EXECUTIVE SUMMARY Between September and November 2012 a group of eleven part-time professionals examined the potential for creating a financing mechanism to serve the low carbon financing needs of small island states. They were assisted and directed by Dr. Al Binger and Ms. Christine Duncan. The eleven part-time professionals comprising the team are Bernardo Deregibus, Shang Gao, Yan Lu, Jose Daniel Marin, Judith Mueller, Helen Roy, Rajitha Swaminathan, Philip LaRocco, Gina Rodolico, Jennye Greene and Evgenia Sokolova.
This project was launched under the sponsorship of SIDSDOCK, a coalition of thirty countries and as a follow-up to a May, 2012 discussion of the need for such a financing mechanism based on a slideshow presented at a meeting in Barbados and a concept paper titled “National Financing and Carbon Market Access Mechanism(s) for Small Island Developing States”. The 30 Members of SIDSDOCK include, in the Pacific Ocean: Cook Islands, Federated States of Micronesia, Fiji, Independent State of Samoa, Kingdom of Tonga, Kiribati, Nauru, Republic of the Marshall Islands, Republic of Palau, Republic of Vanuatu, Solomon Islands, and Tuvalu; in the Caribbean: Antigua and Barbuda, Commonwealth of the Bahamas, Barbados, Belize, Commonwealth of Dominica, Dominican Republic, Grenada, Jamaica, Republic of Suriname, Republic of Trinidad and Tobago, St. Christopher (St. Kitts) and Nevis, St. Lucia, and St. Vincent and the Grenadines; in the Atlantic and Indian Oceans: Democratic Republic of São Tomé and Príncipe, Republic of Cape Verde, Republic of Maldives, Republic of Mauritius, and the Republic of the Seychelles.
The team reached out to a sample of twelve member countries and established communications with country-level counterparts. These member countries and their country-level counterpart are presented in the table below: Region Country SIDS Country Level Counterpart AIMS Cape Verde Dr. Edmilson Correia Pinto AIMS Republic of Seychelles Mr. Tony Imaduwa Asia Pacific Cook Islands Mr. Tangi Tereapii Asia Pacific Kingdom of Tonga Mr. Ofa Sefana Asia Pacific Republic of Palau Mr. Sebastian Marino Asia Pacific Solomon Islands Mr. John Korinihona Asia Pacific Tuvalu Mr. Mafalu Lotolua Caribbean Commonwealth of Mr. Michael Fadelle Dominica Caribbean Grenada Mr. Timothy N.J. Antoine Caribbean Jamaica Mr. Richard Kelly Caribbean St. Lucia Ms. Judith Ephraim
The purpose of this communication was to determine the status of projects being considered in the project pipeline, to exchange information on the requirements of a successful financing mechanism and to understand better the in-country and regional planning and implementation capacity and the needs to improve human and institutional capacity.
From these exchanges a preliminary pipeline of 24 projects was established. These vary by technology, type of initiative and stage of development. A list of the 24 project and a brief description of each project is presented below: Country Project Title Project Description Belize Biofuels Project The Government of Belize and SIDSDOCK are developing a biofuels production project using feedstocks from: acacia mangium, arundo donax and attalea cohune. The proposed output from the pyrolysis processing would produce approximately 2.7 million barrels of bio-oil. Belize Biogas from The Government of Belize and SIDSDOCK are Wastewater and developing an anaerobic digestion/biogas project Manure Project at the waste-water facility in San Pedro Ambergris Caye. The project will use livestock manure from Spanish Lookout. The developers plan to negotiate a PPA with Belize Water Services Limited (BWSL). The project will produce biogas for electricity, fertilizer resulting from the sludge by product for sale to local farmers and carbon offsets for sale in the carbon market.
Cape Verde Cape Verde Center The government of Cape Verde with the support for Renewable of the UNDP (implementing agency) wants to Energy and Energy implement renewable energy and energy Efficiency efficiency initiatives in one small village in the Vale da Custa Community in the Island of Santiago. The village then would become a Reference Center for Energy Efficiency and Renewable Energy for other villages.
Cape Verde Desalination The government of Cape Verde with the support through Renewable of the UNDP, the implementing agency, wants to Energy for Remote install water desalination systems using Areas renewable energy in areas not connected to the grid.
Cape Verde Development of a The government of Cape Verde with the support Regulatory of the UNDP, the implementing agency, wants to Framework for identify the best option in terms of regulation and Renewable Energy legislation of energy efficiency and renewable and Energy energy for Cape Verde. This information will be Efficiency used to produce a regulatory framework to promote renewable energy and energy efficiency projects and to attract new investment from private companies.
Cape Verde Provide LED Bulbs This project consists of replacing the bulbs in for Cities Project street lamps to LED bulbs in the cities in order to reduce energy consumption in public lighting.
Cape Verde Maio, the Efficient This project consists in converting the Island of Island Project Maio into an energy efficient island. There are three main activities that would be implemented: 1) Install low energy bulbs for street lighting, 2) perform energy audit for each household in the island, and 3) implement a campaign of awareness about energy efficiency.
Commonwealth Dominica Solar Water heating is a significant component of of Dominica Water Heating Dominica’s energy demand, particularly in the Awareness tourism sector. The government of Dominica is Initiative encouraging the installation and use of solar water heating in all new government, residential, commercial and industrial buildings to achieve renewable energy targets while reducing its fuel import bill. Cook Islands Pilot Solar Project The Government of Cook Island is proposing a 30 KW solar photovoltaic project for Palmerston Island to replace the use of diesel generators. The project would include battery storage and a biofuel generator as a backup. The project would provide energy to the households on the Island. Cook Islands Solar Mini Grids A UNDP sponsored solar mini grid project began Project in July 2012 in Penryhn, the most remote and largest of the 15 Cook Islands in the south Pacific Ocean. Grenada Geothermal Project Grenada’s Ministry of Finance, Planning, Economy, Energy and Cooperatives has undertaken a prefeasibility study for a 10MW geothermal plant. The objective of the 10 MW (phase 1) geothermal project is to transform Grenada's electricity generation from imported diesel to an indigenous, continuous source of renewable energy. Grenada Renewable Energy The objective of the Loan Facility is to increase Soft Loan Facility market penetration of building-related, grid connected RE technology (wind and solar). Jamaica Wind Expansion Wigton Windfarm Limited (WWFL) is a wholly Project at Wigton owned subsidiary of the Petroleum Corporation III of Jamaica (PCJ), a state owned agency under the Ministry of Science, Technology, Energy and Mining of Jamaica. WWFL is planning a 24 MW expansion to support the Government of Jamaica objectives for increased renewable energy penetration to 30% by 2030 and to achieve a critical mass of wind capacity and economies of scale for the company. Jamaica Non-Residential The local organization is seeking assistance from Baseline Study SIDS DOCK to undertake a detailed baseline study of generation and electricity needs on the island to support activities and projects to reach the Government of Jamaica’s objectives to increase renewable energy penetration to 30% by 2030. Kingdom of 2 Phase Solar Water Building on a successful solar water pumping Tonga Pumping Project pilot program, the Ministry of Lands, Environment/Climate Change & Natural Resource of Tonga are implementing two additional phases. The systems to be installed include DC water pumps: solar submersibles, solar pumps for really deep applications and high quality solar surface pumps for extremely high lifts. The system is designed specifically to run off of the sun without batteries. Republic of Energy Efficiency The project supports current national efforts to Palau Project realize the target of 30 % reduction in overall national energy consumption by 2020 and includes energy efficiency upgrades of government premises, rebate programs for Energy Star (or equivalent) certified appliances, and awareness /educational campaign and an electricity consumption reduction program for outlying states. Republic of Port Victoria Wind The Abu Dhabi Future Energy Company PJSC Seychelles Farm Project (MASDAR), in conjunction with Seychelles Government is currently constructing a wind farm in the island of Mahé, Seychelles. The project started in 2010 with a wind resource assessment to assess the wind potential and determine the best site. The study also included an Environment Impact Assessment. The main goal of the project is to address energy security, reduce dependence on imported fossil fuel and diversify energy mix. Republic of Grid-Connected The Government of Seychelles in conjunction Seychelles Rooftop with UNDP-GEF, Seychelles Energy Commission, Photovoltaic Public Utility Corporation, and private partners Systems are launching a 1 MW grid connected solar program. The main objective of the project is to increase the use of grid-connected photovoltaic (PV) systems as a sustainable means of generating electricity on selected main islands and smaller islands of the Seychelles. Republic of Providence Waste- The Government is promoting solutions, which Seychelles to-Energy Project are both cost-effective and efficient to manage waste in a sustainable manner. A Request for Proposal (RFP) was distributed to invite interested parties to design, build, operate and finance a waste to energy facility. Solomon Islands Outer Islands The Outer Islands Renewable Energy project is Renewable Energy aimed at the production and transmission of Project renewable energy through hydro-power. This project will be implemented by the Solomon Islands Electricity Authority (SIEA) and its total capacity is estimated at 7047 kW. Solomon Islands Tina River Hydro- The Tina River Hydro-Power project is a hydro- Power Project power scheme to generate energy and provide transmission to the existing Honiara Grid Network. The project will be implemented by the Ministry of Mines, Energy & Rural Electrification and the Solomon Islands Gov’t. Its total capacity is estimated at 15-20 MW. Solomon Islands SAVO Geothermal The SAVO Geothermal project is the production Project and transmission of renewable energy on Savo Island. The project will be implemented by two Australian companies, Kentor Energy Pty LTD and Geodynamics LTD and its total capacity is estimated at 20-50 MW. Solomon Islands Solar Home Systems The Solomon Island Government is planning to undertake a solar rural electrification project. Solar Home Systems would be installed to replace fossil fuel use on the Islands. The project is implemented by INTER-ACTION Corporation of Japan and the Ministry of Mines, Energy & Rural Electrification as well as the Solomon Islands Government with a capacity of 250kW. Tuvalu Island The Tuvalu Electricity Corporation (TEC) is Electrification developing an island electrification project over 2013-20 the next 7 years to generate 7-8 MW using a variety of renewable energy technologies and energy efficiency programs.
In parallel the options to be considered for financing mechanisms were investigated. The basic assumptions for the creation of the financing mechanism were: a. The financing mechanism must not place a burden on already strained government budgets and debt; b. Best practices should be identified from other such mechanisms and incorporated in the development of the financing mechanism; c. Governance and management should involve checks and balances, clear delineation of responsibilities and accountability and independent professionalism; and, d. The financing mechanism must be flexible enough to accommodate multiple streams of capital and different types of grants or support.
All four of these assumptions suggested strongly that the cornerstone of any financing mechanism must be the creation of “special purpose vehicles” for each project or program element. By compartmentalizing each initiative it would be possible to deal with the multiplicity of technologies, settings and type of initiative. It would also make possible the application of “project finance principles” (the creation of investment entities that are financially self-contained) regardless of the project type or financial fundamentals, thus also allowing co-financing.
The wide variety of project types and stage of development suggests SIDSDOCK follow a process of building SIDS capacity and improving the quality and quantity of projects via a “program organization” (SIDSDOCK.org), which would receive and disburse grants and contracts. This “program organization” would operate in collaboration with an investment vehicle (SIDSDOCK.com). Both of these organizations would derive from the parent membership organization, SIDSDOCK, which would incorporate governance elements to assure professionalism, checks and balances and attractiveness to both the public and private sectors. These elements include: a. Creating a “Nominations” committee within SIDSDOCK to appoint representatives to SIDSDOCK.org and SIDSDOCK.com; b. Creating a “Project Advisory Group” to screen new projects and programs and assign these to the appropriate program or investment body; c. Creating a “Monitoring & Evaluation” committee to oversee the actions of the program and investment bodies; and, d. Creating a SIDS Carbon Body to audit and trade carbon offsets on the international carbon market.
The final deliverables are organized as follows: a. A long report titled “A Guidebook for Decision-Makers Concerning the Attraction of Low Carbon Finance to Small Island Developing States” provides definitions of important terms, a literature review of existing funds similar to the financial mechanism proposed for SIDSDOCK, extensive descriptions on the different governance bodies of the financial mechanism, a description of fund and project flows and implementation guidelines for successfully creating the financing mechanism. The intended audience is decision makers, politicians and members of ministries in the various SIDSDOCK member islands.
b. A short description of the financial mechanism in the form of a pocketbook containing a basic description of the different governance bodies of the fund and provides general information and descriptions of the financing mechanism and flow of funds and project. This pocketbook can be distributed to attract investors and can be used as a marketing tool.
c. An appendix that includes additional detailed information on the financing mechanism as well as the complete project pipeline.
In order to allow for successful implementation of the financing mechanism, the team recommends the following next steps: a. Regional discussion of proposed financing mechanism; b. Commitment to improve the current pipeline; and, c. Establishment of SIDSDOCK.org, including a position responsible to advance the implementation of SIDSDOCK.com