Commercializing Energy Efficiency Finance

completed

EE projects to be supported by the program include a range of technology upgrades to energy-using facilities across the residential, commercial, industrial, and institutional sectors. These can include lighting, motors, space conditioning (heating and cooling), automated control systems, as well as cogeneration systems that produce electricity from waste heat generated for industrial uses.The program is expected to generate a range of environmental and economic benefits related to the development of the EE industry and a stream of subsequent EE project investments. Specifically, CEEF would: (i) build new capacity in the EE and small and medium enterprises (SME) finance sectors; (ii) support the development of energy service companies; (iii) develop EE investment projects across all sectors; (iv) improve the competitiveness of the Czech, Slovak, Estonian, Latvian, and Lithuanian economies by increasing the energy efficiency of their operations; and (v) improve the local, as well as the global environment, through reduced emissions of greenhouse gases and other conventional pollutants. As a result, CEEF is expected to contribute to the acceleration of the improvements in standards required as part of the EU admission process in these countries. Furthermore, thanks to the program, the above benefits will be realized in a sustainable manner. By creating incentive for local FIs to enter the EE financing market, CEEF would increase the local financial sectors’ experience and capacity to provide EE project finance on an ongoing, and eventually, on an independent basis. Thus the impact of the program is likely to be sustained by market forces after its conclusion. IFC would play an important role in this project through: - Supporting Disadvantaged Sectors. SMEs and the residential sector are expected to be the largest beneficiaries of CEEF, as they comprise the end-user groups generally unable to carry out EE upgrades from their own resources. At the same time, they also face reluctance by the financial sector to extend long term financing for EE investments. - Promoting the Ultimate Commercialization of EE Funding. CEEF is expected to increase the experience and capacity of domestic FIs to provide EE project finance and thus: reduce the gap between perceived and real credit risk in EE finance; contribute to more favorable credit conditions to borrowers; and promote financial innovation in this market. Unlike most other schemes promoting EE financing, the program would be available to several FIs simultaneously, thereby promoting competition in the field and encouraging the development of a variety of specialized niche financial products to meet the needs of energy users in the residential, commercial, industrial and institutional sectors. Projects are financed on fully commercial terms as negotiated between the FI and their borrowers, with a guarantee fee charged by IFC to the FI. Over time, as experience is gained and as more FIs enter this market, FIs are expected to offer not only more EE financing but also to do so on more competitive terms. As they gain sufficient comfort, it is expected that FIs would take on the risk of certain EE project financing without the guarantee support, an “evolution" that has been already observed in the Hungary Energy Efficiency Guarantee Program (HEECP/HEECP2). - Raising awareness. Through its extensive TA program but also through the demonstration effect of projects made possible by the guarantee, CEEF is expected to play an important role in raising awareness in these markets about the viability of EE investments for ESCOs and FIs.