Renewable Energy
KfW’s Engagements
German-Mongolian Financial Cooperation
Input to the ASEM Seminar on Renewable Energy,
Ulaanbaatar, 22-23 May 2015
Kristina Soennichsen, Energy Researcher
Project Management Mongolia
KfW Development Bank
Bank aus Verantwortung
Index
1
KfW – Who we are
2
“Energiewende” & German Domestic Promotion of Renewable Energy
3
KfW Development Bank – Our Experience with RE Worldwide
4
KfW Development Bank – in Mongolia
2
KfW – Who We Are
Bank aus Verantwortung
More than 65 years of KfW
Financing with a public mission
›  Promotional bank of the Federal Republic of
Germany
›  Founded in 1948 as Kreditanstalt für
Wiederaufbau
›  Shareholders: 80% Federal Republic,
20% federal states
›  Headquarters: Frankfurt am Main
Branches: Berlin, Bonn and Cologne
›  Representative offices: 80 offices and
representations worldwide
›  Balance sheet total 2014: EUR 489.1 billion
›  Financing volume 2014: EUR 74.1 billion
›  5,518 employees (2015)
›  Best long-term rating: AAA/Aaa/AAA
4
A bank with a wide array of functions
Domestic promotion
Business Area
Mittelstandsbank
Promotion SMEs,
business founders,
start-ups
International business
We promote Germany
We ensure
internationalisation
We promote
development
Business Area
Privatkundenbank
Business Area
Export and Project
Finance
Business Area
Promotion of
Developing and
Transition Countries
Business Area
Kommunalbank
Financing municipal
Promotion
infrastructure projects
construction
and global loans
of new housing
Germany/Europe
and modernisation agency business for
as well as education Federal Government
International
project and
export finance
Promotion of
developing and
transition countries
Promotion of environmental and climate protection
5
Environmental Protection and Climate Protection
KfW is One of the Leading Financiers in the World
Environment/ Climate Protection
KfW commitments (billion EUR)
27.8
25.3
19.8
17.6
22.8
5,6
4,6
5,2
Decided increase of
commitments in recent years.
3,3
5,0
20,8
16,5
22,2
18,4
Main focus on renewable
energies and energy efficiency.
12,6
2008
2009
Germany
Foreign countries
Central pillar for KfW´s activities.
2010
2011
2013
Continuance on high level in future:
2/3 of total commitments
6
KfW‘s contribution in 2013
Total credit commitments for environmental projects
and climate protection: 27.8 bn. EUR
Renewables (Germany):
4.8 bn. EUR
Energy efficiency (Germany):
16.7 bn. EUR
Example: „Energy efficient construction and
renovation“
›  Secured or created jobs for one year: 440,900
›  Reduced greenhouse gas emissions by 0.8 million tons
›  High leverage: 1 Euro of public subsidy triggers private investments of
12 EUR (average value over last years)
7
Energiewende & German Domestic
Promotion of Renewable Energy
Bank aus Verantwortung
Functioning of EEG
kWh
kWh
electricity market
(EPEX Spot)
transmission
system operator
kWh
›  EEG plant operators usually receive technology-based guaranteed payments for electricity from
the transmission system operator for the next 20 years (injection priority)
›  Transmission system operators bring the EEG electricity to the market (Day-Ahead or Intraday)
›  Difference between revenue and costs (injection interest rates, merchandising, balancing
deviations) is allocated to electricity consumers
›  A national EEG-charge per kWh is computed
9
KfW-Action Plan Energy Turnaround
Innovation
Renewable Energy
2013: 4.8 bn €
Energy Efficiency
2013: 16.7 bn €
ERP-Innovation Programme
KfW-Offshore Wind Programme
KfW-Energy Efficiency Programme
KfW Programmes
Energy-Efficient Construction and Refurbishment of Buildings
KfW-Programme Municipal Energy Provisioning (Power and Heat)
KfW-Programme Generation
and Storage of Renewable Electricity
KfW-Programme
Energy-Efficient Urban Lighting
KfW-Programme
for Renewable Production of Heat
Concepts for and Management of
Energy Refurbishment
in Urban Areas
Direct Loans for Larger Private Corporates
(„Finanzierungsinitiative Energiewende“)
KfW IPEX-Bank (Direct Loans and Project Finance for Corporates)
Grids
Windenergy (On- and Offshore)
Solar Energy (Photovoltaic und Solarthermal)
Energiewende / 20.03.2014
Energy-Efficient Power Plants
10
KfW Development Bank
Our Experience with RE Worldwide
Bank aus Verantwortung
KfW Development Bank: Our Functions in the System of
German Development Cooperation
Political framework: BMZ, BMF, BMU, AA and others
Implementation
Development Bank
Financial Cooperation
Corporate Financing
Task:
Task:
Promote reform processes
and public investment
Financing of private
investment in developing and
industrializing countries
è  Provision of capital
è  Complementary advisory
services
Cooperation with state and
state-guaranteed private
institutions
è  Provision of capital
Technical Cooperation
and Personnel Support
Task:
Enhancing the capabilities
of people and organizations
è  Provision of expertise
Establishment and expansion
of private business
structures
12
International business: We promote development
KfW Development Bank
›  We promote economic and social progress in developing and transition
countries to improve people's lives.
›  As development bank of the German Federal Government, we provide
Task
Objectives
Partners
Financing
2009-2013
support and advice for reform processes and investments in developing
and transition countries
›  Sustainable improvement of economic and social conditions
›  Climate and environmental protection
›  Promotion of the financial sector
›  Governments, other governmental and non-governmental institutions in
developing and transition countries, and bilateral and multilateral donors
›  EUR 5.3 billion
13
14
FC in the Energy Sector – Goals until 2030
›  Access to affordable energy crucial for sustainable development
›  Energy is the largest sector in BMZ commitments - further expansion projected
›  German goals until 2030 (BMZ)
›  Create energy access for an additional 100 mil. people
›  Increase German ODA for RE and EE to at least EUR 3.6 bn. annually
›  International goals until 2030 (UN-initiative)
›  Create universal access to modern energy
›  Double the share of renewable energy in the global energy mix
›  Double the annual growth rate for energy efficiency
15
Energy Sector Commitments 2009-2013
Total Energy Commitments (2009-2013): 6447 Mio. €
thereof Renewable Energy: 3659 Mio. €
Wind
8,9%
Biomass/ Biogas
0,3%
Demand Side Energy
Efficiency
14%
Solar
6,9%
Geothermal
0,9%
Hydro
11,3%
Renewables - Mixed
27,7%
Thermal PP/ Combined
Heat and Power/ District
Heating
7%
Gas supply
0,8%
Sector/ Research
Programs
1,4%
Electricity transmission/
distribution
20,7%
Incl. commitments by financial sector teams
16
Field of Activity: Renewable Energies
›  Context
›  Often higher investment-cost and levelised-cost of energy compared to
conventional technologies
›  Subsidies and non-cost-recovery tariffs for fossil fuels distort renewable energies’
market potential
›  Partly unpredictable RE-production requires smart-grids and system
management
›  Approach and Contribution of FC
›  Explore RE-potential in developing countries (feasibility studies)
›  Create enabling framework for the use of RE (grids, storage, meters, controllers,
etc.)
›  Adapt RE-technology to developing countries
(solar home systems etc.)
›  Support RE-flagship project
›  Expand RE on a broader scale (larger programmes)
17
Important issues
● Policy matters: clear market rules and regulations (strong institutions,
PPAs, support mechanisms, etc.) including licensing and approval
mechanisms are needed
● Professional project preparation is required: site selection; resource
measurements, land acquisition, feasibility studies, social and
environmental studies, licenses, … Some regions have a severe lack of
well prepared and meaningful projects. Early stage project development is a
continues task / issue for all players in the market (risk of drying-up the
pipeline starts well at the beginning, upstream).
● Risk mitigation is needed for risks during planning, construction &
operation phase, cost-increases, timing-risks, debt-service and interest
coverage. The bankability of PPA continue to play a key for commercial as
well as development banks.
18
Morocco
Bank aus Verantwortung
Solar Power Morocco
Electricity from the Desert
›  Context
›  Rapid rise in electricity demand
›  Small amount of energy resources
›  High dependence on fossil fuels
›  Approach
›  Ouarzazate is the first solar thermal power plant in the
country
›  First phase with 160 MW, total capacity of
500 MW planned
20
Solar Power Morocco II
Electricity from the Desert
›  Impacts
›  Provision of environmentally sound energy and sustainable resource use
›  Less oil imports, less dependent on foreign countries
›  Energy export to Europe in the future?
›  Contribution of FC
›  Phase 1: Total costs EUR 750 mil, KfW funds
EUR 115 mil, of which EUR 15 mil IKI-grant, the
rest reduced-interest loan
›  Phase 2: Total costs unknown,
KfW funds EUR 90 mil.
21
Kenya
Bank aus Verantwortung
Geothermal Energy in Kenya
Heat from inside the Earth
›  Context
›  Insufficient power supply
›  East African Riff Valley big source of geothermal energy
›  Costly drillings to find adequate sites
›  Approach
›  Support of probe drillings and side development with
EUR 11 mil.
›  Reducing the risks for the private sector
23
Geothermal Energy in Kenya II
Heat from inside the Earth
›  Impacts
›  Reliable electricity supply for 430.000 people and many private enterprises
›  Higher growth and employment in the region
›  Model for neighboring countries (Ethiopia, Tanzania, Uganda)
›  Contribution of FC
›  KfW funds: EUR 40 mil. loan
24
KfW Development Bank
In Mongolia
Bank aus Verantwortung
German-Mongolian Strategy of Cooperation
in the Energy Sector
Increase energy efficiency and contribute to economically and ecologically
sustainable supply and use of energy in Mongolia
›  Reduce the growth in CO2 emissions
›  Increase the efficiency of power plants and reduction of technical
losses in transmission and distribution
›  Increase in the cost coverage ratio in the energy sector
›  Extensive energy efficiency policy is needed in order to increase the
supply and output capacity
Financing Volume of the German FC in the Mongolian energy sector:
130 million EUR
German Financial Cooperation in the Energy Sector / Frankfurt
26
Energy sector - Ongoing engagement
Projects in Implementation
Renewable Energy
Program I
German
Contribution
EUR 6.1 million
›  Improve power supply of
Uliastai
›  Rehabilitation of the
HPP Bodgyn
Objective
›  Rehabilitation distribution
grid
Energy Efficiency
Program II
Energy Efficiency
Program
EUR 10.5 million
›  Modernisation of TPP
Darkhan
EUR 8.5 million
›  Modernisation TPP IV
›  Reverse/Osmosis-Plant
›  Extension of turbine
house, a 35 MW new
steam turbine and new
equipment
German Financial Cooperation in the Energy Sector / Frankfurt
›  Condenser Tube
Cleaning System
27
New projects
›  Program Energy Efficiency in the Central Transmission and Distribution
Network
› 
› 
› 
› 
10 mil. EUR, Regular FC loan (Standard)
Second phase up to 12 mil EUR
Energy efficiency in the CES electricity network
Network analysis and Feasibility study in preparation
à Start of data collection 01.03.2015
›  Ger-Area Development Programm – Central Heating Component
›  Up to 35 mil. EUR loan + 2 mil. EUR grant study and TA
›  Measures for environment and climate protection for urban development of Ulaanbaatar.
›  Project Objective: Increase efficiency of heat supply
à  Reduction of environmental and climatic pollution by inefficient boiler or ger stoves in the
peri-urban areas (Ger- district)
à  Significant improvement of the of the living conditions of the population by reducing the
high air pollution in the city
›  Cooperation with the city of UB and ADB
28
Conclusion
›  KfW development cooperation is well positioned to successfully support
Mongolian partners in achieving their goals
›  Challenges can be addressed together
›  Secure the energy supply of population and economy in the in the future
›  Create a consistent and realistic strategic energy sector plan
›  Support Mongolia’s energy sector to be more efficient, environmentfriendly and reliable
German Financial Cooperation in the Energy Sector / Frankfurt
29
Thank you for your attention
KfW Office Ulaanbaatar
Phone +976 7011 5951
Mail [email protected]
Bank aus Verantwortung