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Scaling-Up Renewable Energy Program for Low Income Countries

Scaling-Up Renewable Energy Program for Low Income Countries

Summary

The Scaling-Up Renewable Energy Program in Low Income Countries (SREP) is a targeted programme of the Strategic Climate Fund (SCF), which is one of two funds under the Climate Investment Funds (CIF) framework.

The SREP was designed to demonstrate the economic, social and environmental viability of low carbon development pathways in the energy sector in low-income countries. It aims to help low-income countries use new economic opportunities to increase energy access through renewable energy use and to foster economic growth.

Basic Description

Name of the Fund Scaling-Up Renewable Energy Program in Low Income Countries (SREP)
Official Fund Website https://www.climateinvestmentfunds.org/topics/energy-access
Date Created
Date fund proposed: February 2008.
Date fund made operational: 14 December 2009.
Proposed Life of Fund The SREP is subject to the CIF ‘sunset clause’ which proposes the closure of the CIF once a new financial architecture becomes effective under the UNFCCC regime. The implementation of the CIF ‘sunset clause’ has been suspended repeatedly and in 2019 indefinitely. Until such time, donors and recipients operate under the existing framework.
Objectives The SREP is designed to demonstrate the economic, social and environmental viability of low carbon development pathways in the energy sector in low-income countries. It aims to achieve five main objectives:

  1. Assist low income countries in fostering transformational change to low carbon pathways by exploiting renewable energy potential
  2. Highlight economic, social and environmental co-benefits of renewable energy programmes
  3. Help scale up private sector investments to achieve SREP objectives
  4. Enable blended financing from multiple sources to enable scaling up of renewable energy programmes
  5. Facilitate knowledge sharing and exchange of international experience and lessons.

SREP’s targets include:

  1. Generating over 3 million MWh per year of renewable energy
  2. Improving access to energy for over 140,000 businesses and 17.3 million people
  3. Reducing 2.5 million tons of GHG per year.
Financial inputs and fund size As of November 2020, SREP’s financial inputs amount to USD 750 million, including USD 86 million in funding from the private sector.

The contributor countries are: Australia, Denmark, the Republic of Korea, Netherlands, Norway, Spain, Sweden, Switzerland, Japan, United Kingdom and United States.

The application of all CIF finance (concessional loans, grants, and guarantees through the multilateral development banks (MDBs)) can be classed as official development assistance (ODA) by MDBs if:

  • It meets the criterion of promoting economic development and welfare;
  • The grant element is at least 25%; and
  • The funds are to be used in a country included in the OECD-DAC list of ODA eligible countries.
Activities Supported SREP provides financing for renewable energy use and generation, specifically for proven “new” renewable energy technologies. For the purposes of SREP, renewable energy technologies include solar, wind, waste to energy, cookstoves, geothermal, as well as hydropower with capacities normally not exceeding 10MW per facility. Most of SREP projects provide energy solutions that include multiple renewable energy technologies (Mixed RE).

SREP also supports complementary technical assistance as this is considered essential for transformative and enduring change and country engagement and ownership. Technical assistance includes support for planning and pre-investment studies, policy development, legal and regulatory reform, business development and capacity building (including for knowledge management and monitoring and evaluation).

Administrating Organization

Secretariat or Administrative Unit The CIF Administrative Unit supports the work of the Strategic Climate Fund Trust Fund Committee and other committees, including the SREP Sub-Committee. It provides recommendations and reporting on operational and financial matters to the CIF governing bodies.

The Unit is housed in the World Bank Group’s Washington DC offices and is comprised of a small professional and administrative staff.

Trustee The World Bank (International Bank for Reconstruction and Development) acts as Trustee for all Climate Investment Funds, including the SREP.

Fund Finance and Access Modalities

Conditions and Eligibility Requirements Low income countries are prioritised for the SREP.

Country access requires:

  • ODA-eligibility (according to OECD/DAC guidelines); and
  • Existence of active multilateral development bank (MDB) country programmes.

Proposed criteria for country selection are:

  • Transparent assessment of need, determined by high dependence on conventional fuels for electricity generation, low electricity access, and/or high dependence on traditional use of biomass for thermal applications
  • Country’s stated interest in taking a programmatic approach to large scale renewable energy development that could lead towards a low carbon development pathway in the energy sector
  • Institutional capacity to undertake large scale SREP-funded programme
  • Project distribution across countries and regions (with a special focus on Sub-Saharan Africa)
  • In-country renewable energy potential and scope including availability or abundance of renewable resources.

For more detailed information on selection criteria: Criteria for Selecting Country and Regional Pilots under SREP (March 2010).

Regarding project eligibility, preference is given to projects with strong poverty alleviation benefits. Economic and/or social development and environmental benefits are key criteria for project selection.

Project proposals should demonstrate the potential to scale-up from lessons learned in pilot and demonstration projects and programmes (such as those supported by the GEF). A key criterion is the potential of the proposal for demonstration and replication, particularly the potential for removing barriers in the enabling environment beyond the immediate project boundary so as to facilitate scaling up through private sector investments.

Accessing the Fund
Access Modalities – Only the MDBs (the African Development Bank, the Asian Development Bank, the European Development Bank, and the Inter-American Development Bank) and the World Bank Group, including the International Finance Corporation, can access funding under the CIF, including from the SREP.

Accessing the SREP follows a pre-programming and programming phase with several steps:

Pre-Programming Phase

  1. SREP Sub-Committee (SC) agrees upon the number of country or regional pilots and criteria for country selection.
  2. CIF Administrative Unit, through MDBs informs countries and invites expression of interest.
  3. Selection of pilots is conducted by SREP-SC based on Expert Group Reports.
  4. MDB scoping mission are conducted at the invitation of governments to assess readiness and capacity for investment plans.
  5. If requested, MDBs advance preparation grants and investment plan preparation grants to assist in the development of investment plans.

Programming Phase

  1. SREP-SC endorses Investment Plan.
  2. Investment and financing proposals are developed.
  3. SREP-SC approves financing for investments and other proposals.
Financial Instruments – SREP offers financing in the form of grants, contingent grants or loans, concessional loans, guarantees and equity, blended with IDA and other concessional financing, to leverage other public and private sector resources. SREP uses a range of financial instruments that are already available in MDBs, including:

  • Output-based aid to increase the affordability of renewable energy services provision by buying down a portion of the capital cost of the investment
    • The buy-down is available for renewable energy access investments that are unaffordable for low income consumers. Such assistance should be tied to investments that meet economic and social sustainability criteria, and adhere with economic principles that guide the effective use of subsidies
  • Investment finance using quasi-equity financing, capital cost buy-down or other financial instruments to make grid-based renewable energy power, and related transmission and distribution investments financially viable
  • Credit enhancement facilities to leverage trade finance and short-term working capital finance, and to provide partial risk coverage of loans to grid-based renewable energy investments, businesses and rural consumers who may have inadequate credit histories or limited collateral for securitising the renewable energy loans
  • Financial intermediation grants that can be on-lent as loans through domestic financial institutions, including micro-finance institutions for renewable energy investments
  • Incremental budget support for national/regional programmes delivering community services such as health care, water supply and education. Incremental support will be available for funding renewable energy hardware and services, including arrangements to assure long term repair and maintenance.
Accreditation process – There is no accreditation process for the CIF as only the MDBs can access and implement CIF funding, including for the SREP.
Overview of implementing entities – The World Bank Group, the African Development Bank, the Asian Development Bank, the European Development Bank, and the Inter-American Development Bank are the implementing agencies for SREP investments.
Nature of recipient country involvement – SREP programmes are country-led, build on and draw benefit from national policies so that renewable energy is fully integrated into national energy plans. SREP activities are designed and implemented with the full and effective participation and involvement of, and with respect for the rights of, Indigenous Peoples and local communities.

The government of recipient countries needs to appoint a national focal point for SREP. This focal point works as a liaison agency and is most commonly led by a deputy minister, a government commissioner or other representatives of government ministries. The national focal point’s responsibilities include:

  1. obtaining project/programme-level data from the SREP project implementation units/teams,
  2. aggregating data at the country programme level and
  3. submitting the information to the CIF Administrative Unit on an annual basis.
Allocation criteria – According to SREP Financing Modalities, countries which are assessed as “having high or moderate risk of debt distress are to receive all SREP funding in the form of grants. Countries with low debt risk may receive other forms of SREP concessional funding.”

As of October 2011, the grant allocation ranges from USD 25 million to USD 50 million per country.

Safeguards, Gender and Indigenous Peoples
Safeguards – The safeguards included at the project level under the SREP depend on the partner multilateral development bank implementing the project. The projects are therefore subject to the environmental and social safeguards of the implementing MDBs.
Gender – SREP falls under the CIF Gender Policy and the CIF Gender Action Plan. While the Gender Policy provides a governance framework for gender integration in the CIF, the Action Plan is “committed to mainstreaming gender in CIF policy and programming, in support of gender equality in climate resilient, low-carbon development investment across the CIF portfolio”. The CIF Gender Action Plan is currently in Phase 3 and has two main aims:

  1. To deepen upstream support to MDBs and countries on gender technical assistance for Investment Plan and project design,
  2. To enhance gender monitoring and reporting, and knowledge and capacity.
Indigenous Peoples – SREP is subject to CIF governance which treats Indigenous Peoples as a core stakeholder group. While there is a separate CIF Gender Policy, there is no equivalent CIF Indigenous Peoples Policy. Instead the existing policies and approaches of the MDBs implementing SREP projects and programmes apply.

Indigenous Peoples are granted representation in CIF governance. With their status of active observers, IPs have the opportunity to advocate on behalf of their constituents in the CIF Trust Fund Committees and the SREP Sub-Committee.

Fund Governance

Decision Making Structure The SREP is part of the governance arrangements for the SCF, which includes a SCF Trust Fund Committee, a SREP Sub-Committee, and a MDB Committee.

SCF Trust Fund Committee
The SCF Trust Fund Committee is in charge of overseeing the operations and activities of the SCF, which includes the FIP. It gives equal weight to representatives from donor and recipient countries. The composition of the SCF Trust Fund Committee consists of representatives from:

  • Eight recipient countries
  • Eight contributor countries
  • Select Observers, namely one each from Green Climate Fund (GCF), Global Environment Facility (GEF), United Nations Development Programme (UNDP), United Nations Environment Programme (UNEP), United Nations Framework Convention on Climate Change (UNFCCC), United Nations Permanent Forum on Indigenous Issues (UNPFII), four from civil society organisations, two from the private sector, and two from Indigenous Peoples.

The list of actual SCF Trust Fund Committee members is available at: https://www.climateinvestmentfunds.org/cif_enc

SREP Sub-Committee
The SREP Sub-Committee was established to oversee and decide on the operations and activities of the SREP.

Composition of the SREP Sub-Committee:

  • Six representatives from donor countries to the SREP
  • Six representatives from eligible recipient countries were selected on a regional basis and identified through a consultation with recipient countries.
  • Select Observers, namely one each from the Energy for the Poor Initiative (EFPI), GCF, GEF, UNDP, UNEP, UNFCCC, UNPFII, four from civil cociety organisations, two from the private sector, and two from Indigenous Peoples.

Decision-making is achieved through consensus.

The list of actual SREP Sub-Committee members is available at: https://www.climateinvestmentfunds.org/cif_enc

MDB Committee
The MDB Committee facilitates collaboration, coordination and the exchange of information, knowledge, and experience among MDB partners. The list of MDB focal points is available at: https://www.climateinvestmentfunds.org/cif_enc

Accountability Mechanisms CIF
An Independent Evaluation of the CIF experience was requested by the CIF Trust Fund Committees and completed in 2014. The evaluation was conducted by a consulting firm selected and supervised by a joint working group of the independent evaluation offices of five Multilateral Development Bank (MDBS): ADB, AfDB, EBRD, IDB, and the World Bank.

Among the findings are the following:

  1. “The lack of a strategy with respect to CIF’s sunset clause is causing uncertainty in operations”.
  2. “Efficiency and effectiveness has been hindered by the CIF’s complex architecture, consensus decision rule and lack of a secretariat with strong executive function”.
  3. “Some projects are plausibly transformational; other lack a convincing logic of transformation and impact”.
  4. “Aside from this report, there is no provision for independent evaluation at the national, Programme, or Fund level, or for a summative evaluation of the CIF”.

The CIF administrative unit has also been working with partner countries to understand their domestic frameworks for monitoring and evaluation. A strategic assessment of the environmental ,social and gender impacts of the CIF was completed in 2010, and IUCN conducted a Gender Evaluation of the CIF in 2012. More recently, a report evaluating the engagement of women and gender-related groups in the CIFs was released in 2020.

SREP
SREP has an internal monitoring and reporting system that tracks progress in scaling up deployment of renewable energy solutions. The CIF Administrative Unit as well as Implementing MDBs and in-country stakeholders are responsible for tracking the performance of SREP investments. The results indicators incorporated to evaluate the impact and outcome of SREP-funded activities include:

  1. “Annual electricity output from renewable energy;
  2. Number of women and men, business, and community services benefitting from improved access to electricity and/or other modern energy services;
  3. Increased public and private investments in targeted subsectors;
  4. Capacity from renewable energy (MW).”
Participation of Observers and Stakeholders In designing the Climate Investment Funds, consultations took place with potential donors and recipients, the United Nations family, other multilateral development banks (MDBs), civil society organisations, and the private sector. The CIF were created on agreement from some 40 developing and industrialised countries. Non-governmental actors have a direct role in the governance of the fund as detailed above. Representatives of NGOs and the private sector were also part of the expert group.

Observers
The SREP Sub-Committee invites a number of active observers to attend its meetings, including representatives from four civil society organisations (one from Asia, LAC, Africa, and Developed Countries respectively), two Indigenous Peoples representatives, two private sector entities (one from a developed country and one from a developing country), one each from the GEF, UNDP, UNEP, UNPFII, UNFCCC and EFPI.

These observers can add items to committee agendas, recommend external experts, and request verbal interventions during discussions.

The list of actual SREP-SC observers is available at: https://www.climateinvestmentfunds.org/cif_enc/

Expert Group
An Expert Group was established by the SREP Sub-Committee to make recommendations on the selection of country or regional programmes. The Expert Group consists of six members with a wide range of scientific, economic, social, environmental, development, policy and/or governance/institutional expertise.

Partnership Forum
The Partnership Forum serves as an annual gathering, which enables stakeholders to engage in dialogue on the CIF’s strategic directions, results and impacts. Forum stakeholders include representatives of donor and eligible recipient countries, MDBs, UN and UN agencies, Global Environment Facility (GEF), UN Framework Convention on Climate Change (UNFCCC), the Adaptation Fund, bilateral development agencies, NGOs, Indigenous Peoples, private sector entities, and scientific and technical experts. The Partnership Forum is co-chaired by the World Bank’s Vice President for Sustainable Development and a country representative elected by countries participating in the Partnership Forum.

Transparency and Information Disclosure Pledges, deposits and funding decisions for SCF and its subsidiary funds (PPCR, SREP and FIP) are reported to the SCF Trust Fund Committee in biannual trustee reports. Details on individual projects are made public and available at: https://www.climateinvestmentfunds.org/projects

Disclosure Policy
In May 2009, the Trust Fund Committees approved a disclosure policy supporting in-country disclosure of country-owned investment plans and strategies (developed under each of the Trust Funds) prior to their submission to a CIF Committee for approval. Proposed plans are also posted on the CIF website no later than three weeks prior to review of the proposal by a Committee. In the case of proposed programmes and projects, an information document describing the proposal is to be made public at least two weeks prior to a decision on the funding of the proposal. The policy recognises that a country or a project proposer may have justifiable reasons for not publicly disclosing all information in an investment plan or project, and in exceptional cases, subject to Committee approval, certain information may be kept confidential.

Other Issues Raised