A Transformational Energy Efficiency SME Advice

Carbon Trust has also run two separate loans schemes, demonstrating that Energy Efficiency loans work 0% loans for the UK Treasury, lending over £120m to 3,500 SMEs between 2003 and 2010
All projects which received funds had a strong business case based on energy savings, with paybacks of 4 years or less. In addition they had to meet a “carbon threshold” of CO2 emissions reduction per £
The risk profile of the companies that got a Carbon Trust low was, at a portfolio level, better than that of the general population of companies

£550m commercial loans programme launched in 2011 in partnership with Siemens Financial Services
During 2010, Carbon Trust sought out a financial partner to leverage the operational know-how, supplier networks, and strong brand already in place into a new scheme
Partnership launched after discussions with a number of potential finace partners, including banks
Carbon Trust provides the business case to ascertain cost, energy and carbon savings

Lessons learned
Significant marketing effort, as well as advice, was needed to drive uptake
Using equipment suppliers as main route to market greatly increased uptake and reduced costs
As a group, SME applicants for energy efficiency financing have a lower credit risk than the average population of SMEs
The Carbon Trust assessment of project savings gave customers confidence that their monthly energy savings would exceed loan repayments, ensuring positive cash flow impact from the start. After the repayment period, projects yield significant cash benefits<br>

Theo Paphitis, well-known businessman and member of the “Dragon’s Den” television serial, fronted one of our print marketing campaigns And we have carried out national awareness raising campaigns to stimulate interest and demand<br>

In Mexico, cost-effective SME energy efficiency measures could save MXN$28 billion (12%) and reduce emissions by 10MtCO2 (14%) per year Source: GIZ (2012) “Recomendación estratégica sobre tecnologías y subsectors como orientación para sustentar acciones de eficiencia energética en el sector PyME” BMZ for Ministerio Federal de Cooperacíon Económica y Desarrollo March 2012. Assumptions: average electricity saving of 19% for commerce/services, 11% for industry and 30% for agriculture (average of 17% across all sectors), and thermal energy savings of 10% across all sectors. Other benefits: Strengthening competitiveness
Sales of ‘greener’ products
Employee motivation
Indirect job creation though the energy efficiency sector
Mitigation against the impact of future regulation<br>

Many EE projects pay back quickly, yet despite the compelling project economics, a number of barriers stop many companies from investing Human capital
Lack of awareness about the commercial benefits of energy efficiency
Lack of knowledge and expertise to identify and quantify costs and benefits of opportunities e.g. understanding energy consumption and knowing which technologies are appropriate.
Lack of time and resource to manage implementation e.g. select suppliers, run feasibility studies etc.

Information
Lack of data about energy consumption for own business or poor visibility of energy costs
Lack of benchmarking data to understand relative performance
No sharing of best-practice approaches to energy management

Finance
High purchase costs for equipment (new or replacement) (in Mexico, partially due to import tariffs)
High financing costs, (in Mexico, FIDE loans incurring 14% interest rates)
Limited access to finance due to risk-adverse commercial banks that don’t understand energy efficiency projects (the nature of returns through energy savings) $<br>

While a number of effective programmes offering advice and finance already exist, they are fragmented and sub-scale 8 Gobierno Federal CFE FIDE SENER SEMARNAT SE SHCP PEMEX CRE BANCOMEXT CONCAMIN CESPEDES CCE CONCANACO SERVYTUR Programa de Ahorro y Eficiencia Energética Empresarial (PAEEEM)
Financing to replace obsolete equipment (with Sello FIDE equipment)
Funding for refrigeration, AC and LEDs ($MN200k);
10% scrappage bonus for other efficient equipment such as motors Programa Nacional paral el Aprovechamiento Sustentables de la Energia (PRONASE)
Electrical substitution (Motor replacement)
Normas Oficiales Mexicanas (NOM) / Normas Mexicanas (NMX) Eficiencia Energética
Advice and technical assistance – with or without funding - to modernise facilities and apply new technologies in productive sectors Mi Tortilla
$MN150k for tortilla manufacturers
Training & advice to improve efficiency
financial advisor (via SE) to help access funds Educación para el Uso Racional y Ahorro de la Energía Eléctrica (EDUCAREE)
Dissemination activity
Awareness workshops
Training developers
Implementation support (elements for an energy assessment) CFEctiva Empresarial
Funds for power factor correction (<90%) & voltage optimisation (low to medium voltage)
Energy efficiency education for equipment operators, obsolete equipment replacement, & specialist advice for process improvement Fondo PyMES
Targets SMEs to improve competitiveness through business management and access to finance:
National Guarantee System
Financial advisors network
business centres (189)
Technological Innovation Fund (SE-CONACYT)
Projects for innovative products, processes, services or materials
Training & business consulting
SME Library Mexico GHG Program
GHG emissions reporting & sectorial analysis CONUEE INECC COMPITE NAFIN<br>

To be transformational, a co-ordinated Program is proposed to raise awareness, deliver advice and provide finance in a cost-effective manner 9 ADVICE

Website & publications

Advice centre (calls/emails)

Training & events FINANCE
 
Loans

Investment support COORDINATION & PROMOTION

Strategic coordination
Program marketing
Program management & Quality Assurance (QA) On-site energy audits Cost effectiveness of delivering service $2/tonne $20/tonne SME size and therefore saving potential 10 employees 250 employees<br>

The Programme will reach at least 150,000 SMEs over 5 years, delivering more direct support to 10,000 larger SMEs, lending $100m and reducing emissions by 1MtCO2 at programme cost of $6.1/t Access to website and 20-30 new publications each year 2,000 audits for larger SMEs each year 660 loans in year 1, up to 1,900 by year 5 30,000 calls and emails handled each year 100 events each year, with 40 SMEs at each All SMEs 150,000 4,000 10,000 6,265 5-year
reach Annual activities 10<br>

The total cost of the SME Programme, including loans capital is ~US$134M over 5 years<br>

Agenda Carbon Trust is an independent company that helps partners and clients find the opportunities and face the challenges brought about from combating climate change
We advise governments, businesses and public sectors
We measure and certify products and organizations
We help deploy and develop low carbon technologies

We have stimulated and financed SME EE investment for over 10 years
Good project economics, but known barriers hold back investment
Our proven advice programmes have overcome these barriers to catalyse investment
Our loans programmes have lent over £120m, and our awareness campaigns have transformed the UK market

This year we collaborated with INECC and the British Embassy on a study to identify the SME EE opportunity in Mexico and design a programme to exploit it
Large opportunity with human capital, information, and capital barriers holding back uptake
Fragmented delivery picture, with sub-scale support for the opportunity
However coordination, extended advice, national awareness, and additional capital can transform the landscape

Setting up an SME programme in Mexico
Identifying roles and partners
Coordinating detailed design and planning rollout
Launch, expansion, and ongoing delivery<br>

A Transformational Energy Efficiency SME Program for Mexico Carbon Trust presentation for the Financial Instruments to Promote Sustainability and Climate Change Mitigation-The Experience from Financial Institutions in Latin America and the Caribbean workshop

Morelia, Michoacán, México, 29 November 2012 Daniel Buira
Senior Manager, Innovation
Daniel.Buira@carbontrust.co.uk
+44 7801 817532<br>