Financing Innovatively: What can we do in Renewable Energy Sector?

There is widespread recognition that renewable finance needs to be scaled up from its current levels. However, there is no clear view on how developing countries like Nepal can efficiently and effectively mobilise further finance to meet the needs of its increasing energy economics from new and innovative sources of financing. Jan.

While the demand for renewable energy technologies keeps growing, the cost of such devices remains an important barrier for a majority of households and small businesses, slowing down their potential dissemination in developing countries.

The International Energy Agency (IEA) has reported in its recent Global Energy Demand Report that the world requires $48 trillion investment till 2035 in order to meet the growing need for energy. To meet this increasing energy demand, countries need to diversify sources of energy production and means of energy distribution and countries must invest $40 trillion in energy supplies over the next 21 years, according to the same report of IEA. Economic growth and rising living standards have been fuelling the global energy demand, forcing governments to find ways and money to increase supplies. The world has invested $1.6 trillion in 2013 for energy supply, more than double the amount in 2000. Until 2035, the annual investment figure is expected to reach $2 trillion, report says.

In the recently published Global Status Report on Renewable 2014 it is stated that that total investment in renewable power and fuels (excluding large hydro-electric projects) fell for the second year running in 2013, reaching $214 billion worldwide, some 14% lower than in 2012 and 23% below the 2011 record. That means, there is a significant gap between financing need and the existing financing, which is more than $50 billion investment gap (23% of the $214 billion).

In this context, the key question is- where from such a big investment can be generated to meet the growing needs of financing, while the global economy is affected with financial crisis? Indeed, this difficult situation has stimulated increased interest in innovative financing to help deliver more and better aid.

Seeking to overcome this barrier, we need further works and demonstrations on innovative finance for designing a range of innovative financing mechanisms for the renewable energy sector with a particular focus on the domestic cooking and lighting markets.  Key activities under this work could be conducting field based assessments to understand renewable energy users’ perceptions and preparedness for new financing methods, and evaluating the applicability and readiness of various result based finance instruments in the domestic cooking and lighting markets.  On this front, I will welcome inputs and partnership for this important works!

Keshav C Das

New Delhi, January 03, 2015

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