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Unlocking climate finance for decentralised energy access
IIED and HIVOS Working Paper, June 2016
Note: Climate finance figures are based analysis of the Climate Funds Update (CFU) database, which covers public finance f...
Decentralised energy access: finance needs vs allocation
The estimate of USD 23 billion is from World Energy Outlook, IEA ...
INVESTMENT NEEDS
(USD BILLION/YEAR)
Total needs 48
Current (in 2009) 9.1
Business-as-usual projections 14
Additional finan...
Who needs finance and for what?
• Energy users
e.g. to pay for products, equipment, maintenance
• Energy providers
e.g. R&...
Status of climate finance (CFU database): Of 35.3 bn
USD bn pledged, 14.1 bn has been approved
Mitigation: focus on middle income countries via loans
Clean Technology Fund channels largest share of
mitigation finance
Status of 5.6 bn climate finance allocated to energy…
40% of climate finance flowing toward energy projects
Distribution of energy finance: preference for loans to
utility-scale projects in middle-income countries
Utility-scale solar, wind & geothermal receive largest share
Distribution of grid-based and decentralised energy supply
projects in low-income countries
Key barriers to flow of international public climate
finance to decentralised energy access
General barriers
• High risks ...
Innovation on the ground: lessons from
Bangladesh and Nepal
• High-level policy enablers
• Special agencies to aggregate a...
Recommendations
1. Improve targeting of Climate Funds to decentralised energy access in low-
income countries
• Map fundin...
Recommendations
2. Strengthen national enabling environment
• Use climate finance to support policy and regulatory reforms...
Neha Rai, IIED
neha.rai@iied.org
Sarah Best, IIED
sarah.best@iied.org
Eco Matser, Hivos
eco.matser@hivos.org
Contacts
Refe...
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Unlocking climate finance for decentralised energy access

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A presentation by IIED senior researcher Sarah Best of the International Institute for Environment and Development (IIED) at European Development Days 2016 on 15 June 2016.

The presentation on 'Unlocking climate finance for decentralised energy access' was made in a session on 'Current research and practices on how climate finance can serve the energy needs of the poor'.

The session presented research findings, debated the role of climate finance in filling the gap for energy access, and suggested ways to reform and improve climate funding mechanisms.

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Unlocking climate finance for decentralised energy access

  1. 1. Unlocking climate finance for decentralised energy access IIED and HIVOS Working Paper, June 2016
  2. 2. Note: Climate finance figures are based analysis of the Climate Funds Update (CFU) database, which covers public finance for all major international climate funds Climate finance allocation for energy
  3. 3. Decentralised energy access: finance needs vs allocation The estimate of USD 23 billion is from World Energy Outlook, IEA 2011
  4. 4. INVESTMENT NEEDS (USD BILLION/YEAR) Total needs 48 Current (in 2009) 9.1 Business-as-usual projections 14 Additional financing needed 34 Electricity On-grid 11 Mini-grid 12.2 Off-grid 7.4 Cooking LPG 0.9 Biogas systems 1.8 Advanced biomass cookstoves 0.8 Total additional financing needed for decentralised energy (electricity and cooking) 23 Additional financing needs for grid-based and decentralised energy Source: IEA 2011
  5. 5. Who needs finance and for what? • Energy users e.g. to pay for products, equipment, maintenance • Energy providers e.g. R&D, feasibility analysis, piloting, buying inventory, business growth • Financial institutions e.g. concessional finance to channel to providers, risk guarantees • Governments e.g. policy, regulatory and market development, capacity-building
  6. 6. Status of climate finance (CFU database): Of 35.3 bn USD bn pledged, 14.1 bn has been approved
  7. 7. Mitigation: focus on middle income countries via loans
  8. 8. Clean Technology Fund channels largest share of mitigation finance
  9. 9. Status of 5.6 bn climate finance allocated to energy…
  10. 10. 40% of climate finance flowing toward energy projects
  11. 11. Distribution of energy finance: preference for loans to utility-scale projects in middle-income countries
  12. 12. Utility-scale solar, wind & geothermal receive largest share
  13. 13. Distribution of grid-based and decentralised energy supply projects in low-income countries
  14. 14. Key barriers to flow of international public climate finance to decentralised energy access General barriers • High risks (perceived, actual) • Investor returns and short-termism • Investment size and transaction costs • Policy and regulatory environment • Shortage of business models or quality plans Climate finance barriers Preference for loans versus grants Approaches of financial intermediaries Priorities of funds’ results frameworks
  15. 15. Innovation on the ground: lessons from Bangladesh and Nepal • High-level policy enablers • Special agencies to aggregate and channel funds to small-scale (eg IDCOL, AEPC) • Holistic, market-building approach • Mix of financing instruments for users, providers & financial intermediaries • Regulatory push by central banks
  16. 16. Recommendations 1. Improve targeting of Climate Funds to decentralised energy access in low- income countries • Map funding priorities versus needs • Earmark funds for decentralised energy • Adjust design features – investment criteria, risk appetite, results framework • Get the right balance of loan and grant funding • Channel finance through entities with capacity to fund small-scale eg special agencies
  17. 17. Recommendations 2. Strengthen national enabling environment • Use climate finance to support policy and regulatory reforms • Strengthen institutions for managing climate finance in low-income countries 3. Fill knowledge gaps • Research and communication for stakeholders to understand finance gaps, needs and sources • Lesson-sharing between countries on innovative mechanisms and enablers
  18. 18. Neha Rai, IIED neha.rai@iied.org Sarah Best, IIED sarah.best@iied.org Eco Matser, Hivos eco.matser@hivos.org Contacts References Rai, N, Best, S and Soanes, M (2016) Unlocking climate finance for decentralised energy access. IIED, London. http://pubs.iied.org/16621IIED.html?c=energy

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