The World Bank, acting on behalf of the Green Climate Fund (GCF), has signed a US$11.3 million grant with the State Bank of Viet Nam to support the development of a commercial financing market for industrial energy efficiency investments.
The total financing support from GCF also includes a US$75 million guarantee.
US$8.3 millionfrom the grant will be used to build capacities for the private sector to identify, appraise and execute energy efficiency projects andprovide technical assistance to the Ministry of Industry and Trade and relevant authorities to strengthen policy frameworks and regulations and create an enabling environment to accelerate the energy efficiency market in Viet Nam.
The remaining grant funds and the guarantee will be used to establish a risk sharing facility to provide partial credit guarantees to support local banks who may risk potential defaults on loans for energy efficiency projects. By reducing lending risks, the facility is expected to mobilize around US$250 million of commercial financing, to be provided to industrial enterprises and energy service companies at competitive terms and with low collateral requirements.
The Carolyn Turk, WB Country Director for Viet Nam was quoted as saying that scaling up energy efficiency is the "single best and lowest cost option" to achieve multiple goals at once: meeting energy demand, preventing pollution and reducing greenhouses emission while also increasing industry competitiveness.
She was convinced that the risk sharing facility is an innovative financial instrument to crowd in private sector investment financing for a greater uptake of industry-wide energy efficiency measure.
The World Bank’sLow Carbon Studyestimates that Viet Nam could save up to 11 GW of new generation capacity by 2030 if comprehensive demand-side energy efficiency investments are carried out. The energy efficiency investment need for key industries in Vietnam was estimated at around US$3.6 billion./.