Context
Mauritius has communicated an ambitious economy wide energy efficiency (EE) target of 10% by 2030 and needs to develop concrete implementation instruments for its achievement. Public institutions’ annual budgets do not cater for investments in EE, and private enterprises focus their limited capital in investments in their core business. Through the Energy Efficiency (Energy Consumer and Energy Audit) Regulations 2017, the Energy Efficiency Management Office (EEMO) mandates large energy consumers to conduct energy audits within their organisations, but enforcement of implementation of the audits’ recommendations is lacking due to shortage of appropriate financing instruments.
Goals and approach to transformational change
Investments by Energy Service Companies (ESCO) on behalf of clients, where ESCOs are remunerated through the achieved energy savings in an Energy Performance Contracting (EPC) modality could overcome above mentioned barriers. Although, the EPC/ ESCO being a nascent market in Mauritius, banks are risk averse and require high risk premiums as well as collateral that the ESCOs cannot provide as assets are generally installed at their clients’ premises.
The project will initiate widespread use of EPC in private and public sectors in Mauritius through a financing mechanism that addresses and alleviates the financing sector’s perception of risks related to EPC.
Components and support mechanisms
Within its Financial Cooperation (FC) component, the “De-risking Facility for Energy Performance Contracting in Mauritius” (“Mauritius – Energy Efficiency”) project establishes a first loss guarantee mechanism accessible to commercial banks lending to ESCOs and their energy performance contracting (EPC) projects. By covering part of the credit risk, the guarantee addresses collateral constraints that currently hinder lending. As ESCO cash flows from reputable clients are bankable but insufficient without security, the facility unlocks commercial financing and catalyses private investment in energy efficiency.
The Technical Cooperation (TC) component creates the enabling framework for a functioning EPC market. In coordination with other energy efficiency initiatives (e.g., GEF-supported programmes), it will support the registration and grading of ESCOs, develop standard EPC contracts for public and private sectors, and recommend necessary policy and regulatory adjustments. The project will strengthen institutional linkages, build technical and procurement capacity (with attention to women professionals), and conduct awareness raising among public, private, and financial actors to accelerate EPC uptake.
Long-term impact
The envisioned Mauritius Guarantee Fund will lead to the implementation of 95 projects during the first 5.5 years, and 358 after 16 years of operation, corresponding to 210,296 tCO2e, and 1,637,489 tCO2e respectively. The emission reductions by 2030 represent 38.8% of the envisioned emission reduction contribution of 234,000 tCO2e from the NDC sub-target of 10% economy wide energy efficiency improvements, as described in the National Mitigation Strategy and Action Plan.
