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Chile facilitates financing for energy efficiency projects with IDB support

$35 million of public and private funds will encourage the diversification of the energy matrix and reduce the greenhouse gas emissions

The Inter-American Development Bank will support Chile’s efforts to expand financing for energy efficiency programs by helping to mobilize $35 million in projects developed by energy service companies (ESCOs). These projects, based on energy performance contracts, will lead to decreased energy demand and help reduce greenhouse gas emissions by almost one million tons.

This project is expected to help leverage additional financing from several sources. Up to $23,93 million is expected to come from financial institutions; engineering firms and energy service companies will provide $4,86 million; Chile’s national development bank CORFO will provide $3,61 million; and the Global Environmental Facility (GEF) will participate with a non-reimbursable contribution of $2,36 million administered by the IDB.

These funds will go to the design and implementation of a Partial Credit Guarantee Program (PCGP) to foster the participation of the engineering firms and ESCOs in the development of an energy service market in Chile. The ultimate goal is to contribute to the development of a more sustainable energy matrix and to protect the environment.

From 1990 to 2008, the Chilean economy grew at an annual average rate of 5.5 percent, leading to a strong expansion in energy demand. Chile’s electricity supply is primarily produced by hydroelectric sources, followed by natural gas. The country’s energy matrix is consequently highly vulnerable to fluctuations in rainfall and to volatility of international fossil fuel markets.

The implementation of the partial credit guarantee program supported by IDB is expected to result, over the next eight years, in the participation of at least 6 banks in the financing of energy efficiency projects, an increase from 5 to 12 in the number of engineering firms and energy service companies in the market, and the issuance of 120 guarantees for energy efficiency projects.

It is expected that the energy efficiency gains produced by these projects will amount to 860.000 MWh in savings and will reduce direct and indirect emissions of CO2 equivalent by approximately 980.000 tons over a 10 year period.