The document provides an overview of a recent IEA RETD Financing Study and highlights the importance of smart grids for energy infrastructure. It summarizes the study's findings that existing finance mechanisms alone will not attract the large quantities of new investment needed for renewable energy and that new approaches are required to reduce risks and show potential profits to investors. It also outlines the IEA RETD smart grid roadmap project which models an increasing share of renewable electricity in Ireland through 2050 with significant cost savings, and identifies key actions over the next 10 years such as establishing smart grid test facilities and developing interoperability standards.

1. Sustainable Energy Infrastructure:
Financing RE - an economic development and
infrastructure approach
& smartgrids for sustainable development
Matt Kennedy
CoChair of IEA RETD
21 Feb 2012, Global Energy Basel

2. Agenda
 To provide an overview of a recent IEA RETD Financing Study
 Strategies to finance large-scale deployment of renewable energy
projects - an economic development and infrastructure approach
 To highlight the importance of smartgrids for energy infrastructure,
utilising a smartgrid roadmap development project to 2050
www.iea-retd.org 2

3. Presentation of the FINANCE-RE report
Background to the study
 Released in December 2011
 Title: Strategies to finance large-scale deployment of renewable
energy projects - an economic development and infrastructure
approach
 Rational IEA-RETD: get more insight in what is needed now to attract
substantial financial flows to the renewable energy sector? What to
do now in order to make miles?
 Available at: http://iea-retd.org/archives/publications/finance-re
www.iea-retd.org 3

4. Presentation of the FINANCE-RE report
Take-Away Themes from Report
 Existing finance mechanisms alone will not attract huge quantities
of needed new investment capital
 Need to access new capital by reducing risk-to-reward ratio,
showing potential profit to investors
 New approaches needed to:
1. Combine support mechanisms with new financial products, possibly
under management of national infrastructure bank
2. Bring together job creation, finance, innovation, and policies for energy
security, national economic recovery, and sustained competitiveness
www.iea-retd.org 4

5. Presentation of the FINANCE-RE report
Obstacles to Renewable Energy Investment
1. Perceived cost disadvantage to fossil fuel technologies
2. Intermittent resources require enabling technologies
3. Limitations of existing transmission grids
4. Matching funding sources to risk-to-reward profiles
5. Real world economic recessions and national deficits
6. Embedded institutional relationships support incumbent fossil fuel
Market failures such as un-priced carbon emissions
7. Technological and Competitive Risks bring investment obstacles
 Uncertainty Large upfront asset costs
 Restricted lending by banks, High transaction costs
 Inflated costs to cover unknown or risk contingencies
www.iea-retd.org 5

6. Presentation of the FINANCE-RE report
Public Support and Finance Mechanisms
 Price-Based Instruments
 Quantity-Based Instruments
 Investment Subsidies
 Financial Institution Partnership Programs
 Complementary Tax Measures
 Pension funds: P8 Groups with USD $3.5 trillion
 Sovereign Funds: top 10 with USD $3.8 trillion
 Insurance Funds: could be tapped with tax credit incentives
 Profitable Corporations: making use of Tax Equity Incentives
www.iea-retd.org 6

7. Presentation of the FINANCE-RE report
Basis for Plausible Solutions
 Incorporate and integrate four kinds of pubic and private
approaches for renewable energy:
1. Economic Development, incentivizing renewable energy technological
transition: replication of Asian models (RE as industrial policy)
2. Financial Innovation, institutionalize finance that buildings RE
infrastructures, including EIB, Germany’s KfW,, proposed GIB
 Proposed early launch (incubator) to give investor confidence
 Public funds as seed and leveraged (first loss position)
 Recycle investment funds and Explore green bonds
www.iea-retd.org 7

8. Presentation of the FINANCE-RE report
Basis for Plausible Solutions
3. Innovation Strategies, create enabling technologies that drive down costs
encourage “open and distributed” innovation to tap dispersed global talent
and to collaborate across institutions.
Use “Distributed Innovation” to form public-private networks for accelerated
and leveraged R&D, e.g., Marie Curie EU FP7, UK Carbon Trust Wind
Accelerator, and US SEMATECH
4. Enabling Energy Policies, support investment in RE infrastructure with
consistent enabling environment giving stable long-term investment signals.
Scale-up of Existing Technologies
Support Emerging Technologies
www.iea-retd.org 8

9. Presentation of the FINANCE-RE report
RE Financing Infrastructure Conclusion
 Need to consider it as national/regional, long-term, infra-structure
building exercises vs. series of un-related individual large projects.
 Need policies and institutions to increase public-funding leverage to
target and unleash the large pools of private capital.
 The suite of policies should align and integrate strategies for creating
a new renewable energy infrastructure and a robust economy with
long-term job generation, improved and lower cost technologies,
better climate, energy security, and raised national competitiveness.
www.iea-retd.org 9

10. Presentation of the Smartgrid Roadmap
The importance of
Smartgrid : A Roadmap
www.iea-retd.org

11. Presentation of the Smartgrid Roadmap
Smart Grids?
The basic concept: maximizing throughput of the electricity delivery system
while reducing the energy consumption
 monitoring, analysis, control, communication
www.iea-retd.org

12. The Smart Grid
www.iea-retd.org

13. The Smart Grid
www.iea-retd.org

14. Presentation of the Smartgrid Roadmap
Roadmap – Steering Group
www.iea-retd.org

15. Presentation of the Smartgrid Roadmap
Industry consultation
www.iea-retd.org

16. www.iea-retd.org

17. Projected Final Energy Demand by Sector
www.iea-retd.org

18. Projected Electricity Generation Mix
www.iea-retd.org

19. Presentation of the Smartgrid Roadmap
Key Findings
By 2050, this scenario shows:
• Increasing electrification of thermal loads in the residential, services and
transport sectors
• Electrical final energy demand >48,000 GWh
• 88% renewable, 33,000 GWh on-shore wind
• Decarbonisation of electricity in the Irish system
• Reduction in energy imports in excess of 4.3 Mtoe
Monetary Savings (offset imports):
$/Barrel Oil $111 $179 $247
Savings (Billions) €2.35 €3.79 €5.23
www.iea-retd.org

20. Presentation of the Smartgrid Roadmap
Smart Grid Roadmap – next 10 years
• Establish a test-bed facility, strengthening smart grid technology research.
• Develop and deploy training courses in smart grid systems and
technologies.
• Review of policies dealing with energy and CO2 ratings of buildings to
encourage electrification.
• Develop interoperability standards and secure communications and data
protocols
• National rollout of smart meters with DSM and variable ToU tariffs.
• Develop an overlay of secure, high speed communications onto the
electricity system.
• Continue grid investment programmes, Grid-West, Grid 25.
www.iea-retd.org

21. Questions? Thank you
For additional information on RETD
Online: www.iea-retd.org
Contact: matthew.kennedy@seai.ie
IEA_RETD@ecofys.com