Energy Efficiency Revolving Fund (EERF), Thailand

Program Type

Concessional loan
Credit line
Revolving fund

Program Type - Description

Dedicated credit line to commercial banks to fund EE projects at low interest rates

Target Group

Cross Sectoral

Geographic coverage

Thailand

Year

2003

Ongoing

No

Sponsoring Entity

Royal Thai Government

Counterpart Entity

Commercial Banks

Implementing Entity

Department of Alternative Energy Development and Efficiency (DEDE), Thailand

Objective

To facilitate investment in EE by helping commercial banks to develop appraisal procedures and provide low-interest rate loans for EE projects

Energy Efficiency / GHG Goals

No minimum level of energy saving was required. Government of Thailand has a stated objective to reduce energy intensity by 25% between 2005 and 2025.

Barriers Addressed

  • Access to funding at competitive rates for upfront costs of EE projects
  • Knowledge diffusion through banks as they were incentivized to finance EE project at attractive financing rates and were encouraged to develop EE business lines to gain access to ENCON funding.

Financing Mechanism

Funds from DEDE / ENCON Fund were provided as program loans to commercial banks through EERF at zero interest for amounts of THB 100 – THB 400 million (c.USD 3.2 million – USD 12.7 million). Banks on-lent this financing and were allowed to charge interest up to 4% to cover their costs and risk.
Once a project was identified (by owner, an ESCO or other service provider), it is submitted to EERF through a bank which conducts an appraisal / financial analysis prior to submission. If successful, the project is then submitted to DEDE by the bank with a repayment plan. Once implemented, the borrower repays the loan principal and interest to the bank, which repays the principal to DEDE ENCON Fund. The owner provides regular reports to DEDE on energy saving achievement.
EERF loans may be used to cover costs of purchase and installation of equipment, design, import taxes and duty, etc. as defined in the ENCON Act.

Eligibility Criteria

Criteria as defined in the ENCON Act:

For industrial projects, they include improvement in combustion efficiency of fuels, prevention of energy loss, recycling of energy wastes, substitution of one type of energy by another type, more efficient use of electricity through improvement in power factors, use of EE machinery or equipment, operation control systems and materials, etc.

For projects in buildings, criteria include reduction of heat from sunlight, efficient air-conditioning, use of EE construction materials, efficient use of light, use and installation of machinery, equipment and materials contributing to energy conservation, use of operation control systems for machinery and equipment, etc.

Subsidized interest loan size limited to USD1.4 M per project (up to 100% of total cost) and a loan term limited to 7 years.

No minimum level of energy savings required.

Major Activities

EERF supported mainly industry and building sector projects. 67% of the projects between 2003 and 2009 were related to change to higher efficiency equipment.

Key Results

By April 2010, 335 EE projects and 112 renewable energy projects were financed by EERF for a total of USD 453 million (including USD 210 million from the EERF) generating USD154 million of annual energy cost savings.

Lessons Learned

  • Capacity building: EERF has allowed commercial banks to become familiar with EE project financing and, in doing so, promoted EE development to industrial and commercial customers.
  • Project pipeline: EERF allowed commercial banks to get access to new projects by offering very competitive loans.
  • Low interest finance: Customers could get access to financing at lower interest rates than internal funding.
  • Efficient loan processing procedures: EERF also provided simplified procedures for project appraisal and loan processing.
  • Customer creditworthiness: As the banks were taking all the credit risk, they only lent to creditworthy customers focusing on the sub-borrower’s balance sheet, hence limiting EE project opportunities. The implication is twofold: (i) the facility did not encourage cash flow lending (project finance and (ii) penetration of the facility to the SME and less creditworthy customers was limited.
  • Lack of ancillary products / risk-sharing: Broadening the scope of the EERF such as with credit enhancement solutions, risk guarantees (especially to attract ESCOs) and increasing the size of loans would help to capture a higher number of opportunities.

Contact

Department of Alternative Energy Development and Efficiency (DEDE)

Energy IT Group
DEDE IT Centre, 3rd Floor, Building 6
17 Rama 1 Rd, Kasatsuk Bridge
Pathumwan, Bangkok 10330
Thailand

Tel No.: + 662  223 0021 - 9