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A Transformational Energy Efficiency SME Advice and Loans Program for Mexico Carbon Trust participation in the workshop on Financial Instruments to Promote.

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Presentation on theme: "A Transformational Energy Efficiency SME Advice and Loans Program for Mexico Carbon Trust participation in the workshop on Financial Instruments to Promote."— Presentation transcript:

1 A Transformational Energy Efficiency SME Advice and Loans Program for Mexico Carbon Trust participation in the workshop on Financial Instruments to Promote Sustainability and Climate Change Mitigation-The Experience from Financial Institutions in Latin America and the Caribbean Morelia, Michoacán, México, 29 November 2012 Daniel Buira Senior Manager, Innovation

2 Agenda Carbon Trust is an independent company that helps partners and clients find the opportunities and face the challenges brought about from combating climate change –We advise governments, businesses and public sectors –We measure and certify products and organizations –We help deploy and develop low carbon technologies We have stimulated and financed SME EE investment for over 10 years –Good project economics, but known barriers hold back investment –Our proven advice programmes have overcome these barriers to catalyse investment –Our loans programmes have lent over £120m, and our awareness campaigns have transformed the UK market This year we collaborated with INECC and the British Embassy on a study to identify the SME EE opportunity in Mexico and design a programme to exploit it –Large opportunity with human capital, information, and capital barriers holding back uptake –Fragmented delivery picture, with sub-scale support for the opportunity –However coordination, extended advice, national awareness, and additional capital can transform the landscape Setting up an SME programme in Mexico –Identifying roles and partners –Coordinating detailed design and planning rollout –Launch, expansion, and ongoing delivery

3 We have developed a number of approaches to overcome these barriers. For example our advice programmes have catalysed UK SME investment Total cost savings Lifetime project cost savings Lifetime energy savings Present value of total energy savings Capital investment Investment required to get the energy savings Policy cost Annual policy cost in £m (2009/10) (32) (252) Catalysing ratio >13:1 Carbon Trust advice and support activities of £32m in FY2009/10 helped our customers save 5m tonnes of CO 2 as well as create value for their companies, resulting in a “policy cost” of under £7/t

4 Carbon Trust has also run two separate loans schemes, demonstrating that Energy Efficiency loans work 0% loans for the UK Treasury, lending over £120m to 3,500 SMEs between 2003 and 2010 –All projects which received funds had a strong business case based on energy savings, with paybacks of 4 years or less. In addition they had to meet a “carbon threshold” of CO 2 emissions reduction per £ –The risk profile of the companies that got a Carbon Trust low was, at a portfolio level, better than that of the general population of companies £550m commercial loans programme launched in 2011 in partnership with Siemens Financial Services –During 2010, Carbon Trust sought out a financial partner to leverage the operational know-how, supplier networks, and strong brand already in place into a new scheme –Partnership launched after discussions with a number of potential finace partners, including banks –Carbon Trust provides the business case to ascertain cost, energy and carbon savings Lessons learned –Significant marketing effort, as well as advice, was needed to drive uptake –Using equipment suppliers as main route to market greatly increased uptake and reduced costs –As a group, SME applicants for energy efficiency financing have a lower credit risk than the average population of SMEs –The Carbon Trust assessment of project savings gave customers confidence that their monthly energy savings would exceed loan repayments, ensuring positive cash flow impact from the start. After the repayment period, projects yield significant cash benefits

5 Theo Paphitis, well-known businessman and member of the “Dragon’s Den” television serial, fronted one of our print marketing campaigns And we have carried out national awareness raising campaigns to stimulate interest and demand

6 In Mexico, cost-effective SME energy efficiency measures could save MXN$28 billion (12%) and reduce emissions by 10MtCO 2 (14%) per year SectorTotal carbon emissions (ktCO2e) Total energy costs (millions MXN) Potential carbon savings (ktCO2e) Potential cost savings (millions MXN) Commerce / services10,587$71,2371,669$8,659 Industry50,447$107,5886,488$11,765 Other inc. agriculture14,098$46,4322,618$7,857 Total75,131$225,25710,775 (14%)$28,283 (12%) Source: GIZ (2012) “Recomendación estratégica sobre tecnologías y subsectors como orientación para sustentar acciones de eficiencia energética en el sector PyME” BMZ for Ministerio Federal de Cooperacíon Económica y Desarrollo March Assumptions: average electricity saving of 19% for commerce/services, 11% for industry and 30% for agriculture (average of 17% across all sectors), and thermal energy savings of 10% across all sectors. Other benefits: Strengthening competitiveness Sales of ‘greener’ products Employee motivation Indirect job creation though the energy efficiency sector Mitigation against the impact of future regulation

7 Many EE projects pay back quickly, yet despite the compelling project economics, a number of barriers stop many companies from investing Human capital –Lack of awareness about the commercial benefits of energy efficiency –Lack of knowledge and expertise to identify and quantify costs and benefits of opportunities e.g. understanding energy consumption and knowing which technologies are appropriate. –Lack of time and resource to manage implementation e.g. select suppliers, run feasibility studies etc. Information –Lack of data about energy consumption for own business or poor visibility of energy costs –Lack of benchmarking data to understand relative performance –No sharing of best-practice approaches to energy management Finance –High purchase costs for equipment (new or replacement) (in Mexico, partially due to import tariffs) –High financing costs, (in Mexico, FIDE loans incurring 14% interest rates) –Limited access to finance due to risk-adverse commercial banks that don’t understand energy efficiency projects (the nature of returns through energy savings) $

8 While a number of effective programmes offering advice and finance already exist, they are fragmented and sub-scale 8 Gobierno Federal CFE FIDE SENER SEMARNAT SE SHCP PEMEX CRE BANCOMEXT CONCAMINCESPEDES CCE CONCANACO SERVYTUR Programa de Ahorro y Eficiencia Energética Empresarial (PAEEEM) Financing to replace obsolete equipment (with Sello FIDE equipment) Funding for refrigeration, AC and LEDs ($MN200k); 10% scrappage bonus for other efficient equipment such as motors Programa Nacional paral el Aprovechamiento Sustentables de la Energia (PRONASE) Electrical substitution (Motor replacement) Normas Oficiales Mexicanas (NOM) / Normas Mexicanas (NMX) Eficiencia Energética Advice and technical assistance – with or without funding - to modernise facilities and apply new technologies in productive sectors Mi Tortilla $MN150k for tortilla manufacturers Training & advice to improve efficiency financial advisor (via SE) to help access funds Educación para el Uso Racional y Ahorro de la Energía Eléctrica (EDUCAREE) Dissemination activity Awareness workshops Training developers Implementation support (elements for an energy assessment) CFEctiva Empresarial Funds for power factor correction (<90%) & voltage optimisation (low to medium voltage) Energy efficiency education for equipment operators, obsolete equipment replacement, & specialist advice for process improvement Fondo PyMES Targets SMEs to improve competitiveness through business management and access to finance: National Guarantee System Financial advisors network business centres (189) Technological Innovation Fund (SE-CONACYT) Projects for innovative products, processes, services or materials Training & business consulting SME Library Mexico GHG Program GHG emissions reporting & sectorial analysis CONUEEINECC COMPITE NAFIN

9 To be transformational, a co-ordinated Program is proposed to raise awareness, deliver advice and provide finance in a cost-effective manner 9 ADVICE Website & publications Advice centre (calls/ s) Training & events FINANCE Loans Investment support COORDINATION & PROMOTION Strategic coordination Program marketing Program management & Quality Assurance (QA) On-site energy audits Cost effectiveness of delivering service $2/tonne$20/tonne SME size and therefore saving potential 10 employees 250 employees

10 The Programme will reach at least 150,000 SMEs over 5 years, delivering more direct support to 10,000 larger SMEs, lending $100m and reducing emissions by 1MtCO2 at programme cost of $6.1/t Access to website and new publications each year 2,000 audits for larger SMEs each year 660 loans in year 1, up to 1,900 by year 5 30,000 calls and s handled each year 100 events each year, with 40 SMEs at each All SMEs 150,00 0 4,000 10,000 6,265 5-year reach Annual activities 10 ServiceCarbon saving - lifetime (tCO2) Energy saving - lifetime (MWh) Cost saving - lifetime (US$m) Cost US$/tCO2 - lifetime Website & publications 303,902876, Advice Centre 203,540587, Training & events 143,822414, Site audits266,950732, Loans99,262159, Total1,017 ktCO22,771 GWh3606.1

11 The total cost of the SME Programme, including loans capital is ~US$134M over 5 years Service elementSet-up costOperational cost (5-years)Total cost ($m) Local ($m) Consultancy ($m) Local ($m) Consultancy ($m) Co-ordination Advice Finance Total Capital for loans100.00

12 Agenda Carbon Trust is an independent company that helps partners and clients find the opportunities and face the challenges brought about from combating climate change –We advise governments, businesses and public sectors –We measure and certify products and organizations –We help deploy and develop low carbon technologies We have stimulated and financed SME EE investment for over 10 years –Good project economics, but known barriers hold back investment –Our proven advice programmes have overcome these barriers to catalyse investment –Our loans programmes have lent over £120m, and our awareness campaigns have transformed the UK market This year we collaborated with INECC and the British Embassy on a study to identify the SME EE opportunity in Mexico and design a programme to exploit it –Large opportunity with human capital, information, and capital barriers holding back uptake –Fragmented delivery picture, with sub-scale support for the opportunity –However coordination, extended advice, national awareness, and additional capital can transform the landscape Setting up an SME programme in Mexico –Identifying roles and partners –Coordinating detailed design and planning rollout –Launch, expansion, and ongoing delivery

13 A Transformational Energy Efficiency SME Program for Mexico Carbon Trust presentation for the Financial Instruments to Promote Sustainability and Climate Change Mitigation-The Experience from Financial Institutions in Latin America and the Caribbean workshop Morelia, Michoacán, México, 29 November 2012 Daniel Buira Senior Manager, Innovation


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