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Workshop on financing for
renewable energy in Small Island
Developing States (SIDS)
Henning Wuester,
Director of Knowledge, Policy, Finance Centre, IRENA
3 August 2015
Kuala Lumpur, Malaysia
Jointly organized by IRENA and Ministry of the Environment, Japan (MOEJ)
Sustainable Development Goals
2
Objectives by 2030:
ACCESS – ensure universal access to affordable, reliable
and modern energy services
EE - double the global rate of
improvement in energy
efficiency
RE - increase substantially the share of renewable
energy in the global energy
mix
Goal 7: Ensure access to affordable, reliable, sustainable and modern energy for all
IRENA's Global Renewable Energy
Roadmap (REmap 2030)
3
Doubling the share of renewable energy implies a tripling of the share of modern
renewables
REmap 2030 findings
4
The global RE share can reach 36% by 2030.
• This is possible at negligible additional cost.
• Savings of up to USD 740 billion per year by 2030.
• Reduction in annual CO2 emissions by 8.6 Gt by 2030.
• Energy efficiency and improved energy access necessary to allow for
the share of renewables to reach 36%.
• Business-as-usual will only result in an increase of this share to 21%
by 2030.
5
Investment required to
achieve the REmap goals
REmap requires more
than doubling of
average investment
Private finance needs to be mobilized to bring RE investments to scale
Case for small-scale RE in SIDS
6
Economic Case
• RE is now the economic solution for mini-grids on islands
• Solar PV with battery storage can increase RE penetration by more than 20% on islands
• Strong wind, solar, and geothermal potential
Social Case
• Energy access to rural / isolated areas
• 4.5 million jobs in the off-grid electricity sector alone by 2030
• An alternative source of income for rural communities
• Resilience for energy security
RE Targets
and policy measures
Climate finance
Increased share of RE; better access
to energy; achieve SDG
IRENA’s work on SIDS
7
A study on the status of public
financing for RE projects in SIDS
8
The study identified:
• 30 public funds available for RE projects in SIDS
• 24 projects/programmes that were financed part or in full by these
funds
• Each fund’s eligibility criteria and funding sources
• Specific financing challenged faced by SIDS
• Planned RE projects and programmes in SIDS
And analysed:
• Suitability of each planned project with the selected funds
• Reasons for underutilisation of the selected funds
• Ways to improve funding rates in SIDS
Abu Dhabi
Fund for
Development
Asian
Development
Fund
Belgian Investment
company for
developing
countries (Bio-
Invest)
Canadian Climate
Fund for the
Private Sector in
Asia
Clean Energy
Financing
Partnership
Facility - ADB
(CEFPF)
Climate
Investment
Funds
Danish Climate
Investment
Fund (KIF)
Emerging
African
Infrastructure
Fund (EAIF)
Energy and
Environment
Partnership South
and East Africa
EU Africa
Infrastructure
Trust Fund (EU-
AITF)
Evolution One French Global
Environment
Facility
(FFEM)
GEF Trust
Fund
Geothermal Risk
Mitigation
Facility for
Eastern Africa
Global Climate
Change Alliance
(GCCA)
Green Climate
Fund (GCF)
InfraCo Africa Infrastructure
Development
Fund (IDF)
Infrastructure
Fund
(InfraFund)
Interact Climate
Change Facility
S.A.
International
Climate Initiative
(ICI)
MGM Sustainable
Energy Fund
(MSEF)
Multilateral
Investment Fund
(MIF)
NAMA Facility
Project
Preparation
Development
Fund (PPDF)
Seed Capital
Assistance
Facility (SCAF)
Special Climate
Change Fund
(SCCF)
SUNREF Green
Lending Scheme
Scaling Up
Renewable
Energy Program
for Low Income
Countries (SREP)
Sustainable
Energy Fund
for Africa
(SEFA)
Selected public funds
Funding patterns of the selected
public funds
9
• Various types of financial instruments,
including loans, grants, equity, quasi-equity,
and guarantees
• Most of the funds can finance projects in
several countries
• Multiple funding entities complement each
other for one project
• Public funds generally play a minority role
in RE project financing
• Typical investment horizon – max. 10 years
Public funding status in SIDS
10
• 30 public funds financed 24 RE projects and funding programmes in
SIDS
• Strongly public-driven environment & high grant component
• Some direct financing of RE projects (9/24), some supporting project
development and building enabling environment (11/24)
Wind4%
Solar37%
Hydro17%
Geothermal4%
Bioenergy13%
Mixed25%
RE MIX OF FUNDED PROJECTS IN SIDS
< 1 MW5%
> 1 - 5 MW58%
> 5 - 30 MW32%
> 30 - 80 MW5%
> 80 MW0%
INSTALLED CAPACITY DISTRIBUTION OF FUNDED PROJECTS
Barriers to financing RE projects in
SIDS
11
• Investors’ perspective
High perception of risks
Lack of legal framework and policy measures
High public debt rates, limiting the loan absorption capacity
Low energy access rates and lack of suitable energy infrastructure
Remoteness of the off-grid installations in rural communities
Low volume of electricity demand and small-scale investments
Barriers to financing RE projects in
SIDS
12
• Local/domestic project sponsors’ perspective
High cost of capital is less of a concern in SIDS as RE projects are heavily driven by
public concessional finance and the private sector involvement is meager
Limited access to finance (high upfront cost)
Limited capacity of preparing and developing RE projects
High costs of project development and due diligence (high transaction costs)
Lack of business models for financing and operating (ensuring stable revenue streams)
Difficult coordination with and between different public organizations
Key elements to scale up RE
investment in SIDS
13
Financing models and
instruments for small-scale RE
systems
Project development
and facilitation
Capacity building for local
professionals and financial institutions
Project development and
facilitation
Project Navigator
The objective of the Navigator is to increase
the bankability of projects by:
• Strengthening the project development
base
• Enhancing the quality of project proposals
• Reducing costs and mitigating risks through
proper planning and efficient use of funds
Facilitation Platform
The objective of the platform is to support
initiation, development and financing of
renewable energy projects by:
• Improving the transparency of the market
• Supporting projects at the early stage
• Offering IRENA’s tools and databases for
market players
14
Thank [email protected]