The first phase of the EBRD’s Turkish Sustainable Energy Financing Facility (TurSEFF) shows how, with the right mix of financing mechanisms, one can achieve substantial changes in energy use, emissions, and fuel mix in middle income countries.
Turkey has become one of the key countries for the EBRD’s Sustainable Energy Initiative (SEI) in just a few years, a vivid example of what local financial institutions and climate finance can do to overcome market barriers.
Through energy assessments and energy-saving investments, private and public sector organisations in Turkey are now better prepared to cut costs and reduce energy intensity in the most energy- and carbon-intensive sectors, even as the Turkish economy continues to expand.
When the EBRD began operating in Turkey in 2010, both the EBRD and the Turkish government spotted an important opportunity. Both wanted to lay the groundwork for a sustainable energy finance market to assist Turkey strengthen its energy security, improve its environmental performance and reduce the impact of energy imports on the current account deficit.
Drawing on its experience with lending through intermediaries, the EBRD launched TurSEFF. Now three years later, the Facility’s success is manifest for all to see.
Since its launch, TurSEFF has provided $289 million in project finance and cut 650,000 tonnes of CO2 per year. Over 1.5 TWh of energy efficiency and 1.15 TWh per year of renewable energy have been saved. This further translates into a significant $ 145 million cost saving in unspent oil equivalency for the Turkish economy.
“We are thrilled with the success of TurSEFF in mainstreaming sustainable energy investments in Turkey to help local businesses increase productivity, reduce energy costs, and promote sustainable economic growth,” said Terry McCallion, EBRD’s Director of Energy Efficiency and Climate Change.
“Key to this success was the active participation and engagement of the Turkish banking sector, the technical assistance support to ensure successful project implementation and the focused policy work undertaken by the Bank since the signing of the Sustainable Energy Action Plan for Turkey. “
“TurSEFF has been a resounding success delivering real benefits to the Turkish economy by reducing energy imports and increasing the efficiency of industry”, said Mr. Erdal Çalıkoğlu, Deputy General Director at Turkey’s Ministry of Energy and Natural Resources.
EBRD leveraged its own commercial financing with $ 50 million from the Clean Technology Fund (CTF) to provide longer maturities and more attractive pricing to support five major Turkish banks: Akbank, Denizbank, Garantibank, Isbank, and Vakifbank. The goal was to create lending products for sustainable energy, develop a project pipeline, assess loan requests, and verify project implementation.
The European Union funded technical assistance to support government reform and project development and implementation. Private sector interest was high and partner banks saw the potential to further expand the market, leading to a recent extension of the facility that will proceed without concessional climate financing, confirming successful transformation to a market-based lending environment.
The Carousel Mall project in Bakirkoy, one of Istanbul’s oldest shopping malls, is one notable example of how paying attention to the environment can boost business results. At peak times this facility, owned by the Baymer Tourism and Investment Company, has over 100 shops and welcomes up to 45,000 visitors.
An energy efficiency assessment of the mall recommended a number of measures, including cooling system optimisation, air handling unit and transformer replacement, and automation control systems for heating ventilation and air conditioning.
Based on the expected savings, the energy service company (ESCO) and the owner of the mall signed the first energy performance contract (EPC) in Turkey, under which the ESCO guaranteed electricity savings of over two million kWh per year.
With expected CO2 emissions reductions of 2,127 tonnes and cost savings of $ 484,000, this project is an all-around winner.
The impact of TurSEFF in the Turkish lending market shows the power of combining Multilateral Development Bank (MDB) financing, climate finance for the private sector and technical assistance in line with government objectives.
More of this work can be done in other middle income and developing countries. The experience of TuRSEFF shows that MDBs are uniquely placed to undertake this work in partnership with donors, governments, civil society, the private sector and local financial institutions.