Financial Mechanisms for Sustainable EnergyFinancial instruments are fundamental to remove barriers and encourage investments that contribute to more efficient energy use, reduce the use of fossil fuels and mitigate climate change. The IDB has been developing and implementing innovative instruments such as concessional loans, green bonds, energy savings insurance, contingent grants, technology innovation facilities and performance contracts. Efforts have been focused on promoting private investment, institutional strengthening and facilitating regulatory developments on the fronts of energy efficiency, renewable energy, sustainable transportation and energy storage.
Scope of Activities
Renewable Energy ▾
Energy Savings Insurance - ESI ▾
Sustainable Transport ▾
Energy Storage ▾
Energy Efficiency ▾
Support for the design and implementation of financial and non-financial instruments that remove barriers for new solar, wind, biogas, geothermal and biomass projects on and off the grid.
Energy Savings Insurance - ESI
The Energy Savings Insurance Program (ESI) removes barriers to energy investments through four instruments that mitigate project risks and build investor confidence: standard contract, energy savings insurance, savings validation and financing. The contract guarantees the performance of the project in terms of energy savings or energy generated and is backed by an insurance policy that is activated in the event that the promise of savings or generation is not fulfilled. The validation is carried out by an independent entity with experience in energy project certification and its concepts are binding for the parties. The financial support required by investors is channelled through financial institutions interested in creating a market and a portfolio of projects with assured energy savings. The client or investor is responsible for applying to the bank for a loan to finance their project. In turn, the supplier is in charge of managing and acquiring the insurance policy in favor of the investor. The ESI Model is applicable to both energy efficiency and distributed generation projects, largely solar photovoltaic. The energy savings or the energy generated must be guaranteed for a period of time sufficient to recover the investment. The ESI Model is applicable both to projects of equipment replacement by more efficient ones and to new installations. The ESI Program includes incentives for the development of demonstration projects. The ESI Program is also being replicated in Europe by BASE with the support of the European Union’s Horizon 2020 Research and Innovation Programme. See details at: ESI Europe programme and GoSafe with ESI.
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.
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.
Design and implementation of financial and non-financial instruments that promote investments in energy efficiency though technical cooperation and concessional funds.
- Design of a specific ESMS to be applied by a guarantee fund for SMEs (Barbados - CENTRAL BANK OF BARBADOS)
- Development of an ESMS and Green Line for Bancoldex (Colombia - BANCOLDEX)
- Gap analysis of the E&S regulations applicable to Fonplata vs. the IDB safeguards and the IFC performance standards (Argentina - FONPLATA)
- RG-T3045 - Building Green Financial Instruments and Systems in LAC from the Experience of China
- RG-X1244 - Support to Banobras with an Environmental and Social Risk Management System (Mexico - Banobras)
- Support BANDESAL in adjusting its ESRM System to its second-tier activities (El Salvador - BANDESAL)
- Support the Development Agencies in Brazil in the implementation of the new national regulation on E&S issues (Brazil - ABDE)
- Support the structuring of a green financing strategy (Brazil - BANCO DO BRASIL)
- Support to AFEAM with an Environmental and Social Risk Management System (Brazil - AFEAM)
- Support to Bancoldex for the integration of Renewable Energy projects in its Environmental and Social Risk Management System (Colombia - BANCOLDEX)
- Support to Finagro with an Environmental & Social Risks Management System (Colombia - FINAGRO)
- Support to FINDETER with Environmental and Social Risks Evaluation and Management (Colombia - FINDETER)
- Support to FIRA with an Environmental and Social Risk Management System (Mexico - FIRA)
- Support to FND with an Environmental and Social Risk Management System (Mexico - FND)
Why Sustainable Energy?Sustainable energy use seeks not to compromise the energy needs of future generations. It involves promoting low-carbon energy supply from renewable energy sources and optimizing energy use through more efficient equipment and practices.
Goal 7 of sustainable development is to achieve universal access to modern energy in a reliable, affordable and sustainable manner by 2030. Expanding the use of modern technologies and facilitating access to local energy sources contributes to reducing poverty, promoting a better quality of life, strengthening competitiveness and promoting the economic development of countries.
Sustainable energy and barriers to investment:
Bancoldex in Colombia
The Program developed successful projects in the sector of clinics, hotels and hospitals, thus it was scaled up to all sectors of the national economy. BANCOLDEX has made significant progress in socializing and promoting the Program to local financial institutions, technology providers, associations and SMEs. As of May 2020, 29 ESI projects have been developed in Colombia.
Energy storage in remote systems to increase access to energy in Central America.
Energy storage in remote systems to increase access to energy in Central America. The main objective of the program is to provide financing to expand private investments in energy storage technologies mainly in small off-grid cities or remote locations in Central America that combine energy storage with solar photovoltaic systems or hybrid photovoltaic systems combined with diesel where the use of energy storage technology results in a net reduction in diesel use. The initiative seeks to address some of the major barriers to small-scale storage investments, including, in particular, financial barriers such as lack of appropriate cost recovery mechanisms, high upfront costs, financial viability of customers and energy subsidies, as well as lack of familiarity with storage systems. The programme will also seek to address technical cooperation policies and regulatory issues.
Energy Efficiency in Public Lighting
This is an initiative of the Inter-American Development Bank (IADB), the Global Environment Facility (GEF) and Findeter to promote the modernisation of public lighting in Colombia, replacing low-efficiency luminaires with LEDs, through the design and implementation of a methodology to be tested in five pilot municipalities. The adoption of energy-efficient technologies contributes to the environment, improves the quality of life of the communities and promotes territorial development. More information here.
Partners on the GroundWho is supporting Sustainable Energy
The Inter-American Development Bank has partnered with major "green" players to catalyze investments 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.
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