76158 CASE STUDY 30: TUNISIA – SOLAR WATER HEATING EQUIPMENT FINANCE PROGRAM Barriers Lack of affordable credit to households Instrument Interest buy down subsidy Application n/a Amount US$1 million PROJECT BACKGROUND AND OBJECTIVES being Amen Bank and UBCI – have agreed to a further 7% reduction meaning the rate initially charged to UNEP is implementing an effective and innovative customers is 0% and after 12 months 7%. UNEP’s programme, PROSOL, for financing domestic solar water interest subsidy will phase out over the next 6–8 heater (SWH) equipment in Tunisia as part of its months. Mediterranean Renewable Energies Programme (MEDREP). Even with strong consumer confidence in the INSTITUTIONAL ARRANGEMENTS reliability of solar water heater (SWH) technology, the The PROSOL credit programme works as follows. First, a high initial cost of SWHs was still a substantial market customer decides to purchase a solar water heater from barrier when compared to cheaper water heating a supplier, who installs the solar water heater at the alternatives such as gas water heaters. To address this customer’s home. The customer pays the loan barrier, PROSOL introduced a credit mechanism in 2005. processing costs and any residual system costs. After PROSOL employs a range of institutional and financial installation, the supplier receives the subsidy payment support to develop and sustain the solar water heating from ANME of 200 dinars for the 200 litre solar water market, including: heater (2 m²) or 400 dinars for the 300 litre water heater (equivalent to 4 m²). The supplier also receives - A credit mechanism for SWH buyers, with loans 750 dinars for the 200-litre water heater or 950 dinars provided, via the SWH suppliers, of up to a 5-year term for the 300-litre water heater directly from the bank. and collection of principal and interest via the This sum represents a credit granted indirectly to the customer’s electricity bill. buyers of the solar water heater, via the SWH suppliers, - A subsidy for each SWH purchase, provided by the and will be refunded through the customer’s Société Tunisian government, representing 20% of the cost of Tunisienne de l’Electricité et de Gaz (STEG) electricity the system (up to 100 dinars or 62 euros per m²). bill. The SWH suppliers carry the loans on their balance - Discounted interest rates on SWH loans for the year sheets. The PROSOL account at the Société Tunisienne 2005-2006 with funds from MEDREP de Banque (STB) receives the sums collected from STEG of the loan principal and interest; these funds are then INSTRUMENTS USED disbursed to the bank accounts of the solar water The commercial lending rate for similar loan products in heater suppliers concerned, who use these funds to Tunisia is 14%. Through a total commitment of US$1 repay the loans. Overall, about 70% of the costs of the million, UNEP provides a 7% interest buy-down which is SWHs are paid via the loan with the balance from the phased out over time. The banks involved – the leaders subsidy and upfront deposits from customers. Once the 1 | R E F I N e www.worldbank.org/energy/refine SHW’s are installed, customers benefit through reduced costs of water heating. An extensive communications and advertising campaign to market the programme is included, paid in part by MEDREP. OUTCOMES PROSOL began operating in April 2005 and during that year 7200 solar water heating systems were installed, the equivalent of 22,616 m², which on an annualized basis was 60% higher than the previous best year in 2001. 2 | R E F I N e www.worldbank.org/energy/refine