Feed-in-tariffs and tariff premium for new technologies or small markets
Feed-in tariffs or tariff premiums are a policy instrument that allows a premium in addition to the cost of generation or market price of electricity from renewable energy sources for the project or debt service timeline. This instrument has been used widely by several countries since the beginning of this global transition and is today used primarily to support new or nascent technologies. Tariffs are then regularly revisited and revised downwards as the market matures and competition increases. Secured tariff per unit of electricity generated throughout the lifetime of a project can mitigate financial and operational risks for investors and reduce financing costs.
PPP for large-scale solar programme
Morocco has become an exemplar for forging successful public-private partnerships (PPPs) for its ambitious solar target of 2,000 MW capacity by 2020. In its first phase, the 160 MW Ouarzazate Noor 1 CSP Project was implemented through a PPP between the Moroccan Government (in various capacities), international financing institutions (IFIs) and a private sector consortium led by ACWA Power. The Government contributed to the PPP by providing tariff subsidies, and securing offtake and debt guarantees reducing risks to private and public investors. The tariff subsidy is spread through the lifetime of the project, reducing upfront capital requirements. The IFIs contributed through institutional expertise and concessional debt. The consortium of private parties, selected through a public tender, contributed equity financing and technical knowhow. The PPP model brought the total costs of the project down by 25-30%. A mandatory clause of local content procurement in the agreements will be crucial to boosting the local economy.
Green bonds guidelines for financing large-scale renewable energy
Green bonds are becoming an increasingly popular financing instrument to raise funds for large scale renewable energy projects. The Government of Morocco has successfully and strategically utilised green bonds to attract national and international financing for its green energy infrastructure. With a target of drawing 42% of the energy needs from renewable sources by 2020 and 52% by 2030, Morroco launched a Green Bonds Guidelines, setting the rules and an operational framework for national green bonds market. Over the years, green bonds in Morocco have been used for solar power projects, energy efficiency, green buildings, among other infrastructure projects. Till February 2019, Morocco, through the issuance of green bonds by different organisations, collectively raised $420 million for green energy projects. In the long run, Morocco hopes to raise $30 billion from green bonds to fulfil the financing requirements for its renewable energy targets.
Green bonds market
Green bonds are becoming an increasingly popular financing instrument for raising private sector and institutional funding for large scale renewable energy and energy efficiency projects. Indonesia, in 2017, developed a Green Bond and Green Sukuk Framework (the GBGS Framework) to extend both market and regulatory support for the issuance of Green Sukuk, a shariah-compliant bond. Funds raised through Green Sukuk will be exclusively used to finance or refinance eligible green projects. Eligible green projects were defined as “projects which promote the transition to low-emission economy and climate-resilient growth, including climate mitigation, adaptation, and biodiversity”. By April 2019, Indonesia had issued bonds worth $ 2.7 billion, making it the largest green bond issuer amongst ASEAN countries. The GBGS Framework was prepared in compliance with the Green Bonds Standards (GBS), an ASEAN initiative, so that the green bonds can be traded within the ASEAN market.