Description: 

As part of a broader program to catalyze public and private sector investments in renewable energy, this $70.609 million project creates The Renewable Energy Financing Facility as well as finances a knowledge management program and a gender impact study.

Background:

On January 27, 2009, Mexico’s Country Investment Plan (IP) was endorsed by the CTF Trust Fund Committee (TFC). Mexico’s IP described the country’s greenhouse gas (GHG) emissions profile and indicated that the development of renewable energy sources was a key strategic area for CTF resources. An initial analysis determined that a CTF renewable energy program could result in a reduction of around 1.8 million tons of carbon dioxide equivalent (Mt CO2e) per year at an abatement cost between $31/t CO2e and $38/t CO2e.

There have been two proposals so far under the IP, $15.6 million and $53.377 million respectively, both dispersed in 2009. These investments were allotted for private sector renewable energy projects in Mexico, as well as public and private technical cooperation. The $70.609 million third proposal has three components: The Renewable Energy Financing Facility (REFF), a knowledge management program, and a study on local social and gender impacts.

Objectives and Outputs:

The $70 million REFF seeks to contribute to Mexico’s ambition to increase the share of renewable energy sources in its overall generation. The REFF also aims to support the Government of Mexico’s GHG reduction pledge to the UNFCCC. Over time, lessons can be derived from The Facility to help introduce new financial instruments to facilitate private sector participation in renewable energy in Mexico.

Results from the Proposals I and II are generating knowledge on the ground at project sites, among regulators and industry people, and among local populations. The knowledge management arm of the Program will catalogue and organize this knowledge creation in a robust structure to share with peers in the broader climate change discussion. Additionally, a CTF grant of $120,000 will be used to carry out a study on the disproportionate distribution of benefits between genders.

The REFF is conservatively expected to finance a capacity of 1GW in renewable energy projects. The operation of these projects has the potential to lead to a reduction in emissions of 2.0 Mt CO2e per year, or 40.0 Mt CO2e over the course of 20 years

Following from the IP and Proposals I and II, the IDB is presenting Proposal III of this comprehensive public/private program designed to demonstrate renewable energy as a commercially attractive, proven, and reliable source of power and to stimulate transformation of the energy sector in Mexico. Whereas Proposals I and II sought to support the development of a few projects via direct financing by MDBs, Proposal III seeks to accelerate and scale-up the availability of finance to a larger number of projects, NAFIN, a national development bank.

This project summary is drawn from draft project proposals [such as the PAD, PID, SAR, and country investment plan] and may not contain the most up-to-date information.