Financing Renewable Energy for Village Power Applications

1. APEC Village Power Workshop Hanmer Springs, Canterbury, New Zealand November 7-9, 2004 Financing Renewable Energy for Village Power Applications Grace S. Yeneza Managing Director, Preferred Energy, Inc.

2. Introducing PEI • Filipino non-profit organization committed to the promotion and development of renewable and clean energy resources for power and other applications • Applies innovative and flexible solutions in development of projects, whether commercial or community-based • Uniquely placed in the energy sector, as an organization with both policy and project development experience

3. Our Strategic Concept • Flexibility–Sustainability–Enterprise Development • Thinking “outside the box” has proven to be more effective: • Development company approach • Investments in “high risk” local communities and NGOs • Hand-holding of stakeholders • Extensive consultation and community participation processes • Holistic approach to project development (energy+livelihood) enhances sustainability and increases economic impact • Flexible financing mechanisms and appropriate mix of grant+ loans

4. Financing Challenge • Remoteness of sites • Non-commercial nature of potential business – disperse, low load potential, low capacity to pay • Informal nature of community organizations – no “bankable structure” • Reliance on grants and “dole-outs”

5. PEI’s Village Power Fund Model

6. Specific Objectives • Establish a pilot revolving fund for development and financing of commercially viable/sustainable energy project in remote/off-grid communities; • Assist communities via financing of livelihood and other income-enhancing activities arising or in conjunction with energy project • Attract investors to the business opportunities in off-grid areas either as project sponsors/funders or as eligible project proponents

7. Development Approach • Integration of Energy and Productive Uses to enhance livelihood and income generation in the rural communities. • Capacity-building to allow the people to own and operate their project in a sustainable manner

8. Key Players • A Community/individual local entreprenuer that hasidentified a need and willing to invest own local resources to implement project • An experienced local NGO or similar organization with capacity to assist community in project preparation – highly consultative/participatory – and help implement capacity building/skills training • A Fund Manager knowledgeable and familiar with community-based project development to manage the VPF.

9. Site Selection • Social Acceptability • Resource Availability • Project Viability • Presence of Suitable Local NGO Partner

10. Project Structure • Energy and livelihood from project inception • Project designed for the people and by the people • Clear ownership • Project financed by mix of grants + loan

11. Financing issues and concerns • Right mix of resources and players hard to find/develop • Extensive community preparation required • Enterprise approach not easy to develop among local NGOs • Holistic “energy + livelihood” approach required multiple funding sources • Without “Village Power Fund”, it takes time to pull financing together • With multiple funding source there is problem in terms of control in project implementation. i.e., • donors have diverse rules and standards • donors normally want to individually take credit for a project

12. Some Development PrinciplesWe Have Learned • People know what they need. Consult them. • People have skills and resources. Utilize them. • Ownership is key issue. Define it. • Sustainability is a Must. If people invest, they will make the most of the project. • Enterprise development is key to sustainability. • Communities must be trained to think like entrepreneurs.

13. I L A W (Light) I – ncome generation increased, L– eadership and capabilities enhanced, A– ssets and infrastructure acquired, and a W–ealth of opportunities for social and economic growth “Power to the People”

14. Food for Thought (1) • Community-based projects can be sustainable. PEI has developed a sustainable model that is replicable in other developing countries • Energy + Livelihood structure • Participatory development approach • Flexible financing mechanism

15. Food for Thought (2) • How to scale-up? • Government must provide enabling environment for project developers, NGOs/Private sector, i.e., right mix of incentives, rationalized subsidy policy, information, training, etc. • NGOs, private sector, and other developmental organizations should adopt an enterprise development perspective (if people invest they will value and make the most of the project) • Financing should be made available • For project incubation and implementation • For both energy and productive uses

16. Food for Thought (3) • How to scale-up? • Donor funding will go a long way if channeled to flexible financing mechanisms such as a Village Power Fund managed by experienced fund managers • Donors can agree to have “unified but flexible enough” rules and standards geared toward small-scale application

17. Thank You Preferred Energy Inc. Unit 1703 The Centerpoint Building, Garnet Road cor. Julia Vargas Avenue, Ortigas Center, Pasig City 1605 Philippines Telephone Nos. (632) 631-3078; 635-9688 Fax No. (632) 635-9686 Website: http://www.pei.net.ph Email: pei@pei.net.ph