Clean energy fund for poor countries

The European Commission will on Friday (6 ­October) propose a new multi-million euro fund for renewable and energy efficient technologies in poor countries.

The Global Energy Efficiency and Renewable Energy Fund (GEEREF) will provide money for clean energy investments in Africa, Latin America and Asia over the next four years.

Friday’s proposal will suggest an initial target of €100 million, of which more than three-quarters is likely to come from the Commission. The rest could come from inter­national financing insti­tutions and member states’ governments.

"Despite encouraging and new prospects and robust technology track records, renewable energy projects and businesses continue to face significant difficulty raising sufficient finance for investment," according to Environment Commissioner Stavros Dimas.

A feasibility study for the Commission estimated that €9 billion risk capital would be needed for renewable energy generation in developing countries before the end of the decade.

Compared with this need, said Dimas, "€100m might look like a drop on a hot plate but, without promising to solve all the world’s problems, it is big enough to make a difference".

The money is also expected to leverage additional risk capital from the private sector. A Commission estimate puts this between €300m and €1bn.

"In the wake of limited public finance, the need to establish an innovative public-private financing instrument that can maximise the leverage of public funds is a priority," explained Dimas. "Successful models are copied rapidly. Hence our aim is to play an important incubator role."

The GEEREF follows a Patient Capital Initiative (PCI) launched in 2004. The PCI argued the case for providing ‘patient capital’ (long-term loans with a social emphasis) to emerging markets, and the GEEREF would make this a reality for the first time.

The energy efficiency and renewables fund will focus on small-scale projects, defined as those below €10m. Only proven technologies will be eligible for investment.

Possible projects will include small hydro and biomass technologies, and onshore wind power. Solar photovoltaic technologies are currently expected to be too expensive.

The first money could be paid out before the end of 2007, according to the Commission.

As well as building up ­investment money for green energy projects in ­developing countries, the GEEREF will set up reg­ional management funds to handle the loans.

Oliver Schäfer of the ­Euro­pean Renewable Ener­gy Council welcomed the ­creation of a new ­public-private fund. "I’m happy the Commission has ­finally done something ­after two years of talking," he said.

The European Commission will on Friday (6 ­October) propose a new multi-million euro fund for renewable and energy efficient technologies in poor countries.