Submitted to United Nations on 4/10/2002

Issued by The Stella Group, Ltd., a distributed energy strategic marketing and policy firm facilitating projects and financing for: advanced batteries, energy efficiency, fuel cells, heat engines, microgeneration, modular biomass, photovoltaics, solar thermal and wind energy systems. April 2002.

PRINCIPLES FOR ENHANCING RENEWABLE ENERGY AND DISTRIBUTED GENERATION ON A GLOBAL SCALE

While the global sales of renewable and distributed energy resources total $10 billion (US) for the global markets, these industries are still essentially custom industries playing in high value niche markets.

To attract further capital for either semi-automation or full automation, these industries need sustained, orderly markets. To enhance market pull, financing needs to be available over longer periods and at lower rates so as to make higher-capital cost technologies affordable. Programs must drive for standardization of energy systems, automation of products, long-term financing up to 9/10 of the warranted system life, and escrowed service contracts.

For larger projects, power purchase agreements and debt financing are also essential ingredients. Working capital to distribution and sales networks is also required.

So what are the approaches that can address these issues in "real time" and be relevant to the marketplace? The response is to use existing delivery mechanisms "with strings" and if they do not respond "drop" those options that are not responsive.

Seven critical steps, if carried out in parallel, could catalyze markets in the developing world—

1) Distribution assistance and access to working capital - it makes little sense to ramp-up automated manufacturing if the growing market is not demonstrable and if there is no established supply chain. Programs like E&Co that identify qualified small firms and entrepreneurs and prepare them to responsibly receive working capital loans is a critical "first step".

2) Microlending - several funds including Soluz, Grameen Shokti, SELF, and even ACCION have demonstrated that village systems can be sustainably funded, and these programs need to be ramped-up and new microlenders need to be added which already service agriculture, health and economic development market niches.

3) Productive uses loans - incrementally larger loans than given by microlenders get to address beyond quality of life issues (light, water and radio, TV) to income generating uses such as agricultural water pumping, telecommunications, internet cafe, cottage industries. Vehicles can be existing coop loan programs, credit unions, and certain businesses assisting employees. But interest rates must be low and loan terms must range from 10 - 15 years.

4) Escrows for multilateral funds - with the best intentions many of the specialized programs have not created a deal flow because the terms imposed are generally pushed towards conventional practices which are wholly inappropriate for emerging technologies that are more distributed in nature and have higher capital costs. Creating arms-length escrows which have independence from these pressures, but still utilize professional auditing and servicing, will open up new opportunities and convert these stagnant programs into proactive programs.

5) Establish develop bonds for "social" projects - mechanisms need to be adopted which are used in many countries where institutions, governments and individuals can donate or invest into larger "public purpose" projects. Establishing a special investment instrument for the altruistic, catalytic, and philanthropic investors could assist marginal applications that have great long term benefits.

6) Operationalize small and medium project windows with outside advisory boards - special programs have been made available at the development banks which should have opened new opportunities but are underutilized. Establish board that are required to market the opportunity and drive deal flow. If programs within these institutions to do support at least ten deals per year after their first year of operation, they should be closed down.

7) Establish collaborative financing venues with existing financing houses (i.e. ABB Structured Finance, GE Capital, Sumitomo etc.) so that soft money, institutional investments and private sector investments can be coordinated to drive projects. This is done in traditional projects all the time and should be applicable to renewable and efficiency projects if done in a collaborative manner focussed on maximum output..

There are no easy answers or silver bullets, but pursual of strategic parallel paths which together will create an overall climate for enhanced market activity. If we succeed, these industries could grow ten fold in 5 years, which could give them the market depth and project flow to be truly self sustaining.