Financial Mechanism for the Development of Renewable Energy and Energy Efficiency in Developing Countries – Case Study of Eight Southern Mediterranean Countries

Algeria, Egypt, Jordan, Lebanon, Morocco, Syria, Tunisia, Turkey

Date: May 2006 - January 2008
Client: European Investment Bank

Project overview

Economic development in most southern countries depends to a large extent on the heavy use of fossil-based energy, which is highly competitive on account of its low cost and easy implementation and on the use of technologies that are not optimised in terms of energy efficiency. In the future, these countries will thus have to rely widely on the use of renewable energy sources and to increase the energy efficiency of their development.

Regarding the financial constraint, the participation of the private sector will be essential. The objectives of the study consisted of identifying the needs and necessary conditions for developing renewable energies and energy efficiency in developing countries in the Mediterranean region on the one hand and defining financial mechanism(s) likely to meet the identified requirements while taking account of the institutional, regulatory, technical and financial frameworks of the countries involved (Algeria, Egypt, Jordan, Lebanon, Morocco, Syria, Tunisia, Turkey) on the other hand.

Our missions

As the lead firm of the consortium formed with Ernst & Young, BCEOM (former name of Egis) was responsible for the study as a whole, with the following expected results:

1. Analytical assessment of the major actions undertaken to promote renewable energies and energy efficiency at multilateral and bilateral level since 1992:

  • typology of the financed projects
  • amounts involved
  • typology of funding instruments: subsidies, loans, own funds, etc.
  • geographical distribution of projects
  • analysis of conditions for success and reasons for failure

 2. Identifying the potential renewable energy and energy efficiency activities and programmes in the countries involved:

  • energy policy frameworks
  • structure set up in the Clean Development Mechanism (CDM) of the Kyoto Protocol
  • state of the electricity production and distribution sector
  • review of electricity consumption and ten-year trend forecast
  • panorama of the applied technologies
  • identifying the organisations active in the sector (electricity companies, ESCOs, concessionaires, banks, etc.)

3. Funding requirements:

  • description and analysis of the present funding methods for renewable energy and energy efficiency projects
  • identifying possible obstacles to the mobilisation of public and private funding
  • identifying the types of funding necessary for the development of renewable energies and energy efficiency (loads, subsidies, "patient capital", bank guarantees, etc.)
  • assessing possible income from the sale of the Certified Emission Reductions of the CDM
  • estimating the necessary financial flows and ten-year projection.