Helping the UN cut down on fossil fuels through standard energy service contract clauses

Helping the UN cut down on fossil fuels through standard energy service contract clauses

Humanitarian agencies recognise the need to shift their dependence from fossil fuels and transition to more sustainable approaches to generating and consuming electricity, however, systemic barriers are preventing them from doing so, which results in the continued purchase of diesel generators as their primary source of power in locations suffering from energy poverty.

Recognising this, a series of workshops were convened by the GPA Coordination Unit, GIZ and Shell during 2019 in order to identify practical ways to unlock the impasse and support the development of concrete solutions.

The first workshop was held with UN humanitarian agencies, to identify what was inhibiting their transition to sustainable energy solutions within displacement settings and to ascertain where there was flexibility in the system to accommodate alternative energy delivery models. Acknowledging the impracticalities of trying to change well established systems within UN agencies, and appreciating the expertise and experience within the private sector, the identified barriers and possible solutions where presented to commercial specialist from the energy sector, who had experience of delivering sustainable solution in remote Sub-Saharan locations. The results from both workshops were then used to co-design concrete solutions that focused on replacing existing, or planned, diesel generators with renewable or hybrid energy solutions supplied by the private sector through power purchase agreements (PPAs) or leasing models.

Two priority activities were, however, identified by the workshop participants in order to facilitate the large-scale uptake of these alternative delivery models, namely the development of: standard contractual terms for PPA and leasing models; and a de-risking mechanism that protects the commercial entity’s capital investment from the UN’s standard contractual termination clause, which is a precondition of all long term agreements.

Subsequently, the GPA Coordination Unit partnered with GIZ’s Energy Solutions for Displacement Settings Team to develop a standard set of contractual clauses for PPA and Leasing Agreements for UN agencies and energy service companies. This resulted in Becker Büttner Held (BBH), a law firm, being commissioned to undertake a third party, independent study, financed by GIZ. The approach taken was one which embraced collaboration, in which BBH engaged with UN agencies and private sector entities to identify potential contractual pinch points and co-design contractual clauses that incorporated solutions that both parties could agree upon. The subsequent report can be downloaded from Energypedia.  

An independent consultant is presently engaged in developing a de-risking tool, as a result of financial and technical support from Shell. The outputs from the study will be published in Q2 of 2020. The standard clauses and de-risking tool are to be piloted by the UN later this year, in order to support the large-scale transition to sustainable energy solutions at their offices and in their operations.

 

If you would like to know more on the above, please contact mark.gibson@unitar.org.

 

Further readings:

• Fossil Fuel Powered Generators in Humanitarian Operations Produce High CO2 Emissions
• How to insure long-term activities in short-term funding? A Guarantee Mechanism in Humanitarian Energy Contracts
• Helping the UN cut down on fossil fuels by de-risking energy service contracts
• Four ways to accelerate solar-powered electrification in humanitarian settings