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Rio+20 for Scaling up Financing for Renewable Energy

Expert Group Meeting on Innovative mechanisms for financing renewable energy projects in North Africa Tunis, Tunisia October 3-5, 2012. Rio+20 for Scaling up Financing for Renewable Energy. Wei Liu Policy and Analysis Branch Division for Sustainable Development UN -DESA liuw@un.org.

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Rio+20 for Scaling up Financing for Renewable Energy

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  1. Expert Group Meeting on Innovative mechanisms for financing renewable energy projects in North Africa Tunis, Tunisia October 3-5, 2012 Rio+20 for Scaling up Financing for Renewable Energy Wei Liu Policy and Analysis Branch Division for Sustainable Development UN-DESA liuw@un.org

  2. Rio+20 Outcome Document: Paras 125-9. … increasing the share of renewable energy … are important for SD … note the launching of the “Sustainable Energy for All” initiative by the SG … Para 255. We agree to establish an intergovernmental process under GA … The process will assess financing needs, consider the effectiveness, consistency and synergies of existing instruments and frameworks, and evaluate additional initiatives ... Proposing an effective sus. dev. financing strategy to mobilize resources Para 256. An intergovernmental committee, comprising 30 experts nominated by regional groups, with equitable geographical representation, will implement this process, concluding its work by 2014. Para 267. We consider that innovative financing mechanisms … to mobilize additional resources for financing for development ...

  3. Some Initial Work Has Been Done: • Report of the Secretary-General’s High-level Advisory Group on Climate Change Financing, 2010. • World Economic and Social Survey 2012: In Search of New Development Finance, DESA. • Finance for the Transition to a Green Economy in the Context of Sustainable Development and Poverty Eradication, Rio+20 Issues Brief. • World Economic Forum, Green Investing 2011 – Reducing the Cost of Financing.

  4. Global Total New Investment in Clean Energy Source: Bloomberg New Energy Finance, WEF (2011).

  5. Financial new investment in renewable energy by region, 2004-10 ($bn) Source: Bloomberg New Energy Finance, UNEP (2011).

  6. Financing of Large-scale New Build Clean Energy Assets by Country, 2010 • Clean energy assets: facilities that generate either renewable electricity or bio-fuels. • It historically accounted for approximately 60% of overall funds deployed into clean energy in a given year. • Typically, fund flows have included non-recourse debt, private equity or balance sheet capital provided to large-scale wind farms, solar parks or ethanol plants. Source: Bloomberg New Energy Finance, WEF (2011).

  7. Financial new investment in renewable energy by technology, and growth on 2009 ($bn) Source: Bloomberg New Energy Finance, UNEP (2011).

  8. Key elements of finance supply chain: • Sources: the origin of financial flows • Channels: the main routes or intermediaries through which public and private funds flow • Instruments: the types of financial products • Major uses: the main sectors requiring low-carbon economy finance.

  9. The current financial supply chain for low-carbon development … The origin offlows (public, private and mixed) The financial products and policy mechanisms via which finance is supported or delivered The routes or intermediaries through public and private funds flow The main sectors requiring sustainable development finance Major sources are Private Capital, Remittances and ODA. Potential exists to direct flows from sovereign wealth funds and other institutional investors Many projects will call for a blend of instrument types The link between instruments and uses is potentially the weakest link in the supply chain A number of channels for public money play similar roles, others are more specialised

  10. Key issues in the finance supply chain: • Positive initiatives on innovative finance are underway, but often lack scale. In many cases, the cost of renewable energy still very high. • The flows from current sources are insufficient to meet low-carbon development investment requirements. • The proliferation of channels for public finance is not the most effective means of improving financial flows. • Policy frameworks are often ill-suited to attracting financing towards sustainable development. • Some actions/uses are inadequately covered by existing instruments.

  11. Main sources of financial flows • Domestic resource mobilization: by far the most important source of finance for sustainable development • - The Tunisian Solar Programme (PROSOL) Solar water heating systems • Private capital - For Climate Finance: 75% comes from private sources, 25% from public sources (CPI, 2011) - Total investment in clean energy in 2010 @ $200 bn in G20 countries alone, excluding R&D. • Official Development Assistance (ODA) - Current ODA for CC/env is about $2.3 bn - Meeting the target of 0.7% GNI would deliver $150 bn additional flows from DAC countries

  12. Top Issuers of Green Bonds in ($ millions) Source: Bloomberg New Energy Finance data.

  13. However, National Development Banks potentially to be a major player • China Development Bank (CDB) made over US$36 bn in low-interest credit facilities available to a handful of Chinese equipment makers in 2010. • CDB is now operating overseas and is looking to make capital available to projects in Africa, Brazil and other places that would use Chinese equipment.

  14. Other Selected Channels for Renewable Energy • The Clean Development Mechanism (CDM), Joint Implementation USD2.3 bn (2010) • The Global Environment Facility USD3.03 bn (2009-2010) • The Climate Investment Funds (CIF) Pledges of USD6.5 bn in 2008; comprised of Clean Technology Fund and Strategic Climate Fund • The Green Climate Fund (GCF) Aims to mobilize USD100 bn per annum by 2020; yet to become fully operational

  15. Financing channels: New Funds through Stock Market in Clean Energy, by location of exchange, 2010 • Approximately half of the new funds raised came from 36 successful IPOs Source: Bloomberg New Energy Finance, WEF (2011).

  16. Financing channels: Venture Capital/ Private Equity New Investment in Clean Energy, by country, 2010 Source: Bloomberg New Energy Finance, WEF (2011).

  17. Public finance as lever: Green Components of National Economic Stimuli, 2010, US$ billions Source: Bloomberg New Energy Finance, WEF (2011).

  18. Finance instruments for renewable energy project Source: UNDESA (2012).

  19. Ranges of levelized costs of electricity associated with new construction with and without a $30/t CO2 tax for 5% discount rate: Data source: OECD/IEA and NEA 2010 data.

  20. Financing each technology stage for large-scale deployment Source: UNDESA (2012).

  21. THANK YOU FOR YOUR ATTENTION

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