Public-Private Dialogue at IRENA’s 8th Assembly highlights what governments and businesses can do to unlock investment in renewable energy
“We find ourselves in a time when scaling-up renewable energy investment makes sense, even when not much of anything else makes sense,” Steve Sawyer, Secretary General of the Global Wind Energy Council told a ballroom filled with ministers, diplomats, parliamentarians and other leaders from public and private sector at IRENA’s 8th Assembly on 13 January 2018.
Reporting to IRENA’s decision making body from the Public-Private Dialogue, Sawyer’s statement rang true in that in a world of fake-news and fast changing circumstances, for more than a decade a renewable energy has been an increasingly reliable and affordable investment.
Globally, annual renewable energy investment rose to almost USD 265 billion last year — outpacing that in conventional sources of electricity. However, current investment levels in renewable energy are far from what is needed to meet the ambitions of the Paris Agreement, and IRENA analysis has shown that to meet that climate goal, annual investment levels need to roughly triple from current levels and be consistent every year from now up to 2050. It is expected that 85% of the total investment will have to come from private finance with approximately two-thirds of funds mobilised in emerging renewable energy markets.
While plummeting renewable energy costs and genuine interest in switching to renewables from the private sector are making this global goal more achievable, access to financing and scaling-up investment remains a major challenge.
Seeking to promote the wider and faster uptake of renewable energy technologies, in January 2014 IRENA and 35 leading players in renewable energy from around the world established a Coalition for Action. Today, the swelling Coalition of 75 members including private companies, industry associations, research institutes and civil society, gathered in a Private-Public Dialogue at IRENA’s 8th Assembly, to engage with participants of IRENA’s Legislators Forum and government representatives, in a discussion that highlighted key opportunities and challenges in growing renewable energy markets worldwide, and the need for better alignment between government, legislators and industry.
Coinciding with the Dialogue and Assembly, and feeding into their discussions, the Coalition launched two white papers: one on the scaling up of investment in emerging markets, identifying the challenges and opportunities for unlocking investment in renewable energy; and another on community energy and the broadening of renewable energy ownership.
During the Dialogue, there was a broad consensus that a lack of bankable renewable projects in the marketplace (compounded by political and market barriers), not capital, was failing to attract investment for a scale-up of renewable energy investment necessary to meet the Paris Agreement targets and the Sustainable Development Goals.
To help address this challenge, the group had these take-home messages for the Assembly and its participants:
- Political will, clear targets and a long-term policy framework that ensures a broad and just participation in the energy transformation, are crucial to successfully scale up investment.
- Public finance institutions need to move away from direct financing to focus on risk mitigation including off-taker guarantees and currency risk hedging mechanisms, which in turn is critical to reduce financial costs.
- Standardized contract templates are an important tool to reducing transactions and in allowing for the aggregation of projects to create larger financial deals.
- Non-discriminatory market access is needed, allowing for both private and community based investors to engage effectively in the energy transition.
- The importance of maximizing socio-economic benefits at all levels, especially the local community level including local job creation.
- Support long-term and effective carbon pricing and the removal of existing fossil fuel subsidies.
Off-grid Renewables are Growing, Bringing Socio-economic Benefits to Millions
Off-grid renewable energy has witnessed spectacular growth over the last decade. Since 2008 capacity has trebled and the number of people in rural communities served by the technology has witnessed six-fold growth. Today, up to 133 million people are receiving life-changing access to low-cost, secure renewable energy and benefit from the socioeconomic impact access delivers. Global off-grid investments in 2017 reached USD 284 million.
These findings feature in a new IRENA brief launched during the UN High-Level Political Forum in New York. The paper, entitled: Off-grid Renewable Energy Solutions, Global and Regional Status and Trends, builds on IRENA’s statistical analysis to offer a global picture of the sector’s trajectory and impact. The data highlights the extent to which off-grid renewables are emerging as a mainstream solution to the expansion of electricity services all over the world, contributing to sustainable development goal 7 (SDG 7) by broadening the reach of electricity beyond existing grid infrastructure.
“Off-grid renewable energy is an important contributor to energy access across the developing world having witnessed widespread, rapid growth in deployment over the last few years,” said Dr. Rabia Ferroukhi, Deputy Director of the Knowledge, Policy and Finance at IRENA. “Our analysis captures this momentum whilst shedding light on the need to step-up efforts towards 2030 Sustainable Development Goals.”
Africa has emerged as a dynamic, fast-moving hub for off-grid renewables. The development of solar lighting solutions and innovations in deployment and financing models, such as pay as you go options and mobile payment platforms have contributed to Africa’s rapid advances. The continent’s off-grid industry now serves around 53 million people – the equivalent of the entire population of South Africa – up from just over two million in 2011.
The brief identifies Asia as a global leader in off-grid renewables capacity deployment. Today, up to 76 million people across the continent may now benefit from such power sources.
South America, home to some of the highest rates of electricity access in the developing world, has also witnessed off-grid renewable growth the brief suggests, where the technology is considered key to ‘last mile’ electricity access.
Off-grid renewable energy solutions are being deployed to provide electricity services for a wide range of end-uses, including for powering agriculture, telecommunication infrastructure, healthcare centres, schools, and rural enterprises. The paper emphasises that linking delivery of off-grid solutions to energy service delivery can unlock substantial socio-economic benefits, contributing to multiple SDGs.
While dramatic cost reductions have been the primary driver of this acceleration, it is the multifaceted socioeconomic benefits that provide the greatest incentives for its deployment. Renewable energy’s centrality to the SDG 7 goal on universal access to clean, reliable and affordable energy against a backdrop of a billion people who still live without it, is unquestionable. However, beyond energy itself renewables are a key contributor to sustainable development, generating jobs, stimulating growth, ensuring resource security and improving health.
The paper notes that in Bangladesh, around 133 000 jobs have been created through a Solar Home System programme and an off-grid renewables initiative in Rwanda aims to generate 7 000 jobs whilst delivering energy access to almost 80 000 people. Similarly, incomes in rural households benefit from lower cost solar lanterns, and remote health and educational facilities are enhanced through consistent availability of power.
“Renewables are a central pillar of SDG 7 and represent one of the most effective and economicmeans available in the pursuit of universal energy access,” said Rabia Ferroukhi, Deputy-Director of Knowledge Policy and Finance at IRENA. “Yet beyond this, we are now beginning to truly understand the way in which distributed renewable electricity is transforming the lives of those receiving from it, bringing stability and opportunity to millions of people around the world.”
CPEC and Pakistan-China Energy cooperation
The demands of global energy are substantially rising day by day in the 21st century, whereas the dependency on fossil fuels like coal, oil and natural gas have become a serious concern which is about 80% of the world’s primary source of energy. The concerns about fossil fuels are due to their ever rising prices and their negative impact on the environment due to the harmful emission of greenhouse gases. Therefore, in this context the reliance on nuclear power energy is considered by various countries, including Pakistan, as a good alternative option of energy supply, which is comparatively cheaper also.
Pakistan has great strategic importance in South Asia because of its location, its dynamic young population, its vibrant economic potential, being a nuclear power, and now being a strategic partner of China in the backdrop of the construction of the China-Pakistan Economic Corridor (CPEC).The CPEC is a flagship project of China’s Belt and Road (B&R) initiative and the completion of CPEC is likely to bring major economic advantages to China, Pakistan and South Asian region.
Like many other countries, for its economic development based on enhancing its industrial and agricultural production, energy is very important for Pakistan and it needs to address its current energy crises on an urgent basis. In this context signing of the CPEC agreement with China by Pakistan in 2015 is considered as a milestone achievement, as it includes many electricity generation projects, which will help address energy shortages of Pakistan.
Apart from developing other means of electricity generation in Pakistan, China is already helping Pakistan in nuclear energy production by supplying nuclear power reactors, under IAEA safeguards based on agreements signed in the field of nuclear cooperation. Apart from installing Chashma 1 and Chashma 2 power plants, which are already producing electricity in Pakistan, in 2017 China has signed another deal with Pakistan to also install Chashma 3 and Chashma 4 power plants. Out of these each power plant, after completion, will produce 1000 megawatts of electricity. As part of the CPEC project, China is also building two HUOLONG ONE nuclear reactors in Karachi that will become ready to use by 2021.
After signing the CPEC agreement China is very keen to help Pakistan in the energy production, as energy is required not only for the construction of CPEC projects but also for its subsequent operation. This is because China is also going to get huge trade benefits by trading with the outer world using the CPEC. In other words, apart from helping its friend Pakistan in energy production, this cooperation also serves China’s economic interests in a major way. In this context, the CPEC is a win-win project that serves Pakistan and China’s interest in a similar way.
As China is doing a lot to advance its interests by expanding its economic production by basing on its CPEC related exports, Pakistan should also take the CPEC as a big opportunity to develop its economy to become economically self reliant. In this context, it should focus on completing the construction of the CPEC and its related energy projects on time, so that it addresses its energy shortages and quickly moves on towards its economic development.
In fact, it is more important for Pakistan to work harder for completion of the CPEC related projects and make use of the CPEC to advance its industry and agriculture, increase trade, attract foreign direct investment and increase its revenues. This is important because Pakistan’s economy needs a major boost to recover from its ever increasing budget deficits, inflation, domestic and foreign debt situations,widening gap of balance of payments due to constantly declining exports and falling foreign exchange reserves.
This is also important to repay the domestic debt and foreign debt in order to save Pakistan from becoming a defaulting state in the coming years. Above all it is necessary to avail the opportunity of reaping CPEC related economic advantages to develop Pakistan’s economy in a reasonable time frame to meet its aforementioned obligations and finally to bring prosperity to Pakistan and its people.
In the light of above it is logical to say that Pakistan and China’s cooperation in the energy field is beneficial for both countries and CPEC is a project that helps Pakistan in meeting its energy shortages, and it will be equally beneficial to Pakistan and China to advance their economic interests. Rather CPEC related energy projects and trade will be much more beneficial to Pakistan to meet its above discussed economic challenges.
The Race for Universal Energy Access Speeds Up
Fondly referred to as “mini Africa” by local residents, Sabon Gari is one of Nigeria’s biggest markets, where you can find anything from electronics and clothes to toys and hardware. Shops here used to depend on expensive diesel generators for electricity. But today, thanks to a new solar mini-grid, shop owners say they now spend just a fraction of what they used to previously on electricity.
More than 5000 miles (8000 kms) away, in the remote island of Monpura in Bangladesh, Lhota Khatun runs her own sewing business out of her bedroom, thanks to a solar mini-grid installed on the island. Since 2016, she has had dependable electricity access that helps her work at night, after her children are in bed.
Sabon Gari and Monpura represent communities around the world that, today, are more productive and prosperous through reliable and affordable access to electricity.
Energy is at the heart of development. Access to electricity makes communities safer, helps small businesses thrive and powers essential services such as schools and clinics. It also helps provide a conducive environment for investments, innovations and new industries that spur growth and provide jobs for entire economies.
The World Bank constantly works with governments to tailor solutions to suit every country’s unique energy needs. These approaches, led by countries, are working.
For example, a new $350 million electrification program in Nigeria is expected to attract $410 million in private investment, and create a vibrant market for mini grid and off-grid energy solutions.
In Kenya, the World Bank supports more than $1.3 billion of generation, transmission, distribution and off-grid investments, helping the country more than double electricity access rates from 23 percent in 2009 to 56 percent in 2016. A new $150 million off-grid project is designed to provide service to another 240,000 households living in more remote and poorer areas.
And in Bangladesh, the World Bank supports the largest off-grid solar program in the world, powering over four million households through solar home systems, 1,000 solar irrigation pumps, and 13 solar-based mini-grids. More than 18.5 million people in rural Bangladesh now have reliable access to solar-powered electricity through this program.
Altogether, between 2014 and 2017, the World Bank helped deliver new and improved electricity services to more than 45 million people.
Progress has sped up. Sub-Saharan Africa’s electricity deficit has begun to close for the first time. India is bringing electricity to 30 million people a year – more than any other country. And a number of pioneering countries have put in place approaches that have allowed them to rapidly expand electricity services. Among these are a commitment to both grid and off-grid electrification efforts, long-term national electrification planning, and a focus on the quality and affordability of service.
The success of these approaches has led to a jump in demand from countries for support for energy access programs, which is being reflected in the World Bank’s portfolio. In recent years the World Bank provided an average of $900 million a year in energy access financing. This grew to $1.4 billion last year.
Support to mini-grid and off-grid programs is growing the fastest, from roughly $200 million a year in recent years to $600 million last year. The World Bank is on track to provide 20 percent of the projected investment needed for solar home systems in developing countries over the next four years.
The recent progress on energy access will be discussed as part of the review of global energy targets under Sustainable Development Goal 7 (SDG7) at the UN High-Level Political Forum. Underpinning these discussions is the fact that while progress is picking up towards universal energy access, more than 600 million people will still not have electricity access in 2030 if current trends persist. That could have a devastating impact on health, education and economic prospects for a significant part of the world’s population.
Accelerating progress will require the private sector to play a key role. The World Bank is actively mobilizing private investment for energy access projects by helping to put in place conducive policies, demonstrating viable business models, and providing targeted funding to leverage commercial financing.
In Haiti, a project supported by the World Bank and Climate Investment Funds establishes a fund that will provide grants and loans to mini- and off-grid businesses. The project is expected to eventually mobilize $45 million in private financing and help bring electricity to 10 percent of Haiti’s population.
Innovation and technology are also playing a key role. Geospatial mapping is changing the face of electricity planning, with unprecedented detail and accuracy on unserved populations. For example, the Nigerian Rural Electrification Agency is mapping more than 200 sites for mini-grid development based on this approach.
The World Bank is committed to help countries harness these innovations, whether technological, financial or on the policy side, to accelerate the expansion of reliable and affordable electricity services, and to end energy poverty once and for all.
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