Programme for the promotion of solar water heaters in Tunisia (PROSOL)

• The profitability for the end-user was limited due to: i) disproportionate equipment purchasing costs in comparison to conventional water heating technologies (LPG, natural gas, electricity) ii) the subsidies provided for fossil energies. 
• The access costs are rather high, and no credits are available for the initial investment. 

PROSOL provides an integrated solution, trying to lift the main barriers the SWH market development is facing in financial, technical and organisational aspects. An integrated funding mechanism was implemented based on a financial scheme tailor-made to the needs of the consumer and the Tunisian market. For a flexible bonus and credit handling, ANME and STEG directly channel the funds to the suppliers’ accounts.

The Policy is located on the national governance level.

The present good practice example is focused on residential sectors and individual SWH applications for collective, commercial usage.

Relevant sectors

• Residential

• direct and
• indirect 
• capacities: 150 litres, 200 litres, 300 litres and 500 litres
• minimum performance: 450 kwh/m²/year
• warranty: 5 years for tank and collector

The programme is laid out to replace fossil energies, and in particular liquid petroleum gas (LPG) which is highly subsidized by the Tunisian Government with the objective of reducing government subsidies, save energy and increase the energy independence of the country.

Based on a penetration rate of 500 m² per 1,000 inhabitants, the solar energy potentially used for water heating is estimated at around 5 million SWH m².

Relevant target groups

• Manufacturer
• Energy agency
• Bank
• User
• Trade association
• Research institution and university

Direct beneficiaries

• User

  The end-user has access to a profitable technology with a gross ROI period of approximately 5 years. After 5 years, the end-user will use hot water almost for free, which will relieve the financial burden on households. The consumer will also benefit from the PROSOL mechanism advantages (purchase bonus, bank credit with an interest rate of MMR + 1.2% and the high-quality conditions offered)

• Governmental actor

  improves the energy independence and reduces subsidies for fossil energies through the generated energy savings. PROSOL has also lead to the creation of jobs for the supply and installation of SWH within the programme framework

• Bank

  Offering the credit funding, an envelope of 117m TND had to be laid out at an interest rate of MMR + 1.2%;

• Installation contractor

  By 2010, more than 1,200 micro-enterprises were involved in installation and after-sales services (ASS) within the PROSOL programme. These contractors offered their services and collect the installation costs (170 TND for the 200-litre SWHs and 220 TND for 300 litres).

Relevant barriers

• Technical barriers: The SWH market, its limited development and narrowness, was not attractive for operators. PROSOL and its Qualisol system enabled a market to emerge with a diversified structure of technologies and product portfolio. Now, there are more than 45 suppliers, 7 of whom are on a local level and more than 180 SWH models on the market compared to 5 suppliers with 2 local manufacturers in 2004. Furthermore, an installation interval of around 90,000 m² SHW per year could be achieved. Suppliers joined PROSOL and develop further through intensely optimised distribution and margins entailing a reduced SWH price and an improved profitability for the end-user.
• Knowledge and information barriers: Information about SWH and its benefits was lacking and difficult to access. PROSOL provides information to consumers about renewable energy and SWH in particular; communicates the impact and profitability of SWH for the end-user. PROSOL includes communication with the public through a major advertising campaign, mainly targeted at architects, engineering offices, installation contractors and to the general public.
• Economic and financial barriers: The SWH technology is difficult to access for the majority of households due to high initial costs. Furthermore, competing energy sources, especially LPG and natural gas are highly subsidised. PROSOL has improved the profitability of the end-user with the ANME subsidy and has facilitated access for households to direct credits. The programme has also simplified the necessary maintenance and ASS for the smooth functioning of SWH. The development of PROSOL as programmatic CDM will generate additional revenue for ANME. A further advantage is, that SWHs are exempt from VAT, representing finished or semi-finished products and raw materials, as well as from customs duties, as they are deemed as imported products or raw materials.
• Organisational barriers: The granting of consumer credits by banks is rather complicated due to the scope of application files and the time span needed for credit approval. On the other hand, banks require a hardware collateral representing the credit amount as a minimum and impose direct debiting from the customer’s bank account. Additionally, bank credits can only be considered by holders of a bank account. PROSOL introduces an easy way of accessing the bank credit, comprising the following steps: -signing one PROSOL adhesion form -credit collateral granted by STEG who can cut power supply in case of failure of repayment by the customer -credit allowance without any direct contact involved between the bank and the customer as well as guaranteed repayment via the electricity bill over 5 years.

• The new thermal regulation for buildings, currently rolled out in public buildings;
• The directive on mandatory use of SWH in public buildings, the Tunisian government makes the installation of SWH obligatory for new public buildings in need of hot water, like university housing facilities, hospitals, military barracks, 
• The new building code, which is in the process of being defined by ANME, should entail a better distribution of SWH in the residential sector;
• The national programme for energy conservation for the periods from 2005 to 2007 and 2008 to 2012 aimed at boosting the primary energy sector and to improve the country’s energetic independence and to make it less vulnerable from highly probable oil crises in the future. 
• The national programme for the reduction of state subsidies for fossil energies to cut government spending. 
• The effort made by Tunisia to reduce the greenhouse emissions and to contribute to the international fight against climatic change. 
• The effort made by Tunisia with the respect to job creation (1,500 jobs minimum) and to the creation of added value to foster the SWH industry’s future development. 

The PROSOL programme is engineered in an integrated and innovative way on a multi-player basis entailing a sustainable development impact (economic, social and environmental).

The PROSOL programme is rooted on long-lasting financial resources allowing for a shift of subsidies from LPG to SWH targeted to energy savings for the government and the consumer (win-win approach).
PROSOL is an integrated multi-player mechanism laid out to overcome any barriers encountered at the large-scale distribution of SWH (first funding mechanism in Tunisia). The SWH market has allowed for the creation of new jobs to develop the industrial fabric.
The PROSOL programme has been rolled out like a project to fight climatic change and developed like a programmatic CDM (registered by the CDM EB in July 2011).

• general application of the same mechanism to the minor trades (hairdressers, traditional baths, restaurants, gyms, etc.) which are currently blocked by STEG refusing to treat niches just like residential customers; 
• integration of regular maintenance intervals into the funding mechanism and expanding the credit amounts in order to cover the maintenance costs; 
• introduction of the “Qualisol” label as approval requirement for installation contractors for the best possible installation quality;
• product certification according to solar key mark (Quality Label for Solar Thermal Products in Europe, see: www.solarkeymark.org to improve the quality and stimulate the export of local products;
• monitoring of and reporting emission reduction in the framework of the CDM. ANME improves the PROSOL management environment on a regular basis (software and quality assurance).

Agencies or other actors responsible for implementation
ANME is responsible for the roll-out, follow-up and monitoring of the proper programme implementation. ANME is also in charge of the FNME management and granting subsidies to suppliers;
STEG ensures the channelling of credits to the beneficiaries and guarantees its repayment to the suppliers;
MEDREC (Mediterranean centre for renewable energies), UNEP and GIZ underpin the programme with accompanying measures and technical support.

• ANME via FNME for granting subsidies; 
• the Banque Attijari via the credit line provided from STEG for the granting of credits during the programme period (117m TND, i.e. approximately 100m USD for the period from 2007 to 2011)
• the beneficiaries (auto-financing).

• creation of a specific management unit for PROSOL;
• development of an information system for PROSOL (software); 
• reinforcement of staff and material for the programme management team.

• MEDREC and UNEP stimulating the development through technical support; 
• GIZ: funding technical support initiatives; 
• National professional chamber of renewable energy (CSNEnR): logistic and organisational support; 
• Consumer protection organisation (ODC): support in communication and quality assurance tracking

• diagnosis of the market situation; 
• identifying development barriers of the solar thermal industry and economic solution analysis; 
• laying out a mechanism for funding, improvement and experiments on the model; 
• entering a dialogue about concerted actions with the stakeholders to validate the mechanism and guarantee their adhesion; 
• establishing a manual of procedures for programme management;
• setting up contract specifications for programme eligibility (product performance and suppliers’ resources); 
• implementing an information and programme management system;
• initiating the programme with an information campaign to raise the awareness of the general public; reinforcement of operator capacities (suppliers and installation contractors).

• surface coverage (m²): 510,000 from 2007 to 2011
• energy savings (Toe): 540 ktoe accumulated (over 15 years) 
• FNME bonus: 51m TND
• energy savings: 5m TND 
• saved state subsidies: 25m TND 
• positive programme impact (job creation, industrial integration, …) as development objective within the offer (60% integration rate)
• 570,000 tons CO²eq saved greenhouse gas emissions as quantified objective of the CDM programme

Co-operation of countries
Countries like Morocco, Jordan, Syria and Egypt have a strong interest in adapting the Tunisian experience as well as in the transfer of policies via the GIZ network.
UNEP is also committed to stimulate the solar thermal programme in South Africa (Capetown) with the Tunisian experience.

• National agency for energy conservation (ANME)
• Tunisian company for electricity and gas (STEG)
• United nations environment programme (UNEP)
• Mediterranean centre for renewable energies (MEDREC)
• German association for international co-operation (GIZ)

• National agency for energy conservation (ANME): ANME is project leader and responsible for the implementation and execution of the project, managing the FNME resources, processing the SWH procurement files and granting bonuses directly. At the same time, ANME takes care of quality assurance in equipment and services and contributes to a CDM increase for the programme to stress the SWH image.
• Tunisian company for electricity and gas (STEG): STEG takes out a credit line, grants credits to beneficiaries, guarantees credit repayment and provides credit recovery.
• Attijari Bank (private bank): The private “ATTIJARI Bank” ensures the availability of the credit line to STEG, the first line of 117m TND has been put in place for the period from 2007 to 2011 under a specific convention between STEG and ATTIJARI. Given the recovery warranties provided by STEG, the interest rate amounts to MMR +1.2. (MMR = money market rate) 
• National professional chamber of renewable energy (CSNER): representing the suppliers and installation contractors: The SWH suppliers/installation contractors are involved in the marketing and installation of SWHs and issuing the necessary guaranties for the programme (5 years on the SWH and guaranteed after-sales service).

• number of systems installed (200l, 300l, 500l) 
• installation surface (m²)
• energy savings achieved
• investment (TND)
• amounts and types of granted subsidies (TND)
• amounts and types of granted credits (TND)
• list of programme-eligible system features 
• list of programme-eligible operators (suppliers and installation contractors).

Evaluation
In 2011, ANME initiated an independent evaluation campaign for PROSOL to prepare the period after 2011.

• Avoiding lost opportunities: PROSOL recovers a major share of the water heating appliances market as it offers continuous bonus payment (more than 20% of the investment costs) and direct access to credit as well as reliable quality assurance provisions. The purchase of any other technology does not bring about such benefit. On the other hand LPG is not continuously available (in particular in 2011 due to the revolution) and requires a physical effort for the supply of 13 kg cylinders. Consumers will therefore always prefer SWH.
• Minimising rebound effects: The mechanism was conceived to avoid over-consumption of hot water thanks to the installation of solar water heaters as: - The bonus level encourages the choice of a small collector surface (PROSOL grants the bonus payment for the options for 150 litres and 200 litres). - The available product ranges provide a low capacity (150, 200 and 300 litres). - It is recommended installing 150 or 200 litres for 2 to 4 family members and 300 litres for larger families.
• Minimising snap-back effects: The mechanism was conceived to avoid a suddenly returned development in the industry through: - The programme is targeted to objectives to be implemented by ANME over 5 years (achieving 700,000 m² by end of 2011 and 1 million m² by end of 2015). ANME and the responsible ministry evaluate it on a regular basis. - The offer is fully mature (7 local manufacturers holding more than 70% of market share). - Suppliers are no longer indebted, so that they can expand their offer. - FNME implements a sustainable funding system. - ANME intends to incorporate maintenance costs in the initial SWH price, ensuring preventive maintenance to guarantee continued hot water supply over the warranty duration of the appliances (5 years). - The local manufacturers’ export share has increased by 10% of their sales.
• Minimising free-rider effects: - structuring the market in accordance with - programme eligibility conditions for a preliminary overhaul of suppliers and products based on the PROSOL programme contract specifications; - the follow-up monitoring of installations by ANME (10% of SWH installed each year) - accompanying measures to improve the product and service quality; - informing the end-user about the PROSOL quality requirements.
• Creating Spill-over effects: - ANME monitoring via sampling of 10% of installations; - the option to rule out defaulting operators thanks to transparency; - The local manufacturers enhance import quality and foster its increase. By the end of 2010 the Tunisian SWH manufacturers’ export share represented more than 10% sales growth on average.

Sustainability aspects

• reducing greenhouse gas emissions by using solar energy instead of fossil fuel combustion technologies and thus generating energy savings
• In the context of developing countries, energy savings, which in the longer run result in monetary savings, can be used for other basic needs (e.g. balanced diet, education for children)

Co-benefits

• creation of jobs (in the industry: around 8 jobs per 1m TND and sales; in supply and installation: around 10 jobs per 1,000 m² installed; in after-sales service: around 0.4 jobs per 1000 m² installed) 
• integrating the SWH working field into the overall industrial landscape for better mastery of technology;
• uplifting the competitive advantage of local industries through economies of scale and improving the technological expertise; 

• limited SWH offer having a negative impact on the technology distribution as well as a price decrease through economies of scale;
• complicated credit approval and repayment procedures;
• limited access to the technology due to significant costs for SWH (credit level);
• delays in product certification for their marketing eligibility under PROSOL resulting from a lack of testing laboratories and programme eligibility tests; 
• limited SWH installation skills; 
• lack of financial staff at ANME for the programme management and monitoring.
• In order to overcome these barriers, various action was undertaken:
• expand the offer by promoting the industrial integration of SWH in Tunisia; 
• increase the credit volume to avoid self-financing of the SWH for 300 litres and more by the end-user; 
• review the procedures of credit approval to the end-user and decrease the release period for subsidies and credits that are directly channelled to the suppliers’ accounts; 
• establish a SWH certification centre in accordance with international standards and improve the contract specifications for eligibility of products and suppliers; 
• roll-out a training programme for the installation contractors to improve the quality and installation of the SWH; 
• implement a management unit as well as an information system for PROSOL.

ANME takes on the annual budget planning allowing for the provision of reserves by FNME, of credits and the tracking of the PROSOL roll-out with respect to the technical facilities installed, to the amount of energy and subsidies that could be saved. 

Target year: 2011

PROSOL is focusing on:

• installing additional 510,000 m², 360,000 m² out of which in the residential sector, to achieve an accumulated surface of 700,000 m² by the end of 2011;
• saving energy of about 38 ktoe/year over the same period, 20 ktoe/year of which is in the residential sector and 540 ktoe over a duration of an SWH life cycle (15 years); 
• avoiding 570,000 tonnes CO₂eq for the period between 2007 and 2011.

PROSOL had helped to save 26 ktoe of energy by the end of 2010. PROSOL should allow for saving 25m TND state subsidies for fossil energies and to generate a profit of around 30m TND (subsidy and energy savings) for the community.
PROSOL has also created jobs (1,500 minimum) and an industrial added value, which may position Tunisia as an SWH producing country. Based on a comparison with similar countries, the employability factor of the SWH field is evaluated at around 15 to 20 jobs per permanent volume of 1,000 m²/year.

The SWH costs for 200 litres amount to approximately 1,350 TND on average. The SWH purchased in the PROSOL frame brings about the benefit of a 200 TND subsidy, and the end-user can apply for a credit of 1,150 TND from STEG. In this case, the consumer needs to repay 22,416 TND per month over a period of 60 months, which corresponds to the principal amount and interest of the credit (MMR + 1.2). The consumer does not have to bear the initial costs (35,400 TND) as application fee to STEG.
The overall PROSOL roll-out costs for the period of 2007 to 2010 amount to 150m TND. Approximately 30m TND are funded by the FNME as subsidy to the end-user, the remaining 120m TND are borne by the end-user (around 20% cash payment and 80% via STEG credit).
The credit terms and conditions are subject to a convention between STEG and Attijari bank and are set forth as follows:

• MMR + 1 for year 2007
• MMR + 1.2 for the years between 2008 and 2011

For the period from 2007 to 2011, PROSOL has contributed to energy savings of approximately 33 ktoe and thus allowed to save around 25m TND state subsidies for oil-based products. The overall net profit for the community is calculated at around 30m TND, resulting from the saved energy and subsidies. This could be achieved thanks to approximately 50m TND bonus payments provided by FNME. On the whole, the ROI period for the state subsidies amounts to around 2 years.
With its low two year ROI period, PROSOL is a highly profitable operation not just for the state, but also for the end-user.
These profits neither include the additional revenues of the CDM nor are they comprised in the SWH funding; they are exclusively used for improving the product and service quality.

• Genuine energy savings for the state, the community and households, evaluated in the follow-up reports by ANME (144 ktoe/year accumulated over the duration of the programme from 2007 to 2011, equalling 137m TND altogether). On the other hand, the selling of “certified emission reductions” (CER) by ANME to Orbeo requires monitoring to prove these CERs.
• the creation of a market amounting to approximately 100,000 m² per year, i.e. a sales volume of around 60m TND per year, which has attracted more than 40 suppliers, out of which 7 represent manufacturers and fitters. Today, the entire industry employs more than 1,500 staff (Lehr et. al 2011).
• the efficient involving of the banking system in renewable energy distribution programmes.