National Expert Pool for Consulting Services for the “Transformative Investments for Industrial Energy Efficiency (TI4E)” in Brazil

Background:

In Brazil, industries are responsible for approximately 33% of the country’s final energy consumption and 9% (185 MtCO2e) of the country’s GHG emissions in 2017. Going against global trends, Brazilian industries have become increasingly energy intensive in the last decade, meaning its energy efficiency (EE) and greenhouse gas (GHG) emission mitigation potentials are largely untapped, especially among small and medium-sized enterprises (SMEs). This also applies to other sectors. Brazil’s EE market is promising, but held back by a number of barriers which can be categorized as: (i) Those limiting the demand for EE products and services including lack of awareness and lack of regulatory incentives; (ii) limited capacity of energy service companies (ESCOs), consultants and suppliers to generate and service a pipeline of investable, low-risk EE projects; and (iii) limited attractiveness of existing public and private financial mechanisms due to financial institutions’ perceived risk and above all excessive collateral requirements.

The NAMA Support Project “Transformative Investments for Industrial Energy Efficiency” (TI4E), implemented by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), aims to address these challenges in a holistic manner to deliver a transformative push to Brazil’s EE market. TI4E has got the ambition to not only foster EE investments through public interventions, but also to pave the way for the EE market to attract finance from private investors, establishing EE as an investable asset class. Technical assistance and de-risking mechanisms shall enable the mobilization of capital for EE investments in industrial SMEs at scale, saving on fossil fuel consumption and unlocking an emissions reduction potential of approximately 1.1 million tons of CO2 equivalents. As such, TI4E contributes to the achievement of Brazil’s Nationally Determined Contribution (NDC) under the Paris Agreement on climate change.

In São Paulo State, the largest manufacturing hub in South America, TI4E will raise awareness of several thousand SMEs through a broad marketing campaign; build capacities of local EE consultants through the Brazilian National Service for Industrial Training (SENAI); de-risk projects by building an energy technology list (ETL); provide partial subsidies to the provision of high-quality energy audits in industrial SMEs and for the provision of implementation support to SMEs which are expected to invest in high-impact EE interventions; set up a Guarantee Fund with Desenvolve SP (DSP), the State Development Bank of São Paulo, to reduce collateral requirements in such investments and mobilize private financing. On the national level, TI4E will advise the government on new policies and support the Brazilian Development Bank (BNDES) to develop new financial mechanisms to scale up EE financing significantly.

GIZ intends to contract a service provider to advice on EE investment projects in industrial SMEs, perform and further develop validation procedures for such investments, extend the ETL and link it with an existing accreditation system for technology providers and support the scale-up of TI4E’s approach to unlock EE financing in other regions and sectors in Brazil. Through GIZ the contractor will interact and directly support several Brazilian institutions.

Objectives:

This assignment contributes to TI4E overall objective to provide technical assistance and promote access to finance for EE projects of industrial SMEs from the State of São Paulo and to scale-up this access to other sectors and regions from Brazil.

The specific goals of the assignment are:

1. Supporting specialists on the preparation of EE investments in industrial SMEs, especially with regards to thermal technology interventions with high GHG mitigation impacts, economic-financial assessments, and contractual modalities.
2. Perform independent validations of retrofit installations in industrial SMEs as well as the M&V reports on energy savings in line with relevant standard and norms.
3. Enlarge the ETL significantly with technical specifications of additional EE technologies and enable its integration within BNDES’s accreditation system FINAME for concessional credit lines.
4. Further develop TI4E’s existing de-risking instruments into a modular EE financing toolkit and advise selected Brazilian financial institutions on how to deploy it.

Specific Project Task:

Work package IV: Developing a modular EE financing toolkit and advising selected Brazilian financial institutions on how to deploy it.

The creation and deployment of a modular EE financing toolkit, including standardization approaches and de-risking instruments, will allow banks to significantly increase the financing offer for EE investments in SMEs and reduce the transaction costs in such operations.

The tasks are briefly outlined in the following:

Tasks of the National Expert Pool:

• Participate in online meetings with SENAI’s specialists and provide guidance on project development steps.
• Review energy audits and the corresponding documentation of EE projects elaborated by the SENAI's specialists with regards to economic-financial assessments, contractual
• modalities, solid risk allocation frameworks and the way EE projects are presented to banks.
• Provide comments and advisory on how to improve the energy audits and documentation of EE projects from a financial perspective.
• Analyze the standardization approaches and de-risking instruments developed by TI4E and research for other national and international tools.
• Complement and structure the EE financing toolkit for Brazilian financial institutions with additional tools.
• Prepare and conduct interviews on TI4E’s eligibility criteria, prepare tests of standard eligibility criteria using project case studies and the underlying analysis.
• Support assessments of TI4E’s implementation at DSP and the underlying loan cycle, validate and ensure the quality and applicability of recommendations being proposed.
• Prepare presentations and workshops with financial institutions to present the EE financing toolkit and follow-up on further support processes.
• Assess the financial institutions, prepare roadmaps, and deliver the advisory work for banks to apply the EE financing toolkit.
• Seek approvals and confirmations from financial institutions required as per ToR.
• Compile the report on key lessons learned from WP IV and develop detailed recommendations for further uptake.
• Provide additional support for all the WPs of this assignment, following the orientation of the Coordinator of WP I & II and the Lead Specialists.