Consultant - Feasibility Study and Design of De-Risking Facility to Decarbonize Humanitarian Operations - Remote

2023-05-18

Full Time

Description

BACKGROUND

Mercy Corps is a leading international non-profit organization powered by the belief that a better world is possible. Our team of more than 6,000 humanitarians works in over 40 countries to help people triumph over adversity and build stronger communities from within. Mercy Corps fully leverages the expertise of our Energy 4 Impact (E4I) energy access platform to increase access to climate-smart, sustainable energy, improving the lives of millions around the world.

Since the Global Platform for Action on Sustainable Energy in Displacement Settings (GPA) was established in 2018, Mercy Corps has been a very active Steering Committee member, with a focus on strengthening energy access market systems in support of livelihoods and economic opportunities in displacement settings. Currently, Mercy Corps has doubled down on its collaboration with the GPA to provide thought leadership in the decarbonization of humanitarian operations. This effort builds on Mercy Corps’ Enter Energy initiative and on the funding of our own Sustainability Report that lays a roadmap for halving our emissions by 2023. Our first-hand experience informs the collaboration with the GPA in the implementation of the German Foreign Office-funded “Decarbonising Humanitarian Energy Multi-Partner Trust Fund” (DHE) program. Specifically, Mercy Corps is supporting the design of the “De-Risking Facility” component which is “seeking to protect an energy service provider’s capital investment from the standard contractual termination clause”, which is a precondition of all long-term agreements with the United Nations and some NGOs, including power purchase agreements (PPAs) and leasing agreements. A fund that would cover this risk would allow energy service companies to finance, install, and manage renewable energy solutions in a manner that is more cost-effective than presently possible and could support the scale-up of the energy transition by removing the need for humanitarian actors to self-finance through grants from donors.

While the energy assessments to support the transition from diesel generators to cleaner energy sources at partner offices, facilities, and/or operational activities (e.g. water pumping, medical facilities, schools, community spaces, etc.) would be provided through a technical assistance programme (i.e. the Centralised Clean Energy Service), and a grant to offset part of the costs associated with energy efficiency measures would be paid directly out of the DHE, the decarbonization through solar PV solutions to replace diesel generators (generally rooftop-mounted) is foreseen through energy service contracts, where energy companies would cover the initial capital investment (CAPEX) and operational expenditure (OPEX), and own and operate the renewable energy systems. In turn, humanitarian organizations would enter into third-party agreements (e.g. PPAs, asset leasing, energy service agreements) with the energy companies by switching their current spending for diesel-based energy generation to monthly installments to the new energy providers. It is estimated that at least 22 million EUR CAPEX is required for these installations. Based on the de-risking study conducted for Shell and GPA in 2019 (to be re-validated) third party energy providers would require a de-risking facility of about 2,2 million EUR to manage the contract termination and other risks effectively.

The main objectives of the De-risking financial facility will be:

Reduce contract default/payment risks: De-risking financial facilities are designed to reduce risks borne by private sector energy companies and make energy investments more attractive to private investors. The initial scoping phase would identify and evaluate potential electrification projects of humanitarian operations (e.g. offices, guesthouses, warehouses) that face significant risks and barriers to private sector investment, such as political instability, regulatory uncertainty, or lack of financing,1 and the use of contractual termination clauses in long term agreements with humanitarian organizations. The Consultant would conduct a comprehensive risk assessment of the identified projects and develop strategies to manage and mitigate the risks involved.
Mobilize private capital/investment: The facility aims to mobilize private sector investment in the energy sector by addressing the barriers to investment. The facility would be designed to attract investment from various sources, including philanthropic organizations, impact investors, and public-private partnerships, to support energy projects in humanitarian contexts.
Accelerate humanitarian energy access: By increasing investment, the facility aims to accelerate energy access and contribute to the achievement of Sustainable Development Goal 7 starting from humanitarian operations.

Based on the foregoing and background documentation2, Mercy Corps intends to recruit a consultant/consulting firm to conduct a deeper study of the energy service de-risking sector and to support the design of a de-risking facility to decarbonize humanitarian operations.

The design of the financial facility should enable UN agencies and NGOs to enter into agreements with renewable energy companies to meet their electricity needs, while addressing financial risk. The facility should be structured to maximize the benefits for the humanitarian sector, while balancing the risks for energy companies and investors. An effective design should include:

Clear eligibility criteria for projects to be solarized;
Robust risk assessment and mitigation mechanisms;
Flexible financial structures to address different types of risks ; and
Transparent monitoring and evaluation processes.

DETAILED TASKS TO BE PERFORMED:

The detailed tasks and deliverables to be completed by the consultant are:

PART 1: Desk research and interviews, including market mapping and gap analysis.

A) Market mapping

Collate and review the literature on relevant de-risking facilities, with a specific focus on applicability to the broadest legal framework possible while maintaining financial viability for humanitarian agencies. The mapping will include high-level data and information, where available, on size and type of facility, key criteria and focus areas, structure type (including legal registration details, as available), brief learnings and insights on successes and challenges, and partners involved.
Map de-risking energy access initiatives globally, with a specific focus on West Africa (Nigeria and Niger). Facilities designed to de-risk “behind-the-meter” commercial and industrial (C&I) projects should be specifically analyzed to determine how they functioned to manage informational, technical, regulatory, and financial risks.
Hold 20-25 expert consultations (including UN and humanitarian organizations, energy companies, commercial and development banks, multilateral development institutions, and investment funds, governmental actors) to a) better understand humanitarian organizations’ decarbonization needs and b) energy company de-risking requirements to meet humanitarian organizations’ needs.
Consolidate insights from these stakeholder consultations, and draw out key learnings.
Deliverables: Deck on mapping/overview of de-risking facility for decarbonization of humanitarian operations (PPT, 10-15 slides), summarizing key findings and learnings

B) Guiding principles and opportunity analysis

Conduct an analysis to understand what are the main guiding principles that will need to feature in the de-risking facility for it to be successful in addressing humanitarian organizations' and energy companies' needs.
Assess risks and identify risk mitigation measures for decarbonizing facilities in humanitarian settings (i.e. solar facilities)
Quantify the financial and sustainability advantages of switching from diesel to renewable energy generation for humanitarian operations
Develop key insights, recommendations, and identify needed research on a) how the de-risking facility should be structured to effectively attract reputable energy companies in fragile markets and humanitarian settings - this would take into account the different regulatory systems (current and emerging) in the Global South and also in the pilot countries (Niger and Nigeria) and analyze the cost-opportunity and applicability for national and international energy companies; b) whether to create a new facility or complement an existing facility; c) what indicative facility size (if new facility), and what ecosystem support services are required to improve economic sustainability and high-value impact outcomes.
Deliverables:
Guiding principles analysis deck (PPT, 10-15 slides), summarizing key findings and insights as described in points above, and building from market mapping deck
A stakeholder workshop to align on the facility type so we can dive into the design work in Part 2; this will result in a PPT (~15 slides) summarizing feedback inclusive of specific recommendations on de-risking facility structure, capitalization requirements and key considerations for success

PART 2: Selection and coordination of a third-party fund manager to design de-risking facility

Drawing on Part 1, the consultant will design the tender request materials that will guide the selection of a third-party solution provider to design the de-risking facility in abidance with Mercy Corps’ procurement procedures. The Consultant will provide technical assistance to the selected solution provider to ensure that the facility set-up is relevant to the context and needs of stakeholders:
- In coordination with the Mercy Corps procurement department, E4I and the GPA, lead the development of the background tender documents and coordinate the selection process.
- Onboard and coordinate the selected solution provider to design the de-risking facility and ensure the service provider delivers the tasks per quality and time. It is to be noted that Mercy Corps retains the right to break down the fund-design phase from the roll-out phase. The design of the facility will include figures on the economics and what social impact can be achieved at different fund sizes.
- Provide technical advisory (technical guidance, inputs, reviews) to selected third-party solution provider
- Design and deliver a co-design workshop together with the 3rd party fund developer and relevant stakeholders to discuss, review and refine the fund design and structure, and align on next steps.
- Supervise the third-party solution provider to deliver a high-level implementation plan and roadmap to set up and launch the fund; identify key next steps that need to be performed, and for each, provide a brief summary (2-3 lines) on what this should entail e.g. on full legal review, partnerships strategy (fund managers, co-funders, etc.), pilot planning and geographical focus selection, governance and operational framework development, detailed M&E framework, financial modelling and value for money assessments, risk management, team structure, pipeline development, and exit strategy.
- Prepare a draft Private Placement Memorandum for the fund to be the operational document to launch the fund, with a full description of the market opportunity, fund strategy, target size, team, competitive niche, etc.
Deliverables:
Tendering documentation as per Mercy Corps procurement procedures (in coordination with Mercy Corps team)
Supervise the third-party solution provider to provide an implementation roadmap (PPT, 15-20 slides), consolidating key insights and recommendations as described above
Design and deliver a workshop, co-created and co-facilitated with the selected solution provider including presentations for the workshop. Our expectation is to together align on the stakeholder list, as appropriate.

PROPOSED METHODOLOGY

The consultant should further refine the methodology for the assessment. In summary, we foresee the following key activities to achieving the goals of the assessment:

Desk study of existing data, reports, and case studies
Key informant interviews (KIIs) with private sector energy companies, humanitarian energy players, humanitarian organizations (including UN and NGOs), financial institutes, and any other relevant primary data collection exercise (e.g., FGDs, surveys) to understand the barriers, risks, and needs of the key actors in the value chain.
Analysis and summary of findings and reporting
Design and lead tendering process for the selection of the third-party solution provider. It has to be noted that Mercy Corps retains the right to break down the fund-design phase from the roll-out phase.
Collaboratively design the fund structure with third-party solution provider (fund manager), Mercy Corps, and GPA

LEVEL OF EFFORT

The engagement will be for a maximum of 60 days.

TIMELINE

The below timeline can be slightly modified, however the presentation of the facility presentation must occur as indicated:

Part 1:
Market mapping: June 19 - July 17
Guiding principles and opportunity analysis: July 24 - September 4

Part 2:
RFA and selection: September 11 - October 16
Facility co-design: October 23 - December 4
Facility presentation: December 11 - December 18

ASSESSMENT GOVERNANCE AND IMPLEMENTATION

During the delivery of services, the consultant shall be under the direct supervision of the Energy Access Technical Support Unit (TSU) Director and working closely with the TSU and E4I team. The GPA team will also be involved in the review of key documents and intervention designs.

Required Expertise

5-10 years of experience in a relevant technical field
Proven experience in access to finance for the off-grid energy sector, including C&I solar, is key including providing technical assistance to private companies and designing creative financing mechanisms
Experience with de-risking structures, including political risk insurance, etc., is a plus.
A comprehensive understanding of UN and NGOs procurement procedures
Expertise in humanitarian energy challenges is a plus
Presence or experience in Nigeria and Niger, either directly or through a partner is a plus
Fluency in French is a plus

Diversity, Equity & Inclusion
Achieving our mission begins with how we build our team and work together. Through our commitment to enriching our organization with people of different origins, beliefs, backgrounds, and ways of thinking, we are better able to leverage the collective power of our teams and solve the world’s most complex challenges. We strive for a culture of trust and respect, where everyone contributes their perspectives and authentic selves, reaches their potential as individuals and teams, and collaborates to do the best work of their lives.

We recognize that diversity and inclusion is a journey, and we are committed to learning, listening and evolving to become more diverse, equitable and inclusive than we are today.

Equal Employment Opportunity
We are committed to providing an environment of respect and psychological safety where equal employment opportunities are available to all. We do not engage in or tolerate discrimination on the basis of race, color, gender identity, gender expression, religion, age, sexual orientation, national or ethnic origin, disability (including HIV/AIDS status), marital status, military veteran status or any other protected group in the locations where we work.

Safeguarding & Ethics
Mercy Corps team members are expected to support all efforts toward accountability, specifically to our stakeholders and to international standards guiding international relief and development work, while actively engaging communities as equal partners in the design, monitoring and evaluation of our field projects. Team members are expected to conduct themselves in a professional manner and respect local laws, customs and MC's policies, procedures, and values at all times and in all in-country venues.