GGGW IRENA Side Event GGGW IRENA... · •Political risk •Policy and regulatory risk...
Transcript of GGGW IRENA Side Event GGGW IRENA... · •Political risk •Policy and regulatory risk...
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Henning Wuester,
Director – Knowledge, Policy and Finance Centre,
IRENA
Jeju International Convention Center
Republic of Korea
6 September 2016
GGGW IRENA Side Event
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Investments in renewable energy capacity have to be scaled up considerably (more than triple in the decade up to 2030)
Investment needs to double the share of renewables
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BAU
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Challenges of mobilising private and institutional investors
Lack of project pipeline
Limited access to affordable capital
High risk or perceived risk
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Small deal size & high transaction cost
Limited supply of dedicated financing tools
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Research approaches
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Comprehensive literature review on available financial instruments for RE
Survey on the use and usefulness of financial risk mitigation instruments
Analysis of case studies to identify success factors
• UK Walney Offshore Wind Farm
• Indonesia Sarulla Geothermal Project
• Jordan Aggregated Solar Project
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Challenges
• Lack of project pipeline
• Difficulty of accessing early stage developing funding
• Limited capacity in project development and financial analysis
Instruments
• Project preparation facilities and funding
• Capacity building tools such as IRENA’s Project Navigator
• Platforms such as IRENA’s Sustainable Energy Marketplace: http://marketplace.irena.org
Recommendations
• Support project preparation through capacity building and dedicated grants
• Facilitate interactionbetween project developers and investors
• Improve project visibility and market transparency
• Build investor confidence with long-term project pipeline
Advance projects from initiation to full investment maturity
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Challenges
• Limited access to finance
• Limited availability of attractive local debt
• Local financial institutions’ limited experience in lending for renewables
Instruments
• Grants for training and capacity building
• Loan syndication (B-loan structures)
• Concessional loans
• On-lending facilities using credit lines
Recommendations
• Build capacity at local financial institutions
• Design and implement on-lending facilities for renewable energy projects
• Develop simpler tools to assess projects
Engage local financial institutions in RE finance
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Challenges
• Political risk
• Policy and regulatory risk
• Counterparty risk (power off-taker risk)
• Grid interconnection and transmission line risk
• Currency risk
• Liquidity and refinancing risk
• Resource risk
• Technology risk
Instruments
• Political risk insurance
• Partial risk guarantees
• Export credit guarantees
• Currency risk hedging instruments
• Local currency lending
• Liquidity facilities
Mitigate risks to attract private investors
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IRENA Survey (2014):
Use of guarantees for
renewables remains
limited
Utilisation of guarantees in
renewable energy projects
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Challenges
• Political risk
• Policy and regulatory risk
• Counterparty risk (power off-taker risk)
• Grid interconnection and transmission line risk
• Currency risk
• Liquidity and refinancing risk
• Resource risk
• Technology risk
Instruments
• Political risk insurance
• Partial risk guarantees
• Export credit guarantees
• Currency risk hedging instruments
• Local currency lending
• Liquidity facilities
Recommendations
• Enable greater issuance instruments to mitigate risks
• Develop new risk mitigation instruments, structures, funds or facilities targeting specific risks
Mitigate risks to attract private investors
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Challenges
• Small deal size
• High transaction cost
• Limited liquidity in the market
• Limited attractiveness to large-scale investors
• Financial regulations restraining illiquid and riskier investments
Instruments
• Standardisedcontracts
• Aggregation of small-scale projects
• Securitisedinstruments
• Green bonds
• Yieldcos
Recommendations
• Standardisedtemplates for: project documentation, tendering, contracting and due diligence processes
• Project aggregation
• Develop policy and guidelines for green bond issuance
Mobilise more capital market investment44
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Challenges
• Need for dedicated focus on renewable energy
• Large agenda requires focused attention with specialized knowledge of renewable energy
Instruments
• Funds dedicated to renewables
• Specialized global facilities
• Regional facilities
Recommendations
• Establish financing facilities to issue risk mitigation instruments, cover transaction fees, and support the design of structured finance mechanisms
• Various funding sources for renewables can be pooled at national, global or regional level
Create facilities dedicated to scaling up RE investment
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Thank you!