ACP-EU Energy Facility

An Energy Facility worth EUR 220 million will increase access to modern energy services for people in Africa, the Caribbean and the Pacific (ACP). It is a funding mechanism that will make it possible to use the leverage effect of development aid resources to attract funding from other financial sources. This is a significant contribution to the EU Energy Initiative that was launched at the World Summit for Social Development in Johannesburg in 2002

ACT

Communication from the Commission to the Council and the European Parliament of 26 October 2004 on the future development of the EU Energy Initiative and the modalities for the establishment of an Energy Facility for ACP countries [COM(2004) 711 final - not published in the Official Journal].

SUMMARY

AN ENERGY FACILITY FOR ACP COUNTRIES

The Energy Facility for African, Pacific and Caribbean countries will be a catalyst promoting initiatives and projects in the area of energy, acting as a clearing house and building research and management capacity in ACP countries.

Key Principles

Four key principles underpin the Facility:

Governance: The Energy Facility targets in particular ACP countries which pursue or are firmly resolved to create a sound national energy policy, based on good governance principles. The Facility helps countries to establish their institutional and regulatory framework and to attract additional financial resources for public-private partnerships.
Ownership: The Energy Facility is to be fully demand driven. It will be an instrument to support and deepen the involvement of actors in ACP countries in the design and implementation of energy policies.
Flexibility: Maximum impact is sought by offering creative combinations of grants with other sources of financing. The Facility is open to joint financing with Member States, other international financing institutions such as the European Investment Bank and private sector investments via public-private partnerships.
Innovation: The Facility is intended to offer innovative responses to the challenge of providing sustainable energy services to the poorest areas. Projects can include electrifying rural areas, improving the efficiency of households' cooking and promoting sustainable energy generation through bio-mass, small hydro-electric plants and wind turbines.

Priority Activity Areas to be funded under the Energy Facility

The Commission has identified three Priority Activity Areas:

Delivery of energy services: The largest financial contribution from the Facility is designed to improve rural people's access to modern energy services, particularly in Africa. Priority is given to people in unserved areas. Proposals must ensure the economic, social and environmental sustainability of the investment.
Creating an enabling environment: Where governance conditions are not in place for delivery-oriented intervention in the field, up to 20% of the Facility supports the development of an enabling environment for the energy sector based on good governance principles. The Facility facilitates the implementation of sound national energy policies and strategies, improves the institutional, legal and regulatory framework, strengthens the capacity of key stakeholders, and improves monitoring and evaluation capacity.
Supporting future large-scale investment programmes: Up to 20% of the Facility resources is devoted to preparatory activities required to facilitate future large-scale investment plans for cross-border interconnections, grid extensions and rural distribution, preparing them for financing by international finance institutions.

Management of the Energy Facility

Management of the Energy Facility must respect the principle of project ownership by the ACP partners and their right of initiative.

Officials from the Commission manage the Facility, although they are able to call on outside expertise.

The existing decision-making processes established between the EU and ACP institutions apply in the management of the Facility.

Member States are involved in the development and overall guidance of the Facility and are able to ensure the necessary coordination of their own bilateral activities with those of the Facility.

Implementation is developed along the lines of the Water Facility.

Approval by the EU

In June 2005, the ACP-EU Council approved the creation of the Facility, for a total amount of 220 million euros. The Commission approved its implementation in April 2006.

THE FUTURE OF THE EUROPEAN ENERGY INITIATIVE

Recalling that access to modern energy services is a prerequisite for social and economic development, the Commission takes stock of the EU Energy Initiative launched at the World Summit on Sustainable Development.

It notes, inter alia, that engaging in dialogue and specific partnerships with developing countries has led to strong ACP ownership of this initiative. But it has also revealed the need for allocation of more resources by the EU to this area, and this underlies the will to create a specific Energy Facility for ACP countries.

BACKGROUND

Energy is critical for almost all human activity, and access to modern energy services is a prerequisite for poverty alleviation and social and economic development.

Nearly two billion people in developing countries lack access to high quality, reliable and modern energy services. Recognising the importance of improving this access for the poor, the Commission and Member States launched the EU Energy Initiative for poverty eradication and sustainable development (EUEI) at the World Summit on Sustainable Development (WSSD).

This initiative has increased the attention given to energy services within the external assistance of the EU.

See also