Supporting NAMA development in Chile

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Information about Supporting NAMA development in Chile

Published on February 20, 2014

Author: Ecofys



This presentation informs on work carried out for the Chilean government regarding a proposal for a NAMA (Nationally Appropriate Mitigation Action) in “self-supply energy systems based on non-conventional renewable energy” in Chile. The proposal was developed in cooperation with Fundación Chile and financed by the International Climate Initiative of the German government through the Mitigation Momentum project ( The development of the proposal was undertaken in a consultative process involving key governmental, private sector and civil society stakeholders. Frauke Röser, Managing Consultant International Climate Policies at Ecofys, gave the presentation during a webinar in February 2014.

Supporting NAMA development in Chile Ecofys webinar 20/02/2014 Frauke Roeser

Outline Introduction to NAMAs Case Study – Chile Self-supply Renewable Energy Q&A 2 © ECOFYS | 20/02/2014 | Frauke Roeser

Backdrop 3 © ECOFYS | 20/02/2014 | Frauke Roeser

The evolution of NAMAs in the climate negotiations > Paragraph 1 (b) (ii) of the Bali Action Plan of 2007: > “ […] Nationally appropriate mitigation actions by developing country Parties in the context of sustainable development, supported and enabled by technology, financing and capacity building, in a measurable, reportable and verifiable manner.” COP 13 Bali • Bali Action Plan first mentions NAMAs 4 COP 15 Copenhagen • NAMA submissions by countries • „NAMAs to be subject to MRV“ © ECOFYS | 20/02/2014 | Frauke Roeser COP 16 Cancun • NAMA Registry agreed • „NAMAs aim at achieving deviation from business as usual“ COP 17 Durban • Guidelines for Biennial Update Reporting (including NAMAs) COP 19 Warsaw • NAMA Registry operational

Key aspects of a NAMA A NAMA is a voluntary intervention by a developing country government: > Which is in line with national and/or local development priorities > Which receives support from domestic and/or international sources > Which has effect on reducing GHG emissions either directly or indirectly > Which is measurable, reportable and verifiable ("MRVable") to ensure transparency of the NAMA outcomes 5 © ECOFYS | 20/02/2014 | Frauke Roeser

NAMA Types > NAMAs can be: – Strategies (e.g. renewable strategy – wind, solar, tidal) – Policies and Programmes (e.g. energy efficiency standard, Feed-in tariff, energy efficient lighting programme) – Projects (e.g. Bus Rapid Transit lane) 6 © ECOFYS | 20/02/2014 | Frauke Roeser

Differences of NAMAs to CDM Element NAMA National Strategy Policy Programme Project CDM* Type of activity - Funds flow To government To project developer Carbon credits No Yes Sustainable development benefits Very important Prerogative of host (‘nationally appropriate’) country *Clean Development Mechanism 7 © ECOFYS | 20/02/2014 | Frauke Roeser - Individual Project - Aggregation of projects

Global NAMA action > 87 NAMAs and 37 feasibility studies in 35 countries in the NAMA database > Tracking of global NAMA activity Source: 8 © ECOFYS | 20/02/2014 | Frauke Roeser

State of play of NAMAs > 40 submissions to the UNFCCC Registry: 36 supported; 4 unilateral > NAMA Database contains 87 NAMAs and 37 studies from 35 countries Not known 6 Submitted to registry Not submitted to registry Implementation 3 Proposal/ Planning 10 Concept 0 10 Source: 9 68 34 © ECOFYS | 20/02/2014 | Frauke Roeser 20 30 40 50 60 70 80 Number of NAMAs

Regional distribution of NAMAs NAMA > Latin America most active region Europe, 11% Middle East and Africa, 26% – Followed by Africa – Europe: Serbia submitted 12 NAMAs Latin America, 50% Asia, 13% > Broader regional spread than CDM – Africa and Least Developed countries notably larger share CDM Latin America Econo13% mies in Africa 2% > Possible reasons – NAMA emphasize sustainable transition 1% development Asia Pacific 84% Source:, accessed 15/01/2014 10 © ECOFYS | 20/02/2014 | Frauke Roeser – Flexibility in design

Sectoral distribution of NAMAs NAMA > Energy supply largest share (36%) Waste 14% Buildings 14% Agriculture 2% Industry 11% Forestry 4% Transport 19% Energy supply 36% Source: Ecofys et al 2013 Industry 10% CDM Waste 11% Forestry Transpo 0.6% rt 0.35% © ECOFYS | 20/02/2014 | Frauke Roeser > Broader sectoral coverage than in CDM – Esp. transport and buildings notably more relevant – Less stringent MRV requirements – Accounting for medium to long Energy Supply 75% Source:, accessed 15/01/2014 11 buildings > Possible reasons Building s 1.3% Agricult ure 2.4% – Followed by transport and term emission reduction and transformational change possible

NAMA Finance > New and additional funds agreed: > US$30 bn as fast start finance for 2010 – 2012 > „Mobilize“ US$100bn per annum by 2020 > Establishment of Green Climate Fund (GCF) > Few NAMAs in implementation > Finance still mainly focussing on readiness activities > Only one dedicated NAMA implementation fund: NAMA Facility of UK and Germany > Need to provide finance to build confidence > Public finance likley to be limited > Important role of the private sector 12 © ECOFYS | 20/02/2014 | Frauke Roeser

Outline Introduction to NAMAs Case Study – Chile Self-supply Renewable Energy Q&A 13 © ECOFYS | 20/02/2014 | Frauke Roeser

Mitigation Momentum > Support to the Chilean government through the Mitigation Momentum project – Funded by the German International Climate Initiative – Partnership with Energy Reserach Centre of the Netherlands (ECN) > Counterpart in Chile – Ministry of Environment – Ministry of Energy – Centre for Renewable Energy (CER) > Local partner Fundacion Chile 14 © ECOFYS | 20/02/2014 | Frauke Roeser

Energy context Chile > Between 2012 and 2020, electricity consumption is projected to increase at a rate around 5.9% > By 2020 ca. 8000 MW of new generation capacity will be needed to satisfy demand > Chile relies heavily on hydropower and has almost no indigenous fossil energy resources. Source: Minsiterio de Energia Chile/ CER > Recent droughts and environmental challenges have limited the development of hydro projects. There is continued concern over access to competitively priced gas supplies. > As a result, around half of new capacity under construction is coal 15 © ECOFYS | 20/02/2014 | Frauke Roeser :

Energy Strategy Chile > Strong emphasis on nonconventional renewable energy (NRCE) in Chile’s National Energy Strategy > Law 20.257 sets a target of 10% NRCE by 2024 > New institutions to boost NCRE – the Renewable Energy Centre (CER) Source: Gobierno de Chile, Ministerio de Energia, 2012 16 © ECOFYS | 20/02/2014 | Frauke Roeser :

Objective of the NAMA Promote the incorporation of renewable energy systems for selfsupply. All non-conventional renewable energy projects qualify as long as 50% of the generated energy is consumed onsite. 17 © ECOFYS | 20/02/2014 | Frauke Roeser

Barriers – Renewable energy Financial • Payback periods of RE vs. core business investments in the sector • Banking institutions not accustomed to small-scale RE project finance • Unwillingness to invest in pre-feasibility studies when outcomes are uncertain Capacity • Access to qualified installers and consulting companies to deliver projects • Access to qualilfied technicians to operate and maintain equipment Awareness Regulatory 18 • Lack of understanding of technologies and benefits • Lack of trust • Long and difficult process to gain approval for injecting electricity to the grid © ECOFYS | 20/02/2014 | Frauke Roeser

NAMA Components 19 © ECOFYS | 20/02/2014 | Frauke Roeser

Levelized cost of energy > Aim is to lower the Levelized Cost of Energy below or near the retail energy rate while maximizing the leverage of programme funds. 20 © ECOFYS | 20/02/2014 | Frauke Roeser

Financial Component 21 © ECOFYS | 20/02/2014 | Frauke Roeser

Example guarantee fund NAMA Guarantee Fund The guarantee funds are granted and set aside to cover loan defaults. Guarantee funds are invested in a low risk investment like govt. treasuries Funds from the commercial financial institution and development bank are used for the actual loans Portfolio loss allocation Total contribution: 80% $10 million Non recoverable funds (losses): Years to depletion: Leverage on non-recoverable funds: Leverage including recoverable funds (worst case scenario): CORFO+Int. development bank Portfolio loss allocation Total contribution: Leverage 0% $50 million 2.00 Commercial Financial Insitution Portfolio loss allocation Total contribution: 20% $30 Project loans Terms Int. rate Tenor 3.75% 15 years Projected volume of loans Total projected investments 22 -$6.40 million 23 years 15.63 10.00 © ECOFYS | 20/02/2014 | Frauke Roeser million Share financing Equity 20% Loans 80% Defaults Exp.rate 10% $80 million $100 million

Impacts of the NAMA > GHG emissions – Impacts depend on size of fund and leverage of financial instruments. Theoretical potential as much as 1.7 million tonnes CO2/e per year > Job creation – Distributed renewable energy projects will create jobs from installation, ongoing operations and maintenance. > Market creation – NAMA will enable more suppliers to establish in Chile, lowering costs from cumulative learning effects, reduced regulatory costs and increased competition of suppliers. > Mitigation capacity – The mitigation capacity of Chile will increase as the RE market expands, financing institutions gain experience with RE project finance and high-skilled workers develop critical skills. 23 © ECOFYS | 20/02/2014 | Frauke Roeser

Outlook > Chile NAMA is one of five successful NAMAs under the NAMA Facility call in 2013 – Chile: Self-supply Renewable Energy – Costa Rica: Low Carbon Coffee NAMA – Mexico: NAMA for Sustainable New Housing – Colombia: Transit-oriented Development – Indonesia: Sustainable Urban Transport Program Indonesia Source: > British German NAMA Facility is first dedicated fund for NAMA implementation > Implementation expected to begin in 2014 24 © ECOFYS | 20/02/2014 | Frauke Roeser

What made the NAMA a success? > Strong government owernship and support > In line with national strategy and priorities > Stakeholder based approach to NAMA design > In depth review of key barriers to mitigation – investment in renewable energy applications – Mix of interventions to address barriers > Early engagement with finance sector – Detailed design of finance mechanism > Concrete, realistic, implementable 25 © ECOFYS | 20/02/2014 | Frauke Roeser

Outline Background on NAMAs Case Study - Chile Q&A 26 © ECOFYS | 20/02/2014 | Frauke Roeser

Thank you! Ecofys Germany GmbH International Climate Policies Am Karlsbad 11 10785 Berlin Germany Frauke Röser T: +49 (0)30 29773579-32 E: 27 © ECOFYS | 20/02/2014 | Frauke Roeser

Financing of NAMAs 28 © ECOFYS | 20/02/2014 | Frauke Roeser

MRV of Self-supply renewable energy NAMA in Chile 29 © ECOFYS | 20/02/2014 | Frauke Roeser

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