Mexico will boost renewable energy with help from the IDB

Package of up to $210 million from the IDB, Clean Technology Fund and Mexico’s Nacional Financiera aims to mobilize more than $1.5 billion for renewable energy projects

The Inter-American Development Bank (IDB) approved a concessional loan for $70 million to boost funding for renewable energies in electricity generation in Mexico, thereby reducing greenhouse gas emissions.

The resources, which were provided from the Clean Technology Fund, will mobilize at least the same amount of funding from Mexico’s development bank, Nacional Financiera (NAFIN), along with $70 million from an existing IDB conditional line of credit approved in 2009, for a total of at least $210 million.

The Clean Technology Fund (CTF), one of two climate investment funds for which the IDB serves as an implementing agency, promotes funding for the demonstration, implementation, and transfer of low-carbon technologies with a long-term potential for significant reductions in greenhouse gases. The CTF finances programs in 12 countries around the world.

“We hope to generate a demonstration effect that will induce other Mexican financial institutions to participate in these types of projects,” said Ramon Guzman, IDB project team leader.”The program will provide direct loans to entities that promote projects for renewable energy generation, as well as credit lines to cover any cash flow deficits.”

The aim of the operation is to mobilize more than $1.5 billion in additional financing from institutions other than the IDB and NAFIN. This would eventually enable project sponsors to build renewable energy plants with a total cost of around $2.5 billion.

These funds are expected to be used for the construction of at least 10 renewable energy facilities, in particular wind power plants and small hydroelectric plants, for a total increase in Mexico’s installed generating capacity from clean sources of 1,000 megawatts. The estimated savings of greenhouse gas emissions in this scenario would total two million tons of CO2 yearly .

The IDB loan is for a 20 year-term, with a grace period of 10 years, and a reduced interest rate.