Accelerating Renewable Energy Investments through CABEI in Central America Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Belize Climate Change
GEF Grant US$ 7.020 million
Cofinance US$ 82.670 million
Project Cost US$ 89.690 million
Facts and figures
Historically, hydroelectric power dominated Central America's electricity sector. However, since the late 1990s, privatization of the energy market and increasing demand has led to substantial investment in thermal (mainly oil) generation plants. Hydropower’s
contribution to regional electricity generation has fallen from 80% in 1980 to approximately 53% in 2000, while fossil fuel generation has risen to 43%. Geothermal energy, wind energy, and biomass-to-energy account for the remaining 4%. Annual energy demand in Central America is expected to increase by about to 6% over the next half decade and the Inter American Development Bank (IADB) estimates that more than US$ 7 billion of investment will required to meet this demand. Because of the abundant and diversified natural resources available in the region (hydroelectric, wind, geothermal, biomass) energy from renewable sources could help meet this demand However private sector participation in the renewable energy sector remains modest, especially for small projects. A number of institutional, technical and financial barriers need to be removed for small RE projects to be able to play a role in the energy mix of the region.
The project takes a regional approach to reducing greenhouse gas emissions and contributing to Central America’s economic development by promoting electricity generation systems from renewable energy which can be connected to the conventional electric distribution grid. It will accelerate investment in renewable energy through the Central American Bank for Economic Integration (CABEI) by removing the financial
barriers that currently impede the large-scale development of renewable energy projects. Barriers will be removed by integrating small-scale renewable energy lending strategies at CABEI and including a pro-active small-scale renewable energy pipeline in the bank’s
lending portfolio. The project will also support market penetration through expanded financing opportunities and develop risk mitigation mechanisms to increase the availability of investment capital for small-scale renewable energy projects. During its lifetime the project will support between 12 and 20 renewable energy projects, representative of the different technologies available (mini-hydroelectric and biomass power plants). Eight small-scale privately owned energy generation projects have already been identified for financing.
CABEI’s participation in the financing of the identified projects will mobilize a total
investment of around US$ 80 million in renewable energy projects, improve the quality of life of beneficiary remote populations and reduce Central American CO2 emissions by an estimated 172,000 tons per year.
The Central American Bank for Economic Integration (CABEI) is the multilateral bank for the Economic Integration of Central America, whose mission is to promote the progress and integration of the region, to encourage equitable economic growth while respecting environmental concerns. The bank supports public and private projects that generate jobs, contribute to improve the productivity and competitiveness of the beneficiary countries, and raise the human development indicators of the region.
CABEI currently has an energy sector lending portfolio of US$ 674 million, of which 59% represents on-grid renewable energy investment for hydro, wind and biomass-based electricity generation. To date, CABEI has financed many large-scale, a few medium and small size renewable energy projects, but had not been directly engaged in the financing of micro projects. Although CABEI has previously only acted as a financier, under the project, the bank will take a more pro-active role in project identification, formulation, appraisal and preparation as well as offering tailor-made financial products to accelerate future investment in smaller projects.
Website: CABEI - www.bcie.org/ (English and Spanish)
This page last updated March 23, 2007