Alternative Financing for Municipal Embedded Generation (AFMEG)

We address the resource and capacity gap of intermediary cities in applying for financing of renewable energy embedded generation projects.

Local governments in South Africa are looking to develop embedded energy generation projects (solar and wind power technology) to achieve municipal level goals. These projects can assist municipalities to reach climate change targets, provide affordable electricity, reduce load shedding and possibly stimulate local job creation – all desperately needed in the country.

Recent policy and regulatory changes now allow certain municipalities to install these projects, however, accessing finance for these initiatives remains a challenge. The Development Bank of Southern Africa (DBSA), in partnership with the Green Climate Fund (GCF), have set up a ~ R4bn Embedded Generation Investment Programme (EGIP) to stimulate growth of embedded generation initiatives in the country. Yet, small and intermediary municipalities struggle to participate in the investment programme, due to lack of capacity and resources to meet the application requirements.

Project Location

King Sabata Dalindyebo Municipality, Matzikama Local Municipality, Walter Sisulu Local Municipality, Ray Nkonyeni Municipality

Project Duration

April 2021-February 2022

Project Highlights

PROJECT LAUNCH

On 11 May 2021, together with DBSA, 3E and Rebel Group we launched our UK PACT project.

AFMEG will build the capacity of municipalities to develop policies, a financial model and pre-feasibility studies to access finance for embedded generation projects.
“Looking at our funding models and revenue cash flows, with the assistance and support from ICLEI, we know the municipality can do better and communities can get what they deserve.”

– Honourable Councilor Bulelwa Kweyiya: Executive Mayor of Walter Sisulu Municipality
‘’The UKPACT opportunity came at the right point, and it made perfect sense to partner [with ICLEI] to take advantage of the opportunity. We are pleased we are successful and at a point where we can look at implementation.’’

– Olympus Manthata: Head of Climate Finance at DBSA

Project aims

The project will assist four intermediary cities in applying to the project preparation facility of the EGIP. From this point, bankable projects can be further developed, and investment by the EGIP leveraged for municipal embedded generation initiatives. The project will entail the following activities:

Municipal policy analysis and recommendations to enable embedded generation
Pre-feasibility studies of embedded generation projects
A financial model for chosen projects
A Capacity building training programme which will cover the following topics:
- Introduction to climate change
- Just energy transition considerations for urban planning
- Gender mainstreaming in the energy sector
- Embedded energy generation projects for cities
- Introduction to climate finance
- Key requirements for project pre-feasibility studies
Final report and resource pack of lessons learned

The outputs from this project will further help financiers, municipalities and national entities understand the requirements for intermediary cities to apply for embedded generation funding in the future.