Supporting the Chilean government in developing a NAMA proposal

Supporting NAMA development in Chile

Ecofys webinar

Frauke Roeser 20/02/2014

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Outline

20/02/2014 Frauke Roeser

Introduction to NAMAs

Case Study – Chile Self-supply Renewable Energy

Q&A

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Backdrop

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The evolution of NAMAs in the climate negotiations

> Paragraph 1 (b) (ii) of the Bali Action Plan of 2007: > “ […] Nationally appropriate mitigation actions by developing country Parties

in the context of sustainable development, supported and enabled by technology, financing and capacity building, in a measurable, reportable and verifiable manner.”

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COP 13 Bali

•Bali Action Plan first mentions NAMAs

COP 15 Copenhagen

•NAMA submissions by countries

• „NAMAs to be subject to MRV“

COP 16 Cancun

•NAMA Registry agreed

• „NAMAs aim at achieving deviation from business as usual“

COP 17 Durban

•Guidelines for Biennial Update Reporting (including NAMAs)

COP 19 Warsaw

•NAMA Registry operational

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Key aspects of a NAMA

A NAMA is a voluntary intervention by a developing country government: > Which is in line with national and/or local development

priorities > Which receives support from domestic and/or international

sources > Which has effect on reducing GHG emissions either directly

or indirectly > Which is measurable, reportable and verifiable ("MRVable")

to ensure transparency of the NAMA outcomes


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NAMA Types

> NAMAs can be: – Strategies (e.g. renewable strategy – wind,

solar, tidal) – Policies and Programmes (e.g. energy

efficiency standard, Feed-in tariff, energy efficient lighting programme)

– Projects (e.g. Bus Rapid Transit lane)


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Differences of NAMAs to CDM


Element NAMA CDM* Type of activity - National Strategy

- Policy - Programme - Project

- Individual Project - Aggregation of projects

Funds flow To government To project developer Carbon credits No Yes Sustainable development benefits

Very important (‘nationally appropriate’)

Prerogative of host country

*Clean Development Mechanism

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Global NAMA action

> 87 NAMAs and 37 feasibility studies in 35 countries in the NAMA database > Tracking of global NAMA activity


Source: www.nama-database.org

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State of play of NAMAs

> 40 submissions to the UNFCCC Registry: 36 supported; 4 unilateral > NAMA Database contains 87 NAMAs and 37 studies from 35 countries

Source: www.nama-database.org

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Number of NAMAs

34 68

10

3

6

0 10 20 30 40 50 60 70 80

Concept

Proposal/ Planning

Implementation

Not known Submitted to registry

Not submitted to registry


Regional distribution of NAMAs

> Latin America most active region

– Followed by Africa

– Europe: Serbia submitted 12 NAMAs

> Broader regional spread than CDM

– Africa and Least Developed countries notably larger share

> Possible reasons

– NAMA emphasize sustainable development

– Flexibility in design

CDM

NAMA

Source: http://cdm.unfccc.int/Statistics/Public/CDMinsights/index.html, accessed 15/01/2014

Middle East and Africa,

26%

Asia, 13% Latin America,

50%

Europe, 11%

Africa 2%

Asia Pacific 84%

Econo-mies in tran-sition 1%

Latin America

13%

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http://cdm.unfccc.int/Statistics/Public/CDMinsights/index.html



Sectoral distribution of NAMAs

CDM

NAMA

Source: http://cdm.unfccc.int/Statistics/Public/CDMinsights/index.html, accessed 15/01/2014

Source: Ecofys et al 2013

> Energy supply largest share (36%)

– Followed by transport and buildings

> Broader sectoral coverage than in CDM

– Esp. transport and buildings notably more relevant

> Possible reasons

– Less stringent MRV requirements

– Accounting for medium to long term emission reduction and transformational change possible

Waste 14%

Industry 11%

Forestry 4%

Energy supply 36%

Transport 19%

Agriculture 2%

Buildings 14%

Energy Supply 75%

Agriculture

2.4%

Buildings

1.3%

Waste 11%

Industry 10%

Forestry 0.6%

Transport

0.35%

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NAMA Finance

> New and additional funds agreed: > US$30 bn as fast start finance for 2010 – 2012 > „Mobilize“ US$100bn per annum by 2020 > Establishment of Green Climate Fund (GCF)

> Few NAMAs in implementation > Finance still mainly focussing on readiness activities > Only one dedicated NAMA implementation fund: NAMA Facility of

UK and Germany > Need to provide finance to build confidence

> Public finance likley to be limited > Important role of the private sector

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Outline


Introduction to NAMAs

Case Study – Chile Self-supply Renewable Energy

Q&A

13

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Mitigation Momentum

> Support to the Chilean government through the Mitigation Momentum project – Funded by the German

International Climate Initiative

– Partnership with Energy Reserach Centre of the Netherlands (ECN)


www.mitigationmomentum.org > Counterpart in Chile

– Ministry of Environment – Ministry of Energy – Centre for Renewable Energy (CER)

> Local partner Fundacion Chile

http://www.mitigationmomentum.org/

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Energy context Chile

> Between 2012 and 2020, electricity consumption is projected to increase at a rate around 5.9%

> By 2020 ca. 8000 MW of new generation capacity will be needed to satisfy demand

> Chile relies heavily on hydropower and has almost no indigenous fossil energy resources.


> Recent droughts and environmental challenges have limited the development of hydro projects. There is continued concern over access to competitively priced gas supplies.

> As a result, around half of new capacity under construction is coal

Source: Minsiterio de Energia Chile/ CER:

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> Strong emphasis on non-conventional renewable energy (NRCE) in Chile’s National Energy Strategy

> Law 20.257 sets a target of 10% NRCE by 2024

> New institutions to boost NCRE – the Renewable Energy Centre (CER)

Energy Strategy Chile


Source: Gobierno de Chile, Ministerio de Energia, 2012:

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Promote the incorporation of renewable energy systems for self-supply. All non-conventional renewable energy projects qualify as long as 50% of the generated energy is consumed onsite.

Objective of the NAMA


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Barriers – Renewable energy

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• Payback periods of RE vs. core business investments in the sector

• Banking institutions not accustomed to small-scale RE project finance

• Unwillingness to invest in pre-feasibility studies when outcomes are uncertain

Financial

• Access to qualified installers and consulting companies to deliver projects

• Access to qualilfied technicians to operate and maintain equipment

Capacity

• Lack of understanding of technologies and benefits • Lack of trust Awareness

• Long and difficult process to gain approval for injecting electricity to the grid Regulatory


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NAMA Components


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Levelized cost of energy


> Aim is to lower the Levelized Cost of Energy below or near the retail energy rate while maximizing the leverage of programme funds.

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Financial Component


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Example guarantee fund

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Portfolio loss allocation 80%Total contribution: $10 millionNon recoverable funds (losses): -$6.40 millionYears to depletion: 23 yearsLeverage on non-recoverable funds: 15.63

10.00

Portfolio loss allocation 0%Total contribution: $50 millionLeverage 2.00

Portfolio loss allocation 20%Total contribution: $30 million

Share financingEquity 20%Loans 80%

TermsInt. rate 3.75% DefaultsTenor 15 years Exp.rate 10%

$80 million$100 million

Funds from the commercial financial institution and development bank are used for the actual loans

The guarantee funds are granted and set aside to cover loan defaults. Guarantee funds are invested in a low risk investment like govt. treasuries

Leverage including recoverable funds (worst case scenario):

CORFO+Int. development bank

Commercial Financial Insitution

Projected volume of loansTotal projected investments

NAMA Guarantee Fund

Project loans

Frauke Roeser

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Impacts of the NAMA

> GHG emissions – Impacts depend on size of fund and leverage of financial instruments. Theoretical potential as much as 1.7 million tonnes CO2/e per year

> Job creation – Distributed renewable energy projects will create jobs from installation, ongoing operations and maintenance.

> Market creation – NAMA will enable more suppliers to establish in Chile, lowering costs from cumulative learning effects, reduced regulatory costs and increased competition of suppliers.

> Mitigation capacity – The mitigation capacity of Chile will increase as the RE market expands, financing institutions gain experience with RE project finance and high-skilled workers develop critical skills.


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Outlook

> Chile NAMA is one of five successful NAMAs under the NAMA Facility call in 2013 – Chile: Self-supply Renewable Energy – Costa Rica: Low Carbon Coffee NAMA – Mexico: NAMA for Sustainable New Housing – Colombia: Transit-oriented Development – Indonesia: Sustainable Urban Transport Program Indonesia

> British German NAMA Facility is first dedicated fund for NAMA implementation

> Implementation expected to begin in 2014


Source: nama-facility.org

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What made the NAMA a success?

> Strong government owernship and support > In line with national strategy and priorities > Stakeholder based approach to NAMA design > In depth review of key barriers to mitigation – investment in

renewable energy applications – Mix of interventions to address barriers

> Early engagement with finance sector – Detailed design of finance mechanism

> Concrete, realistic, implementable


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Outline


Background on NAMAs

Case Study - Chile

Q&A

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Thank you!

Ecofys Germany GmbH International Climate Policies Am Karlsbad 11 10785 Berlin Germany Frauke Röser T: +49 (0)30 29773579-32 M: +49 (0)172 200 4129 E: [email protected]


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Financing of NAMAs


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MRV of Self-supply renewable energy NAMA in Chile


Technology

Supporting the Chilean government in developing a NAMA proposal