Improving Energy Efficiency Financing Mechanisms for the Industrial Sector

Efforts to improve EE in its industrial sector can play a major role in ensuring Turkey’s energy security and sustainable economic growth. Small and medium enterprises (SMEs) are a major driving force of the Turkish economy. Although they account for 99% of all the enterprises, they only receive 23% of the total investment loans made in the industrial sector.   Financing is a critical component in the EE project cycle. Currently, there exist a number of barriers on the market, which prevent large-scale flow of investments from local financial institutions (LFIs) to industrial EE projects. LFIs are providing the largest amounts of dedicated EE and RE financing (about USD 4.5 billion in the last 4 years alone). However, considering the size of the Turkish economy, this amount is negligible and more than 50% is invested in RE.

Previously, Econoler completed a study on the EE financial mechanisms in Turkey for UNDP. Econoler was mandated to use the findings of this previous study to develop new individual EE financial mechanisms adapted to the Turkish industrial market that could be implemented by major Turkish agencies, namely YEGM, KOSGEB and TTGV. More specifically, Econoler’s mandate involved:

• Assessing the total required and currently unmet industrial-sector EE funding needs in Turkey to identify a range of financial mechanisms that would increase financing leverage ratios over those currently achieved in Turkey,
• Determining how funding mechanisms could be set up as revolving funds so that available industrial EE financing funds would build up over time and be re-used several times, instead of being used just once and requiring a regular budget ;
• Recommending ownership, governance structure, operators, and administrative arrangements for any new industrial-sector financial mechanisms to be managed within the government of Turkey;
• Proposing suitable monitoring and evaluation systems aimed at monitoring and tracking the contributions of new financing mechanisms to EE targets;
• Providing help to YEGM, TTGV and KOSGEB individually to improve their existing EE support programs and develop other programs aimed at making significant and measurable impacts towards the 2012-2023 Energy Efficiency Strategy Paper’s target.
• Led a study tour with Turkish officials in Mexico to provide them with an insight of the financing mechanisms that were implemented in Mexico.

Upon completion of this assignment, the three agencies undertook the process to launch their new EE financial mechanisms, in line with the policies of the Government of Turkey.