& Renewable Energy Finance Workshop hosted by UNEP FI & SEFI 27-29 September 2004, Budapest

Over 150 people from 28 countries attended the successful launch event of Green Power CEE. The feedback was excellent with 84% of the evaluations received rating the event as either: very good or excellent!

The event was highly interactive, with many questions, much debate and a lot of networking around the mini-exhibition - the chairmen had to work hard to keep the packed schedule to time.

Among the highlights were the launch of UNEP FI's CEE Taskforce and the announcement of OTP Bank's membership. A welcome announcement came from the EIB regarding their increased support for renewables (to reach 50% of all electricity generation investment by 2008) and in particular for the CEE region. The EIB declared that they were adapting to support financial intermediaries with the resources to evaluate the smaller scale of RES projects.

See http://www.eib.org/Attachments/thematic/renewable_energy_en.pdf

Please see below for some brief points from the presentations. Please send us any reports or notes you have from the conference to enable us to disseminate good ideas further.

Conference Summary

It is clear that there are more and more people now working in energy efficiency and renewable energy projects in the region with more and more money flowing into projects. This is very positive especially taking into account obstacles such as the need for the development of more progressive policy and legal frameworks.

As more successful projects are being launched, momentum is beginning to build and this growing body of experience will begin to disseminate best practice examples, helping avoid previous mistakes.

New technologies are important and are being applied in the region but of almost greater importance are new ways of thinking, creative business models and developing the right eco-system to support project developers.

Andrew Baldock of Black & Veatch presented a very interesting synopsis of the research they conducted for the EBRD on the potential for renewables in the CEE region (from the EBRD's perspective and conforming to their criteria).

Please link to Andrew's presentation Andrew Baldock

Simplify Policy

Policy must be set with a clear independent vision, and take into account the added advantages of job creation, stability and security of energy supply, not to mention the environmental benefits.

There was considerable debate on which market incentives were best: feed-in tariffs or quota obligations with tradeable green certificates. There was some debate on whether feed-in tariffs were positive or negative? It was commented that feed-in tariffs and subsidies worked well initially to stimulate nascent markets but they are often "sticky", once set seldom removed. After a market has developed, subsidies can have a negative effect distorting the market.

Finance - Risk Mitigation

The critical area of finance was covered in depth in the UNEP FI and SEFI workshop. It was noted that Kyoto was beginning to have an impact on the financial markets (this was before the news broke of the impending Russian ratification). Risk mitigation was a crucial area and one where public finance could best be served to help reduce the risk for private project finance.

As the market develops there is a better understanding of the risks (technical risk, dispatch risk and market risk) and how to mitigate the risk: using more experienced partners, 15 year service level agreements etc.

A key barrier to long term (15 year) investment remains short term (3-5 year) policy and legislation.

Large corporates (GE) were helping to mitigate risk by buying and reselling on carbon credits and thereby adding value by repackaging the credit with GE's triple A credit rating.

Helping Project Developers

Experience is lacking across the region but it is slowly building up. Project developers needed assistance and training to help develop their business plans, due diligence reports and submit their proposals to prospective investors. Some success was being found in combining smaller projects into larger systems in order to help increase the efficiency of such projects.

New mechanisms are needed to fund feasibility tests (in one case a technology supplier carried out the feasibility with a contract independent of winning the technology supply contract).

Once project developers have successfully launched 1 or 2 projects they are then able to develop their own larger projects themselves. Attention needs to be focused on helping launch project developers and having them gain the necessary skill set.

Sound cooperation must continue between public and private finance. Public finance could be best employed to help provide guarantees, initiate projects and fund feasabilities.

Energy Efficiency Potential

A big potential growth area for the region through the introduction of newer technologies such as combined cycle gas turbines, co-firing, CHP, hydro modernisation and more efficient district heating projects.

The Berlin Energy Agency described an excellent model for improving the efficiency of public buildings by outsourcing to an ESCO (Energy Service Company) which would invest money into energy saving technology in return for along contract to enable both the public body and the ESCO to reap the savings (upto 25% of the current energy expenditure).

New Technology and New Ways of Thinking

New ways of thinking are required to combine technologies into modules for specific decentralised solutions. For example Wind + Biomass, Wind + Hydrogen, Solar + Anaerobic Digestion. Companies need to be able to provide these solutions as integrated projects.

"imagination is the ultimate renewable resource"

Wind

Wind turbines are increasing their size (3MW), design efficiency going offshore. New technologies and standards are available to help ease the compatibility with transmission grids. However new technologies are required to help store wind derived energy to ease the variability of the resource.

The newer larger wind turbines were each replacing 2/3 older turbines but they are much harder to transport to wind sites. Gaining planning permission across the region remains the major barrier to developing the market, one case quoted took 7 years for 3 wind turbines to be approved.

Biomass

There was considerable debate on how to set up biomass systems, how to measure and standardise biomass fuel. Project financiers need to take into account the variability of moisture content and sizing as this affects the net calorific value and hence the product evaluation.

Biofuels

There is a need for more large scale production/extraction infrastructure to develop the biofuel industry and enable standardised product.

Future

There is still a lot to do, new tools and technologies, applicable for the region, must be developed to increase the flow of finance and projects.

Targets for RES (Renewable Energy Systems) should be set and disseminated, as a percentage of primary energy use for the short, medium and long term on a national and regional level.

We look forward to next year's Green Power CEE with hope and optimism. Thank you to everyone who supported and helped with this year's successful event.

Kind Regards