A growing public resolve to tackle climate change, and record-low prices for solar and wind technology, means that the deployment of renewable energy can and must be accelerated. Achieving this will require funding to be dramatically scaled up from current levels. This week at the Global Green Growth Week 2016, IRENA hosted a side event ‘Unlocking Renewable Energy Investment: the Role of Risk Mitigation and Structured Finance’ to share its findings on how best to increase renewable energy investment.
“More investment in renewables is needed if countries hope to meet their decarbonisation commitments while also reaching their growth and development aspirations,” says Henning Wuester, Director of IRENA’s Knowledge, Policy and Finance Centre. “At this year’s Global Green Growth Week, we presented our findings and recommendations for governments and public finance institutions to help mobilize private investment in renewable energy,” Wuester added.
In June, IRENA released a publication that analyzed policies and tools that can help scale up investment. Last year, $286 billion was invested in renewable energy, but IRENA estimates that number must double by 2020, and triple again by 2030 to around $900 billion to meet the growing global energy demand with renewables while also achieving climate objectives.
Sharing IRENA research
The limited use of guarantees in renewable energy investment is one area identified by IRENA as a limiting factor to mobilise private investors. In 2014 IRENA completed a survey of different public finance institutions around the world, and found that on average institutions only spent around 4% of their total infrastructure risk mitigation issuance value on renewables.
“Risk mitigation instruments such as political risk insurance and power off-taker guarantees, are crucial in unlocking large-scale investments. This is an area where public finance institutions can play a more prominent role,” says Wuester. “The Global Green Growth Week provides an excellent opportunity for us to highlight how renewables can promote green growth and propose practical ways of unlocking large-scale investments around the world.”
Held this week, 5-9 September on Jeju Island in Korea, this year’s annual Global Green Growth Week is focused on the theme Maximising impact for Inclusive and Sustainable Green Growth, and will highlight three thematic priorities: water, land-use, and green cities.
“Public funding currently stands at around 15% of total renewable investment, and it’s not likely to increase. The effective use of such limited public funds is hence critical. It’s now imperative that governments and public finance institutions target risk mitigation instruments and structured finance approaches, to mobilize private finance and scale up investment, instead of using scarce resources to directly financing renewables that are increasingly competitive in commercial terms.” explains Wuester. “We’ve identified five action areas for governments, public finance institutions, and other market actors to engage in a renewable future, and we discussed these recommendations with those attending the event.”
To learn more about renewable energy finance and ways to scale up renewable energy investments, check out IRENA’s newest publication Unlocking Renewable Energy and Investment: the role of risk mitigation and structured finance.