Affordable loans for clean energy in agriculture - the clean energy revolving fund

Dec 07, 2018

Source/author : Renewable energy and Energy Efficiency Partnership

Read article : https://bit.ly/2SzwdgL

BACKGROUND

The Clean Energy Revolving Fund (CERF) offers affordable loans to farmers and small agricultural processing businesses, for the purchase of clean energy technologies. These technologies increase farmers’ productivity, resilience and regional competitiveness by helping them to manage electricity costs, and contribute to climate change mitigation. CERF is managed by Nexus for Development and supported by REEEP with funding from the Austrian Government and Blue Moon Fund.

THE CHALLENGE

Agriculture employs half the Cambodian labour force and strong growth in the sector over the past two decades has helped lift millions of farmers out of poverty. Cambodia’s agricultural sector is highly dependent on monsoon rains and the annual flooding of the Tonle Sap Lake, and therefore extremely vulnerable to climate change as well as dam building projects upstream on the Mekong River. Also, in recent years Cambodian farms have had difficulty competing internationally, partly because grid electricity is expensive, unreliable and not universally accessible. Many farmers use back-up diesel generators, which are polluting and leave users vulnerable to fluctuating diesel prices and supply problems. Clean energy technology offers a reliable and affordable alternative, but has not yet been widely adopted due to two barriers:

• Farmers lack knowledge and experience of clean energy technologies and do not necessarily trust them.

• Most farmers cannot afford the high upfront capital cost of a clean energy system. Bank loans are not an option, as the large majority of farmers are unbanked and have no credit rating, and standardised methodologies to assess their creditworthiness do not exist. This leads risk-averse banks to demand high interest rates and/or land titles as collateral – conditions farmers are unable to agree to especially for technologies that, as far as they are aware, are untested. While Cambodia has a high rate of access to finance through microfinance institutions, these do not provide loans of sufficient size and can charge high interest rates.

THE IMPACT

• Cost savings: CERF borrowers have reduced their operational costs by up to 34%, primarily through a reduction of up to 80% in diesel consumption.

• Enhanced resilience: Solar powered irrigation systems protect farmers from changing rainfall patterns, and do so more reliably than gridconnected or diesel-powered systems. Cost savings provide farming enterprises with a buffer against other shocks.

• Enhanced energy security in rural communities: The CE technology purchased by farmers is more resilient to storms and other weather shocks than the central grid, and experiences far less downtime.

• Emissions reduction: CERF-funded technology produces up to 160,000 kWh of clean energy per year, and avoids the emission of 168 tonnes of CO2 e per year.

• Market building: Three clean energy technology providers have been accredited to CERF so far, and as a result are able to reach a wider customer base through the offer of a fit for purpose financing solution.


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