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

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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)

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Doubling the share of renewable energy implies a tripling of the share of modern

renewables

REmap 2030 findings

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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.

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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

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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

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A study on the status of public

financing for RE projects in SIDS

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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

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• 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

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• 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

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• 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

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• 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

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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

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Thank youHWuester@irena.org