ADDRESSING CHALLENGES FOR GREEN ENERGY AND CARBON MARKET DEVELOPMENT Presented to

1. ADDRESSING CHALLENGES FOR GREEN ENERGY AND CARBON MARKET DEVELOPMENT Presented to The High Level Workshop on Public Private Partnerships Implementation in the Energy Sector in Africa: Challenges, Best Practices and New Trends Lloyd Chingambo Africa Carbon Credit Exchange Addis Ababa | Ethiopia June 30 – 1 July, 2011

2. Outline • Review challenges facing attempts at developing Green Economies in Africa • Identify renewable energy projects that could address the energy needs of Africa • Propose Financing Mechanisms and Solutions • High some attempts being made to develop a Green Economy in a rural setting in Zambia.

3. Challenges facing attempts at developing Green Economies in Africa Africa Carbon Credit Exchange Telephone: +260-1-238473/2 www.africACCE.com

4. Africa’s Challenges in the Energy Sector • In the majority of African countries, most of the rural areas are not served by the national grid, and this scenario is not likely to change in a long time • In most African countries financial resources are severely limited, they are therefore unable to develop infrastructure including energy • Most of the African countries are heavily dependent on external Development Aid for social and economic programmes instead of relying on internal financial resources • Most African countries do not sufficiently leverage external resources to support infrastructure and energy projects.

5. Africa’s Challenges in Energy Sector, Cont/… • Most countries have inadequate policy infrastructure in the: • Energy Sector • Financial Sector • Infrastructure, etc. • There is disconnect between Public and Private Sector objectives that needs to be bridged for Public Private Partnerships (PPPs) to be effective.

6. Identification of renewable energy projects that could address the energy needs of Africa

7. Potential Renewable Energy Programmes that could be developed in Africa • Africa should consider addressing access to energy in the rural areas by developing “stand-alone” solar and wind energy systems, to include: • Solar • Wind (5kw solution) • Bioenergy (1 kw solution) • Reinvigorate greenfield and brownfield hydro development: micro, mini and large hydro power systems • Develop large scale bio-energy programs with a focus on waste • Agricultural Waste – rather than burning it • Livestock Waste – rather than washing it into the ground • Landfills • Adopting and adapting appropriate new and innovative renewable energy technologies to replace diesel generators

8. Proposing some Financing Mechanisms and Solutions Africa Carbon Credit Exchange Telephone: +260-1-238473/2 www.africACCE.com

9. Financing Options for Renewable Energy Projects • 100 % grant financing, particularly for rural electrification • Partial grant and debt financing • 100% debt financing with collateral in countries with lower ratings

10. One Approach: Cost blending to fund Renewable Energy Projects in Africa • What is Cost blending? • Why is it being recommended here? • Cost blending, involves pooling and blending of funds from various funding sources. When funds from different sources are pooled together, the mechanism makes it possible to finance projects nearly all projects. Secondly, pooling lowers the average cost of capital thereby making the cost of capital cheaper. • With cost blending it becomes possible to create a permanent financing vehicle with which to continue raising funds cheaply, from the market, on an “on-going and sustainable basis in the form of a Bankruptcy Remote Sinking Fund”.

11. Features of the Bankruptcy Remote Sinking Fund • It is capable of facilitating the creation of innovative financing mechanisms and catalyzing renewable energy and carbon projects in Africa • It has the robustness to facilitate investment opportunities with different risk profiles • It can be made to foster the development of environmentally sustainable low carbon and renewable projects • The Fund could be created at national, regional and continental level • It can support implementation of social renewable projects • Under professional management, it makes it very difficult to default on loans.

12. Construction of the Bankruptcy Remote Sinking Fund

13. Current attempts at developing a Green Economy in a rural setting in Zambia Africa Carbon Credit Exchange Telephone: +260-1-238473/2 www.africACCE.com

14. ACCE Luangwa Bridge Green Village Project, Zambia • Name of the Settlement Luangwa Bridge • Population 700 people • Economic Activities Fish Market and Long Distance Bus Stop • Units needing power School; Lodge; Health Center; Households • Source of power Currently Diesel generators • Current capacity of consumers • to pay for power Minimal: ~USD 3,000, whole community (will grow with power) • Renewable Energy Project Village Electrification • Technology Solar/Wind Hybrid Power Systems • Expected Impact To lead to new business ventures (such as: maize milling; fish freezing, mechanized fish drying, filling station, better shops, etc.).

15. CONTACT DETAILS AFRICA CARBON CREDIT EXCHANGE 4th Floor, Godfrey House | Kabelenga Road P.O. Box 390035 Lusaka. Zambia www.africACCE.com lchingambo@africacce.com Telephone: +260-1-238473/2