Challenge
By the early 2000s, because of the depletion of its oil reserves and fast-growing domestic demand, Tunisia had become a net importer of energy. The rate of energy consumption, at 0.4 tons of oil equivalent per US$ 1,000 of gross domestic product, was also higher than both Europe and many of its neighbors. At the same time, Tunisia’s industrial sector was under increasing competitive pressure from Asia and its low cost exports. A successful project to encourage solar water heaters (managed by the World Bank and financed by the GEF) raised the possibility of applying similar energy conservation strategies in the industrial sector. More efficient use of energy would help companies lower their production costs, making them more competitive, and protect the environment by lowering emissions. The critical challenge was providing the right conditions and financial incentives to encourage investments in energy efficiency.
Solution
In 2004, the government launched the Energy Efficiency Program in the Industrial Sector (Programme Efficacité Energétique dans le Secteur Industriel.) In support of the program, a project, managed by the World Bank and financed by the GEF, arranged to help foster the development of a sustainable market for energy efficiency products. In addition to the removal of institutional and capacity related barriers, its aim was to establish energy service companies (ESCOs) as the main vehicle for guaranteeing a sustainable energy efficiency market. By the end of the program to promote solar water heaters, conversations were underway on a follow-up project focused on the industrial sector. With clarity on the objectives and how to reach them, a project was designed with three interrelated components: the GEF Pilot Phase for Energy Efficiency aimed at promoting energy efficiency measures through an output-based subsidy, to be paid once measures are implemented; the GEF Partial Guarantee Fund to promote the use of energy service companies (ESCOs) by offering loan guarantees to companies that contract with ESCOs (up to a maximum of US$200,000); and the GEF Technical Assistance component aimed at reinforcing and expanding the technical capacities of key stakeholders to manage energy efficiency investments.
Results
Through the support of the GEF, the project achieved the following results:
Investment assistance encouraged energy efficiency actions by medium-sized and large enterprises through ESCOs. The sub-projects supported by this component resulted in 710,333 tons of CO2 emissions avoided over the duration of the project, from 2004 to 2011, and 101,476 tons of CO2 emissions avoided annually (compared to the target of 636,422 tons for the entire project and 127,284 tons of CO2 annually). The sub-projects also contributed to quantified, that is actual, energy savings of at least 31 kilotons of oil equivalent per year (ktoe per year) and are expected to generate 51 ktoe per year of energy savings going forward (compared to the target of actual energy savings of at least 10 ktoe per year, and expected future savings of 33 ktoe per year).
Implementation of a partial credit guarantee fund helped facilitate project financing. Ten ESCOs were licensed with the National Energy Management Agency (Agence Nationale pour la Maitrise de l’Energie – ANME.) Four were fully operational during the project, and with the support of credit guarantees, 30 contracts were signed with industrial companies. At the time the project closed, 37 percent of all energy efficiency projects in the industrial sector were using th Partial Guarantee Facility.
Technical assistance and training was provided for stakeholders (public institutions, industries, financial institutions, energy service providers, ESCOs, and so on). A National Program of Energy Efficiency has been developed and a dedicated Energy Efficiency Fund, the FNME, has been put in place. The program provided critical resources for raising awareness, enhancing technical skills and empowering market operators, for example ESCOs and industrial companies, to invest in energy efficiency projects.
Bank Group Contribution
The World Bank provided technical assistance and managed the overall project, with the Global Environment Facility (GEF) providing US$8.5 million in financing.
Partners
The total cost of the project was US$31.8 million. In addition to the GEF funding, local private sector sources provided US$18.4 million, while an additional US$5.0 million was financed from public funds.
Moving Forward
A key question at the close of the project concerned the durability of the financial intermediation mechanisms as a critical guarantee of a sustainable pipeline of future energy efficiency projects in the industrial sector. Through the current Energy Efficiency Project (approved June 2009), the country is leveraging the Bank Group’s experience from previous lending and grant projects in Tunisia, as well as analytical activities that will identify measures needed to overcome barriers to energy efficiency investment. The project aim is to scale up industrial energy efficiency and cogeneration investments, and thereby contribute to the government's new four-year energy conservation program.
Beneficiaries
Direct beneficiaries were industrial companies, engineering consultants, the newly created ESCOs and financial institutions (banks, leasing companies). During implementation, all stakeholders were directly or indirectly involved in the project. Lowering emissions benefitted the health of all Tunisians.
