Working Group 2 (WG2)

The mandate of WG2 is to identify performance, market, credit, and regulatory risks associated with small scale projects. The research is conducted on the basis of five key mechanisms to address financial risks in small scale renewable energy financing:

1. End-User Credit Enhancement Instruments aimed at mitigating end-user credit risks. These instruments can include credit guarantee funds and other instruments such as interest rate subsidies, partial guarantees, conditional grants. All proposed instruments will seek to engage local financial institutions to leverage lending for small scale renewable energy projects.

2. Credit Risks Partial Guarantee Instruments that extend and/or soften the lending terms on small scale renewable energy projects, e.g., from 3-5 years up to 15 years, depending on the technology and project.

3. Contingent Grants for financial institutions to help entrepreneurs/developers secure equity sponsorship for their projects.

4. Small Scale Renewable Energy Project Preparation Mechanisms. A project preparation mechanism was proposed by the Working Group that would address two key issues: (1) entrepreneurial need for business planning support and development of bankable projects, and (2) lender need for assistance in evaluating small scale renewable energy projects. It is assumed that the project preparation support mechanism would work through local financial institutions for both aspects of support. The second area - lender assistance in evaluating small scale projects - could be linked to the Transaction Support Facility currently being piloted by the Sustainable Energy Finance Initiative (SEFI) in the Mediterranean region.

5. Micro-insurance. WG2 is exploring opportunities/value of providing micro-insurance for small scale renewable energy projects.

Publications and reports

Financing Mechanisms and Public/Private Risk Sharing Instruments for Financing Small Scale Renewable Energy Equipment and Projects