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Rob Short Environmental Specialist DBSA 19 th November 2003

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Intermediation of Small-Scale Carbon-Financed Clean Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects. Rob Short Environmental Specialist DBSA 19 th November 2003. Presentation Contents. Introduction to the DBSA Background Experiences Barriers

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rob short environmental specialist dbsa 19 th november 2003

Intermediation of Small-Scale Carbon-Financed Clean Infrastructure Projects – The Development Bank of Southern Africa’s Experience and Prospects

Rob Short

Environmental Specialist

DBSA

19th November 2003

presentation contents
Presentation Contents
  • Introduction to the DBSA
  • Background
  • Experiences
  • Barriers
  • Prospects
  • Next Steps
the dbsa
The DBSA
  • Infrastructure DFI.
  • Owned by the South African Government.
  • Mandate to operate in the Southern African Development Community (SADC).
  • Self-capitalised.
  • Key operational units: International Finance Unit, Project Finance Unit (SA) and SA public sector units.
background
Background
  • Signed agreement at the WSSD in 2002.
  • Assist our clients in accessing an additional finance source for their sustainable development objectives.
  • To assist the DBSA in promoting and developing new markets.
  • To enhance our developmental impact.
  • Develop our relationship with the World Bank.
experience to date energy
Experience to date…….Energy
  • Main area of success.
  • Use of biomass to generate energy through the installation of a wood fired boiler (SA – Private).
  • 5MW and 3.9 MW micro-hydro plants (SA – Private).
  • Micro-hydro in Zambia (Private).
  • Financing opportunity for a combined wind and hydro.
  • Discussions around solar water heating.
experience to date waste management
Experience to date…….Waste Management
  • Enormous interest in landfill capture and use.
  • DBSA is currently supporting two feasibility studies with local authorities.
  • Been interest in bagasse but no real progress.
  • The cost of land filling is becoming a significant issue.
  • Discussions with rural local authorities re agricultural residues.
  • Significant interest in composting as part of resource recovery initiatives.
experience to date fuel switching
Experience to date……Fuel Switching
  • Approached re biodiesel (including a sink element).
  • Conversion of diesel generators to natural gas.
experience to date general points
Experience to date…….General Points
  • No energy efficiency projects, though are working with donors in this area.
  • No transport, but is emerging awareness of the opportunity.
  • Have not turned away any CF projects for financing yet…..is early days though.
  • Issue of amount of financing required is a potential problem (tends to be too small).
  • No bundled projects to date.
barriers
Barriers
  • Barriers are more broadly about project development, than just around the supply of financing.
  • ER Price (concerns about losing out on the upside). Wait and see approach.
  • Lack of project development funds for small-scale start-ups, specifically with regard to CF element.
  • Lack of regulatory certainty in terms of CF and also the restructuring of the energy sector.
barriers cont
Barriers (Cont.)
  • Lack of knowledge and capacity (in many areas including the financial sector).
  • Grant mind set.
  • Lack of entrepreneurs (with financial experience) in this sector because of historical and existing institutional set-ups.
  • Need for upfront payments (unrealistic expectations).
  • Energy prices (low income generating ability)
  • Development of PPAs.
  • Perceived lack of support from Government.
addressing the barriers
Addressing the Barriers……
  • Have the benefits of intermediation been proven?
  • Buying down the risk through the provision of project feasibility support.
  • Providing comfort to other financiers through our involvement (depth of due diligence and expertise available in house).
  • Other financiers do not want to take whole risk.
  • Shown opportunities in and support for this area which has stimulated activity.
addressing the barriers1
Addressing the Barriers……
  • Internal advocacy for CF (lack of internal familiarity re these projects – risk and project leaders).
  • Building understanding of what should be considered in a contract.
  • Assisting project developers in identifying and mitigating risks upfront (value of local knowledge).
  • Better understanding of potential currency fluctuations and hedging opportunities.
  • In at the beginning of the process.
prospects
Prospects……
  • Confident for a number of reasons.
  • Enabling environment for these projects in SA and the region is about to change for the better.
  • DNA being set up in South Africa. Process beginning in other SADC countries e.g. Mozambique and Zambia.
  • South Africa in the process of finalizing its renewables\clean energy policy (includes a target).
prospects1
Prospects…..
  • Number of key grant processes that will change perceptions of the opportunities that exist i.e. REMT (WB – GEF), SAWEP (UNDP – GEF) and other EU initiatives.
  • South Africa’s (and therefore the region’s) up coming energy “problem” offers opportunities e.g. DSM and energy efficiency.
  • Problems with quality of supply in some areas (promoting idea of “shared benefits”).
prospects2
Prospects…….
  • Support for natural gas in the region offers fuel switching opportunities.
  • The cost of developing and managing landfill space is increasing. Waste minimization is therefore looking more attractive.
  • Opportunities for bundling solar water and energy efficiency projects.
  • Need the first examples.
next steps
Next Steps…….
  • Identifying possibilities in the different categories of small-scale projects to be taken through to implementation. To show their potential and to test different methods of financial structuring.
  • Need to identify bundling opportunities (housing sector?).
  • Work with other funds and banks in the region.
  • Mobilize more project development support internally and externally.
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