Energy efficiency presents enormous investment and savings opportunities for businesses and households, with significant promise to reduce greenhouse gas emissions.
Even as the environmental advantage of energy-efficient technologies becomes increasingly apparent, their uptake remains hamstrung by asymmetric market information and financial constraints. Suppliers with an informational advantage often lack the incentives or channels to relay crucial information on the climate-related benefits and cost-minimising potential of energy-efficient appliances to consumers. Popularising energy efficiency solutions demands a reframing of the way providers of technologies responsible for high energy consumption, like air conditioners or boilers, approach businesses.
A switch needs to be made from merely selling the technology to selling the promise of future energy savings that sufficiently justifies the high upfront investment. In 2016, BASE joined forces with United for Efficiency (U4E), an UN Environment initiative aiming to accelerate the transition towards clean and efficient appliances. The two organisations complemented each other’s expertise, wherein U4E developed standards and policy recommendations regarding energy-efficient appliances, while BASE designed and implemented financial models to realise the policy objectives.
Together, they partnered with the Lawrence Berkeley National Laboratory in 2016 under The Caribbean Cooling Initiative (C-COOL) to accelerate the adoption of energy-efficient and climate-friendly air conditioners and refrigerators in Jamaica, Dominican Republic, Barbados, The Bahamas, and Saint Lucia. This endeavour resulted in the creation of National Cooling Strategies, including policy recommendations such as for Minimum Energy Performance Standards (MEPS) and labelling, and the development of a region-specific Cooling as a Service (CaaS) financial model. These measures laid the foundation for suppliers and consumers of air conditioning and refrigeration products to transition to the latest technology without requiring any upfront investment.
The success of C-COOL sparked interest in similar undertakings among other countries, for which the financial model was tweaked to fit specific contexts better. Additionally, a toolkit including contractual arrangements, economic models, funding structures and explanatory documentation were developed and made publicly available to enable stakeholders from other countries to implement the model.
In Rwanda, the R-COOL initiative was introduced to support the government’s ongoing efforts to develop a safe, efficient, and economical energy sector through the formulation of MEPS and labelling policies. Furthermore, a financial and risk mitigation mechanism called Coolease was conceptualised to buttress the move away from substandard equipment in favour of energy-efficient equipment among businesses. For cases where clients have insufficient awareness about the cleanest and most cost-efficient technologies available to them, the programme hopes to continuously curate and update a list of equipment after considering their efficiency performance and refrigerant type. Under the Coolease mechanism, Rwanda’s Business Development Fund (BDF) can offer clients financing to purchase climate-friendly air conditioners and refrigeration systems through a leasing agreement wherein the equipment itself is used as collateral. In doing so, Coolease could reduce the financial hurdles and high-risk perceptions associated with energy efficiency investments. A Green Growth Guarantee Fund was established by BDF and the Rwanda Green Fund (FONERWA) to cover part of the loss in case of default.
To further broaden the reach of energy-efficient technologies to the residential and the light commercial sector in the East African Community, the Rwanda Cooling Finance Initiative (R-COOLFI) was set up by BASE and its partners, with the Rwandan Environment Management Authority (REMA) serving as the leading executive entity of R-COOL green on-wage in Rwanda. The development and implementation of the green on-wage financing can potentially help overcome key barriers that are the burden of upfront investment and the need for collaterals and thus reduces the need for stringent credit assessment and collaterals. Once implemented, the model would enable salaried customers to acquire eligible equipment on special credit conditions and pay for it over time through deductions on their salaries.
In West Africa, BASE joined the ECOFRIDGES initiative to conduct an extensive market assessment and help design two financial mechanisms: green on-wage (GO) financing in Ghana and on-bill financing in Senegal. Both credit facilities were successfully made open to the public at the end of 2020. In Ghana, ECOFRIDGES GO offers unsecured personal loans to employees of professional entities that already have or had a business relationship with the bank to acquire certified equipment and pay for it over time. In Senegal, ECOFRIDGES on-bill financing allows consumers to finance the purchase through monthly payments on their electric utility bills.
BASE and U4E also work together to provide a Small-Scale Funding Assessment (SSFA) in Latin America. This project aims to undertake the architecture of the revolving loan fund to develop a market for energy efficiency lighting, air conditioners and refrigerators in Costa Rica. The programme seeks to accelerate improvements in energy efficiency under public procurement programs.
Experience through these different cases indicates that a wide array of innovative tools that increase awareness about specific energy-saving opportunities, set equipment standards, mandate audits and assessments, enable access to capital, and create financial incentives, need to be deployed in combination with each other to maximise the capture of energy efficiency potential.
