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GSR 2015 - Financing and Investment

109 05 RENEWABLES 2015 GLOBAL STATUS REPORT n FINANCING AND INVESTMENT Historically, governments and international organisations took the lead in advancing energy access. However, in the last decade or so there has been a simultaneous evolution from a centralised, public-led approach towards public-private partnerships and private ventures, and towards a greater focus on renewables. Increased involvement of the private sector is due largely to a growing awareness that (as in the mobile phone market) off-grid, low-income customers represent fast-growing markets for goods and services.79 Renewables are playing a greater role due to increased recognition that isolated cooking and electricity systems, particularly renewable systems, are the most cost-effective options available for providing energy services to households and businesses in remote areas; this is increasingly the case as technologies continue to improve and as costs decline.80 All of these factors have resulted in increased funding (public and private) for DRE. DRE systems continued to attract investment from venture capitalists, commercial banks, and companies. For example, energy companies such as Khosla Impact and Solar City invested about USD 63.9 billion in off-grid solar PV in 2014.81 Bank of America (United States) pledged USD 1 billion to help finance DRE projects that normally would not pass risk assessments, and to seed a Catalytic Finance Initiative to stimulate at least USD 10 billion of new investment in high-impact clean energy projects.82 Such initiatives will help develop innovative financing mechanisms to reduce investment risk and attract a broader range of institutional investors to the DRE sector. Other financing streams were less conventional. Persistent Energy Capital, a boutique investment bank pursuing a commercial approach to energy access for all in Africa, has invested in companies that provide renewable energy products and services in Ghana, Tanzania, Uganda, and elsewhere.83 The Renewable Energy and Energy Efficiency Partnership (REEEP) started a competitive incubator programme that provided small and medium-sized enterprises with seed-level grants or convertible loans to adopt DRE systems, as well as offering coaching, advisory, and matchmaking services to investors.84 Multilateral financial institutions and development banks continued to make their mark on DRE in 2014. While also still supporting fossil fuels, the World Bank invested at least USD 3.6 billion in renewable energy in 2014 (it did not disaggregate its data by DRE or non-DRE).85 The Asian Development Bank raised some USD 400 million for energy access in 2014 under its Energy for All Initiative, which will benefit about 8.25 million people.86 The Inter-American Development Bank continued to support its Multilateral Investment Fund, whose total cumulative lending topped USD 2 billion in 2014 and was spread across more than 1,800 separate DRE projects.87 The African Development Bank directed USD 60 million into its Sustainable Energy Fund for Africa, with individual projects focused on cookstoves in Nigeria, solar PV in Cameroon, and solar-diesel mini-grids in Tanzania.88 The Islamic Development BanklauncheditsUSD125millionRenewableEnergyforPoverty Reduction programme, which promoted low-cost DRE sources across six countries, most of them in sub-Saharan Africa.89 And in 2014, the German Development Bank KfW committed funds for energy projects to provide more than 2 million people with access to modern energy.90 Some of these banks rely on competitive prizes as a novel financing mechanism. For instance, the Inter-American Development Bank runs an “Energy Innovation Contest” every year that supports the implementation of innovative projects in the areas of renewable energy, energy efficiency, and energy access in Latin America and the Caribbean. In 2014, it gave awards to a hydro kinetic (ocean and rivers) project for isolated communities of Tierra del Fuego and Patagonia Austral in Chile, and to a scheme that provides remote service and maintenance for household solar systems in Nicaragua.91 Also in 2014, Global LEAP held two off-grid product award competitions, with awards presented for the most efficient off-grid LED lights and televisions.92 Furthermore, the Green Climate Fund (GCF) has started to leverage billions of dollars of financing through the Conference of Parties process at the United Nations Framework Convention on Climate Change. The GCF aims to harmonise ongoing global financing efforts related to energy and transport infrastructure (among others) from the World Bank, the Global Environment Facility, the Adaptation Fund, the Clean Development Mechanism of the Kyoto Protocol, and the G8, with DRE systems and technology transfer being two of the core areas of focus. As of late 2014, the GCF had raised USD 10.2 billion in pledges.93 In parallel with increases in financing volumes are new mechanisms such as crowdfunding. Crowdfunding continued to increase in popularity in 2014, with a number of entities initiating campaigns to release new products or expand into new areas. The UN Foundation’s Energy Access Practitioner Network used crowdfunding to raise USD 200,000 for various SE4ALL efforts.94 Other actors have installed micro-grids using crowdfunded loans to facilitate access to energy for off-grid communities in Kenya, and to support DRE entrepreneurs in Haiti.95

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