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Financial Mechanisms to Drive Sustainable Energy

Latin America and the Caribbean is in renewable and nonrenewable energy resources, however, a high percentage of population in the region still lack access to modern electricity services, coverage and quality of services still does not meet all needs in an equitable manner. Read More


 

SCOPE OF ACTIVITIES OF ESI

Sustainable Energy

Latin America and the Caribbean is a world leader in the utilization of renewable energy sources such as hydropower and efficient biofuels. However, the region has only developed about 30 percent of its hydropower capacity, and the potential of new but rapidly developing sources -- such as wind, solar, and geothermal energy -- has barely begun to be tapped relative to the existing resource endowment.

Energy Efficiency - ESI

The use of more efficient technologies and equipment retrofit strategies play a key role in reducing the energy intensity of economic activities and avoiding additional energy demand. The introduction and adaptation of innovative technologies can improve business productivity, reduce greenhouse gas (GHG) emissions to advance climate change mitigation in a cost-effective manner. Among the financial mechanisms for the implementation of EE projects that, the Bank has already implemented Energy Saving Insurance Program (ESI). Insurance that covers projected energy savings for EE measures in small and medium enterprises (SMEs). Those measures, specifically defined and fully verifiable, are agreed in a standard contract between the companies and the technology service providers. Its risk-sharing mechanisms compensate companies if the projected financial flows associated with EE savings are not materialized.

Sustainable Transport

The transport sector in Latin America and the Caribbean contributes to approximately 34% of energy-related greenhouse gas emissions. The Bank seeks to promote investments in lower emission vehicles such as hybrid and/or electric public and private transport fleets. Electric mobility represents a great opportunity for the countries of LAC, since reduces GHG emissions to the extent that the electricity grids in the region have relatively low emission factors, lower than in some developed countries. Electrical mobility also helps to reduce emissions of air and noise pollutants, improve local air quality and reduce the impact on health, particularly for inhabitants in urban areas. Interventions from the financial side are aimed at removing barriers to investment through risk mitigation mechanisms for investors and financial institutions and the development of innovative solutions driven by concessional climate funds. Some of the issues addressed are the analysis of concession contract models, technical and financial evaluation of specific projects, definition of investment models and support to financial institutions in building sustainable transport capacity.

Energy Storage

Is a critical tool for the expansion of renewable energy, enabling the electrification of transport and energy consumption in urban areas, in particular with grid-connected storage systems. There is a relatively wide range of technologies that can be exploited and their use will need to be extended as storage costs decrease, which is already happening progressively. It focuses on the development of schemes to facilitate investment in battery electric energy storage, in recognition of the multiple services that batteries can provide in the supply, demand and transmission of energy. Initially the Bank has focused on promoting the implementation and scaling up of hybrid solar/wind systems - small and large scale energy storage and the analysis of regulatory issues.



 

WHERE IT IS IMPLEMENTED

Colombia

The ESI Program is executed in Colombia under the leadership of BANCOLDEX. The financing strategy combines medium- and long-term loans with three risk mitigation instruments that support the identification and structuring of technically robust and bankable projects: a performance contract, technical validation of the project, and energy savings insurance.

Technical Documents

Incentives
Success cases
Long-term financing
Technical validation
Process flow
Insurance Coverage
Standard Contract

Mexico

The ESI Program is executed in Mexico under the leadership of FIRA, a development bank with an agricultural and agro-industrial focus. The financing strategy combines medium- and long-term loans and guarantee funds with two risk mitigation instruments that support the identification and structuring of technically robust and bankable projects: technical validation of the project and a technological guarantee that acts as an energy-saving insurance policy.

Technical Documents

Incentives
Success cases
Long-term financing
Technical validation
Process flow
Insurance Coverage

Peru

The ESI Program is executed in Peru under the leadership of COFIDE. The financing strategy combines medium- and long-term loans with three risk mitigation instruments that support the identification and structuring of technically robust and bankable projects: a performance contract, project technical validation, and energy savings insurance.

Technical Documents

Incentives
Long-term financing
Technical validation
Process flow
Insurance Coverage
Standard Contract
Financing sustainable solutions for electric transport in Peru (PE-L1254)

Colombia

The ESI Program is executed in Chile under the leadership of Banco Estado. The financing strategy combines medium- and long-term loans with three risk mitigation instruments that support the identification and structuring of technically robust and bankable projects: a performance contract, technical validation of the project, and energy savings insurance.

Technical Documents

Incentives
Long-term financing
Technical validation
Process flow
Insurance Coverage
Standard Contract
 

PROJECT MAP

Locate all active initiatives in the region.
 

WHY SUSTAINABLE ENERGY

Energy efficiency and sustainable energy reduce energy demand, promote lower carbon energy supply, reduce net emissions and also enhance carbon sinks.

In this way, progress is being made in expanding -in a diversified and secure manner- the access of Latin American and Caribbean countries to efficient, sustainable, reliable and affordable energy, while helping to reduce poverty, promote a better quality of life, foster competitiveness and boost sustainable development, while facilitating economic growth.



Sustainable energy and barriers to investment:

Limited FinancingLimited financing for the adoption of new technologies.
Asymmetric and imperfect informationAsymmetric and imperfect information that sends incorrect signals to potential stakeholders about the opportunities that sustainable energy provides.
Performance RiskPerformance risk, technical risk and uncertainty in terms of flows of investment projects.
Scarce ExperienceScarce experience in the implementation and management of projects.
Poorly Developed NetworkPoorly developed networks of equipment and technical service providers.


 

SUCCESS CASES/STORIES

First Certified Agricultural Green bond in Oaxaca

Adoption of a green business model, which allowed it to be competitive in an area that is not very favorable for agriculture [...]

Banco do Brasil is among the 10 most sustainable companies in the world

According to an annual ranking of corporate sustainability performance


 

PARTNERS ON THE GROUND

Who is supporting Sustainable Energy

The Inter-American Development Bank has partnered with major "green" players to catalyze investments in the U.S. in the Latin American and Caribbean region.

The IDB is promoting and expanding sustainable energy with support from the Government of Denmark through the Danish Energy Agency.


 
RESOURCES
  • Mantente informado sobre el financiamiento verde

Events


WEBINAR | Experiences on PPPs and concessions for climate finance in Brazil
The Inter-American Development Bank, in association with Radar PPP, developed a training program for professionals from development agencies in Brazil with three main objectives...
Videos


video (1)


Investments with an impact
video (2)


Greening the Financial Markets Across the Two Sides of the Atlantic
Publications


Publication


A Framework and Principles for Climate Resilience Metrics in Financing Operations
Publication


Demystifying Green Bonds: Green Agribusiness Credit Certificates


 

VISIT OTHER INITIATIVES

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  • Green Social and Thematic Bonds
  • Financial Mechanisms in Sustainable Energy
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  • Climate Risk
  • Blue Economy
  • China LAC Financial Instruments
  • Green Bond Transparency Platform
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