COMMON MISTAKES MADE BY PROJECT PROPOSERS

Transcription

1 OPERATIONAL PROGRAMMES Biodiversity 1. Arid and Semi -Arid Zone Ecosystems 2. Coastal, Marine, and Freshwater Ecosystems 3. Forest Ecosystems 4. Mountain Ecosystems Climate Change 5. Removal of Barriers to Energy Efficiency and Energy Conservation 6. Promoting the Adoption of Renewable Energy by Removing Barriers and Reducing Implementation Costs 7. Reducing the Long-Term Costs of Low Greenhouse Gas Emitting Energy Technologies International Waters 8. Waterbody-Based Operational Program 9. Integrated Land and Water Multiple Focal Area Operational Program 10. Contaminant -Based Operational Program (cross-cutting issue of land-degradation, primarily desertification/deforestation) COMMON MISTAKES MADE BY PROJECT PROPOSERS Many proposals share the common weaknesses which diminish their chances for approval. Among them are: Failure to identify and quantify project's global benefits (not necessary to quantify for biodiversity). Failure to link the proposed project to the existing framework of national sustainable development and environmental protection. Insufficient attention to the national/regional 'baseline' and failure to raise significant co-financing to bolster the baseline, where needed. Failure to identify the root causes of the problem, and lack of a logical sequence of activities to address these causes at their source. Lack of nexus between the project and GEF focal areas. Failure to ensure full participation of all key stakeholders. Inconsistency with relevant Conventions, or ineligibility under the Conventions. Lack of mechanisms or incentives for sustainability. Inappropriate or unrealistic time frame - either too short or too long. Lack of recognition of poor policy or institutional structure within the country. Inadequate provision for monitoring and evaluation. Failure to document or substantiate scientific claims. Failure to clearly analyze why technology (climate change) or conservation (biodiversity) is not taking place lack of identification of barriers/root causes Failure to link the proposed project activities to removal of these barriers/root causes Assumption that technology demonstration projects will lead to market adoption of technology. Lack of analysis of why technology not widely adopted, especially in scenarios where proof of concept is already established..

2 FUNDING PLATFORMS OF THE GEF Full-size projects. GEF's three implementing agencies (and soon RDBs) work with the operational focal point in each recipient country to develop project ideas that are consistent both with the country's national programs and priorities and with GEF's operational strategy and programs. Regional or global programs and projects may be developed in all countries that endorse the proposed activity. Medium-Sized Projects (MSPs). Grants of less than US$1 million are available through expedited procedures that speed processing and implementation. These medium -sized grants increase GEF's flexibility in programming resources and encourage a wider range of interested parties to propose and develop project concepts. Enabling Activities. Grants for enabling activities help countries to prepare national inventories, strategies, and action plans in cooperation with the Convention on Biological Diversity and the UN Framework Convention on Climate Change. This assistance enables countries to assess biodiversity and climate change challenges from a national perspective, determine the most promising opp ortunities for project development, and subsequently pursue full-scale projects. Project Preparation and Development Facility (PDF). Funding for project preparation is available in three categories or "blocks." Block A grants (up to $25,000) fund the very early stages of project or program identification, and are approved through GEF's implementing agencies. Block B grants (up to $350,000) fund information gathering necessary to complete project proposals and provide necessary supporting documentation. These grants are approved by the GEF CEO, with attention to the GEF operations committee's recommendations. Block C grants (up to $1 million) provide additional financing, where required, for larger projects to complete technical design and feasibility work. Block C grants are normally made available after a project proposal is approved by the GEF Council. Small Grants Program. UNDP administers this project, which offers grants of up to $50,000 to eligible projects. Small and Medium Enterprise (SME) Program. A partnership with the International Finance Corporation (IFC), a World Bank affiliate, the SME program finances projects that demonstrate a positive environmental impact and have basic financial viability, thus promoting private sector investment opportunities in developing countries.

3 PART I - ELIGIBILITY 1. Project name: 2. GEF Implementing Agency: 3. Country or countries in which the project is being implemented: 4. Country eligibility: 5. GEF focal area(s), and/or cross-cutting issues: 6. Operational program/short-term measure: 7. Project linkage to national priorities, action plans, and programs: 8. GEF national operational focal point and date of country endorsement: 9. Project rationale and objectives: 10. Expected outcomes: 11. Planned activities to achieve outcomes: 12. Stakeholders involved in project: PART II - INFORMATION ON BLOCK A PDF ACTIVITIES 13. Activities to be financed by the PDF: 14. Expected outputs and completion dates of the PDF A: 15. Other possible contributors/donors and amounts: 16. Total estimated project budget and information on how costs will be met at PDF A stage: PART III - INFORMATION ON THE APPLICANT INSTITUTION 17. Name: 18. Date of establishment, membership, and leadership: 19. Mandate/terms of reference: 20. Sources of revenue: 21. Recent activities/programs, in particular those relevant to the GEF: PART IV - INFORMATION TO BE COMPLETED BY IMPLEMENTING AGENCY 22. Project identification number: 23 Implementing Agency contact person 24 Project linkage to Implementing Agency program(s):

4 Project Preparation Financing Block A Ceiling for PDF A is $25,000 (document should be approximately 3-4 pages) PDF funds may be available at the very early stages of project development to provide assistance for preparing a project brief. This is an opportunity, not a requirement. It is fully expected that many project briefs will be prepared without GEF project preparation financing. Any project proposer can submit a request for PDF A financing for the purpose of preparing a medium-sized project brief. Project proposers are expected to mobilize some level of cofinancing for project preparation, including in-kind contributions. Requests should be endorsed by the government (by its GEF operational focal point). The Implementing Agency approves Block A PDF financing, and submissions are sent to the GEF Secretariat for information and comments. BLOCK A funding can cover: local consultations, national hearings, and/or workshops to discuss specific project and/or program concepts, including translation into local langauages, where appropriate, and the preparation of background papers that could facilitate discussion; PDF A travel costs for consultants and experts to visit neighboring countries for consultations and discussions on potential transboundary projects; consultancies to develop program and/or project options, including the preparation of terms of reference for feasibility studies, strategy papers, and where possible, the preparation of such papers; (d) Scientific, technical, and environmental reviews of proposed projects to ensure that they warrant further consideration; and (e) Costs of external expertise, as appropriate. Output of block A grants include: project brief; assessment of scientific, technical, environmental, and economic feasibility of the proposed activity, including its relevance for future funding; and preparation of specific documents such as terms of reference for further feasibility work, short strategic notes on programs and policies designed to facilitate in-country discussion, sectoral strategy notes or issues and options papers designed to facilitate informed decision-making in the country.

5 COVER PAGE INFORMATION 1. Country: 2. Focal Area: 3. Operational Programme: 4. Project Title: 5. Total Cost: 6. PDF Request: 7. In-kind contributions: 8. Requesting Agency: 9. Executing Agency: Block: 10. Duration: PDF Block B PROJECT STRUCTURE 11. Project objective: 12. Global significance: 13. Background: 14. Project description: including implementation arrangements 15. Description of proposed PDF activities 16. PDF Block B Outputs: 17. Eligibility 18. National level support 19. Justification Global benefits 20. Timetable Budget Output Activities Estimated Cost (US$)

6 PDF Block B Preparation Guidelines- The ceiling for PDF B is $350,000 (document should be approximately pages) 11. PROJECT OBJECTIVE State in the opening sentences the main objective of the overall project, highlighting its main output(s). The opening summary section must be clear and convincing so as to engage the reviewer from the outset. Avoid lengthy digressions into larger national or regional problems and instead draft pointed statements that detail the global importance of the area in question, underscore the urgency of problems facing the area, and justify the necessity of PDF Block B funding. To the extent possible at the current stage of project development, present the objectives and activities to be included in the proposed GEF project. Final objectives and activities will be concise, measurable, and should progress in a logical sequence. 12. GLOBAL SIGNIFICANCE Discuss the area's local, regional and global importance in terms of biodiversity, climate change, international waters, or ozone depletion. Describe the nature and scope of the problems facing the area in question. 13. BACKGROUND Background: Briefly describe the context of the proposed project including the development activities that have been completed up to the present. Attach a map of the area or region if appropriate. Cite relevant sources. 14. PROJECT DESCRIPTION (description of full GEF project, post PDF-B including implementation arrangements) 15. DESCRIPTION OF PPROPOSED PDF ACTIVITIES Provide a more detailed description of proposed PDF Block B activities consistent with the preparation of a GEF project to address the objectives presented in Section 1. PDF Block B objectives and activities must clearly lead to an endpoint at which time a fully consultative and participatory project development phase is completed and a final GEF Project Brief (S) is ready for submission to the GEF Council, and upon approval, for later implementation. 16. PDF BLOCK B OUTPUTS Succinctly list the planned outputs of PDF Block B activities. The main output is the GEF Project Brief. In addition PDF activities produce outcomes as a result of the project design process that may take the form of strengthened institutional arrangements, mechanisms for consultation and coordination, and methodolog ies for local participation 17. ELIGIBILITY Explain how the proposed GEF project, including all project development activities, satisfy GEF project eligibility criteria as defined in the GEF operational strategies & programmes for each focal area. Discuss as well project eligibility under general GEF criteria including 'global benefits', 'incremental cost', and cost effectiveness (further information on these criteria is available within the operational strategy documents). Other : criteria include a) ratification of correspondig conventions, (or compliance with related international agreements in the cases of "international waters and ozone depletion and b) consideration of technical, 18. NATIONAL LEVEL SUPPORT If significant progress in project development has been made at the national level, describe these activities including information regarding institutional arranfements, national conservation priorities, and planned actions. Detail exaclty what assistance will be offered by counterpart, hostcoun try, executing agencies as part of future GEF -support project development activities. Describe the host country's commitment to development of proposed project by mentioning letters of support and/or requests for GEF assistance signed by heads-of state or ministers (attach such letters of support to the PDF Blpock B proposal, as appropriate). 19. JUSTIFICATION Describe why a PDF Block B grant is necessary within the scope of the larger project proposal. Be very clear as to how the proposed PDF Block B activities will allow for the development of an envisaged GEF project or projects. This clarification up front will help to eliminate any confusion with so called 'Enabling activities' wich are those activities that assist nations in fulfilling their responsiblities under the international conventions and other agreements linked to Gef programming. Quote relevant Convention guidance to justify project intervention. Explain the institutional, cooperation & coordination frameworks. Make a solid argument that will convince the GEFOP and the GEF Council that the proposed project can only be successfully advanced with PDF Block B funding. Re-emphasize the proposed project's national, regional and global importance. (Note: as the section implies, there is a distinct advantage in having a clear and compelling vision of the future GEF project (s) that Block B funds would help to design. If Block B funds are to be used both to identify and design a GEF project(s) then be sure to explain why Block B funding is the most appropriate source of project design support (as opposed to initiating project development with PDF Block A funds for example). 20. TIMETABLE Simply state the month and year that the project development activities are to begin and when they are expected to be completed. Indicate when the GEF project (s) to be generated by PDF activities would be presented to the GEF Council. BUDGET Present a cost table that details expenses to be incurred under PDF Block B by activity. The following headings should be included: PDF Activity, Time Frame (optional), GEF, Government and Other. 'Other' refers to funding from sources such as NGOs, development agencies, etc.

7 OPERATIONAL PROGRAM NUMBER 5 REMOVAL OF BARRIERS TO ENERGY EFFICIENCY AND ENERGY CONSERVATION 5.1 The United Nations Framework Convention on Climate Change (UNFCCC) seeks to stabilize atmospheric greenhouse gas concentrations at levels that would prevent dangerous anthropogenic interference with global climate. The Operational Strategy of the GEF puts initial emphasis, among others, on three Operational Programs that address long-term program priorities of the Convention to mitigate climate change. The first of these deals with the removal of barriers to energy conservation and energy efficiency, as many studies have suggested that institutional, economic, and social barriers delay or inhibit the realization of the large energy saving potential in many sectors and regions. GUIDANCE 5.2 At its first meeting, the Conference of the Parties (CoP) of the UNFCCC asked the GEF, as the interim operating entity of the financial mechanism......to adopt a mixed strategy wherein projects will be selected with a double set of program priorities as described in paragraph 9 of the [GEF] report, that is, if they meet either one of the long-term program priorities or one of the short-term program priorities. 5.3 The CoP also provided the following initial guidance that the GEF, as the interim operating entity of the financial mechanism, should support agreed activities in Parties not included in Annex I to the Convention 1 that: (d) (e) are country driven and in conformity with, and supportive of, national development priorities; are consistent with and supportive of internationally agreed programs of action for sustainable development; transfer technology that is environmentally sound and adapted to suit local conditions; are sustainable and lead to wider application; are cost-effective; 1 When the GEF provides assistance outside the Convention s financial mechanism, it will ensure that such assistance is also fully consistent with the guidance provided by the CoP. 5-1

8 (f) (g) strive to leverage other funds; and mitigate climate change. PROGRAM OBJECTIVE 5.4 The objective of this Operational Program is to reduce the risk of climate change by reducing net greenhouse gas emissions from anthropogenic sources and by protecting and enhancing removal of such gases by sinks. This objective will be achieved by removing barriers to large-scale application, implementation, and dissemination of least-economic cost energy-efficient technologies (whether commercially established or recently developed); and by promoting more efficient energy use. There is high potential for energy efficiency measures in all stages of fuelcycles -- production, transport, and use -- and for energy conservation measures on both the supply side and the demand side. 5.5 To date, the commercially viable application of these measures has been slower than desirable from the perspective of mitigating climate change. It also has been considerably slower than might be expected based upon a prima facie evaluation of relative costs. This lag in their adoption is frequently attributed to the existence of barriers of many types -- any of which can prevent seemingly profitable market transactions from taking place. 5.6 This Operational Program shares with Operational Program Number 6 its design and the programmatic objective of removing barriers to market-oriented transactions. Both of these programs are intended to lay the foundation for increased public and private sector investments that also result in mitigating potential climate change. 5.7 The programmatic benefits will result from the combined effects of the continuous and sustainable implementation of win-win measures following the removal of barriers. These programmatic benefits can be estimated by reductions in greenhouse gas emissions either directly (as compared to what they would have been) in tons of carbon-equivalent emissions averted or indirectly from changes in energy intensities or inter-fuel substitutions in specified sub-sectors. Programmatic benefits also can result from structured learning from projects implemented. The effectiveness of this learning is estimated by more qualitative performance indicators. 5.8 Meeting the overall programmatic objective depends, however, on two key assumptions, which concern scope and replication. The first assumption is that successful outcomes will be achieved in many of the various major market applications 5-2

9 for energy efficiency and conservation measures. The following are major market applications (with specific examples of measures in parentheses): (d) (e) (f) (g) (h) (i) (j) (k) electricity production and distribution (load analysis, better maintenance and instrumentation, boiler and turbine improvements); industrial energy consumption (efficient drives, motors, and improved systems configurations); manufacturing processes in energy-intensive industries (basic materials processing); effective use of energy intensive materials; combined heat and power technologies; coal production, transport, storage, and use (best practice applications); manufacture of more energy-efficient equipment (refrigerators, industrial motors, and lighting systems); energy for rural and agro-processing industries; passive heating and cooling (building regulations and designs); commercial buildings (more efficient lighting and space conditioning); and district heating and cooling (insulation, weatherization, boiler tuning, and controls). 5.9 The second key assumption is that a successful market application in one country will be replicated widely in other countries where the same market applications have significant GHG-reduction potential. Therefore, to the degree possible, the GEF would support the type of barrier-removal mechanisms that are transferable to other countries and would assist with such dissemination of learning and experience. EXPECTED OUTCOMES 5.10 A successful outcome is one where particular least-cost, win-win energy efficiency and energy conservation measures have become financially sustainable in a recipient country market. 5-3

10 5.11 The indicators of overall financial sustainability for energy efficiency and conservation measures will depend on the sub-sector and the barrier-removal measure. One indicator could be market share for energy efficient equipment, and it may be possible to estimate the programmatic cost-effectiveness of GEF measures by the increase in market share resulting from each unit of GEF resources expended One key assumption for getting the desired outcome is that the sum total of the outputs of the various GEF projects and other specific activities will be sufficient to open and sustain the market for particular energy efficiency and conservation measures. In any given market, all the major barriers must be removed for energy conservation and efficiency to be realized on a sustainable basis. The associated risks to cost-effectiveness of GEF operations are the following: Identified barriers are not removed but only surmounted temporarily. To address this risk, the project proposal would attest the sustainability of win-win projects after GEF support has ended, including demonstrations that appropriate cost recovery mechanisms would be established and mainstream financing facilitated. Moreover, projects should take an approach that stresses continuity of institutional capacities developed; Only some of barriers are removed. Achieving program objectives requires removal of several interrelated key barriers. Development assistance experience clearly shows that technology demonstrations by themselves are not sustainable. Provision of hardware alone, while useful for reducing perceived or real uncertainties, will not create the necessary incentives or cost-recovery mechanisms. Hardware should only be provided where technology demonstrations can achieve clear benefits, such as reduced uncertainties over costs, performance, and market acceptance. Demonstrations can help in resolution of institutional issues associated with a new technology, and with the development of a maintenance and service infrastructure. Production capability, access to financing, stakeholder partnerships, information channels, marketing and distribution systems, and institutional capacities are all part of a properly functioning market; Some of the measures identified as barrier removal activities may not in fact be barrier-removal activities. Minimizing the third risk would require more careful scrutiny of the project proposals by the technical reviewers, STAP, and the GEF Secretariat; and 5-4

11 (d) When a demonstration project is executed for a specific business enterprise, conditions for competition may be distorted between this particular enterprise and other enterprises in the same industry. This risk can be minimized by a sufficiently broad specification of the technology and an open bidding process for procurement A major risk to sustaining outcomes, one that is inherent in all of GEF s longterm Operational Programs in climate change, is a fall in international prices of fossil fuels that reduces the economic potential for the supported measures. PROJECT OUTPUTS 5.14 The output of a GEF-supported project in this Operational Program will be the removal of a barrier to a particular type of energy conservation or efficiency measures in a given recipient country market. Some barriers are generic and common to all measures and some will be specific to the sub-sector and application. Some examples of generic barriers and measures to remove them are shown below in Table 1. Not all barriers will be equally important in any given setting, nor will the removal of all of them incur the incremental cost financing that GEF provides The indicators of barrier removal are at the project level and depend on the barrier being removed. For example, a survey may be needed to show that the requisite skills have been transferred, movement in prices relative to economic costs may need to be tracked, or information on measures of credit availability may need to be collected. GEF ACTIVITIES 5.16 GEF activities in this Operational Program will remove identified barriers in a specific market. Some of the more important barriers and mechanisms for their removal are shown in Table 1. In order to increase the cost-effectiveness of GEF operations, country-driven opportunities in each of the market applications listed in paragraph 7 will be initially emphasized where: national communications and or other sources provide information about country priorities and about opportunities in, and barriers to, energy efficiency and conservation; conducive sectoral policies increase the likelihood of sustainability of win-win projects and the wider replicability of barrier removal activities; and 5-5

12 most significant potential for cost-effective opportunities exists GEF assistance will provide more sustainable benefits in those markets where severe energy price and other distortions do not tilt the playing field against energy efficiency and conservation. A macroeconomic and policy environment that allows and encourages fair competition is desirable for removing barriers The activities would be coordinated with past 2, ongoing, and prospective work of the Implementing Agencies (in both their GEF and non-gef capacities) and others to avoid duplication and ensure cost-effectiveness. Project designs and activities should: incorporate and build upon all past activities, including past GEF projects; be mainstreamed with existing Implementing Agency programs; and be coordinated with existing and anticipated bilateral and multilateral technical assistance, targeted research, and investment Table 1 shows several generic barrier-removal measures. Each of these measures require a different mix of the following standard GEF modalities: (d) (e) targeted research (e.g., adaptation to local conditions); capacity building (e.g., financial evaluation); institutional strengthening ( e.g., regulatory framework); investments (e.g., demonstration projects); and training (e.g., to operate, maintain demonstration sites). 2 In particular, UNDP/World Bank ESMAP studies have been conducted for a large array of countries and sectors. 5-6

13 TABLE 1: EXAMPLES OF GENERIC BARRIERS TO ENERGY CONSERVATION AND EFFICIENCY AND OF MEASURES TO OVERCOME THEM. Lack of information GENERIC BARRIER Lack of trained personnel or technical or managerial expertise Below long-run marginal cost pricing and other price distortions Regulatory biases or absence High transaction costs High initial capital costs or Lack of access to credit High user discount rates Mismatch of the incidence of investment costs and energy savings Higher perceived risks of the moreefficient technology MEASURES TO REMOVE BARRIERS Information centers and services; Appliance labeling, consumer information Training programs (e.g., integrated resource planning; analyzing nontraditional projects) Instituting supportive legal, regulatory and policy changes Standards Market development and commercialization; Demand-side management programs; Energy service companies Innovative financing mechanisms Energy service companies Institutional matching of costs and benefits; Energy service companies Technology research, adaptation, and demonstration; and/or performance contracting Each GEF project proposal will show how the above activities would be coordinated and demonstrate the following: assess the economic scope for energy conservation and energy-efficient technologies and programs whose implementation is blocked by barriers; estimate the contribution of the project to reducing greenhouse gases; identify all key barriers, particularly energy pricing distortions; 5-7

14 (d) (e) (f) propose specific measures to remove barriers, specify priorities for those barriers that will be removed with GEF financing, and estimate their costs; demonstrate the sustainability of win-win projects after GEF support has ended, including demonstrations of appropriate cost recovery; and determine how programmatic benefits will be monitored and evaluated One assumption is that these activities are appropriately designed, carried out, and sufficient to remove barriers as an output. The success of the effectiveness of these activities would be monitored by performance indicators appropriate to that activity. Another key assumption is that financing can effectively be used to remove barriers. Despite some experience gained by Implementing Agencies from barrier removal activities in the Pilot Phase, assistance for barrier removal is a newly emphasized endeavor for the GEF and comes with the risk associated with any new endeavor. This risk will be minimized through structured learning from experience. PUBLIC INVOLVEMENT 5.22 One of ten basic operational principles of the GEF is that its projects provide for consultation with, and participation as appropriate of, the beneficiaries and affected groups of people. User participation, therefore, is envisaged for all projects. In many instances, the direct participants in projects in this Operational Program will be industries and parastatal organizations. In projects dealing with energy efficiency in rural areas, public participation of affected beneficiaries will not only be appropriate, but also essential for the success of the project. The GEF Council approved a paper on Public Involvement in GEF-Financed Projects that defines policies for information dissemination, consultation, and stakeholder participation in projects funded by the GEF. RESOURCES 5.23 GEF activities in this Operational Program are expected to take place over about 10 years, although the outcomes will have to be monitored for up to 20 years. The GEF s role is in removing barriers to the widespread dissemination of least-cost energyefficient technologies and practices. While the GEF is available to meet the incremental costs of removing these barriers, other financiers are expected to meet the costs of energy efficiency programs once the barriers have been removed and the markets for energy efficiency and conservation are open. The required GEF resources for this Operational Program are estimated to be in the range of US $ million per year 5-8

15 for the next 5 to 10 years, but further work will be undertaken on the longer term resource requirements. 5-9

16 OPERATIONAL PROGRAM NUMBER 6 PROMOTING THE ADOPTION OF RENEWABLE ENERGY BY REMOVING BARRIERS AND REDUCING IMPLEMENTATION COSTS 6.1 The United Nations Framework Convention on Climate Change (UNFCCC) seeks to stabilize atmospheric greenhouse gas (GHG) concentrations at levels that would prevent dangerous anthropogenic interference with global climate. Clearly, this stabilization will require greatly increased utilization of renewable energy technologies (RETs). In fact, widespread application of RETs offers some of the best prospects for achieving deep reductions in greenhouse gas emissions at the global level over the next century, while satisfying some of the increased demand for commercial energy. The Operational Strategy of the GEF puts initial emphasis, among others, on three Operational Programs that address long-term program priorities of the Convention to mitigate climate change. This, the second of these three Operational Programs, seeks to reduce GHG emissions associated with energy consumption and production through increased use of already commercially viable RETs. GUIDANCE 6.2 At its first meeting, the Conference of the Parties (CoP) of the UNFCCC asked the GEF, as the interim operating entity of the financial mechanism......to adopt a mixed strategy wherein projects will be selected with a double set of program priorities as described in paragraph 9 of the [GEF] report, that is, if they meet either one of the long-term program priorities or one of the short-term program priorities. 6.3 The CoP also provided the following initial guidance that the GEF, as the interim operating entity of the financial mechanism of the Convention, should support agreed activities in Parties not included in Annex I to the Convention 1 that: are country driven and in conformity with, and supportive of, national development priorities; are consistent with and supportive of internationally agreed programs of action for sustainable development; 1 When the GEF provides assistance outside the Convention s financial mechanism, it will ensure that such assistance is also fully consistent with the guidance provided by the CoP. 6-1

17 (d) (e) (f) (g) transfer technology that is environmentally sound and adapted to suit local conditions; are sustainable and lead to wider application; are cost-effective; strive to leverage other funds; and mitigate climate change. PROGRAM OBJECTIVES 6.4 The objectives of this Operational Program are to: remove the barriers to the use of commercial or near-commercial RETs; and reduce any additional implementation costs for RETs that result from a lack of practical experience, initial low volume markets, or from the dispersed nature of applications, such that economically profitable winwin transactions and activities increase the deployment of RETs. 6.5 Many applications of RETs already have become lower-cost options than fossilfuel alternatives, or would be if implementation costs could be lowered by technology transfer or sharing of practical experience and by market development. This means that these renewable energy options can be deployed profitably today in a wide-range of applications, particularly those in remote and rural areas where demand densities do not justify electrical grid extension. 6.6 To date, the adoption of these technologies in commercially viable applications has been slower than desirable from the perspective of mitigating climate change. It also has been considerably slower than might be expected based upon technology development and a prima facie evaluation of relative costs. This lag in the adoption of RETs is frequently attributed to the existence of barriers of many types -- all of which can prevent seemingly profitable market transactions from taking place. 6.7 This Operational Program shares with Operational Program Number 5 its design and the programmatic objective of removing barriers to market-oriented transactions. Both of these programs are intended to lay the foundation for increased 6-2

18 public and private sector investments that also result in mitigating potential climate change. 6.8 In some applications and resource conditions, RETs are not yet cost-competitive with conventional energy supplies. These cases are the objective of GEF Operational Program 7, Reducing the Long-Term Costs of Low Greenhouse Gas-emitting Energy Technologies. 6.9 The programmatic global benefits will result from the combined effects of the continuous and sustainable deployment of RETs in a specific market following the removal of barriers. These benefits can be estimated by the reductions in greenhouse gas emissions that were averted as a result of this deployment. Programmatic benefits also can result from structured learning. The effectiveness of this learning is estimated by more qualitative performance indicators. Meeting the overall programmatic objectives depends however on two key assumptions, which concern scope and replication. Scope 6.10 The first assumption is that successful outcomes will be achieved in many of the various major market applications for RETs. A market application is defined by both the economic sector (for example, households, agriculture, commercial buildings, industries, etc.) and a specific RET. Some RETs will be more appropriately applied in certain economic sectors rather than others. Initially, the following seven market applications of RETs in specified economic sectors will offer opportunities for costcompetitive renewable energy and GHG emissions reduction, as identified both by scientific studies and by practical experience: (d) (e) (f) wind pumps for mechanical water pumping for agriculture and domestic water supply; low-temperature solar thermal heat for household and agricultural sectors; biomass and geothermal heat, including combined heat and power, and use of urban and industrial wastes for process heat and district heating; wind, biomass, photovoltaics, small-scale hydro, and other renewable energy for rural electricity supply; renewable energy for grid-connected electricity (e.g., wind farms); storage systems (e.g., batteries) for cost-effective but intermittent renewable energy supplies; and 6-3

19 (g) biogas digesters for lighting and water pumping (family-size digesters for home lighting and cooking; community-size digesters coupled with engines and electric generators for water pumping, lighting, and village power needs) This program, however, will maintain flexibility to consider new applications, as the commercial range will increase over time as technology costs fall further. Replication 6.12 The second key assumption is that a successful market application in one country will be replicated widely in other countries where the same RET market applications have significant GHG-reduction potential. Therefore, to the degree possible, the designs of the mechanisms chosen to remove barriers should be replicable to other markets. EXPECTED OUTCOMES 6.13 A successful outcome is one where particular least-cost, win-win renewable technologies have become financially sustainable in a recipient country market The indicators of overall financial sustainability of renewable energy technologies will depend on the sub-sector and the barrier-removal measure. One indicator could be market share for a renewable energy technology in a specified application and it may therefore be possible to estimate the programmatic costeffectiveness of GEF measures by the increase in market share resulting from each unit of GEF resources expended One key assumption for getting the desired outcome is that the sum of the outputs of the various GEF projects and other specific activities will be sufficient to open and sustain the market for particular renewable energy technology application. In any given market, all the major barriers must be removed for RETs to be available on a sustainable basis. The associated risks to cost-effectiveness of GEF operations are the following: identified barriers are not removed but only surmounted temporarily. To address this risk, the project proposal would attest the sustainability of win-win projects after GEF support has ended, including demonstrations that appropriate cost recovery mechanisms would be established and mainstream financing facilitated. Moreover, projects 6-4

20 should take an approach that stresses continuity of institutional capacities developed; (d) only some barriers are removed. Achieving program objectives requires removal of several interrelated key barriers. Development assistance experience clearly shows that technology demonstrations by themselves are not sustainable. Provision of hardware alone, while useful for reducing perceived or real uncertainties, will not create the necessary incentives or cost-recovery mechanisms. Hardware should only be provided where technology demonstrations can achieve clear benefits, such as reduced uncertainties over costs, performance, and market acceptance. Demonstrations can help in resolution of institutional issues associated with a new technology, and with the development of a maintenance and service infrastructure. Production capability, access to financing, stakeholder partnerships, information channels, marketing and distribution systems, and institutional capacities are all parts of a properly functioning market; some of the measures identified as barrier removal activities may not in fact be barrier-removal activities. Minimizing the third risk would require more careful scrutiny of the project proposals by the technical reviewers, STAP, and the GEF Secretariat; and when a demonstration project is executed for a specific business enterprise, conditions for competition may be distorted between this particular enterprise and other enterprises in the same industry. This risk can be minimized by a sufficiently broad specification of the technology and an open bidding process for procurement A major risk to sustaining outcomes, one that is inherent in all of the GEF s longterm Operational Programs in climate change, is a fall in international prices of fossil fuels that reduces the economic potential for the supported measures. PROJECT OUTPUTS 6.17 The output of a GEF-supported project in this Operational Program will be the removal of a barrier to a particular renewable energy application, possibly a barrier resulting from high implementation costs. Not all barriers will be equally important in a given setting nor will the removal of all of them incur the incremental cost financing that the GEF provides. 6-5

21 6.18 The indicators of barrier removal are at the project level and depend on the barrier being removed. For example, a survey may be needed to show that the requisite skills have been transferred, movement in prices relative to economic costs may need to be tracked, or information on measures of credit availability may need to be collected. GEF ACTIVITIES 6.19 GEF activities in this Operational Program will remove identified barriers to and reduce implementation costs of renewable energy technologies in a specific market. There are many mechanisms that can be implemented to remove specific barriers or clusters of barriers to renewable energy, depending upon the market and the specific identified barriers in the local context. Often these mechanisms work in tandem such that a combination of factors ultimately leads to real investments. Mechanisms will vary greatly depending upon the technology in question and also must be tailored to the specific social, political, economic, and institutional contexts in each country or region In order to increase the cost-effectiveness of GEF operations, country-driven opportunities in each of the RET applications listed in paragraph 9 will be initially emphasized where: national communications and or other sources provide information about country priorities and about opportunities in, and barriers to, renewable energy; conducive sectoral policies increase the likelihood of sustainability of win-win projects and the wider replicability of barrier removal activities; and most significant potential for cost-effective RET applications exists GEF assistance will provide more sustainable benefits in those markets where severe energy price and other distortions do not tilt the playing field against RETs. A macroeconomic and policy environment that allows and encourages fair competition is desirable for removing barriers to renewable energy. Renewable energy technologies should not be penalized by special taxes or by subsidies provided to competing fossil technologies. Regulations allowing for independent power producers are also helpful GEF activities would be coordinated with past, ongoing, and prospective work of the Implementing Agencies (in both their GEF and non-gef capacities) and others to avoid duplication and ensure cost-effectiveness. Project designs and activities should: 6-6

22 build upon GEF experience and projects; be consistent and mainstreamed with existing implementing agency programs; and build upon other bilateral and multilateral technical assistance and investment activities In preparing projects, implementing agencies can draw upon existing GEF experience, as well as implementing agency research studies and project preparation activities. In particular, UNDP/World Bank ESMAP studies are relevant to understanding markets for renewable energy in a large array of countries. The generic barriers to the adoption of renewable energy are similar to the barriers to energy efficiency and conservation that are listed in Table 1 of Operational Program number 5. Each barrier removal measure would require a different mix of the following standard GEF modalities: (d) (e) targeted research (resource endowment, adaptation to suit local conditions); capacity building (e.g., in financial evaluations); institutional strengthening (e.g., in establishing a regulatory framework); investments (demonstration projects); and training (to operate and maintain demonstration sites) Each project proposal in this Operational Program would show how activities of the Implementing Agencies would be coordinated and: assess the economic scope in specified markets for win-win renewable energy projects on the basis of renewable energy resource data and cost data for the RET and the alternatives; estimate the contribution that fulfilling the full scope of the project would make to mitigating greenhouse gases; identify all key barriers, including high implementation costs and energy price distortions; 6-7

23 (d) estimate the extent to which barriers hamper cost-effective implementation; (e) (f) (g) propose specific measures to remove barriers, specify priorities for those barriers that will be removed with GEF financing and estimate their costs; demonstrate appropriate cost recovery and hence sustainability after GEF support for removing barriers and reducing implementation costs has ended; and determine how the programmatic benefits will be monitored and evaluated The effectiveness of particular activities in capacity building, institutional strengthening, information dissemination, etc., would be monitored by performance indicators appropriate to that activity (project completion reports, use of best practices, and of efficient use of resources) Another key assumption is that money can effectively be spent to remove barriers. Despite some experience gained by the Implementing Agencies from barrier removal activities in the pilot phase, assistance for barrier removal is a newly emphasized endeavor for the GEF and comes with the risk associated with any new endeavor. This risk will be minimized through structured learning from experience. PUBLIC INVOLVEMENT 6.27 It is one of ten basic operational principles for the GEF that its projects will provide for consultation with, and participation as appropriate of, the beneficiaries and affected groups of people. For instance, the development of micro-grids, whatever their primary source of energy, requires a significant level of community consensus and support regarding such factors as billing, service, and organization. Local participation is a key ingredient in the design of such isolated systems, in their implementation, and in their day-to-day operation. The forms and degree of participation will vary; some technologies may require communities to act in concert, as with small-scale community energy systems, while other technologies require participation of electric utility companies, large industrial enterprises or agricultural interests, or professionals like architects. The GEF Council approved a paper on Public Involvement in GEF-financed Projects that defines the procedures for information dissemination, consultation, and stakeholder participation in projects funded by the GEF. 6-8

24 RESOURCES 6.28 A barrier removal project typically takes three or more years to implement, and its resource requirements will depend mainly on the technology but also on the market and the particular barriers to be removed. In this Operational Program, initial activities are expected to be financed over a period of 10 years or more, with outcomes monitored for up to 20 years. The GEF s role is in removing barriers to the widespread dissemination of least-cost renewable energy technologies. While the GEF is available to meet the incremental costs of removing these barriers, other financiers are expected to meet the costs of renewable energy programs once the barriers have been removed and the markets for RETs are open. The required GEF resources for this Operational Program are estimated to be in the range of US $ 100 to 150 million per year for the next 5 to 10 years, but further work will be undertaken on the longer term resource requirements. 6-9

25 OPERATIONAL PROGRAM NUMBER 7 REDUCING THE LONG-TERM COSTS OF LOW GREENHOUSE GAS-EMITTING ENERGY TECHNOLOGIES 7.1 The United Nations Framework Convention on Climate Change (UNFCCC) seeks to stabilize atmospheric greenhouse gas concentrations at levels that would prevent dangerous anthropogenic interference with global climate. Clearly, this stabilization will require greatly increased utilization of renewable energy technologies (RETs). In fact, widespread application of RETs offers some of the best prospects for achieving deep reductions in greenhouse gas emissions at the global level over the next century while satisfying some of the increased demand for commercial energy. The Operational Strategy of the GEF puts initial emphasis, among others, on three Operational Programs that address long-term program priorities of the Convention to mitigate climate change. This, the third of these, deals with the reduction of the longterm costs of low greenhouse gas-emitting energy technologies. GUIDANCE 7.2 At its first meeting, the Conference of the Parties (CoP) of the UNFCCC asked the GEF, as the interim operating entity of the financial mechanism......to adopt a mixed strategy wherein projects will be selected with a double set of program priorities as described in paragraph 9 of the [GEF] report, that is, if they meet either one of the long-term program priorities or one of the short-term program priorities. 7.3 The CoP also provided the following initial guidance that the GEF, as the interim operating entity of the financial mechanism of the Convention, should support agreed activities in Parties not included in Annex I to the Convention 1 that: are country driven and in conformity with, and supportive of, national development priorities; are consistent with and supportive of internationally agreed programs of action for sustainable development; transfer technology that is environmentally sound and adapted to suit local conditions; 1 When the GEF provides assistance outside the Convention s financial mechanism, it will ensure that such assistance is also fully consistent with the guidance provided by the CoP. 7-1