Discussion
12 Apr - 30 Apr 2021

Discussion Room 5: Finance and Investment

Caroline Tresise • 1 April 2021

The Thematic Discussion rooms are now closed. Thank you to everyone who participated in our consultation, we will be sharing the summaries and the key results shortly. The Networking Lounge and News Room will remain open, please check back for more updates.

 

You are now in the Discussion Room for Energy Finance and Investment.

To automatically translate this content into Russian, use the "Select your language" link at the top of this page.

Pour traduire automatiquement ce contenu en français, utilisez le lien "Sélectionnez votre langue" en haut de cette page.

Para traducir automáticamente este contenido al español, use el enlace "Seleccione su idioma" en la parte superior de esta página.

若需 将 该页 内容 自动 翻译 成 中文 , 请 点击 页面 顶部 的 “选择 您 的 语言” 链接。

لترجم إلى اللغة العربية ، استخدموا الرابط "اختر اللغة" في أعلى الصفحة.
The context

This Discussion Room addresses how public and private investment can rapidly be mobilized and leveraged to reach SDG7.

Over the last year, many of the planet’s largest economies and companies have announced that they aim to bring their emissions down to net-zero by the middle of this century or soon after. Making economies carbon-neutral by 2050 is a huge undertaking bringing many challenges. At heart, it is an energy challenge, as the energy that powers our daily lives produces three-quarters of global emissions.

A total transformation of our energy infrastructure is required — a worldwide undertaking of unprecedented speed and scale. As with the achievement of energy access goals, this calls for decisive action over the next decade.

Rising climate ambitions add to the significant momentum behind investment in clean energy. Furthermore, in 2020, the COVID-19 pandemic exposed the severe vulnerabilities and structural inequalities resulting from chronic under investments in energy access in developing countries. Health facilities are under-energized and unable to deal with increasing numbers of patients from the pandemic, while critical equipment, handling and distribution of vaccines is hampered by lack of access to secure and reliable energy.

As economies recover from the shock of the pandemic, a focus on clean energy investment offers a huge opportunity to stimulate economic activity, provide reliable clean energy employment, and put global emissions into structural decline. In order to mobilize public and private investment, all actors will need to enhance their capabilities and design policies and financial structures that appropriately allocate and manage risks, and address the barriers which inhibit investments in given sectors and countries.
 

What is the overall goal of this consultation?

To hear from young people on how public and private investment can rapidly be mobilized and leveraged to reach SDG7, where Governments need to strengthen their partnerships, how to engage the private sector and what the role of youth is in driving this agenda forward.

 

Questions

1. INCREASING INVESTMENT

  • How can we increase investment into renewable energy to reach net-zero and SDG7 targets?
  • How can the bankability of small-scale projects be increased? (What kind of mechanisms should be explored and what sources of funding are needed?)

2. CHALLENGES

  • What is holding back the investment into renewable energy?

3. REGULATIONS

  • What regulations, incentives and financial mechanisms should Governments put in place to improve the investment environment and price signalling for renewable energy?

4. PUBLIC SPENDING

  • Governments have limited public resources, yet trillions of dollars are needed to achieve SDG7 and the Paris Agreement. How should Governments be spending their limited funds to best engage the private sector to invest?

5. END-USER RELIABILITY

  • What mechanism could companies and Governments utilize to improve end-users’ ability to pay for energy and decrease their credit risk?

 

For background information, please read the official materials uploaded by the HLDE Secretariat:

Our lead moderators who will be preparing recommendations for the Technical Working Groups are:


Rules of Engagement:

  • This discussion is open to any young person between 16-30 years
  • Please be respectful of each other and the moderators
  • Please respond to the questions posted by the moderators
  • Let us know which question you are answering in your comments.
  • You may post anonymously
  • You may post in any language, SparkBlue has a live translation feature
  • Click follow at the top of the page to receive notifications.

Comments (73)

Filip Koprcina Moderator

Dear All,

On behalf of myself and my colleagues, Anunya Bahanda  and @wenhao, I would like to thank you for your contributions, opinions and feedback to the discussion in this group on Finance and Investment. This consultation is officially closed with this message.

In my opinion, this group had one of the most important tasks, and a really tight schedule in which we had to provide written input on recommendations proposed in the draft. While the consultations were officially open until 30th of April, the deadline for sending written input for this group was until Saturday, the 17th of April, giving us only 5 days to brainstorm, discuss and provide feedback. In the written input I included all of the useful feedback, your opinions and comments, that arrived until the evening of Friday, the 16th of April. Unfortunately, we were not able to include the additional feedback that arrived after designated time because of the procedures are limited time. However, I will save the feedback that arrived after the deadline, and try to include in the further proceedings if possible.


Next Steps and timeline for this Technical Working Group

3 May – Executive Summaries of all Theme Reports shared for review by all TWG members. TWG members are invited to review all Executive Summaries to facilitate cross-thematic synergies.
 
7 May – Deadline for written comments on Executive Summaries
 
17 May – Final draft of TWG reports, including revised Executive Summaries, shared with all TWG members. (TWG1 report to be shared by 10 May)
 
Week of 17 May – Final TWG Meetings (TWG1 to meet in the previous week)


If you would like to reach out to me or stay connected, you can add me on Linkedin.

Many Thanks,

Filip Koprčina

Caroline Tresise

Hello and Welcome! Discussion Room 5 on Energy Finance and Development is now OPEN!

Filip Koprcina Moderator

Hello Everyone!

I’m so excited to launch this discussion group on Finance and Investment as your lead moderator along with my two colleagues and co-moderators, Anunya Bahanda  and @Wenhao

My name is Filip Koprčina, and I am a founder and CEO of Energy Shift, a startup company that enables individuals to invest in clean energy worldwide. Also, I am a member of the technical working group 5 on Finance and Investment.

Please feel free to start the discussion by sharing your perspectives and input on the five topics (INCREASING INVESTMENT, CHALLENGES, REGULATIONS, END-USER RELIABILITY AND PUBLIC SPENDING), introducing yourself and/or asking any questions you have for us.

I look forward to learning from all of you and taking your perspectives into the High-Level Dialogue on Energy!

Anahita Hosseini

Hello everyone, 

 

My name is Anahita and I am very happy to be here and I am looking forward to interactive and fruitful discussions. So before I jump to the topics I have to say I have very limited information in the area of investments and finance also with regards to current renewable energy stocks etc. So I would love to learn from those of you who have more info and experience. That being said, I am going to talk about questions 1 and 3 (Increasing investment and regulations) as I think they're intertwined.

If we take a look at the financial markets, it is clear that people are there to gain profits. There might be a few number of people in this world who might be willing to invest in a stock out of their good will or because they care about climate change. After all not getting attached to the company one invests in is one of the rules of investment. So the solution lies in increasing profits or reducing risks of financing/investing in renewable energy. 

There are a number of ways that can be done. One of them is through support from the government. Personally, I'm not a fan of government intervention in the market, but this one is undoing government intervention through tax cuts. Governments can make renewable energy investments more appealing by offering tax cuts. Another way, through which governments can contribute to increasing investments in renewable energy, is through risk sharing/mitigation mechanisms. Governments can agree to cover up to a certain percentage of loss on investments, or use tools such as guaranteed buy-backs at a certain price (which I'm not a fan of btw:D).

Another way is through creating new financial instruments in the market for green financing. I know there has been some progress in this area, but I am not very well informed. So I hope someone else can shed more light on this. 

And last but not least, while more and more individuals are joining financial markets everyday, the amount of money firms and funds have at their disposal cannot be neglected. They could be great sources for funding renewable energy and it's also key to create incentives for them to invest. The institutions overseeing carbon footprint or compliance with environmental regulations, could create bonuses or points for firms and funds that invest in renewable energy.

I'm just thinking out loud and these are pretty raw ideas and need to be worked on in more detail in a team consisting of different people with different areas of expertise and can be evaluated as potential policies. 

What do you think? I'd love to read your views on this.

Best,

Anahita 

 

Filip Koprcina Moderator

Hello Anahita,

Thank you for your feedback, input and ideas.

Yes, I agree with you on the fact that we have to make it more profitable and that tax cuts would be one of the ways to increase investments into renewable energy. On the first meeting, I proposed a 0% tax rate for renewable energy equipment, such as solar panels, inverters etc., which would decrease the costs of renewable energy investments by 25-30%, based on 20-25% VAT and an import fee of 5%.

On the topic of government interventions in the market, that happened in early 2000s and 2010s, when renewable energy was just starting out, and then the government stimulated the market by offering Feed in Tariffs, which enabled producers to get a higher price for their energy than the energy price on the market, leading to deficits which had to be covered from other sources. 

Creating financial instruments can be a solution, and the green bond market is growing rapidly. There are some issues in it as to what you can classify as a green investment and for what those bonds can be used, but they are generally a good financial instruments to raise capital.

Regarding your last point, do you think that pension funds and investment funds should look more closely for the opportunities in the sector?

Filip

Anunya Bahanda Moderator

Hi Anahita - thanks so much for your message! I can understand your hesitation regarding government intervention in the market. I can think of a few ways in which Governments can incentivize private actors to invest in green energy and energy efficiency without direct intervention. For example - utilizing their purchasing power.

A case study of this can be seen in the New York public housing sector in the early 90's, with the Super-Efficient Refrigerator Program. In 1993, the New York Community Housing Authority (NYCHA) held a competition for lower-energy consumptive refrigerators, promising to buy 20,000+ fridges for all their community houses. With NYCHA having 1.3 million apartment buildings, they had a large influence over market pricing alone. To support other smaller housing authorities and members of the public, NYCHA allowed them to piggy-back on the large order and benefit from the cost reductions. 

The economies of scale created by housing authorities and general public demand drove down the costs of these innovative new fridges. The result was the creation of a fridge that was 29% more energy-efficient and around 20% cheaper than the then-market average. Pretty cool!

I would love to hear if you have any examples of some of the Government interventions you mentioned above in your comment. 

Anahita Hosseini

Filip Koprcina sorry for the late reply.

 

Very interesting points. I would love to know more about the green bond market. If you know a good website or other resource please share.

Yes, I think investment funds could play a great role. Maybe even specialised units in investment funds for this purpose!

Anahita Hosseini

Anunya Bahanda Sorry for the late reply.

Wow that's really cool!  If you know any other examples or cases (failed or successful), I would love to learn more.

I don't know of such examples, I was just brainstorming :D

IYUMAME ALVAN NWUCHE

Financing and investing in the ENERGY sector is a welcome development but what are the policies the government in some countries which does not allow the private sector to have a levelling playing ground to invest . Is quite unfortunate that some governments around the world are bias in policy making just to undo and undermine some companies and entrepreneurs who wants to invest their money. When the citizens lack access to affordable and clean energy it tends to lead them to other ways of getting energy which might be hazardous to the environment.

Bigambia

Hi

I agree with you Iyumame! But we also have to understand our local gorvenment mostly in under develop countries. Why i am saying so, this is because most of our gorvenment already have their internal finacial and investment reforms(regulations or law) and they have the tendency to protect already existing national public enterprises selling energy. So protecting or limiting the numbers of investors or such technologies to enter the market through financial and investment barriers policies is a means of keeping national enterprises for long.

Filip Koprcina Moderator

Can you point out to some policies or regulations that stifle the investments and mention the countries this happens in?

Anahita Hosseini

If you have any specific examples or cases I would love to learn more.

IYUMAME ALVAN NWUCHE

Filip Koprcina most african countries are involved in this. The government support those who they want, because of kickbacks .

    Contract scam and corrupt practices in public PROCUREMENT .

Bigambia

My name is Bigambia Bitimi  and I am very happy to be here and I am looking forward to interactive and value discussions.

Increasing investment is a good option, but half of the world population is not yet ready to acquire. What is certain is that with this world pandemie, that has cause the lost of many jobs, closing of many enterprises etc it wouldn't be an easy task this is because low financial income.

Investment increase in renewable energy can be better achieved through local gornment incentive, since they are the financial and investment policies makers this can push investors, organisations and enterprises to push forward this sector.

 

Filip Koprcina Moderator

Hello Bigambia Bitimi,

Thank you for your feedback and comments.

With the pandemic, and even without it, public funds are limited and with just investing public funds we cannot reach the levels of investment necessary to build the energy infrastructure we need. Also, a lot of the governments prioritise health investments and subsidies, support for the citizens and businesses. How would you leverage those limited public funds to create an environment that boost the energy investments? 

Bigambia

Filip Koprcina to leverage those limited funds to creat an environment to boost energy investments:

Firstly I will have to define investments strategies . Secondly sensitize most small-scale projects to start young and the diversification of balanced risks and return. Thirdly be keen on fund expenses.

Also, to increase the demande desire of the population, we have to creat campaign of closeness to them in other to sensitize them on the advantages of such an energy source. 

Anahita Hosseini

Filip Koprcina I totally agree. Governments usually have fiscal deficit and even if they didn't, they would probably have other priorities for political or economic reasons. I don't think the energy transition can be financed alone by public funds.

Anahita Hosseini

Bigambia by creating an environment to boost energy investment do you mean creating incentives for private investors and reducing investment risks?

Bigambia

The bankability of small-scale projects  increase can be done through deep financial (mostly) and technical analysis or study of these project.

Also through constant monitoring and evaluation qualified experts.

 Sources of funding are: crown funding, loan, private equity  are my proposals

 

Filip Koprcina Moderator

I've worked in the space and I'd like to get more info on this. My thoughts are that with big-scale projects you get a better/discounted price on the equipment, manpower and all the land. While on the small-scale projects you pay "full price" for the equipment, and both small and big-scale projects get the same purchase price for electricity produced. Another thing is that with bigger scale projects, banks already offer affordable financing and there are more funding opportunities than for smaller scale projects. What are your thoughts on this?

Anahita Hosseini

Filip Koprcina exactly! I am a big fan of economies of scale, and i think specifically in the energy sector, there's a natural and inherent characteristic that if the firm is not large enough it will eventually fail. This could be due to the high fixed cost of the plant, etc. or because of the demand side and profit margin. 

Caroline Tresise

Hi everyone! I would like to add a general comment to this discussion before diving into the official questions. Something I have been discussing recently is the simple: how do we deal with all the existing fossil fuel investments?

Consider this: A coal plant has a physical life of 100 years (and an economic life of 50 yrs). Someone paid for the plants and they want their money back. If investors do not get reimbursed, they will be classified as 'high risk'.

Sure, there are examples where countries pay off the investors, but what about the countries that simply can't? Furthermore, they rely on investments to develop and understandably want to avoid being classified as "high risk". What do you all think about this? 

Filip Koprcina Moderator

Thank you for adding to this discussion Caroline.

You are raising an interesting point. There was a case in Japan where after the nuclear disaster in Fukushima, they started closing down nuclear plants. Almost immediately after that event, Germany started closing down their nuclear power plants, and Germany paid private companies to close them down, and covered the costs.

The question I would have on this topic is what would be the fair price to pay? Just to cover the costs or to enable companies to make a profit by closing down the power plants? And who should pay it?

Bigambia

To deal with all existing fossils fuel  investment, we first have to work a deep financial analysis of these investmentsand technically equally. This will permit or help having a clear view on fossil fuel investments projects having large percentage chance of loss of capital. Or that are underperformante.

For me for a country not to be consider as a high risk, they simply have to define their long term goals mind, permitting to minimize any shocks that may arise as a result of short-term fluctuations in their investment value.

Also those investors who want their money back have to know that the prices of equities are volatile and may fluctuate erratically,  the return back of the money or equities depend on the excellent practice and strategies applied by the plant. 

Filip Koprcina Moderator

Bigambia yes. The investors are always vary of the price fluctuations and the risk involved, but when they invest in coal or nuclear, there is a period of 40-60 years that they have to get a return on that investment. The current technology allows us to utilize it for 25-30 years with solar before having to replace them. If we were to pay private companies to close down non-renewable plants they invested in, should they make money on that? Connected to that, will other investors stop investing if there is a potential of a shut down in the specific country, thus increasing the risk of losing their investments?

Victoria Adegbaju

My humble admonition on dealing with existing fossil fuel investment would be:

1. Consider a sell off a certain percentage of such investment to neighboring countries within the same region

2. Build infrastructures that can quickly usurp fossil fuel investments within a specified time frame. 

Over time government are seen to be clearly in support of renewable energy but they are financially handicapped by a result of agreements which had been entered into by previous government/regime. Ghana for example has a Take or Pay contract which has resulted in excess & unaffordable electricity overtime and because government is carrying this legacy debt in the energy sector, their is a huge strain on its finances. 

I believe trading off a certain percentage of this investment to neighboring countries will relieve the burden on existing fossil fuel investments, thus creating a longing desire to welcome and increase the use of renewable energy by 2030.

Regards

Bigambia

Filip Koprcina They will make money if only they have well redefine all their strategies and also done analysis. This because in high risk, when you invest and strategies are well define you may definitely see a boom in your financial turnover.

Yeah of course, it may cause a shut down in investors.Company can't invest where the risk of looses is very high and uncontrolled.

Kate Power

Hi Caroline,

 

This is a great question to pose. I don't really have an answer, and I don't think there is just one answer, but perhaps this is an area where governments need to play a role in mandating that existing investments are as clean as possible for the remainder of their operational life?

I am by no means an expert in this area, but if all existing coal plants were required to use carbon capture technology would this not have additional benefits of driving down the cost of this technology through mass deployment? Furthermore, the CO2 captured can in some cases (geography dependent I think) be an additional revenue stream. As I am no expert, I do imagine that it is not as simple as mandating that existing fossil fuel investments be as clean as possible to make it happen, there is so much more to it but perhaps it would send the signal that the industry needs? Another option is through carbon taxation. If it becomes costly to emit than inevitably investments in making their operation less emission intensive become more attractive and economically feasible.

 

I am definitely rambling here, but I think you bring up a very good question and that there are numerous ways to approach it. What is important is that we do address it and ideally asap.

 

 

Anahita Hosseini

very interesting! This is one of those cases where a dozen aspects are involved and hard to conclude. I mean I couldn't even put my thoughts together to come up with an opinion haha. 

I really enjoyed reading different answers under this discussion!

Iman Abdulkadir AHMED Moderator

Kate Power 
Hi Kate, 

You have provided an interesting input, and I agree with you on how there is no one specific solution for the question. I also think tax incentives and government financial incentives can play a role in ensuring that dirty industries adopt cleaner production methodologies. Additionally, I can see carbon capture and storage technologies and carbon offsetting schemes providing a solution to an extent.  However, the deployment and implementation of CCS, especially in non-OECD countries, pose a challenge (technological barriers, financial barriers, developmental barries, policy barriers) and these are also the countries that are heavily reliant on non-renewable energy sources for development. So any insight on how we can address these barriers?

Samuel Adunreke

Thank you for that intervention Catherine. Seeing the short and bening environmental of fossil fuels and investment and the short term low economic benefits they have compared to the high environmental degradation impact they portend, it is to be considered that fossil fuels investment are bad investment Hence we have joined global cIvil Society networks in calling for an end to fossil fuel investment, joining over 300 CSO organization globally in writing a petition to the Board Chair of World Bank and The Presidemt Joe Bidden of the United States. You can see more on our bio document.

Wenhao Sun Moderator

Hi everyone,

 

My name is Wenhao and I'm from China. I'm a member of the Technical Working Group 5 (TWG5) Finance and Investment and will be your co-host for today. I'm currently a master's student at Columbia University School of International and Public Affairs (SIPA) focusing on International Energy Policy and Financial Management.  

 

Feel free to connect with me on LinkedIn.

 

Look forward to hearing your questions and suggestions.

 

Best,

Wenhao

Filip Koprcina Moderator

Great to have you with us Wenhao.

Claude Nimbona

Hi everyone 

I'm claude Nimbona flesh civil engineer live in republic of Rwanda.Due to lack of biggest package in investment,my point view in increasing of investmen ,government must make efforts personally because it has some money related in protection of environment so that I advise to the government authorities to increase amount in field of renewable energy to prevent the effect coming from  using cutting trees in order to prepare charcoal, all government must be careful to control amount they invest in renewable energy are make in practice as they planed.

Best regards 

Claude

Filip Koprcina Moderator

Hello Claude,

Thank you for your feedback.

With the pandemic, and even without it, public funds are limited and with just investing public funds we cannot reach the levels of investment necessary to build the energy infrastructure we need. Also, a lot of the governments prioritise health investments and subsidies, support for the citizens and businesses. How would you leverage those limited public funds to create an environment that boost the energy investments? 

Claude Nimbona

Hello Mr Filip!

Thank you so much 

The limited public funds will be raising up by some private sectors(NGOs, youth development association,etc)who will invest in renewable energy by prioritising with government to fill the engagements which has been not achieved  by government.

Filip Koprcina Moderator

So what you're saying is that youth associations and NGOs should be the ones to raise funds and invest in renewable energy?

Claude Nimbona

Thank you for your Question Filip

I said that government work in corporation with other NGOs or businesses people who invest in renewable energy to fill where government has no sufficient because some emergency projects. 

Pratham Maheshwari

I believe a combination of government, corporations and citizens is required. Citizens have to be made more sensitive for investing in renewable energy and also be given incentive. Monetary incentives could be provided by corporations and to aid in provision of these incentives, government could help through subsidies. As far as the aid government needs, it may introduce a reasonable amount of tax specifically pertaining to usage renewable energy.

Filip Koprcina Moderator

Hello Pratham,

Thank you for your feedback. Could you elaborate a bit on the monetary incentives that could be provided by the corporations and how would that work?

Can you also elaborate more about "tax pertaining to usage of renewable energy"?

Thanks,

Filip

Pratham Maheshwari

Monetary incentives largely refers to subsidies introduced in their purchasing frameworks.

By the tax, I meant a certain reasonable amount could be levied on usage of non renewable sources of energy for a temporary period. Definitely it would require certain amount of time to transit from non renewable to renewable sources of energy. So such taxes would boost the transition as well as compensate to the subsidies provided by the government.

Frans Hanghome

Hi Every one I am Frans from Namibia.

With regard to Finance and Investment my concern is always small-scale projects lather than on larger projects because these seem to be attractive to private investors with proper bidding and feed-in Tariffs mechanism are in place. In fact even with COVID-19 in sue IRENA just reported that the of RE (Renewable Energy) capacity added in 2020 was up 50% compared to 2019( I am sure most of these are grid-connected projects). So as long as there are clear energy policies and resource plans in place most countries are able to get private investors in the energy sector for technologies such as solar and wind that are market competitive with new traditional resources like coal and diesel.

My worries are over off-grid , small scale projects which are least inviting for private investors because without innovative financing tools they remain government driven and let's face it when it comes to public budgets energy is less prioritize in a face of health  and education for example.

To develop an off-grid project often required a combination of donor, public and private funds. For example public funds can be used to carryout stuffs like feasibility studies and land acquisition, donor fund to buy the technology and for the private entity to installation and operation. Most often the tariffs from  small projects are not profitable excepts if subsides such as these are used, but the involvement of the private sector also make sure that concerns such as maintenance and tariff collection are effective.

Filip Koprcina Moderator

That's a good point Frans!

How do you propose to coordinate all of these bodies and is there another option for financing small-scale or off-grid projects? 

Wenhao Sun Moderator

Small scale projects are very important as you noted Frans, especially for the social aspect of these off-grid projects. In some remote regions of sub-Saharan countries, grid does not exist and might not exist for the next decade or two, due to the lack of government funding or simply the lack of resources in general. Off-grid technology is extremely important in mobilizing the productivity for people in these places.

I want to point out that current financial models exist and often times it's just not a popular choice for investors. For example, the pay-as-you-go solar model is being financed through project finance in some countries. Contrary to common belief, these off-grid projects actually have a lower rate of default as off-grid user/operator actually have a high willingness to pay for the lighting and productivity associated with it. Perhaps we should educate investors on the lower risk profile, as well as find ways to find relevant investors (who will be a question) an easier way to invest in these projects (crowdfunding, etc.). 

 

Anunya Bahanda Moderator

Hi Frans - Thank so much for your message! I see you are knowledgeable about the project development cycle for energy projects, understanding the stages of land acquisition, feasibility study, construction and operation. I would love to know if you have any examples of innovative financing mechanisms that support the development of community-scale renewable energy projects at every stage of the development cycle?

One model come to the top of my head: SolarCity's solar panel leasing

SolarCity is a solar panel installation and leasing company in the US (started by none other than Mr Elon Musk). They sold residents energy for lower rates because of net metering (ie. SunCity subsidies resident's energy rates in the high-demand evening time by selling energy to the grid that they made in the high-sunlight daytime). Whilst net metering existed before them, they pioneered three interesting financial mechanisms: 

  1. Leasing - They leased solar panels (that looked like roof tiles) to residents. This was favourable to residents because they did not have to pay for maintenance/ upgrading the panels. This was beneficial to SolarCity because it allowed them to make a continuous revenue stream.
  2. Bond backed by lease portfolio - it used to be difficult for solar companies to borrow money from banks. SolarCity used leases as collateral to get a loan (so even if SolarCity goes bust, customer still paying lease but now to bank)
  3. Partners with investors to capitalize tax benefits - they sign deals with equity investors so that the equity investors could make their returns through tax benefits. SolarCity transferred their tax benefits to equity investors so that they made money by not having to pay tax. This was beneficial to the equity investor because tax credit benefits provide a short returns horizon and lower-risk than waiting for customer returns. This was beneficial to SolarCity because they did not make a huge revenue in the initial years so a tax break was not very impactful.

Would love to hear if your examples as well!

 

Jackson G. White

As Frans stated, the challenges facing the deployment of small-scale renewable energy grid is huge. Apart from unfavorable policy framework and lack of investments, there is also the lack of awareness among (in most developing nations) the public and potential investors. Nonetheless, these barriers  are gateways to a range of possibilities for small scale renewable energy projects. One example is the idea of ‘Community Energy’ elaborated in a 2020 call for action by IRENA. Regulatory suggestions put forward for the deployment of community energy include

 1. Setting renewable energy targets that are specific to the scale of the project while ensuring investors of government’s long-term schemes to boost investment 

2. Creating ownership space for local implementors to hold a minimum share in a renewable energy project to promote citizens participation 

3. Encourage virtual net energy meter as an alternative to net energy metering

4. Provide reasonable FITs to small scale renewable energy projects 

5. Cleverly institute auctions to enable small scale renewable energy producers gain access to public funds for renewable energy projects

Financially, governments, private institutions, and international energy organizations are encouraged to implemthe following to enable small renewable energy projects: grants, loans, revolving fund (loan payments are directed towards the sustainability of the projects, with excess being transferred to the development of another renewable energy project), tax incentives, and the development of one-stop-shop to ease administrative burdens.

IRENA Coalition for Action (2020).

 

Wenhao Sun Moderator

Hi Jackson,

 

You are right - mobilizing diverse sources of funds from public, private capitals, as well as those from MDBs will be crucial to deploy small-scale projects in various parts of the world. You mentioned the importance of policy framework and investments. Maybe a question we should ask is how can countries with different development stage and financial market schemes design the most suitable solution toolkits.

 

Anunya Bahanda Moderator

Hi Jackson - Thanks so much for your comment! I would be curious to hear more about your recommendation of "institute auctions to enable small scale renewable energy producers gain access to public funds for renewable energy projects". What do you mean by actions? Would you have any case studies or examples of successful actions that have helped SMEs gain access to public funding?

Jackson G. White

Hi, Anunya Bahanda, I trust that you are doing well; thank you for the comment and the question. The auction, in this case, entails a bidding process wherein energy providers pitch their projects or energy solution proposals to win energy contract or gain access to fundings. The drawback of this scheme reason is that these auction schemes demand a considerable upfront investment from participants to be considered for further funding with no assurance of winning the contract. Hence, community-scale energy providers stand little chance of winning against their wealthy private companies counterparts. The solution to such an unfair funding program is to restructure the program to create fair competition for all players:

1. Set up auctions tailored for small and new players exclusively, with mechanisms employed to increase participants chances of gaining access to funds (coaching, mentorship could help)

2. Draft and implement policies that protect and prefer small energy players in the instance large private energy providers are partaking in the bidding process

3. The inclusion of community residents in the set-up stage of the bidding program crucial towards their acquisition of funds

4.Governments should consider sponsoring such community energy projects through budgetary support.

An IRENA report shows that these schemes have a considerable level of success in Germany, Denmark, Japan, among others.

For more on the above suggestions, click here: https://coalition.irena.org/-/media/Files/IRENA/Coalition-for-Action/IR…

Ps. I had some technical issues with my account a few days ago.

 

Ben Robinson

Hi All, I was wondering if this was also a space that existing youth driven projects that were focussed around SDG7 could be presented? I am currently putting together a project that looks to explore the relationship between energy and displacement in the Sahel (across the southern border of the Sahara Desert) in an effort to include displaced voices in policymaking and raise the issue of humanitarian energy access up the international agenda. We will also complete a world first (check out the attached doc for that and more). Given that this is the finance and investment room, id be happy to chat to anyone who is interested or has ideas on how to raise the cash! The aim here is to find some funding for the youth changemakers/activists/researchers based in the Sahel who make projects like this possible! 

Filip Koprcina Moderator

Hi Ben,

I think we could incorporate that as a way of how bigger companies can work with young energy companies, startups and entrepreneurs, bringing change to the sector with innovation.

How do you think youth can make a change and how could young companies work together with bigger institutions or companies to bring these kinds of innovation to market?

Filip Koprcina Moderator

Greetings to everyone,

I would like to remind all of you that we have only 24 hours left to provide written input and that this is probably the last opportunity to speak up and get your voice, ideas, feedback heard.

Also, I would like to share a short summary of what happened on a meeting yesterday, when we discussed the ideas and recommendations that were put forward.

What was shocking to see was that youth was not included, which resulted in lack of recommendations that change the position of youth in achieving the SDG7 goals. 1. What do you think how youth can contribute achieving the SDG7?

2. Do you think we should invest in digitalisation and why?

3. How can we finance and invest in clean cooking, because currently a big part of the World doesn't have access to clean cooking?

4. Dominican Republic makes most of the tax revenues from taxes on fuel. If they transition to electric cars and infrastructure, how can they close the gap in tax revenue?

THIS IS YOUR OPPORTUNITY TO CHANGE THE WORLD,  and influence the recommendations, helping the World reach the net zero and SDG7 targets. 

Let's show how youth can change the World and that our voices need to be heard!

Bigambia

Youth contribution to achieve SDG7 can be done through  research work, entrepreneuship and decisions making.

Yeah of course , we have to invest in digitalization, because today it's a canal that facilitate exchange of all king and what ever the activity. I will take a simple example, today i am participating to this consultation work being in Cameroon while others are equally very far from me particpating equally. Without digitalisation, we would'nt have been able to do such a great job together.

Filip Koprcina Moderator

Thank you for your comments and feedback Bigambia, and thank you for being so active!

Kate Power

Hi everyone,

As my current area of research is in public climate finance I feel that I can really only provide some input/food for thought for Topic #4 on Public Spending.

Given that governments do have such limited resources, I think the number one way to free up money to invest in clean energy is to stop providing subsidies to the fossil fuel industry. While this may not be such a simple matter in developing countries where many of these subsidies go towards ensuring poorer households have affordable energy sources, in developed countries it is difficult to see how government's can reasonably justify spending billions of dollars/euros/what have in this regard. Considering the relatively large investor returns that fossil fuel companies generate, I don't understand why they need subsidies to begin with. These are established industries, not start-ups, so if they can't make money without significant government subsidies perhaps it is time they re-examine their business model. 

Regarding how governments can spend their funds to engage the private sector, I think PPPs and Energy Service Companies (ESCOs) are two ways in which to do this. I also think that clear and coherent government regulation and development strategies are undervalued for the role they can play in catalysing private investment. Investors do not like uncertainty, so if governments can provide them with a something of a vision of what the future might look like it can go a long way in driving investment. This being said, this does require some kind of consensus among the political parities of a country otherwise with every election a new government can come in and reverse the policies of past governments and investors understandably have low confidence in whatever "visions" are presented to them.

Regarding topic #3, and I am sure this has already been said, but carbon taxation is an excellent way to level the playing field and drive more investment into clean energy. Although in many places where there are no carbon taxes (ex. USA) renewables are doing fairly well for themselves regardless.

Thanks for giving me the opportunity to contribute!

Filip Koprcina Moderator

Hi Kate,

Thank you for your extensive feedback.

In the latest draft, there was a recommendation to end the fossil fuels finance, which was first agreed upon in the Paris Climate Agreement in 2016, even though for the last 5 years nothing really happened. There is still 500 billion USD subsidies provided to oil companies yearly, but I agree, they should be ended.

PPPs have also been discussed, but when I see how it was phrased as a blended finance, I believe most of the money will go to the bigger companies doing bigger projects. Any ideas on how SMEs can be included?

Carbon taxation, wealth and corporate taxes have also been discussed.

Anunya Bahanda Moderator

Hey! My name is Anunya Bahanda and I am a co-moderator of the Finance & Investment Discussion Group. I would like to add my voice to Question 1: How can the bankability of small-scale projects be increased? (What kind of mechanisms should be explored and what sources of funding are needed?)

I would like to talk about an interesting financing mechanism I have come across recently in the infrastructure development world. 

Many investors are reluctant to fund small-scale energy projects because they 1) have a lack of scalability due to their local nature 2) have high upfront costs with longer-term return horizons.

A possible method of increasing financing could be creating a small-scale energy financing facility - a permanent capital vehicle that would invest into small-scale energy projects of different maturity levels, utilizing revenue-generating projects to offset the risk of greenfield projects.The aggregation of small projects would increase an investors return profile and de-risk individual projects. 

Similar models have been utilised in the gas market, with platforms like Azura financing powerplants across West Africa. I believe institutions such as Eastern and Southern African Trade and Development Bank and ADB are beginning to bring such a mechanism into the renewables sector as well.

I look forward to hearing people's thoughts on this, and reading your posts. see you in the comments!

Samuel Adunreke

Hello all my name is Samuel Adunreke, an impact driven young individual with excellent leadership capabilities and expertise in programs and policies implementation. I represent here today Innovea Development Foundation in Nigeria a registered non profit in Nigeria working on quality community based interventions in practical actions to Development Issues through Entrepreneurship, Financial Inclusion, Energy, Climate Change, Humanitarian Development, Youth Development among other cross cutting Development issues. We have contributed in different forms to Sustainable Development locally, regionally and globally. He was a delegate at the Climate Adaptation Summit 2021, HLDE 2021, and Paris Peace Forums 2020, Climate Adaptation Summit (CAS) 2021 Youth Delegate, World Food Forum 2021, and I am a member of Liason Group of the UNFSSS and YOUNGO Adaptation working group. I'm delighted at the high level participants here and i'll love to talk about climate financing and meeting the need in achieving just and inclusive energy transition globally and most importantly Africa.

Samuel Adunreke

I would like to mention one thing that hasn't been of much deliberaton yet and that is Carbon Finance and Carbon Pricing.

The role of carbon pricing in getting to net zero.

 Carbon pricing has an important role to play in helping jurisdictions  and companies achieve net zero emissions.

Does nature hold the key to Paris?  Interest in using nature as an emissions reduction tool is intensifying.

  • People Centered Policy

Coal miners, power-plant workers, and their communities are highly vulnerable  to decarburization policies.

Well-designed carbon pricing policies can help  smooth the transition for these vulnerable groups

  • Assessing climate risk in financial decision-making.

  A growing number of financial institutions are realizing that climate change  is the ultimate negative externality—and that carbon pricing can help quantify  the associated risks and opportunities

 

By air and by sea, Carbon taxes and fuel levies could play an important part in mitigating  emissions from the aviation and maritime sectors.

Carbon pricing initiatives have gained more attention but seen slow progress over the past year as a tool for reducing GHG emissions in line with the Paris Agreement.

 

The CPLC is an voluntary initiative that brings together leaders from government, business, civil society, and academia to enhance global understanding of carbon pricing as a tool for accelerating and financing effective climate action

 

Suggestions that innovative best practices towards tailoring National, Regional and Community Based practices in monitoring the carbon Pricing achievements is imperative in meeting #NetZero by #2050 as well as addressing needs related to the Paris agreements Article 6

 

Wid Ammar Mohsin

Hello everyone , its a pleasure to be part of you ,

I'm Wid Mohsin , team leader and renewable energy consultant engineer at UNDP Yemen and climate activist  , working with my team on the first waste-to-energy project in Yemen . Happy to share my experience with you and ready to learn from you 

Wid Ammar Mohsin

Hello everyone , its a pleasure to be part of you ,

I'm Wid Mohsin , team leader and renewable energy consultant engineer at UNDP Yemen and climate activist  , working with my team on the first waste-to-energy project in Yemen . Happy to share my experience with you and ready to learn from you 

IYUMAME ALVAN NWUCHE

Finance and investment is paramount in achieving the #SDG7 goal. In the sense that corrupt practices must be curbed in financing of the energy sector.Policies on investment must be enacted to draw investors into the energy sector. Corruption is the order of the day in some countries,whereby the section of the government pleases to give some investors preference over others. Some investors don't have a good playing ground . Have seen in some countries where religion and tribalism is taking it's on course over competence .

Bigambia

IYUMAME ALVAN, as an investors we have to take such factors into consideration (like cultural perspectives). This is a great factor that also contribut to mismanagement or failure in investments. 

Pratham Maheshwari

One trajectory for investment and finance could be developing such infrastructure which would increase the scope of generating more framework for clean energy. Indirect investments leading to exponential rise of frameworks generating clean energy shall accelerate our progress towards achievement of SDG 7

Pratham Maheshwari

Capital investment is utmost necessary for building resilient infrastructure to support the boost of clean energy. Along with, certain steps should also be taken for meeting the urgency of clean energy and a convergence of both the frameworks shall be utmost beneficial

IYUMAME ALVAN NWUCHE

A well meaning government, individuals, organizations will always want a great return on investment. Nobody wants to invest his or her money where there is no worhwhileness  or viability. 

  There must be accountability and transparency at all levels , who will be held responsible when there is shady deals or compromise ?

    Why are some governments or organizations biased in matters related to investment and financing?

  Public contracts and procurement systems or management need to addressed amicably most especially in African countries but other continents are not left out .

Oriana Petitjean

Hello! 

My name is Oriana Petitjean and I am from Caracas, Venezuela. For me it is a pleasure to be attending to this dialogue, thank you Caroline Tresise for the invitation!

I have been reading your comments and I agree that the private sector should be the one involved the most in this type of investment, at least in the ones related to new alternatives. 

For example, Venezuela apart from being the poorest country worldwide, has a really tragic politic unstability ruled by a dictator disguised as chief of state. However, we have an important need for stable energy sources since 42% of the population experiences daily breakdowns. That is why me and my friends have focused on finding stable and cheap sustainable sources to help cover our country needs, and we came up with an idea: to generate electricity from plants. We had an exhausted research and did experiments and we realized that this could be feasible. However, we need funding to continue our research and prepare our commercial prototype, but for us due to our current country situation public funding is not feasible. 

Now, considering that the majority of countries that have this gap for electricity are developing countries and that in general this countries share a common politic unstability; we have to promote international private investment if planning to fulfill this gap with sustainable sources that could also be cheaper in long term. In this regard, I consider that to foster emtrepeneurship in this field we should promote private funding in terms of loans, grants, etc.

In addittion, I have found international competitions for energy and innovations that look to fund disruptive and realistic ideas on the matter, but this takes time and depends on the competition schedules and rules. One idea could be to ask the United Nations and its associated bodies and private partners to develop a Project Postulation Program for developing countries to obtain a grant or loan if the technical experts consider this project plausible.

I think that by investing efforts in this we could help cover the worldwide energy gap and be a little bit closer to our 2030 goals!

Long Nguyễn Thành

bạn nghĩ sao về mức độ rủi ro khi đầu tư tài chính và nguồn quỹ vào các chương trình năng lượng ? 

Caroline Tresise

This consultation will close shortly. Your moderators will post their summaries in the next few days.

I would like to take this opportunity to thank all the participants for your excellent and thoughtful inputs and to encourage you to remain engaged in this group. We will leave the Networking Lounge and the News Room open so please keep posting and stay tuned for "the next steps" and new opportunities from UNDP.

We look forward to continue working with you!

Caroline Baxter Tresise
Facilitator, Community of Practice on Energy, UNDP