Everything you need to know about the Rwanda Cooling Initiative Coolease Financial Mechanism

Q&A - Rwanda Cooling Initiative Coolease Financial Mechanism
July 2019 
 
The Rwanda Green Fund (FONERWA) and the Rwanda Business Development Fund (BDF)in partnership with UN Environment’s United for Efficiency (U4E) initiative and the Basel Agency for Sustainable Energy (BASE) have launched the ‘Coolease’ financial mechanism to promote the adoption of energy-efficient and climate-friendly cooling solutions in Rwanda. 
 
The Coolease scheme is one of the first of its kind in Africa and will enable suppliers and consumers of air conditioning and refrigerations products to transition to the latest technology without an upfront investment. This groundbreaking financial scheme has been developed through the Rwanda Cooling Initiative (R-COOL) and is in line with the Kigali Amendment to the Montreal Protocol, which requires all nations to phase down refrigerants that are potent greenhouse gases.
 
Below is a Q&A providing more details on the Coolease financial mechanism. 
 
What is the Coolease scheme, and how does it work? 
 
Coolease is a financial mechanism that will complement standards and policies to increase and accelerate the adoption of efficient cooling technologies and the use of climate-friendly refrigerant gases. Coolease is provided by a financial institution to the client (typically an enterprise) through a finance leasing agreement, in which the air conditioning or refrigeration system is used as collateral. 
 
A dedicated leasing subsidiary is being set up by BDF to serve as a Special Purpose Vehicle to finance the cooling system for the client in exchange for monthly payments. The technology provider installs the equipment and commits to providing high-quality maintenance, which is embedded in the Coolease agreement. A positive list describes which technologies are eligible for the programme, considering both their efficiency and refrigerant type. A contract between BDF and the technology providers establishes requirements for supply, quality, installation, maintenance and willingness to relocate the equipment. A Green Growth Guarantee Fund set up by BDF and FONERWA will mitigate the loss in case of default.
 
How can consumers and suppliers access Coolease?
 
Suppliers can reach out to BDF to become part of the coolease financial mechanism. An agreement will be signed between BDF and the supplier to engage in a collaboration to provide Coolease to the clients. This agreement will establish requirements for supply, quality, installation, maintenance and willingness to relocate the equipment. To access coolease, consumers can reach out to their preferred technology supplier participating in the Coolease programme. They will receive explanations on how Coolease works as well as for which technologies the financial mechanism is applicable.
 
Coolease is only applicable for clean and efficient technologies, according to a list of eligibility criteria. If the customer is interested in Coolease, the technology supplier will provide a credit request protocol which the client can fill in and send to BDF, together with the invoice from the supplier to access financing. A contact person at BDF will be available to answer any questions related to the mechanism.
 
BDF informs the customer and the supplier if and when the Coolease was approved. The customer will cover any applicable transparent activation fees (either to partly guarantee the loan or to cover part of the investment upfront), and the provider will install the equipment, offer maintenance, and receive the remaining upfront payment from BDF. The client will pay back the monthly leasing fee as well as the maintenance costs over time. By using a more efficient system, the client will save money on electricity every month which will facilitate the repayment of the loan. 
 
Why is the cooling sector important for Rwanda’s development? 
 
If left unchecked, it is estimated that fluorinated gases (which are used in cooling systems) could account for nearly 20 per cent of climate pollution by 2050. This is why the world met in Rwanda to adopt the Kigali Amendment to the Montreal Protocol which will see countries phase out the use of hydrofluorocarbons (HFCs). As a fast-growing nation, cooling is crucial for Rwanda’s health (vaccine and medication storage), agricultural (cold rooms) and tourism sectors (hotel and conference venues). We need to ensure efficient cooling is accessible for all.
 
The cooling sector is also important for Rwanda’s development as it is aligned with the government’s green growth strategy to be a green and climate-resilient economy. Agriculture accounts for 33 per cent of Rwanda’s GDP, and around 72% of the working population is employed in the sector, yet half of the country’s production goes to waste, causing smallholder farmers to lose up to 15 per cent of their income. The cooling sector would close this gap by helping to prevent food spoilage.
 
What is the Rwanda Cooling Initiative? 
 
The Rwanda Cooling Initiative (R-COOL), led by the Government and U4E with funding support from the Kigali Cooling Efficiency Program (K-CEP), was launched in March 2018 to showcase the benefits of a rapid and comprehensive transition to energy-efficient, climate-friendly and affordable clean cooling solutions to advance sustainable development. Not only do current cooling technologies, such as air-conditioning and fridges, rely on global warming gases known as hydrofluorocarbons, but also are inefficient, which makes them expensive to operate and wasteful of electricity and precious resources. 
 
With modern fridges and air conditioners, suppliers and consumers will be able to save money on electricity bills, reach new customers with existing power-generating capacity, reduce peak electricity demand, and mitigate pollution and greenhouse gas emissions. 
 
The Rwanda Cooling Initiative has four main components:
  • A Market Assessment to collect data on the current stock and future projections of refrigerators and air conditioners in the country, the impacts on electricity demand, the supply chain and key stakeholders we need to work with.
  • A National Cooling Strategy to provide a multisectoral roadmap to adopt model regulations and supporting policies for refrigerators and air conditioners.
  • A Financial Mechanism to provide the private sector with the support they need to invest in new and efficient cooling technology in the right way at the right price.
  • An Awareness Campaign and Capacity Building to ensure Rwanda residents and businesses understand the rationale and pathways to access sustainable cooling.
 
How is the Coolease scheme related to the Kigali Amendment? 
 
The Coolease scheme aims to be a catalyst to fulfil Rwanda’s commitments under the Kigali Amendment to the Montreal Protocol. The financial scheme has been developed through the Rwanda Cooling Initiative and will smoothen the transition to the latest clean technology that is free from climate-warming hydrofluorocarbons (HFCs).
 
How big is Rwanda’s cooling market?
 
The market assessment conducted by the Rwanda Cooling Initiative found that the current market size of refrigeration and cooling is worth approximately 35 billion Rwandan francs. The Rwanda Cooling Initiative, with Coolease as one of several financial mechanisms to be pursued, will be critical to channel such private capital towards superior cooling solutions. 
 
 
What can individuals do to reduce the environmental impact of the fridges and air conditioners they already own?
 
There are a few simple steps you can take to reduce the environmental impact of your fridge or air conditioner, including:
  • Regular maintenance and filter cleaning to ensure maximum efficiency.
  • Using air conditioners less often or setting the thermostat to a higher temperature so it doesn’t need to work as hard.
  • Alternatively, use a fan - it is efficient and will cool you down.
  • Don’t leave your fridge door open, and you’ll save money on your power bill.
  • Check the thermostat on your fridge or air conditioner to ensure it’s the right temperature for your needs.
 
More Information
 
For more information about the Coolease Financial Mechanism, please contact:
 
  • Elie Nyirumuringa, Underwriter Officer, Business Development Fund, on +250 788 538 492 or at e.nyirumuringa@bdf.rw.
  • Morris Kayitare, Rwanda Cooling Initiative Project Lead, UN Environment, on +250 788 401 091 or at morris.kayitare@un.org