, supplied as a complete kit (factory prefabricated systems) Providers (suppliers) authorized to submit a dossier: Suppliers with the following attributes may submit an application to be approved as an official supplier under the proposed program: Local manufacturers or assemblers ; Foreign manufacturers established in Lebanon under national laws and procedures; Local representatives of trademark goods manufactured abroad (supported by the manufacturer). Formulation of the application for product eligibility: Any Supplier wishing to register their products for official inclusion under the proposed program must submit the following documentation to MEW (LCEC): A completed application (available inside the technical specification manual for each product to be included in the list of eligible products. The supplier must collect the technical specifications from MEW (LCEC), answer the questions within the specification manual then sign and date all pages. (Can also be signed by an official proxy). Descriptions of the products being submitted for approval. Attached as an annex. A copy of the company s fiscal identity card A copy of the contract giving local representatives the right to represent products trademarked abroad A copy of the certificate of manufacture. For products manufactured or assembled locally, where the manufacturer has not yet been certified as ISO9001: 2000: A certificate of ISO9001: 2000 for the components imported by the local company should be included, in conjunction with documentation demonstrating that certification 74

76 for ISO 9001:2000 has been applied for and is in progress. The manufacturer should be able to provide proof of certification within one year from the date of submitting this complete dossier (two years for newly established companies). The supplier shall submit documents containing detailed descriptions of the current quality management system used by the manufacturer and or assembler. A valid test report, presented by an approved/recognized laboratory, for each product or its components, specifying, technical characteristics and thermal performance of solar collectors and / or storage tanks. Granting certificate of product eligibility To be admitted to the list of eligible products, a solar collector or a SWH must comply with the technical specifications for eligibility. After considering this dossier, which must be complete, MEW (LCEC) will assess all complete files and shall provide written notice of their decision to the supplier. Once approved, products will be registered on the list of eligible products under the proposed program. Approval is given for an indefinite period however; suppliers must notify MEW (LCEC) if there are any changes in the products supplied. The supplier must describe how the changes affect eligibility and any impacts on the performance that result before any new products can be accepted and marketed. WARRANTY AND AVAILABILITY OF SPARE PARTS Equipment Warranty: Suppliers will provide warrantees for all equipment provided to cover; defects due to design, materials used and damage caused during normal use (for conditions in Lebanon) Minimum warranty terms shall be: Ten years for solar collectors, Five years for solar tanks. This guarantee must be issued by all suppliers and installers working under the proposed program. Cover shall begin from the date of provisional acceptance by the client of the fully installed system. Availability of spare parts: The supplier agrees to make spare parts available to suppliers and installers to ensure normal operation of the equipment for at least the warranty period. Deed of Commitment Each supplier is required to sign a commitment document at the time of submitting his application which confirms that they have read and understood the rules and requirements to ensure compliance with the technical specifications. 75

77 ACT OF COMMITMENT I the undersigned: ; Acting as: ; On behalf of the company: ; Company Address: Trade registration number: ; ; After having read this specification on the eligibility of products (Solar collectors and SWH) for the classification of eligible products for the proposed program and its annexes, I agree to comply with all of its recommendations, under which the products manufactured / represented by the company become eligible for proposed program support mechanisms. Supplier s Signature: Done in Beirut on.. 76

78 Technical Specifications for eligibility of solar collectors and solar water heater TECHNICAL DOSSIER FOR SOLAR COLLECTOR/ SOLAR WATER HEATER Eligibility of SWHs under the proposed program To be admitted to the proposed program, all models of SWH (SWH) must comply with the conditions of admission set out in this document. The manufacturer or representative must submit to MEW (LCEC) a complete file detailing specific eligibility for each proposed model. MEW (LCEC)/ will then assess the suitability of the products proposed and will determine which will become eligible under the proposed program. Eligible solar collectors and SWH Solar collectors and SWHs covered by the program are devices that provide direct conversion of sunlight to thermal energy to produce hot water. Identification of solar collectors and SWHs Commercial name For each model of solar collector or SWH covered by the application for eligibility, all components, must be covered by a single brand name. (brand + model and / or type ). Labeling and Marking of solar equipment Each solar collector or SWH must be identified by appropriate markings, in accordance with current standards for solar collectors and for storage tanks Features and Requirements of eligible Systems Standards and regulations All supplied components shall conform to international standards including matters relating to the protection of users (electrical safety, safety, pressure rise). Minimum performance acceptable for SWHs To qualify, all SWH will ensure a specific minimum annual productivity of 450 kwh / m²/year. The reference area is the total area of the input solar collector as defined by the standard EN Specific annual productivity is calculated using the SOLO method or another method approved by MEW (LCEC) on the basis of climatic data from the weather station in Beirut, assuming water temperature at the exit of the tank is 45 C and a daily consumption of hot water equals the storage capacity of the heater. 77

79 Where the request for eligibility is for the solar collector only, the specific annual productivity is evaluated later as part of the estimated performance of the projected solar system.(the criteria of minimum acceptable performance is under review). Minimum standards for the provision of a SWH: SWH models presented must include a set of components for the normal functioning of the system, its attachment to the frame as well as protection against freezing, if necessary. Solar systems must include at least the following components: solar collectors based on liquid circulation as the heat transfer fluid; storage tank, (which can be integrated with collector) Protection against potential over-pressure; Pipes and fittings collector / ball; Specific sockets and accessories for binding; A set of pipes with accessories (valves, stops, packages, etc..) for supplying cold water to the water heater and hot water outlet to use. A device to limit the temperature of hot water to 65 C before the connection point on the main hot water distribution pipe, or a certificate certifying that the water cannot reach a limit greater than the output of the SWH In the case of a SWH with an indirect thermo-siphon, the system should also include: A heat exchanger; A safety valve for the primary circuit; A venting device; An expansion tank or other means to accommodate the expansion of water; In the case of a recirculation SWH the system shall also be equipped with a circulation controlled pump. Technical characteristics of components for the SWH All components of the solar system will be designed to withstand at least the temperatures and maximum working pressures to which they may be exposed. If necessary, MEW (LCEC) may request special tests for solar equipment. Solar collectors: The solar collector must comply with Lebanonn where applicable or with European standards (EN12975) or other relevant international standards. As a guide, and in the case of using a solar collector plane (the most commonly used to heat water): The components of the absorber will be made of materials resistant to the stagnation temperature of the solar collector and not very sensitive to corrosion If the solar collector's transparent cover is made of glass, it must be tempered glass. For any other material of the transparent cover, the supplier is required to submit all necessary documents proving its physical and technical properties and its stability for at least ten (10) years; Pressure testing of solar collectors will be equal to 1.5 times the pressure setting of the tank safety systems without a heat exchanger, or the set pressure of the safety valve for the primary circuit water heaters if equipped with a solar heat exchanger. As a guide, when using vacuum tubes: The glass must withstand wind, hail and other external influences. The provider must submit 78

80 all necessary documents to prove their performance. In case of glass tubes being connected directly to the storage tank, the element used to seal the pipes and the tank must ensure a perfect seal, and must have a guaranteed life of at least 10 years. Supporting documents must be submitted. It must be possible to easily replace each tube. Storage tank The storage tank must meet the following specifications: Resist the minimum operating pressure of 7 bar and be equipped with a security group set at 7 bar, and when the system is under pressure from the network. For systems that are not pressurized, the balloon must withstand a pressure of at least 2 bars. Be equipped with an interchangeable magnesium anode, to protect it from corrosion phenomenon. Balloons all require this device; If the balloon is provided with an anode, the operating instructions and maintenance shall specify how long this interval anode will last before being replaced and the maximum allowable lifetime. The qualifications and affiliation of the person who can perform this action must also be specified. The lining will withstand high temperatures (a temperature equal to the maximum temperature may be rded in the system + 10 º C and in all cases a temperature of at least 100 C). The liner must be food grade. Galvanized or zinc coating is not allowed; Be provided with external protection against rust and be insulated. The insulation is protected by a jacket, which will be resistant to the effects of weather, ultraviolet radiation and damage which may be caused by animals. Piping and insulation The nature of the piping must be compatible with materials used in solar collectors and the heat exchanger if it exists. In any event, the inner diameter of the pipe must be sufficient to allow adequate circulation of fluid. All water pipes must be food grade and withstand a minimum pressure of 7 bar at a temperature of 90 C. In addition, they will be designed to withstand extreme operating temperatures. The connections between dissimilar metals can cause adverse erosion effects and must be prevented with the relevant safety measures. The use of galvanized steel pipe or galvanized steel is not allowed. Thermal insulation of pipes All hot water pipes should be provided with adequate insulation. The insulating material must: Resist temperatures: - 10 C to 100 C; Be free of CFCs; Resist ultraviolet light, or be adequately protected; Be impervious to rain and wind, or be properly protected 79

81 Operating and maintenance Manual The operating and maintenance manual must accompany each shipment of SWH and will describe, in clear and easily understandable language: Operating procedures for the installation of SWH; Necessary maintenance actions (scaling, change of the magnesium anode, possible link to the earth, changing insulation and ducts, cleaning the glass collector surface, what to do in case of neglect or non-use for long periods of time etc..), and the frequency of these actions. When the SWH is equipped with an immersion heater built into the balloon, the user must be duly informed of the conditions for using this booster and the potential impact of inappropriate use on the energy consumption of the installation. Duration of eligibility of a solar collector or an SWH The eligibility of a solar collector or a SWH will be for an indefinite period unless explicitly stated by MEW (LCEC) or or due to a chance of rules and regulations. At any time, MEW (LCEC)/ can suspend, temporarily or permanently, the admission of a solar collector or SWH under the proposed program in accordance with the terms and conditions set out in advance. MEW (LCEC)/ will formally announce the decision to suspend a supplier or products and their installers if necessary. Revision of this document MEW (LCEC) reserves the right to revise parts or all of this document at any time. Notification will be given to suppliers in writing and all changes will come into effect six months after the date of notification. 80

82 TECHNICAL DOSSIER FOR SOLAR COLLECTOR / SOLAR WATER HEATER 1. Product described in the application: Complete Solar Water Heater Solar collector: Commercial Product Name: Supplier: Manufacturer or assembler or importer (agent):.. 4. Product Origin: Solar collector manufacturer: Country of origin: Manufacturer of Balloon: Country of origin: SWH manufacturer: country of origin: General features of the SWH (not applicable in the case of an application for eligibility of a solar collector): Principle of operation: Direct thermosyphon: Indirect thermosyphon: Forced circulation: solar collector storage: Aperture area: m² storage tank volume: l Curb Weight: kg weight: kg Number of collectors: Characteristics of solar: Solar collector Type: Flat plate collector: solar collector vacuum tube: Other: Limits of the solar collector: Maximum temperature [ C]: Pressure [bar]: Test pressure [bar]: Maximum flow [l / min]: Minimum flow [l / min]: Maximum number of solar collectors can be connected in series: Nominal operating conditions of the solar collector: Coolant: Nominal flow [l / min]: Losses in the flow rate solar collector [mmwc]: Solar collector plane: Transparent cover: Type of cover:

83 Glass type: Low Dose Iron: Normal: Tempered Glass: Yes No: Alveolar: Yes: No Sealing Cover / trunk: Absorber Grid material: Number of tubes: Tube diameter: mm diameter collectors: mm Material of Fins: Means adopted for binding fins / tubes: Coating the fins Type of absorber: Black: Selective: Absorptivity coefficient Emissivity coefficient Safe: Material Safety: Setting: Background: Nature of protection against corrosion: Insulation: Nature of bottom insulation: Height: Nature of side insulation : Height: Physical characteristics and dimensional units: Overall dimensions [Long. x High. x Ep] (mm) x.... x Overall surface (m²) Maximum allowable pressure (bar) Curb Weight (kg) Solar collector vacuum tubes: Transparent cover: Nature of the glass: OD glass tubes: mm Inside diameter of glass tubes: mm Absorber Absorber material: Absorptivity coefficient Emissivity coefficient Material of blades: Middle adopted for binding fins / tubes: Safe: Material Safety: Setting: Background: Nature of protection against corrosion: Physical characteristics and dimensional units: 82

84 Overall dimensions [Long. x High. x Ep] (mm) x.... x Overall surface (m²) Number of glass tubes by solar collector Curb Weight (kg) Storage tank: Type of vessel: Materials: Thickness: mm Type of lining: Hydraulic nozzles (number, location, type, diameter): Means of protection against internal corrosion: Principe: Features (in the case of magnesium anode length, diameter...)... Maximum allowable temperature: C Maximum allowable pressure: bars Cover (outer): Nature of the cover: Thickness: mm Anti-corrosion: Insulation: Type of insulation: Thickness: mm Density: kg/m3 Cover: Hydraulic connection balloon - Solar collector: Type of pipes: Diameter: mm Insulation: Security: Name: Features: Set pressure of safety valve: bars Heat exchanger: Built-in tank: Yes No Type (coil,...): Exchange area: m² Power Interchange: W / K Loss: mm CE Coolant: Name: Physicochemical characteristics:

85 Extra supply: Name: Power: Position the ball Control mode: Set temperature: C Electrical Safety: Regulation provided on the integrated booster ball: Thermostat: Timer: Other: specify: Media delivered with the CES: Nature: Thickness: Protection against corrosion: Inclination of surfaces:

86 Annex 5: Copy of Intermediate Circular No 236 BANQUE DU LIBAN Banque du Liban Street Beirut Republic of Lebanon Intermediate Circular No 236 Addressed to Banks Attached is a copy of Intermediate Decision No 10572, of November 25, 2010 relating to the amendment of Basic Decision No 7835, of June 2, 2001 (statutory reserve) attached to Basic Circular No 84. Beirut, November 25, 2010 Governor of the Banque du Liban Riad Toufic SALAMEH 85

87 Annex 4 : BANQUE DU LIBAN Banque du Liban Street Beirut Republic of Lebanon Basic Decision No Amendment of Basic Decision No 7835, as of June 2, 2001, related to the statutory reserve The Governor of the Banque du Liban, Pursuant to the Code of Money and Credit, particularly Articles 70, 76, 79, and 174 of the said Code, Pursuant to Basic Decision No 7835, dated June 2, 2001, and its amendments on the statutory reserve, Pursuant to the Decision of the Central Council of the Banque du Liban, taken in its meeting held on November 13, 2010, Decides the following: Article 1: The text of item (2), Article 3, Basic Decision No 7835, dated June 2, 2001, is cancelled and replaced by the following text: Term obligations subject to part of the statutory reserve are discounted and the related statutory reserve reduced accordingly, in conformity with the provisions of Articles 7, 8, 9, 10 and 10 bis, in paragraph 6 of the present decision, within a ceiling of 90% of the value of statutory reserve on the obligations of the concerned bank, as stated in its balance sheet closed on December 31 of the previous year or in its semi-annual balance sheet prior to the date of discount, depending on which one was issued first. 86

88 Article 2: The text of items (9) and (10), Article 7, Basic Decision No 7835, dated June 2, 2001, is cancelled and replaced by the following text: 9- Loans granted to environmentally friendly projects, whose debit interests are not subsidized by the State, according to the provisions of paragraph 6 of the present decision. 10- Loans granted to environmentally friendly projects, whose debit interests are subsidized by the State, according to the provisions of paragraph 6 of the present decision. Article 3: The texts of paragraph (i), item (1) and item (2), Article 7, are cancelled from Basic Decision No 7835, dated June 2, 2001, and replaced by the following texts: i- Environmentally friendly loans whose value of each does not exceed thirty million LBP, whose debit interests are not subsidized by the State, set in paragraph 6 of the present decision. 2- The concerned bank shall obtain the consent of the Central Council of Banque du Liban over the overall amounts to be invested in every category of loans enlisted in the above-mentioned item (1). Article 4: The text of Article 10 of Basic Decision No 7835, dated June 2, 2001, is cancelled and replaced by the following text: Article 10: Principles of statutory reserve discount : 1- The application for the approval of the overall amounts to be invested in the loans enlisted in the above-mentioned article 7 is submitted to the Governor s Office, in three copies, one being original, provided that the application sets the overall amount of every category of loans separately. 2- After the issuance of the Central Council s decision to approve the application, the concerned bank shall provide the Central Office of Banking Risks (Centrale des Risques): a- Between Wednesday and Saturday of each week: -With a table of new loans balances, except for the loans of the Banque de l Habitat s.a.l. which are used to finance housing loans granted by the latter, according to forms set for every category of loans, with the mention new, to be included within the ceiling set in the Central Council s decision, according to the following table: 87

89 Type of Loan Housing loans granted according to the protocol signed with the Public Housing Institute (in LBP) Loans directly granted to the Public Housing Institute (in LBP) to construct buildings for rent for those with limited income Loans granted with a guarantee from Kafalat s.a.l. or from IFC, EIB, OPIC, AFD, or AFESD (in LBP), whose debit interests are not subsidized Housing loans granted in LBP based on cooperation protocols signed with the banks Loans granted to the housing body of non-conscript military men (in LBP) to be used in order to buy real estate, build housing units, and sell them to military men or lend them to the latter for housing purposes Small loans in LBP granted with the approval of micro-lending institutions Small loans in LBP financed with credits granted to micro - lending institutions or to financial institutions Housing loans granted by the housing body of non-conscript military men to military men before February 6, 2009, which were assigned in favor of the banks Loans granted in LBP to pursue the studies in higher education institutions Agricultural loans granted in LBP based on the cooperation protocol signed between the banks and the Ministry of Agriculture Environmentally friendly loans the value of each not exceeding thirty million LBP, whose debit interests are not subsidized by the State, set in paragraph 6 of the present decision Upon submission of the application, the following form should be adopted: ARO-05 ARO-07 ARO-09 ARO-11 ARO-13 ARO-18 ARO-20 ARO-23 ARO-27 ARO-35 ARO-37 88

90 - With a detailed table for every new loan in which the mode of settlement is set according to Form No ARO-17, except for the loan granted with a guarantee from Kafalat s.a.l., whose interests are subsidized, in which table PB01 annexed to the application for debit interests subsidizing is adopted. Both tables, according to every case, should encompass the signature of the party cautioning, guaranteeing, or signing the cooperation protocol with the banks. b- Until Saturday at the latest, with a table showing the balances of loans used and closed on Wednesday, which were included within the ceiling set in the Central Council s decision, except for the loans granted to the Banque de l Habitat s.a.l. and used to finance the housing loans granted by the latter, according to any of the forms set for every category of loans, according to the following table: Type of Loan Housing loans granted according to the protocol signed with the Public Housing Institute (in LBP) Loans directly granted to the Public Housing Institute (in LBP) to construct buildings for rent for those with limited income Loans granted to Small and Medium Enterprises (SMEs) with a guarantee from Kafalat s.a.l. or from IFC, EIB, OPIC, AFD, or AFESD (in LBP) Housing loans granted in LBP based on cooperation protocols signed with the banks Loans granted to the housing body of non-conscript military men (in LBP) to be used in order to buy real estate, build housing units, and sell them to military men or lend them to the latter for housing purposes Small loans in LBP granted with the approval of micro -lending institutions Small loans in LBP financed with credits granted to micro - lending institutions or to financial institutions For the weekly statement, the following form should be adopted: ARO-06 ARO-08 ARO-10 ARO-12 ARO-14 ARO-19 ARO-21 89

91 Housing loans granted by the housing body of non-conscript military men to military men before February 6, 2009, which were assigned in favor of the banks Loans granted in LBP to pursue the studies in higher education institutions Agricultural loans granted in LBP based on the cooperation protocol signed between the banks and the Ministry of Agriculture ARO-24 ARO-28 ARO The Banque de l Habitat s.a.l., according to the mechanism set in item (2) of the present article, provides the Centrale des Risques with the tables of loans it grants with the financing of the banks, marked with the approval of the latter. The tables are the following: - A table including the balances of new loans, organized according to Form No ARO A detailed table for every new loan, organized according to Form ARO A table including the balances of used loans, organized according to Form ARO The statutory reserve discount for new loans begins, starting Monday, eight days following the week on which the statement was submitted. The statutory reserve discount for previously stated loans begins on Monday, directly following the week of statement. 5- The value of statutory reserve discounts is set in proportion to the overall stated balances or to the overall balances related to settlement tables, depending which balances are less. 6- The statutory reserve is discounted within the ceiling set in item (2), Article 3 of the present decision, according to the following: a- 100% of balances: - Loans granted in LBP directly to the Public Housing Institute. 90

92 - Small loans granted in LBP with the approval of micro-lending institutions and small loans financed by credits in LBP granted by the concerned bank to these institutions or to the financial institutions. - Loans granted in LBP directly to the housing body of non-conscript military men based on the protocol signed between the banks and the housing body of non-conscript military men, including the housing loans which are granted by the said body to non-conscript military men, which are assigned in favor of the banks. - Loans granted in LBP to pursue the studies in higher education institutions. - Agricultural loans granted in LBP on the basis of the cooperation protocol signed between the banks and the Ministry of Agriculture. - Housing loans granted to the displaced in LBP, based on the cooperation protocol signed between the banks and the Ministry of the Displaced. - Housing loans granted to the judges in LBP, based on the cooperation protocol signed between the banks and the mutual fund of judges. - Housing loans granted in LBP based on the cooperation protocol signed between the banks and the Directorate General of Internal Security Forces. b- 60% of the balances of loans whose debit interests are subsidized and granted in LBP with the guarantee of institutions and funds enlisted in item (8) of the above-mentioned Article 7 and 100% of the balances of loans whose debit interests are not subsidized, granted in LBP with the guarantee of the above-mentioned funds and institutions. c- 80% of the balances of housing loans granted in LBP, based on the protocol signed with the Public Housing Institute, including the guarantee of insurance policies in case of payment by installments to the bank, on the same dates of the loan installments maturity. d- 65% of the balances of loans granted in LBP to the Banque de l Habitat s.a.l. and used to finance housing loans granted by the latter. e- 60% of the balances of loans granted in LBP with the guarantee of Kafalat s.a.l. guarantee of SMEs loans. 91

93 f- 100% of the equivalent in LBP of the balances of housing loans granted by the housing body of nonconscript military men before February 6, 2009, which are assigned in favor of the banks. g- 100% of the balances of loans granted in LBP to the Banque de l Habitat s.a.l. according to the Central Council s decision No 16/26/10, dated August 11, 2010 and used to finance housing loans granted by the latter, provided that the overall value of the loans granted from the banks to the Banque de l Habitat s.a.l., subject of the present paragraph, does not exceed 50 billion LBP, which are not renewable. h- Discount rates set in paragraph 6 of the present decision. 7- The statutory reserve discount stops when the loan turns into a doubtful or a bad debt according to the organizational texts issued by the BDL. 8- The concerned banks shall otherwise the loan - principal, interests, and relevant charges - comes to maturity immediately include, in the loan contract signed with the Public Housing Institute, a condition according to which rent contracts to be signed with lessees shall provide them with the right to acquire rented housing units in return of an approved price upon the conclusion of the contract, taking into consideration, even though partially, the installments paid as rent. 9- The concerned banks shall inform the BDL of any amendment of the ceiling, the maturity, and the settlement schedule of the loan, or of any of its previously stated conditions, except for the loans to the Banque de l Habitat s.a.l., used to finance housing loans granted from the latter. The application is submitted to the Centrale des Risques according to any of the forms set for every category of loans, noted as amended according to the following table: 92

94 Type of Loan Housing loans granted according to the protocol signed with the Public Housing Institute (in LBP) Loans directly granted to the Public Housing Institute (in LBP) to construct buildings for rent for those with limited income Loans granted with a guarantee from Kafalat s.a.l. or from IFC, EIB, OPIC, AFD, or AFESD (in LBP), whose debit interests are not subsidized Housing loans granted in LBP based on cooperation protocols signed with the banks Loans granted to the housing body of non-conscript military men (in LBP) to be used in order to buy real estate, build housing units, and sell them to military men or lend them to the latter for housing purposes Small loans in LBP granted with the approval of micro-lending institutions Small loans in LBP financed with credits granted to micro-lending institutions or to financial institutions Housing loans granted by the housing body of non-conscript military men to military men before February 6, 2009, which were assigned in favor of the banks Loans granted in LBP to pursue the studies in higher education institutions Agricultural loans granted in LBP according to the cooperation protocol signed between the banks and the Ministry of Agriculture Environmentally friendly loans the value of each not exceeding thirty million LBP, whose debit interests are not subsidized, set in paragraph 6 of the present decision Upon submission of the amendment application, the following form should be adopted: ARO-05 ARO-07 ARO-09 ARO-11 ARO-13 ARO-18 ARO-20 ARO-23 ARO-27 ARO-35 ARO-37 93

95 Are annexed to the above-mentioned application the documents pertaining to the requested amendment and the new settlement schedule according to Form No ARO-17, except for the loan guaranteed by Kafalat s.a.l., whose debit interests are subsidized, in which table PB01 annexed to the application for the amendment of debit interests is adopted. Both tables shall include, according to the case, the signature of the party cautioning, guaranteeing or signing the cooperation protocol with the banks. 10- The Banque de l Habitat s.a.l. shall inform the Centrale des Risques in Banque du Liban of any amendment of the ceiling, the maturity, and the settlement schedule or any of the previously stated conditions of the loan. The application is submitted according to Form ARO-15, to which are annexed the documents pertaining to the requested amendment and the new settlement schedule organized according to Form ARO-17, provided to be approved by the bank which granted the loan to the Banque de l Habitat s.a.l. 11- Every bank granting loans from the categories set in Article 9 and in Paragraph 6 of the present decision assumes the responsibility for the good execution and supervision of the use of the mentioned loans and for their compliance with the objective for which they were granted. Otherwise, the reduction for every loan granted in a way that goes against the provisions of the said article is suspended. The concerned bank is then compelled to settle a compensation, as a penal clause, amounting to 15% of the loan value, in addition to depositing a special reserve equivalent to the statutory reserve reduction rate against this loan for a period equivalent to that during which it benefited from reduction. Article 5: The numbering of paragraph 6 of Basic Decision No 7835 is amended on June 2, 2001, to become paragraph 7. Article 6: The numbering of paragraphs 11, 12, 13, 14, 15, 16, and 17 of Basic Decision No 7835, dated June 2, 2001, is amended to become, respectively, paragraphs 21, 22, 23, 24, 25, 26 and 27. Article 7: Paragraph 6 of Basic Decision No 7835, dated June 2, 2001, whose text is below, is added: Sixth: Discounting statutory reserve and term obligations subject to part of the statutory reserve against the loans granted to environmentally friendly projects. 94

96 Article 8: Are added to Basic Decision No 7835, dated June 2, 2001, Articles 11, 12, 13, 14, 15, 16 and 17, whose texts are the following: Article 11: Are included within the environmentally friendly projects: 1- Energy projects within the National Energy Efficiency and Renewable Energy Action NEEREA 28 comprising Energy Saving Projects and Renewable Energy Projects. 2- Non-energy projects, aiming at: a- Contributing to protecting the environment or downsizing the environmental impact and pollution, as waste management, wastewater treatment, recycling, and green buildings. b- Promoting ecotourism, organic agriculture, tiles installation, stones dressing, and garden design. Loans granted for the above-mentioned projects should fulfill the following conditions: 1- They should be granted to finance new environmentally friendly projects or to finance projects in place to turn them into environmentally friendly projects. 2- The settlement duration of the loan granted to finance a new environmentally friendly project shall not exceed ten years, starting following the expiry of the grace period which varies between six months and four years from the date the loan is granted. 3- The duration of the loan granted to finance the development of a project in place to turn it into an environmentally friendly project shall not exceed ten years, including the grace period which varies between six months and two years, starting from the date on which the loan is granted. 4- The loan shall not be fully or partially settled before maturity unless following the prior consent of Banque du Liban. Article 12: 28 NEERA was set up due to the joint efforts of the Banque du Liban and the United Nations Development Program (UNDP). 95

97 -Concerning the environmentally friendly loans whose value each does not exceed thirty million LBP or the equivalent in foreign currencies: It is necessary to obtain the approval of the Central Council of the Banque du Liban over the overall amount to be invested in these loans. -Concerning the environmentally friendly loans whose value each exceeds thirty million LBP or the equivalent in foreign currencies: It is necessary to obtain an individual consent from the Governor of the Banque du Liban to benefit from the provisions of the present decision. To this end, the application is submitted to the Financing Unit at the Banque du Liban in three copies, one of them being original, comprising the following documents: 1- The loan contract duly signed between the borrower and the donor bank, clearly and explicitly stating the objective of the loan. 2- A table showing the movement of withdrawing and settling the loan up till the date of final maturity. 3- For the energy projects the client wants to be rated as environmental: a- A report from a specialized engineering office (consultant) showing in detail the environmental costs and the availability of environmental conditions according to documents which prove the adopted standards and the execution plan based on a set and clear timeline and showing the level of environmental rating the project may obtain by an internationally recognized rating agency. b- A document proving that the borrower did the registration to obtain an environmental rating at the Leadership in Energy & Environmental Design (LEED) 29 or at an internationally approved rating agency. 29 LEED (Leadership in Energy & Environmental Design (LEED)) is an internationally acknowledged rating system of green buildings, affiliated to the US Green Building Council, which provides an independent rating to any building which was designed or built in order to save energy and the effective use of drinking water, reduce CO2 emissions and improve the internal environment of the building, and delivers a certificate in this regard. 96

98 c- A document proving that a Commissioning Agent who ensures the availability of conditions in the achieved works and who may be the Consultant Office of the Project is appointed according to the following conditions: -He shall be independent from the party executing the project. -He shall have sufficient experience proving that he has performed similar tasks for projects of the same size and with similar administrative and technical complexities, at least. -His tasks should be set in details and in written before the start of the execution of the project up till its completion. d- The Technical Investigation Report from LCEC 30, for the party in charge of saving energy thanks to environmentally friendly projects. 4- For projects for which the client does not have the intention to obtain an environmental rating: a- Report of the Consultant designated for the project, who performs the tasks of an Energy Service Company (ESCO) and those of post-technical investigation of the project, showing in details the environmental costs and the availability of environmental conditions according to documents proving the adopted standards and the execution plan, based on a set timeline. b- The technical investigation report from LCEC, for the party in charge of saving energy thanks to environmentally friendly projects. c- The technical investigation report of an environmental expert for waste management, water waste management and recycling projects. 30 The Lebanese Center for Energy Conservation (LCEC) is the financial center for energy saving, which makes sure of the technicality of the projects, located at the Ministry of Energy and Water Resources. 97

99 Article 13: The statutory reserve of any bank is reduced against the loans granted to finance environmentally friendly projects, according to the discount conditions set in present decision, as follows: a- For loans in LBP, whose debit interests are not subsidized by the State: 1-100% from the balances of the loans which are granted to finance the environmental part of environmentally friendly projects in the non-energy sector, provided that interests and commissions for these loans of any type whatsoever do not exceed 3% calculated every year, starting from the date on which the loan is put into execution % from the balances of the loans which are granted to finance the environmental part of environmentally friendly projects in the energy sector, provided that interests and commissions of any type whatsoever calculated for these loans do not exceed 3% minus 50% of the return of Lebanese Treasury Bills for one year, calculated every year starting from the date on which the loan is put into execution. b- For the loans in LBP guaranteed by Kafalat SAL Guarantee of Loans for Small and Medium Enterprises, whose debit interests are subsidized by the State: 100% from the balances of loans to finance the environmental part of environmentally friendly projects in the energy sector, which are granted for fifteen years, provided that interests and commissions of any type whatsoever for these loans do not exceed 3%, calculated every year starting from the date on which the loan is put into execution. Article 14: Term obligations subject to part of the statutory reserve are discounted against the loans granted for the financing of environmentally friendly projects according to the discount conditions set in the present decision, as follows: - For loans in foreign currencies whose debit interests are not subsidized by the State: 1-200% of the balances of loans granted to finance the environmental part of environmentally friendly projects in the non-energy sector, provided that interests and commissions of any type whatsoever for these loans do not exceed the cost of funds plus 2%, calculated every year from the date on which the loan is put into execution. 98

100 2-500% of the balances of loans granted to finance the environmental part of environmentally friendly projects in the energy sector, provided that interests and commissions of any type whatsoever for these loans do not exceed the cost of funds plus 2% minus 50% of the return on Lebanese Treasury Bills for one year, calculated every year, starting from the date on which the loan is put into execution. - For the loans whose debit interests are subsidized by the State: 1-200% of the balances of loans granted in LBP or in foreign currencies to finance the environmental part of environmentally friendly projects, provided that interests and commissions of any type whatsoever do not exceed the interest rate on Lebanese Treasury Bills for two years for the loan granted in LBP, the LIBOR rate for three months plus 6% for the loan granted in USD, and the EURIBOR rate for three months plus 6% for the loan granted in Euro, calculated every year starting from the date on which the loan is put into execution % of the balances of the loans, object of the above-mentioned item (1), after the elapse of the seven-year period during which debit interests are subsidized by the State, provided that interests and commissions of any type whatsoever, once the subsidizing period expires, do not exceed the interest rate on the Lebanese Treasury Bills for two years minus 2.5% for the loan granted in LBP, the LIBOR rate for three months plus 2.5% for the loan granted in USD, and the EURIBOR rate for three months plus 2.5% for the loan granted in Euro, calculated every year starting from the date on which the loan is put into execution. Article 15: The environmental part of the loan granted to finance environmentally friendly projects, on the basis of which the statutory reserve is reduced or term obligations subject to part of the statutory reserve are discounted, is calculated according to the following table: Nature of the project Level of rating Environmental part 99

101 New project Existent project Not rated Certified Silver Gold Platinum Rated or nonrated 15% of the value of the project 15% of the value of the project 25% of the value of the project 35% of the value of the project 45% of the value of the project Environmental Cost The real estate value is not calculated within the value of the project upon calculating the environmental part of the project according to the rates set in the above-mentioned table. The rating of the Leadership in Energy & Environmental Design (LEED) or that of an equivalent internationally recognized rating institution or agency is adopted. Article 16: Concerned banks shall obtain the consent of the Banque du Liban over any amendment of the loan, the value of which exceeds thirty million LBP or the equivalent in foreign currencies, granted to the financing of environmentally friendly projects, of the maturity, the ceiling, the currency or the settlement table of loan. They shall also notify the Banque du Liban of any other amendments on the loan. Article 17: The Banque du Liban, in cooperation with the European Union, offers a grant to subsidize loans whose value does not exceed / / LBP or the equivalent in foreign currencies, granted to finance small and medium-enterprises to finance environmentally friendly projects in the energy sector, the maturity of which not exceeding ten years: 100

102 1- By 15% of the value of the loan granted to non-productive sectors, whose debit interests are not subsidized by the Lebanese State. 2- By 5% of the value of the loan granted to productive sectors, whose debit interests are subsidized by the Lebanese State. The Banque du Liban earmarks, upon request, the value of the grant for the concerned project following the technical investigation of the project performed by a specialized institution. The amounts allocated to the project are disbursed through the bank, provider of the loan, upon a request submitted following the completion of the works pertaining to saving energy, renewable energy, and green buildings, based on documents proving the good execution of these works. Article 18: The statutory reserve of any bank is reduced by 150% of the balances of loans granted to finance the purchasing of solar water heating systems, provided that the interest equals 0% and that the overall purchasing value is settled in monthly installments extending over five years. The Ministry of Energy and Water Resources, in cooperation with the Banque du Liban, offers to the concerned bank a grant of 200 USD (two hundred American Dollars), to be settled once the loan is granted and is allocated to settle the last installments, provided that the supplier is among the companies specialized in selling and installing solar water heating systems and approved by LCEC. Article 19: In case the final rating of the environmentally friendly project in the energy sector upon the completion of the execution is less than the rating on the basis of which the loan is granted upon the start of the project, the concerned bank is compelled, upon the first request of the Banque du Liban, to settle a compensation, as a penal clause, equal to the one-year interest rate on Lebanese Treasury Bills, over the difference resulting from the rating difference, in the value on the basis of which is calculated the statutory reserve reduction or the discount of term obligations subject to part of the statutory reserve, which is calculated from the date of signature of the contract and for a period equal to that during which it benefited from reduction. 101

103 Article 20: Islamic banks undertaking operations to finance environmentally friendly projects, when applicable, may benefit from the provisions of Paragraph 6 of the present decision, provided that the return for every contract is calculated according to a set rate equivalent to the interests applied to the loans, object of the mentioned paragraph 6, calculated on the date on which the contract was signed. Article 9: The texts of Forms RO-11, ARO-01, ARO-02, ARO-09, ARO-10, ARO-17, ARO-25, and ARO-26 annexed to Basic Decision No 7835, dated June 2, 2001, are cancelled and replaced by the new texts of the mentioned forms which are annexed to the present decision. Article 10: The Form ARO-37 annexed to the present decision is added to Basic Decision No 7835, dated June 2, Article 11: The present decision enters into force on Thursday, two weeks following the date of its promulgation. Article 12: The present decision is published in the Official Gazette. Beirut, on November 25, 2010 The Governor of the Banque du Liban Riad Toufic SALAMEH 102

104 Banque du Liban Form No: RO-11(1/5) Directorate of Economic Statistics and Research Obligations in LBP subject to the statutory reserve Average between and Name of the Bank: No: Thousand LBP Number of account in the position of banks (Form 2010) Obligations upon request Term obligations Total Issuing institutions / Non-resident (20280) (20380) (20580) (20841) (20842) (20871) (20895) Banks / Non-resident - Minus: Non-due interests Mid- and long-term credit banks/resident and non-resident - Minus: Non-due interests Other registered financial institutions/resident and non-resident - Minus: Non-due interests Deposits of Clients / Resident and non-resident - Minus: Housing borrowing/saving program accounts (1) - Minus: Deposits of the housing body of non-conscript military men (1) - Minus: Guarantees of documentary credits for import (1) - Minus: Non-due interests Deposits originating from fiduciary contracts/resident and nonresident (20980) Deposits of the public sector/resident and non-resident - Minus: Non-due interests Repayable values/for residents and non-residents Various creditors, Private sector/residents and non-residents 103

105 21300 (21325) (21330) (21350) (21730) Partners/Residents and non-residents - Minus: Non-due interests - Minus: Monetary benefits as a guarantee to doubtful debts (1) - Minus: Deposits to increase shareholders equities (1) Loans based on bonds/from residents and non-residents - Minus: Non-due interests (1) Foreign branches (23180) Mother institution, resident and non-resident sister and affiliated financial institutions, except for resident commercial banks - Minus: Non-due interests Out of which: Certificates of deposit and banking certificates sold to other than resident commercial banks (23380) (23780) (23880) Registered exchange institutions/resident and non-resident - Minus: Non-due interest Intermediation institutions/resident and non-resident - Minus: Non-due interests Leasing institutions/resident and non-resident - Minus: Non-due interests Total of obligations in thousand LBP (1) Accounts No 20841, 20842, 20871, and are discounted from term obligations. 104

106 Banque du Liban Form No: RO-11(2/5) Name of the Bank: No: Position closed on Wednesday on: Authorized reductions from term obligations in LBP From term obligations (thousand of LBP) a-balances of mid- and long-term loans -Code a1: Mid- and long-term loans for productive sectors not mentioned below -Code a2: Housing loans -Code a3: Loans whose interests are subsidized, not mentioned below -Code a31: Loans granted based on the convention signed between the Republic of Lebanon and the European Investment Bank, whose interests are subsidized -Code a32: Loans granted and financed by AFESD, AFD, OPIC, EIB, and IFC, whose interests are subsidized -Code a33: Loans granted in foreign currencies against a guarantee from AFESD, AFD, OPIC, EIB, and IFC, whose interests are subsidized -Code a34: Loans allocated to finance the needs of the operational capital of tourist institutions, whose interests are subsidized -Code a0: Loans for productive sectors, which have become within the postponed maturity period and whose interests are no more subsidized -Code a4: Loans granted in foreign currencies against a guarantee from Kafalat, whose interests are not subsidized -Code a5: Loans granted in foreign currencies against a guarantee from Kafalat, whose interests are subsidized -Code a8: Loans financed by AFESD, AFD, OPIC, EIB, and IFC, whose interests are not subsidized -Code a9: Loans granted in foreign currencies against a guarantee from AFESD, AFD, OPIC, EIB, and IFC, whose interests are not subsidized b-bonds and debt instruments -Code b1: Bonds approved by the BDL, within the purchasing price limits -Code b2: Purchased debt instruments in foreign currencies and credits granted to financial institutions and collective investment institutions to be exclusively used to buy debt instruments in foreign currencies 105

107 Code b21: Debt instruments from the public sector and relevant credits Code b22: Debt instruments from the private sector and relevant credits -Code b3: Debt instruments issued by the private sector and benefiting from discounts Total of balances of loans, bonds and instruments benefiting from the reduction of term obligations (a+b) 106

108 Banque du Liban Form No: RO-11(3/5) Name of the Bank: No: Position closed on Wednesday on: Authorized reductions from term obligations in LBP From term obligations (thousand of LBP) c-loans granted in foreign currencies, benefiting from the reduction of term obligations by 200% of their balances -Code a35: Loans granted to finance environmentally friendly projects, whose interests are subsidized -Code a11: Loans granted in foreign currencies to finance environmentally friendly projects in the nonenergy sector, whose interests are not subsidized -Code a19: Balances of loans granted in foreign currencies to productive sectors not mentioned below, benefiting from the incentives of Code a29: Balances of housing loans granted in foreign currencies, benefiting from the incentives of Code a49: Balances of loans granted in foreign currencies against a guarantee from Kafalat, whose interests are not subsidized and benefiting from the incentives of Code a89: Balances of granted loans financed by AFESD, AFD, OPIC, EIB, and IFC, whose interests are not subsidized and benefiting from the incentives of Code a99: Balances of loans granted in foreign currencies against a guarantee from AFD, OPIC, EIB, IFC, and AFESD, whose interests are not subsidized and benefiting from the incentives of Code v09: Balances of other loans granted in foreign currencies, benefiting from the incentives of 2009 Total of balances of loans benefiting from the reduction of term obligations by 200% from their balances (c) d-loans granted in foreign currencies, benefiting from the reduction of term obligations by 500% of their balances -Code a12: Loans granted in foreign currencies to finance environmentally friendly projects in the energy sector, whose interests are not subsidized -Code a13: Loans granted to finance environmentally friendly projects once the interests are no more subsidized Total of balances of loans benefiting from the reduction of term obligations by 500% of their balances Total of reductions from term obligations (d) ((a+b) + (cx2)) + (dx5) 107

109 108

110 Banque du Liban Form No: RO-11(4/5) Name of the Bank: No: Position closed on Wednesday on: Authorized discounts from the statutory reserve (1) Thousand of LBP e-balances of loans not benefiting from the incentives of Code p: Housing loans granted in LBP, based on the protocol signed with the Public Housing Institute -Code q1: Loans granted in LBP against a guarantee from Kafalat, whose debit interests are not subsidized -Code q2: Loans granted in LBP against a guarantee from Kafalat, whose debit interests are subsidized -Code q3: Loans granted in LBP to finance environmentally friendly projects in the energy sector against a guarantee from Kafalat, whose debit interests are subsidized -Code r: Loans granted in LBP against a guarantee from AFESD, AFD, OIC, EIB, and IFC, whose interests are subsidized -Code i: Housing loans financed by credits granted in LBP to the Banque de l Habitat -Code s: Loans granted in LBP directly to the Public Housing Institute -Code m1: Housing loans granted in LBP, based on the protocol signed with the housing body of non-conscript military men -Code m2: Loans granted in LBP directly to the housing body of non-conscript military men -Code m3: Loans granted by the housing body of non-conscript military men, before February 6, 2009, and assigned in favor of the bank -Code h1: Small loans in LBP granted with the approval of the micro-lending institutions -Code h21: Small loans in LBP financed by the credits granted to micro-lending institutions -Code h22: Small loans in LBP financed by the credits granted to financial institutions -Code t: Loans granted in LBP against a guarantee from AFESD, AFD, OPIC, EIB, and IFC, whose interests are not subsidized -Code u: Loans granted in LBP to follow up the studies in higher education institutions -Code ev1: Loans granted in LBP to finance environmentally friendly projects in the non-energy sector, whose interests are not subsidized -Code ev2: Loans granted in LBP to finance environmentally friendly projects in the energy sector, whose interests are not subsidized 109

111 -Code ag: Agricultural loans granted in LBP, based on the protocol signed with the Ministry of Agriculture -Code dp: Housing loans granted in LBP, based on the protocol signed with the Ministry of the Displaced -Code jr: Housing loans granted in LPB, based on the protocol signed with the mutual fund of judges -Code i10: Housing loans financed by loans granted to the Banque de l Habitat, according to the decision of the Central Council No 16/26/10, dated August 11, Code fs: Housing loans granted in LBP, based on the protocol signed with the Directorate General of Internal Security Forces Remark: For the categories of loans not benefiting from the incentives of 2009, the adopted rates of reduction from the statutory reserve are applied as follows: (s+m1+m2+m3+h1+h21+h22+t+u+ev1+ag+dp+jr+i10+fs+q3)+0.6*(q1+q2+r)+0.65*(i)+0.8*(p)+1.5*(ev2) 110

112 Banque du Liban Form No: RO-11(5/5) Name of the Bank: No: Position closed on Wednesday on: Authorized discounts from the statutory reserve (2) Thousand of LBP f- Balances of loans benefiting from the incentives of Code n19: Loans granted in LBP for productive sectors, whose debit interests are not subsidized and not benefiting from the incentives of Code n29: Housing loans granted in LBP, not benefiting from the incentives of Code n09: Other loans granted in LBP, not benefiting from the incentives of Code i09: Housing loans benefiting from the incentives of 2009, financed by credits granted in LBP to the Banque de l Habitat Remark: For the categories of loans benefiting from the incentives of 2009, the adopted rates of reduction from the statutory reserve are applied as follows: 0.6*(n19+n29+n09)+0.8*(i09) 111

113 ANNEX 6 : LIST OF LEBANESE SWH COMPANIES 112

114 113

115 114

116 115

117 116

118 117

119 118

120 119

121 120

122 121