A nationwide goal can’t be accomplished without an integrated plan, which is why the intermediate goal of reducing energy demand by 5% by 2014 is a must that should be attained. The results of the energy audits studies performed under LCEC energy audit program by the year 2010 were not satisfactory due to the fact that only 15% of the recommended measures proposed by energy audits were implemented and the reason behind it was the insufficiency of available funds. For that reason, NEEREA was developed to encourage the implementation of the actions needed for the national objective and to ensure the sustainability of the energy efficiency and renewable energy sector in Lebanon.
NEEREA is the first green financing mechanism in the Arab Region that finances solar, wind, biomass and hydro projects in addition to energy efficiency measures and green building projects. The National Energy Efficiency and Renewable Energy Action (NEEREA) is a national financing mechanism initiated by the Central Bank of Lebanon (BDL) in collaboration with the Ministry of Energy and Water (MEW), the Ministry of Finance (MoF), the United Nations Development Programme (UNDP), the European Union (EU), and the Lebanese Center for Energy Conservation (LCEC). It is a national platform built and launched on 25 November 2010 based on the Circular 236 of the Central Bank of Lebanon, which states the lists the terms and conditions to get subsidized green loans in collaboration with EU. In 2013, as per circular 313, 318, and lately 346, BDL introduced new incentives to focus on energy efficiency, certified green buildings, and renewable energy.
The loan has a ceiling of 20 million USD and is offered at an interest rate of 0.6% for 14 years including a grace period of 6 months to 4 years. The greens loans are provided by Lebanese commercial banks to the private sector. The most important aspect of NEEREA is that it links the commercial banks to private companies to ensure a sustainable development of the socio-economic framework.
The European Union is contributing to NEEREA by offering a grant over a share of the investment cost of maximum 5 million USD. This share is 15% for nonsubsidized sectors and 5% for subsidized sectors, a ceiling of 750,000 USD for the first and 250,000 USD for the latter.
Private, existing and newly built facilities can all apply to this loan if and only if the project presented is an environmental friendly one such as energy efficient lighting, motors, heaters, and coolers or is a source of renewable energy such as solar, wind and hydro.
Clients interested in implementing green energy projects through NEEREA should follow the specific process:
1. Prepare a technical report (as per the reports templates prepared by the LCEC) either by the client himself or by the appointed energy company including a full feasibility study with full financial and technical analysis. The report should also include the total amount of the requested loan.
2. Pick a commercial bank where the loan is then studied.
a. Based on the Circular No. 313, projects and loan requests not exceeding 20,000 USD do not require the direct approval of BDL; hence, the report will be sent directly by the commercial banks to LCEC.
b. For loan amount exceeding 20,000 USD, the commercial bank first submits the technical report to BDL for approval and BDL, in turn; send the official report to LCEC for technical verification.
3. The report, once studied by LCEC, is re-sent to the commercial bank or to BDL that reviews the results of LCEC analysis and sends the results to the commercial bank.
4. The commercial bank informs the client whether the loan is granted or rejected. If granted, the client can then implement the technical solutions recommended by ESCO or by suppliers themselves.
This process takes around two months based on the quantity of applications and availability of information. Action would be taken if final execution diverges from original plans.
New projects can benefit from a repayment period up to 10 years, beginning after the end of the grace period ranging from 6 months to 4 years. Re-modeling existing projects can benefit from a repayment period of 10 years, including the grace period ranging only from 6 months to 2 years.
In addition to the subsidized loan, the European Union is contributing to NEEREA by offering a grant to be added to the loan. The grant covers 15% of the loan amount for nonsubsidized sectors and 5% for subsidized sectors, with the total ceiling being 750,000 USD. Grants are disbursed once the project is completed and checked by the technical team of LCEC.
LEED or equivalent certified systems could benefit from the loans that can cover a certain amount of the overall project cost. However, the value of the loan share of the project increases as the level of the certification increases. If the loan the applicant had applied for, based on a ranking, is not obtained, the client will have to pay penalty.
By January 2015, more than 200 projects were approved by the NEEREA financing mechanism with a total amount of more than 200 Million USD. Results show that around 60% of the projects were for solar photovoltaic while 82% of loans amount were for green buildings. These projects all together contribute to an annual saving of 18,500,000 million USD with a payback period of 10 years. Until today, NEEREA has achieved to reduce yearly energy consumption by 27,443,115 KWh and 35,553 tons of CO2. However, it should be noted that the average cost of each project is not the same for each category. As Green buildings, occupy only 9% of the implemented projects through NEEREA but 82% of the loans amount, NEEREA projects can be divided into 2:A. 200 renewable energy and energy efficiency projects: RE and EE projects (solar photovoltaic systems, LED lighting, biomass, solar water heaters, building envelope, etc.…) have a total investment cost of 36 million USD, meaning 180,000 USD per project. The savings being 25% of the investment cost, a NEEREA financed RE or EE project saves up on an average of 45,000 USD each year with a payback period of 4 years. These projects also save 27,443,115 KWh of energy and 35,553 tons of CO2 each year.
The total number of loan applications includes different sectors with the residential and commercial respectively having the highest percentage (93%), industrial and NGOs the lowest (7%). In addition, Green projects were distributed all over the country, Mount Lebanon and South Lebanon sharing the greatest amount of the total amount of approved green loans.
Moreover, the EU grant has been provided to 11 different projects. As such, NEEREA is expanding the Lebanese energy market, helping the Lebanese citizens and protecting the environment.
NEEREA has been developed to deliver a wide range of benefits, not only to the end user, but also to all the partners involved. The advantages are distributed among 3 beneficiaries: the bank, the user and the national economy. The bank gets more cash by freeing part of the required reserves at the Central Bank, enhances its green vision and promotes corporate social responsibility. The user will be provided with a long term soft loan at 10% of market rate and will be guaranteed to have high quality technical and financial propositions. As such, on the economic level, the national economy will benefit from a leveraging local investments of around 100 Million USD in the coming 5 years and will suffer from a lesser burden. NEEREA will also ensure political commitment to attain the national objective since it is one of the initiatives of NEEAP Lebanon. In addition, this financing was successful in promoting energy efficiency renewable energy industries in Lebanon, expending the energy market to a new level and in creating sustainable jobs. Thanks to NEEREA, the Lebanese community is more aware of the many positive impacts energy conservation measures can have in the individual and national level and is now braver in integrating energy efficiency and renewable energy into their everyday life.
In addition, NEEREA has helped the national economy by reducing the burden on the Lebanese institution and industries, as a relatively small yet less amount of energy is imported. It has also created sustainable job opportunities; 60 new energy companies recently entered the energy market with 30% more of job vacancies. In total, 10 people from LCEC, 300 from banks and 300 from companies are involved in NEEREA and in total 500 are in direct contact.