The global energy system will have to undergo a major structural transformation in a very short period to meet the climate goals under the Paris Agreement. This transition can be felt across the entire energy supply chain and in all sectors (e.g., power, industry, transport, buildings). The speed and scale of the energy transition in Asia is crucial to this global transformation and the pace of change will differ across countries in the region. Millions of low-income households are still using coal, kerosene or biomass for cooking which is detrimental to the quality of indoor air and associated health risks, primarily for women and children who spend the most time, and are therefore the most exposed, to indoor pollution. Providing access to basic energy infrastructure and 24/7 electricity is yet to be fully addressed in the region.
The annual investment in renewable energy in China has grown at a Compound Annual Growth Rate (CAGR) of 9%, increasing from $42 billion to $90 billion during 2010–2019. In India, investment in renewable energy increased from $8 billion to $11 billion showing CAGR of 4%. Other than China and India the rest of Asia and the Pacific experienced growth in investment at a CAGR of 11% during the period and investment in renewable energy increased from $19 billion to $48 billion.
The annual investment needs for renewable energy and energy efficiency in Asia and Pacific region, for the period 2016-2050, are estimated to be in the range of $825 billion to $1.22 trillion. The investment needs for renewable energy and energy efficiency have been assessed for the power, industry, transport, and buildings sectors. The investment needs of the power sector are the largest ($375 billion to $562 billion). Among the subregions, the level of annual investment would be the highest in East Asia.
For the period 2010-2019, annual investment in the Asia Pacific region has increased from $69 billion to $149 billion. However, even though annual investments have more than doubled, it is not nearly enough. The quantum of financing required at the speed and scale needed to achieve the clean energy transition for the Asia Pacific region in time to keep global warming at or below 2 degrees C. cannot be provided by governments alone, and will require massive private sector flows and innovative green and sustainable financing solutions for clean energy projects.
Clean energy projects can attract a large pool of domestic and international capital to fund climate friendly projects. Some of the possible options to enhance clean energy financing are as follows:
- Enhancing traditional sources of capital - Support the existing debt market through measures such as strengthening existing lending institutions and enhancing the use of thematic bonds, including sustainability and green bonds.
- Strengthening green taxonomies to inform and guide investors and to guard against greenwashing.
- Enhancing equity investments through interventions like asset monetization and enhancing environmental, social, and governance related reporting by corporates.
- Creating new capital sources and instruments to complement traditional debt and equity sources, such as:
- Infrastructure investment trusts that allow tapping into long-term, low-cost debt from insurance and pension funds (both domestic and foreign) to refinance bank debt.
- Blended finance instruments with access to concessionary government and international funds to reduce the risk and cost of private capital.
- Tax efficient trusts which provide pass-through benefits for investors and can be traded publicly.
- The development and implementation of models for public-private partnerships such as pay-per-service, utility-based business models for distributed energy resources (DERs), results-based financing, sustainable public procurement, and others.
- Viability gap funding (VGF) support for complex RE technology tenders to test and refine models and keep tariffs at a reasonable level.
USAID, with its focus on accelerating the clean-energy transition, enhancing private sector participation, and advancing transparent procurement and market-based instruments, seeks to facilitate the financing of clean energy in the Asia Pacific region. It is imperative that suitable financing instruments, efficient procurement mechanisms, and conducive policy and regulatory frameworks are in place to allow private investors to enter the energy sector and fund its expansion.
The main objectives of the Side Event on “Innovative Financing Instruments for Enabling Asia’s Clean Energy Transition” include:
- Presenting the clean energy financing gaps that exist in the region and the challenges for mobilization of finance
- Developing awareness among regional stakeholders regarding types of innovative financing instruments that can be tapped to mobilize finance
- Providing a platform for exchange of practitioners’ experience of benefiting from such innovative financing instruments
|08:00 - 08:05 p.m.||
|08:05 - 08:10 p.m.||
|08:10 - 08:20 p.m.||
Introducing to SAREP and Presentation on Innovative clean energy instruments
|08:20 - 09:20 p.m.||
Moderated Panel Discussion and Q&A
|09:20 - 09:30 p.m.||Concluding remark and vote of thanks|
About the Organizer
This side event is organized by United States Agency for International Development (USAID) India and the South Asia Regional Energy Hub (SAREH).
The United States Agency for International Development (USAID) is the lead U.S. Government agency that works to end extreme global poverty and enable resilient, democratic societies to realize their potential. USAID’s work safeguards this mission and puts countries on a path to pursue clean energy growth and resilient, low-carbon development. Countries around the world are feeling the effects of climate change, from more intense heat waves, droughts, floods, and storms to slower-moving changes like ocean acidification. USAID is sharing world-class knowledge, data, and tools to ensure countries can predict, prepare for, and adapt to change. USAID also helps countries lay the foundations for sustainable growth powered by clean energy and healthy landscapes.
South Asia Regional Energy Hub (SAREH), a coordination and communication platform under South Asia Regional Energy Partnership (SAREP), a key initiative under USAID's Asia Enhancing Development and Growth through Energy (Asia EDGE). SAREP is a five-year, flagship regional energy program of USAID/India. SAREP will improve access to affordable, secure, reliable, and sustainable energy in six countries—Bangladesh, Bhutan, India, Maldives, Nepal, and Sri Lanka. This five-year initiative aims to provide expert technical assistance and capacity development under four interlinked objectives – utility modernization, advanced energy solutions and systems, regional energy markets and integration, and private sector participation and engagement to support the clean-energy transition, as per the country’s climate and energy security priorities. SAREP’s activities and outcomes support and contribute to the Strategic Clean Energy Partnership (SCEP) and the Climate Action and Finance Mobilization Dialogue (CAFMD) under the U.S.-India Climate and Clean Energy Agenda 2030 Partnership.
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