Chapter 6. Policy Measures and Programs
6.6 Sources for Financing
6.6.2 Foreign sources
6.6.2.1 MDBs
Funding is available through multilateral development banks such as the World Bank, the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD) and the African Development Bank (AfDB). This type of formal funding in general is only accessible for governments and not for private developers and most often consists of loans at an interest rate or payback periods below commercial averages, and sometimes grants are applied. The large development banks also offer guarantees to mitigate the risk of the project and facilitate other forms of financing (such as loans from commercial sources). Examples include the International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC).
❙ Table 6-29 ❙ Lists of major MDBs division Location Established
Year Member
Countries Authority
The World Bank(WB) Washington 1944 187 countries Worldwide
Asian Development Bank
(ADB) Manila 1966 67 countries Asia
The European Bank for Reconstruction and Development
(EBRD) London 1991 61 countries Central Asia/
Europe African Development Bank
(AfDB) Avizan/
Tunis 1964 77 countries Africa
Inter-American Development
Bank (IDB) Washington 1959 48 countries Latin America
6.6.2.2 Official Development Assistance
Official Development Assistance (ODA) is flows of official financing administered with the promotion of the economic development and welfare of LDCs as the main objective, and which are concessional in character with a grant element of at least 25 percent and to multilateral institutions. Most ODA comes from
the 28 members of the Development Assistance Committee (DAC) in OECD and is provided as a donation or concessional loan to LDCs on the recipient country list of the DAC.
6.6.2.3 Climate Financing
RE projects can also be financed from several funds established to mitigate global climate change.
United Nations Industrial Development Organization (UNIDO) is the designated agency for the Global Environment Fund (GEF) and has established cooperative relationships with LDCs for RE project development and feasibility study, creating proposals and winning contracts for funding. Another climate financing source applicable for RE projects is the Green Climate Fund (GCF), which is a fund established within the United Nations Framework Convention on Climate Change (UNFCCC) to assist LDCs in adaptation and mitigation practices to counter climate change.
In 2011, the United Nations Environment Programme (UNEP) conducted a close examination of low- carbon energy infrastructure in LDCs and analyzed the main characteristics and barriers. Based on the results, it implemented a Seed-Capital Assistance-Facility (hereafter SCAF) project that supports the development of RE initial projects. In addition, a representative renewable energy international program, called a Scaling-Up Renewable Energy Program (hereafter SREP), is managed by the World Bank, with regional development banks (IDB, ADB, AfDB, IFC) overseeing its implementation. This is the largest RE multilateral support activity in the world in terms of financial scale and participating agencies.
6.6.2.4 IRENA/ADFD Project Facility
IRENA and the Abu Dhabi Fund for Development (ADFD) have collaborated to create a joint project facility, so called IRENA/ADFD Project Facility, to finance transformative and replicable RE projects in LDCs. The facility involves IRENA selecting and recommending promising RE projects in LDCs. ADFD then offers soft (concessional) loans to these projects worth USD 350 million over seven annual cycles. The first selection cycle commenced in November 2012. Since January 2014, USD 189 million of ADFD loans have already been allocated to 19 RE projects recommended by IRENA. Over USD 387 million has been leveraged through other funding sources to cover the rest of the project costs (see IRENA website for more information).
6.6.2.5 Public-Private Partnership
A public–private partnership (PPP) is a cooperative arrangement between two or more public and private
in a developed country or countries are building RE facilities in LDCs. The benefits of such a scheme include the resolution of permit and license issues, as well as the consolidation of project reliability when the government is allowed to participate in shared ownership through its provision of project sites, and related factors. The foregoing is beneficial in that the participating enterprises can be guaranteed a stable cash flow by the public sector that is ensuring the long-term stability of the projects. Moreover, the mentioned scheme could promote investments in more market-friendly ways than simply providing subsidies.
7.1 RE Policy Milestone
Chapter 5 presented the REMP visions and RE deployment targets, as well as major strategies for RE deployment in Cameroon. Specific policy measures and programs for each of those strategies were delineated in detail in Chapter 6. Each of such policy measures and programs includes milestones in the form of a separate roadmap. This section puts forth combined milestones based on the compilation of the proposed roadmaps of those policy measures and programs.
7. Milestone and Policy Recommendation
7.1.1 RE Policy Milestones
7.1.2 Cost Estimation for RE Policy Measures and Programs
(unit: 1,000USD)
Policy measures and programs Classification 2017 2018 2019 2020 2021~2025
Enacting the Renewable Energy Promotion Act
Sum 6.0
(public hearing) Government
procurement 6.0
Private investment -
Organizations and Governance
Sum
10.0 6.0
(consultation) (public hearing) Government
procurement 10.0 6.0
Private
investment - -
Strengthening Local
Governments Capabilities
Renewable Energy Department
Sum
- (establishment) Government
procurement -
Private
investment -
Education/ Sum 6.0 6.0 6.0
(education) (education) (education)
Policy measures and programs Classification 2017 2018 2019 2020 2021~2025 Private
investment - - -
Local RE Deployment Plans
Sum 25.0 25.0
(consultation) (consultation) Government
procurement 25.0 25.0
Private
investment - -
Rural Area RE Deployment Program:
RESCO
Home Rental Model
Sum 3.7 - 11.0 182.5
(Pilot : 1) (Pilot : 3) (Project : 50) Government
procurement 3.7
- 11.0 -
Private
investment
-
- 182.5
O&M Model
sum 11.3
(Pilot : 1) Government
procurement -
Private
investment 11.3
Energy supply model
Sum 8.8 17.5
(Pilot : 1) (Pilot : 2)
Government
procurement 2.6 5.3
Private
investment* 6.1 12.3
On-Grid RE
Deployment Small hydro Sum 20.0 10,179.6
(F/S) (construction)
Policy measures and programs Classification 2017 2018 2019 2020 2021~2025
Program Government
procurement - -
Private*
investment 20.0 10,179.6
Solar PV
Sum 20.0 4,430.8
(F/S) (construction)
Government
procurement - -
Private*
investment* 20.0 4,430.8
Wind power
Sum
20.0 33,193.0 (pre-F/S) (F/S,
construction) Government
procurement - -
Private*
investment* 20.0 33,193.0
Mandatory Installation Program
Sum 73.8
(stage 1) Government
procurement 73.8
Private
investment -
Feed-in-Tariff Sum 20.0 10,320.2
(consultation) (pilot)
Policy measures and programs Classification 2017 2018 2019 2020 2021~2025 Private*
investment* 20.0 7,505.6
Pre-FiT
Sum 10.0 - 93.8 3,283.7
(consultation) - (pilot) (introduction) Government
procurement 10.0 - 93.8 3,283.7
Private
investment - - - -
FiT-Auction
Sum 10.0
(consultation) Government
procurement 10.0
Private
investment
-
Subsidies and Loans
sum 10.0
(consultation) Government
procurement Private investment
Tax Incentives
Sum 100.0 500.0
(operation) (operation) Government
procurement 100.0 500.0
Private
investment - -
Fostering
Manpower and Fostering
Manpower - Sum 60.0 60.0 300.0
(operation) (operation) (operation)
Policy measures and programs Classification 2017 2018 2019 2020 2021~2025 Specialized
Companies Career training
school Government
procurement 270.0
Private
investment 30.0
Fostering Manpower - College
Sum 100.0 500.0
(operation) (operation) Government
procurement 450.0
Private
investment 50.0
Fostering Manpower - Univ./Research institute
Sum 1,500.0
(operation) Government
procurement 1,350.0
Private
investment 150.0
Specialized Company
Sum
- (permit system) Government
procurement
- Private
investment -
Establishing
Information and Sum
10.0 10.0 50.0
(advance (survey)
Policy measures and programs Classification 2017 2018 2019 2020 2021~2025 Private
investment - - -
Information Dissemination Services
Sum 5.0 5.0
(establishment) (improvement)
Government
procurement 5.0 5.0
Private
investment - -
Assessment of RE Resource Potential
Sum 200.0 200.0 500.0
(tech.
transfer) (tech.
transfer) (analysis) Government
procurement 40.0 40.0 500.0
Private*
investment* 160.0 160.0 -
Total
Sum - 64.7 355.8 10,810.3 54,878.8
Government
procurement - 34.7 89.6 290.8 9,313.4
Private
investment - 20.0 206.1 10,359.6 45,565.5
* Induce overseas investment
7.2 Relation to Other Strategies and Policy Recommendation
The achievement of REMP vision and goals would contribute to other national strategies and plans in ways that fossil fuel projects planned in existing documents are replaced by RE deployment projects and it does not create additional energy demand, that is, it does not increase national energy demand by itself.
7.2.1 Contribution to Vision 2030 and DSCE
Basically, REMP is the sectoral strategy document that supports achievement of Vision 2030 and DSCE,
“Cameroon: an emerging, democratic and united country in diversity.” The other sectoral strategies, such as PDSE, PDER, EESS and PNEE, were developed to supports Vision 2030 and DSCE in energy sector.
REMP does the same role as them, but highlights the Vision 2030’s phrases:
3. Developing alternative energies: hydro-electric production in large plants will go along with the development of small power plants and other types of energy notably renewable energies such as solar and wind energies which constitute considerable potentials for Cameroon. In this regard, incentives should be taken notably for the supply of remote rural and border areas with energy (Vision 2030, p. 40, Italic added).
Concerning the environment, the strategy envisaged will focus basically on environmental protection, the sustainable management of resources and stepping up efforts to fight climate change and its harmful effects. It will consist in: (i) improved clean power supply to boost economic growth and stem the tide of climate change, notably by diversifying energy sources (wind, nuclear, bio-fuel, solar…), and replacing fossil fuels by clean energy supplies; (ii) enhancing the protection potential from the harmful effects of climate change, particularly by promoting sustainable development and management projects of natural resources, approving funding mechanisms provided for by the Kyoto protocol (MDP, REDD, etc.); (iii) developing strategies aimed at reducing various forms of pollution (soil, water, air,…); (iv) improving drainage and solid waste management systems; (v) the protection and sustainable management of ecosystems (soil, sub-soil, water, fauna, flora, marine and coastal ecosystems, forests ...); (vi) improving disaster communication, information, warning and management mechanisms (Vision 2030, p. 36, Italic added).
That is, REMP emphasizes the RE sources described in Vision 2030 and suggests replacing fossil fuel
7.2.2 Contribution to INDC
As stated above, RE deployment targets by RE source in REMP are set based on the 2035 RE deployment targets in INDC and are kind of working targets by year and phase for INDC. The policy measures and programs in REMP are methods that facilitate the achievement of REMP targets, which is the same as the INDC targets. Proactive implementation of REMP would increase supply of RE generation and directly contribute to achieving the INDC’s 25% RE deployment targets by 2035. As a result, it is recommended that REMP can be represented as the detail action plan to achieve the INDC target in RE sector.
7.2.3 Contribution to PDSE (PDSEN)
In the Median Scenario in PDSE 2035, the total installed capacity of the 25 existing and planned hydropower projects is about 3,936 MW by 2035 and that of the11 existing and planned thermal power projects is about 697 MW, while the installed capacity of RE source is not very specific. However, the result of REMP power demand analysis and the RE deployment targets shows that total RE power supply should be 5,954 GWh by 2035, which should be made up by 1,427 GWh of solar PV, 244 GWh of wind power, 2,618 GWh of small hydropower and 1,665 GWh of bioenergy, which also requires cumulated installed capacities of 856.3 MW for solar PV, 99.5 MW for wind power, 543.4 MW of small hydropower and 380.1 MW of bioenergy by 2035, respectively. As a result, the implementation of REMP would require large portion of the thermal power and large hydro power projects planned by PDSE 2035 (PDSEN 2035) should be replaced by RE projects. So, it is recommended that PDSE should be updated to incorporate the REMP targets of RE deployment, accordingly.
7.2.4 Contribution to PDER
REMP would also contribute in achieving the 98% of electricity access rate by 2035 set in the PDER through replacement of fossil fuel power projects and grid interconnection to households without electricity access by the deployment of distributed generation resource (RE) to some extent, and exact contribution level would depend on how proactively the government of Cameroon promotes the RESCO program, which is describe in detail in the subsection 6.3.1 below. Implementation of REMP could contribute to PDER’s 98% access rate target in two ways. First, the government of Cameroon could take the planned connection of households who reside in small size localities with less than 500 people scheduled in phase 1, 2, 3 and 4, and replace them by distributed RE generation utilizing the RESCO Program. For example, it is
recommended that the government of Cameroon could take the planned connection of total 181,243 households who reside in small size localities with less than 500 people scheduled in phase 4, and replace them by distributed RE generation utilizing the RESCO Program and spread them into phases 1, 2, and 3.
Second, the planned construction projects for fossil fuel power facilities could be replaced by on-grid RE projects. In these ways, Cameroon could achieve the PDER’s 98% access rate targets earlier and cleaner than planned.
7.2.5 Contribution to EESS and PNEE
The negative environmental and social impacts that may be caused by development of RE sources in the process of implementing REMP would be minimize by closely considering and integrating the recommendations and action plans suggested in the Environmental and Social Strategic Assessment of the Energy Sector in Cameroon (EESS). So, it is recommended that the government of Cameroon should guide and monito that every case of development of RE projects in REMP should deeply consider the recommendations and action plans suggested in the EESS. Lastly, contribution of REMP to the achievement of PNEE would not be direct but mutual complementary. That is, active implementation of PNEE would facilitate the achievement of the RE deployment targets in REMP by lowering total national energy consumption.
7.3 Risk Analysis and Policy Recommendation
In the course of implementing the policy measures and programs planed in REMP, achieving the RE deployment targets, based on the laws, regulations, and systems amended to ensure deployment, might not be as smooth as planned owing to several factors. The potential risk factors include policy-related and political risks, uncertainty in the energy market, technological uncertainties, financial risks, and environmental risks. If these potential risk factors could be identified and analyzed properly in advance, the policy-makers and other interested parties could respond more appropriately when confronted by the unforeseen risks, while implementing the deployment policy measures and programs by seeking the best alternatives or other options.
7.3.1 Policy-Related and Political Risks
7.3.1.1 Policies Are Not Adopted
Often, thoughtfully developed policy fails to be adopted in the final stage or, even if it were adopted, fails to be implemented fully. REMP involves a wide range of policy measures and programs being proposed and it is advisable that these be developed in further detail while REMP is being implemented, and that these be expanded fully into actual policies. Failure to adopt some of the core policies would impede the fulfilment of REMP vision and deployment goals. Even an adoption would not guarantee the fulfilment of the deployment objectives, if the adopted policies were not implemented fully and completely by the government.
Policy Recommendation: Preventing the risks of policy not being adopted would require prompt legislation of the Renewable Energy Promotion Act. Specifying in the act the purpose of REMP and the deployment objectives, as well as the policies to achieve them, and legislation of the act to render it legally binding would prevent or at least minimize the problem
7.3.1.2 Policy Inconsistency, Instability and Conflict of Interest
As mentioned earlier, the REMP vision and deployment goals can be achieved only when they are incorporated into the related plans, such as PDER and PDSE (or PDSEN), and are carried out organically and in parallel with the plans rather than through independent implementation of REMP. However, conflicts in the goals of PDER and PDSE (or PDSEN) versus those of REMP, or if there were poor coordination or lack of consistency, even if well matched in terms of goals, such could cause confusion in the implementation of REMP policies and conflicts among the interested parties. In such an instance, the repercussions will surpass the self-interest of the stakeholders, making cooperation among the interested parties difficult and, ultimately, putting the smooth implementation of REMP at risk.
Policy Recommendation: To solve such problems, the details of REMP should be shared with responsible personnel from other ministries to establish consensus in terms of philosophy and orientation, as well as to ensure consistency in the goals and directions with PDER and PDSEN. Furthermore, all policy-making personnel and interested parties should be allowed to participate fully in the PDER and PDSE (or PDSEN) update processes to establish organic coordination between the plans. It is essential that communication be carried out in language that will allow transparent information sharing between all participants and clear mutual understanding. Similarly, the creation of the “Inter-Departmental Renewable Energy Policy Committee” (tentatively named) is proposed as governing body to help promote communication between the departments. This committee should be headed by the director of the RE policy-making organization. In addition, it should involve all related departments and
interested parties to allow discussion on and coordination of their interests in RE policies and planning, and various issues related to project implementation. The committee will therefore function to ensure policy consistency and resolve conflicting interests.
7.3.1.3 Lack of Continuity in Government Policies
All countries amend their policies according to various environmental and other changes. However, irrational, abrupt, or often repeated policy changes, i.e., a severe lack of continuity, would compromise the trust of local and international investors in projects or market participants related to such policies. The same phenomenon applies to the RE sector. For instance, any change in the policies on national level, upheld by taxation or financial authorities, and the resulting problem with financing to deploy RE, would impede the implementation of REMP. More specifically, any sudden change in terms of RE deployment programs and to the previously agreed tariffs related to the long-term RE PPA project agreement would compromise the project cash flow. In a worst-scenario case, this could cause the bankruptcy of the investors. Such lack of policy continuity severely affects the predictability of the market and, ultimately, makes it difficult to attract appropriate local and international investors.
Policy Recommendation: The government must commit its best efforts to increasing the predictability of its RE policy. The government must accelerate the implementation of REMP and ensure the prompt legislation of the main REMP policy measures, thereby showing its strong resolve to the market. Furthermore, even when the policy-making environment has changed, necessitating revision of the policies, the government must afford market participants sufficient time to adapt to the changes. Moreover, the government should preferably refrain from retrospectively applying the revisions in order to demonstrate to the existing market participants its utmost consideration to spare them unforeseen losses.
7.3.2 Market Risk
Typically, a misrepresented pricing system, insufficient placement of laws and regulations, and inadequate infrastructure in the energy market constrain the penetration of new technology, such as RE, and make fair competition difficult. Additionally, the continued growth of the RE sector depends on macroeconomic conditions in the country. A summary of the market risks confronting the RE sector is presented below.
7.3.2.1 Discontinuing Financial Incentives
Countries establish their policies and create conditions for potential local and international investors to commit their investments. Therefore, the market participants actually implement the RE projects and achieve the RE deployment goals. Subsidies and tax breaks for RE technology are practical and effective policy measures for furthering the deployment of RE. Such financial incentives require tremendous investment, with the attendant risk of the promised support being diminished or discontinued once the national financial conditions weakens or the macroeconomic circumstances deteriorate. If Cameroon were subjected to such circumstances, it would lose the most valuable investors for meeting its RE deployment goals.
Policy Recommendation: The reasoning for granting subsidies or tax breaks to RE technology is to ensure equal and fair participating conditions for market participants both in cheaper fossil-fuel energy sources and cleaner but more expensive RE sources. However, in most instances, the cost of fossil fuels disregards external costs, such as GHG emission costs;
therefore, the actual cost is somewhat higher than the perceived cost. Such misrepresentation can be resolved by introducing government subsidies and tax breaks to lower the cost of RE technology to acceptable levels, thereby encouraging market competition. However, the government of Cameroon can make the cost of traditional energy resources more realistic incorporating the external costs by levying carbon tax or other measures, thereby creating funds from the tax revenue that can be converted into renewable energy funds. Such funds can be utilized for subsidies and tax benefits, as well as for diffusing RE. The government should also rescind the existing tax breaks for conventional energy sources, implement taxation reforms (e.g., imposing additional special-purpose taxes, such as environmental taxes), and utilize the extra revenues as renewable energy funds to support the stable deployment of RE.
7.3.2.2 Higher Initial Investments and Lower Purchasing Power
As mentioned earlier, RE technology is more expensive than fossil fuel energy sources. The cost associated with RE is mostly initial investment cost, as fuel is not required for solar PV, wind energy, and other cleaner energy sources, and their operating costs are therefore significantly lower. The poverty rate of Cameroon is somewhat high, indicating not many people could afford RE facilities, making cleaner technology a difficult choice for consumers. In particular, rural residents have lower incomes and are not yet connected to the national grid. Therefore, it would be difficult for them to switch from the conventional energy sources to modern RE schemes. This makes comprehensive implementation of REMP more challenging.