Latest update on sustainable energy finance

The SDG Knowledge Hub of the International Institute for Sustainable Development (IISD) provides the January update on global developments in sustainable energy finance.

 

Sustainable Energy Finance Update: Transportation and Housing Projects Receive Support

Several new financing announcements and partnerships were announced for renewable energy projects, public transportation and residential housing.

Financing for renewable energy projects was global, spanning Africa, Asia, Central and South America, and Europe, and timely, after a decreasing in overall investment in renewable energy in 2016.

 

During the month of January, several multilateral development banks (MDBs) approved support for initiatives spanning Africa, Asia, Central and South America, and Europe. These projects seek to increase renewable energy capacity, improve energy efficiency or reduce demand for energy in the transportation and housing sectors.

The renewable energy announcements come on the heels of a report from the research company Bloomberg New Energy Finance (BNEF) that new investment in clean energy worldwide fell 18% in 2016, despite a record year for offshore wind financing. Seeking to reverse this trend, these new financing announcements can also help realize SDG 7 (ensure access to affordable, reliable, sustainable and modern energy for all), SDG 9 (build resilient infrastructure, promote sustainable industrialization and foster innovation) and SDG 13 (take urgent action to combat climate change and its impacts).

Hydropower Gets a Boost in Africa, Georgia

The African Development Bank (AfDB) financing in January focused on hydropower. It included a USD$992,000 grant to support the preparation of a hydropower project in Kenya, and a package of USD$80 million loan and USD$20 million equity for rehabilitating the Kainji and Jebba hydro plants in Nigeria to increase their available capacity.

In Georgia, the European Bank for Reconstruction and Development (EBRD), the EU and the TBC Bank are supporting the expansion of renewable energy through a financial package of USD$14.3 million for a medium-size hydropower plant. The EBRD also supported another hydropower plant in Georgia with a USD$80 million dollar loan. This dam on the Tergi River, is groundbreaking because it will be the world’s first carbon-neutral plant. With support from Austria, a forest planted around the dam site will serve as a sink for the plant.

MDBs Support Renewable Energy Deployment

Over the past few weeks, a number of MDBs have approved initiatives that aim to enhance the deployment of renewable energy in African, Asian, Latin American countries, as well as in small island developing States (SIDS), including by incentivizing private sector support. By engaging the private sector, these projects could promote green jobs and support SDG 8 (promote inclusive, sustainable, economic growth, employment and decent work for all). The Sustainable Energy Fund for Africa (SEFA), managed by the AfDB, approved a preparation grant to restructure Tanzania’s Renewable Energy Investment Facility (REIF) to provide both affordable finance to private sector clean energy projects and energy access to rural communities.

In Asia, the International Finance Corporation (IFC) of the World Bank invested in an equity stake in Hero Future Energies, the renewable energy arm of the Hero Group to expand renewable energy capacity, provide jobs and facilitate private sector development in India. The Asian Development Bank (ADB) also invested USD$390 million for renewable energy in India.

On the American continent, Central American small and medium sized enterprises in Costa Rica, El Salvador, Guatemala and Nicaragua that want to use cleaner energy sources will benefit from IFC’s provision of USD$92.5 million in long-term financing to four subsidiary banks of Grupo Promerica.

The Green Climate Fund (GCF) approved a USD$653 million grant in Argentina to catalyze private investment in sustainable energy. By supporting a set of first-moving renewable energy projects, the GCF project aims to demonstrate the technical and financial viability of business models for renewable energy that will help reduce Argentina’s reliance on fossil fuels.

The GCF is also providing USD$26 million to support renewable energy installations in seven SIDS: Cook Islands, the Marshall Islands, Micronesia, Nauru, Papua New Guinea, Samoa and Tonga. The Marshall Islands, Seychelles and Solomon Islands will also receive funding from the Abu Dhabi Fund for Development (ADFD) and the International Renewable Energy Agency (IRENA). The fourth project is in Niger and together they total USD$44.5 million for renewable energy.

Other renewable energy projects announced over the past weeks include: the financial structuring for a wind farm project in Argentina consisting of two USD$100 million loans by the Inter-American Investment Corporation (IIC), acting on behalf of the Inter-American Development Bank (IDB); and ADB support of geothermal projects in Indonesia with USD$109 million financing package as one of the first transactions to receive funding from the ADB fund called ‘Leading Asia’s Private Infrastructure Fund (LEAP).’

Transportation in the Spotlight

Various projects announced over the past weeks related to reducing greenhouse gas (GHG) emissions in the transportation sector, in particular in urgan areas, thereby linking to SDG 11 (make cities inclusive, safe, resilient and sustainable). The EBRD is supporting greener bus fleets in: Pristina, Kosovo; Gaziantep, Turkey; and Constanta, Romania. The ADB signed a USD$75 million loan with Everbright Financial Leasing (EFL) to increase the number of low-emission buses in China. The Global Environment Facility (GEF) is helping the UNFCCC COP 22 host, the city of Marrakech, Morocco, power its rapid transit system with renewable energy. A USD$30 million project funded by the IDB and the Japan International Cooperation Agency (JICA) in Kingston, Jamaica, will help improve traffic flows in congested road corridors.

Housing Projects Increase Energy Efficiency

Much of the finance announced for the housing sector in January was destined to residential buildings and related to increasing energy efficiency. The European Investment Bank (EIB) approved finance for the second phases of a project to refurbish multi-family homes in Bucharest, Romania, to improve their energy efficiency. The EIB signed an agreement worth €150 million with the Dutch Social Housing Foundation, Sint Trudo for new, largely energy neutral, social housing projects. The GCF approved a business loan programme for updating the energy efficiency of equipment, buildings and processes in Mongolia to help with its mitigation efforts.

Working with banks and companies to improve energy efficiency in buildings, the EIB and LEG Immobilien AG concluded a €100 million credit facility to finance energy efficiency in the property company’s housing portfolio. The Nordic Environment Finance Corporation (NEFCO) signed agreements with the consultancy companies NIRAS and ALLPLAN aimed at promoting energy-efficiency measures in public buildings and the use of renewable energy in Georgia. The ADB held a workshop to train officials from the Shanghai Pudong Development Bank (SPDB) to facilitate their ability to address the increasing demand for energy efficient buildings in China.

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