Energising South African Cities & Towns - City Energy Support Unit

The Portland Energy Office proposed a1% ‘fee’ on all city government energybills. These ‘fees’ (totalling about $70000 per year) were used to hire an energymanagement co-ordinator for cityfacilities. That coordinator identifiedmore than $250 000 in energy savingsin the first year.Before looking for money, thinkabout all the ways the energy projectswill benefit the community andwhich agencies would be interestedin those benefits. Financial helpmay be available through nationaland provincial government, locallending institutions, energy servicecompanies, equipment manufacturers,or a combination of these. Remember,projects resulting in energysavings usually provide a return oninvestment that is far greater thanone can get at the bank.Third-party financingSome local governments have usedthird-party financing to design andinstall energy-efficiency retrofitsfor local government facilities. Thethird-party usually funds the energyimprovements. The local governmentpays the third-party over timethrough its energy savings, withthe total cost less than the energyamount saved.If you can build strong politicalsupport for your sustainable energyplan, you may be able to avoid diggingand scratching every year formoney. With sufficient support youmay be able to acquire general fundsor generate revenue from taxes orlevies such as:• carbon taxes on activities such asconferences,• tax on parking spaces,• taxes on electricity use bybusiness and industry,• carbon trading.Be careful of regressive taxes – hittinghardest those who can affordthem least. This will affect supportamong low income groups.Grants and loansOther financial techniques – fairlyrisk-free – are being made to workfor local governments and cities:some are conventional tools, such asmatching grants and revolving loanfunds, modified to work for energyefficiency projects.Others, such as performancecontracts and public-private partnering,are more innovative.Performance contractingPerformance contracting allowslocal governments to try projectswithout making any initial capitalinvestment. It’s a growing trendbecause everyone comes out ahead– businesses and government aswell as the taxpayer.Because your local governmentmay represent substantial and attractivesales potential, local businessesmay be willing to engage ininnovative financing arrangements.Under such an arrangement, athird party, such as an energy utilityor the Development Bank of SouthAfrica (DBSA), provides a servicepackage that typically includes thefinancing, installation and maintenanceof energy-saving capitalimprovements. The customer thenuses the resulting energy savings topay for the improvements.Performance contracts are usuallystructured as a lease, but witha guarantee that payments will notexceed energy savings. This minimisesfinancial risk.Help may also be availablethrough local corporations lookingfor a good project to support.When ‘selling’ your project topotential investors, emphasise notonly the social and environmentalreturns, but also the potential financialreturns. Focus on the businessaspect, not only on the merits ofthe projects, and try to think like anentrepreneur.It’s also important to look at abalanced mix of grants, developmentinvestment funding and commerciallending, and to do your researchwell so that your first port ofcall is not to the wrong institution.When approaching funders forlarger projects, it can certainly helpcross the risk threshold to look at theproject as a ring-fenced entity.GREENFINANCINGKuyasa, a micro-lending fund working inKhayelitsha, offers borrowers three timestheir savings for house improvements,but four times their savings for energyefficiency interventions. The Departmentof Housing is investigating establishingGreen Finance funding mechanisms forall housing.ENERGISING SOUTH AFRICAN CITIES & TOWNS 19