Chilling Prospects 2022: Unlocking financing for energy-efficient cooling in Rwanda

Data analysis
Chilling Prospects 2022

Reflections on five years of the Kigali Amendment by the Rwanda Cooling Initiative

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In 2018, the United Nations Environment Programme (UNEP) United for Efficiency (U4E) initiative, the Basel Agency for Sustainable Energy (BASE) and the Rwanda Environment Management Authority (REMA) launched the Rwanda Cooling Initiative (R-COOL) with support from the Clean Cooling Collaborative (CCC). Its aim was to aid the country’s transition to efficient, climate-friendly cooling through a range of policy measures (including Africa’s most ambitious minimum energy performance standards (MEPS) and labels based on U4E’s Model Regulation Guidelines).

The scope was expanded in early 2021 to include the development of a financing initiative (FI), which is expected to unlock at least USD 1 million in financing for 12,500 approved appliances by 2024. The initiative was informed by the ECOFRIDGES green-on wage financing (GO) approach which had been successfully initiated by the team in Ghana as the most appropriate approach for the Rwandan market, allowing public and private sector employees to use a low-interest bank loan to purchase qualifying appliances with repayments deducted from their salaries. Like ECOFRIDGES, R-COOL FI is comprehensive in addressing recycling and capacity building. 

Initial technical assistance by U4E and BASE entails integrated design and implementation with local partners from the public and private sector so that a smooth handover of responsibilities is orchestrated as early as practicable for a pathway toward self-sufficiency. The emphasis is on models that are replicable in Africa and beyond where rising incomes and electricity access are driving ever greater adoption of mechanical cooling. The initiative operates within the context of the challenges of local finance, including consumer loan interest rates that are often above 20 percent.  

The technical team worked with the Government of Rwanda to negotiate discounts on the manufacturer’s suggested retail price (MRSP) of participating products to cover the cost of financing and offset the incentive for recycling old products. Such financial mechanisms can achieve a triple win: improve consumer access to high-quality equipment; safeguard the climate; and develop local financial intermediation services.  

A robust set of well-enforced criteria, with ongoing monitoring and oversight, and compelling marketing are key to keeping all parties aligned toward the success of the programme while maintaining healthy competition among participants. These criteria should: 

  • Enable grid-connected households and small enterprises (on-bill) and salaried employees (on-wage) to finance efficient refrigerators and air-conditioning systems that are otherwise likely more expensive to purchase than inefficient competing products. 

  • For officials, link with relevant development policy targets and agreements, MEPS and labels, and opportunities to address energy security and economic competitiveness considerations. 

  • Provide a common set of terms and conditions that are agreed upon by all participating parties, and monitor compliance to ensure a level playing field. 

  • Offer capacity building for participating vendors, banks, utilities, government agencies and waste management companies to ensure they understand their roles and responsibilities – start with a pilot phase to test readiness. 

  • Raise customer awareness through a dedicated marketing campaign. 

  • Allow time for importation of products that meet the eligibility criteria, making the case through the anticipated market demand potential. 

  • Ensure relationship building among participating actors to ensure smooth functioning, and exchanges of information (e.g., for applications). 

  • Include a mix of competing vendors and banks to allow for diversity of options but with a suitable pipeline of opportunity where all can benefit.
     

    Infographic: R-COOL GO mechanism
    The R-COOL GO mechanism

According to Chilling Prospects: Tracking Sustainable Cooling for All 2022 (forthcoming) over 750 million Africans face cooling access challenges, and around half are on the brink of purchasing their first air conditioner or refrigerator. Even though a high-efficiency appliance typically costs consumers much less over its lifetime (due to reduced energy consumption), than an inefficient one, the higher upfront cost is a significant barrier for them. Moreover, they have no incentive to consider which refrigerant is utilized, so inefficient products utilizing high-GWP refrigerants remain predominant.

Picture: Launch of the Rwanda Cooling Initiative's Green On-Wage (R-COOL GO) financing mechanism
Launch of the Rwanda Cooling Initiative's Green On-Wage (R-COOL GO) financing mechanism in January 2022

The R-COOL GO finance mechanism fixed a set of objectives and goals for newly certified sold appliances, unlocked finance, saved greenhouse gas (GHG) emissions and saved energy.

R-COOL GO from 2022 to 2025 (cumulative)

Chilling Prospects

Chilling Prospects 2022

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Rwanda