- Improvements in innovation and affordability will drive private sector investment in renewable energy and energy efficiency.
- The provision of renewable and sustainable energy is now part of the mainstream debate, attracting billions of dollars of investment.
- Local banks can fill the financing gap, particularly in small-scale projects, creating new business opportunities for their investors.
- Renewable energy projects in Kyrgyzstan are helping give security to the domestic market and reduce the output of greenhouse gases.
Advances in innovation and affordability are helping make sustainable and renewable energy sources an attractive opportunity for private sector investors.
The issues surrounding such energy sources are becoming part of the mainstream debate. Billions of dollars of private and public money are now being funnelled into projects across the globe, ranging from giant solar power systems in South Africa to household schemes in the central Asian state of Kyrgyzstan.
Energy experts believe that investments will flow once financial institutions have found the risks to be no greater than in any other segment they are financing.
This is particularly the case for small and medium-sized enterprises (SMEs) and small-scale renewable energy projects. The International Finance Corporation (IFC), part of the World Bank, has recognised the best way to fill the gap in small enterprise investment is to work with financial institutions. The IFC now has 900 private banks worldwide actively involved in energy financing.
The success of these investment models is in making credit lines scalable. ‘Local banks are the main messengers that need to be leveraged,’ said Jan-Willem van de Ven, Senior Carbon Manager at the European Bank for Reconstruction and Development (EBRD). ‘It’s good for these banks because normally they would just focus on trade finance or real estate investment. Now they are able to expand their business lines.’
At the beginning of June, it was announced that a landmark renewable energy project in Kazakhstan, the country’s first large-scale solar plant, was to be co-financed by loans of well over EUR 80 million from the EBRD and the Clean Technology Fund (CTF).
Meanwhile, neighbouring Kyrgyzstan has already taken a step forward in energy security with a renewable energy project designed to cut its dependence on electricity imports and reduce CO2 production by 23 000 tonnes each year.
Nurzat Abdyrasulova, General Director of Sivic Foundation UNISON, said one of the main drivers for change was climate change, which had left reservoir levels depleted and reduced the production of hydroelectricity. This meant the country was ripe for a renewable energy drive, with a US$ 20 million fund providing for 480 new energy projects, most of them for households. ‘Our government started to understand that in order to manage energy demand they had to manage energy efficiency,’ Abdyrasulova added.
The right policy framework was necessary for the proper development of renewable energy, according to Marie Donnelly, Director of Renewables, Research and Innovation, Energy Efficiency, at the European Commission. ‘Even those who really and truly believe in a transition to sustainable energy are not naïve enough to think it is going to happen without the right policy in place,’ she added
Thanks to an appropriate policy framework the South African government was able to harness renewable solar and wind energy. ‘South Africa created the programme from scratch,’ said Germán Bejarano García, Head of International Institutional Relations and Advisor to the Chairman, at ABENGOA.
‘They were quite flexible in listening to all advice (available), and the whole programme has been very successful,’ he said. ‘I would say it is the most successful of its kind—it was introduced in a very short period of time, and all players involved in wind or solar energy are present in South Africa. This is good for the country and good for the communities.’
‘Going forward, the energy system for all of us will end up being highly capital intensive. That’s a serious shift in funding, from both the financial and operator’s sides. That’s one of the things you have to think about in terms of the measures you put in place. At the end of the day, electricity as a system will rely on the very highly intelligent use of data and capital. It will have almost nothing to do with electrons. It will be big capital investments up front, and lots and lots of IT to manage the capital to get the best return.’ Marie Donnelly, Director of Renewables, Research and Innovation, Energy Efficiency, European Commission.