Financing Renewable Energy & Energy Efficiency in the Tea and Sugar Industry in East and Southern Africa
Policy measure

According to REEEP (2011), the project Financing Renewable Energy & Energy Efficiency in the Tea and Sugar Industry in East and Southern Africa aimed to “analyse, understand and build capacity for addressing the challenges associated with lending to the tea and sugar industry for sustainable energy investments and enhance networking among financial institutions interested in financing these sectors.”


The project was region-based and included Ethiopia, Mozambique, Tanzania, Uganda and Zambia. The total budget was set at EUR 265,867, including co-funding from the United Nations Environmental Program (UNEP)/UNEP Division of Global Environment Facility Coordination (DGEF), and the main implementing agency was the Energy, Environment and Development Network for Africa (AFREPREN/FWD) (REEEP, 2011).

Implementation

The main activities of the project have been identified by the REEEP (2011) as:

  • "Consult sugar and tea industry representatives on financing barriers to energy development.

  • Assess the challenges and risks facing domestic and regional financial institutions associated with financing energy projects in the tea/sugar industry.

  • Review the constraints to the development of mechanisms for reducing financial risks.

  • Develop mechanisms for overcoming financial barriers to developing renewable energy and energy efficiency service (REES) units.

  • Train financial institutions and sugar and tea industry representatives on financing REES projects, risk assessment and mitigation measures.

  • Enhance networking and dialogue between domestic, regional and international financial institutions and investors.

  • A set of financial and risk mitigation instruments accessible to the region’s financial community, and sugar and tea industries that will facilitate REEES investments.

  • A mailing list facing domestic, regional and international financial institutions and investors interested in financing REEES in target countries.

  • Training workshops on financing for energy projects in the Tea and Sugar industry, risk assessment and mitigation for financial institutions.

  • A website with information on the cogen and small hydro financing opportunities.

  • Reports and short articles on financial barriers facing the tea and sugar industries and options for overcoming barriers."

Challenges

The key challenges associated with the facing financing of cogeneration and small hydro financing have been identified by AFREPREN/FWD (2007) to include the following:

  • "The reliability of information is a problem, as a lot of the data is generic and not site specific.

  • Absence of standardized power purchase agreements applicable to renewable energy investments with lower capacities.

  • Lack of collaboration between utilities and project developers.

  • Poor perception of the power sector, especially due to management concerns arising from the frequent and sometimes-significant power outages and rationing."

Outcomes

According to AFREPREN/FWD (2007), the expected impacts of the project have been identified as:

  • “Increased capacity of financial institutions in understanding the risks of financing REES in agro-industries, mitigating risks and undertaking REES investments in the cogen and tea industries.

  • Development of set of financial and risk mitigation instruments (including reports and short articles on financial barriers) accessible to the regions financial and sugar/tea community in order to facilitate REES investment.

  • Laying the groundwork for the development of a network of domestic, regional and international financial institutions and investors interested in financing REES in target countries. It is expected that “the networking of domestic and regional financiers, sugar and tea industries stakeholders that is being facilitated by the project will produce a highly equipped and informed critical mass of skilled personnel from all the concerned sectors that will be instrumental in accelerating the development of energy efficiency and renewable energy in the region’s agro-industries.”

REEEP (2011) further reports that the project has resulted in the "production of a website with information on the cogen and small hydro financing opportunities.”


An example of a successful outcome of the project is the small hydro development project of Unilever Tea Kenya Limited (UTKL), which realized net savings of KShs 50 million per year on electricity bills and an actual avoided utility bill of KShs 70 to 90 million per year (AFREPREEN/FWD, 2007).

References

AFREPREN/FWD (Energy, Environment and Development Network for Africa), 2007. REEEP/AFREPREN/FWD/GTIEA Training Workshop on “Financing Renewable Energy & Energy Efficiency in the Tea and Sugar industry in East and Southern Africa”. 10th - 11th November 2007, Sarova Panafric Hotel, Nairobi, Kenya. Available at: www.afrepren.org/reeep/outputs/REEEP%20Training%20Workshop%20Report.pdf.


REEEP (Renewable Energy & Energy Efficiency Partnership), 2011. Financing Cogeneration and Small Hydro Projects in the Sugar and Tea Industry in East and Southern A. Available at: www.reeep.org/index.php?assetType=project&assetId=91.