“There should be at least a tripling of annual investments in clean energy within “emerging and developing” economies in order to meet growing energy needs and align with the climate objectives set out in the Paris Agreement”, argue the International Energy Agency (IEA) and the International Finance Corporation, a subsidiary of the World Bank dedicated to the private sector. In a joint report published on the eve of the summit for a new global financial pact organized in Paris on June 22 and 23, the two institutions estimate that investments will have to increase for all of these countries from 770 billion dollars in 2022 to at least $2.8 trillion by the early 2030s.
Of these 770 billion dollars invested each year in the clean energies of the EMDEs (emerging and developing countries), more than three quarters of the financing is concentrated in only three countries: China, by far in the lead, then India and Brazil. .
“China built new solar PV capacity to the tune of 100 GW in 2022, adding ten times the capacity of all solar PV installations in Africa (11 GW) in just one year,” the report said. So, if we redo the calculation, excluding China, the annual investments will have to be multiplied not by three but by six to go from 260 billion dollars invested to an amount between 1,400 and 2,000 billion dollars.
Sub-Saharan Africa, excluding South Africa, only captures 2% of these clean energy investments.
Recalling that half of Africans do not have access to electricity, Fatih Birol, Executive Director of the IEA, gave a striking example: “In the Netherlands, the production of solar energy is equivalent to that of Sub-Saharan Africa. Investments should prioritize clean electrification projects, grid infrastructure and energy efficiency.
The situations and therefore the investment strategies also differ a lot from one country to another.
Thus, Kenya leads the country for its share of renewable energies in its energy mix: 94%! A result obtained thanks to the exploitation of geothermal energy. In contrast, South Africa comes second to last with only 5% of its energy mix in renewables in 2020. However, by directing 63% of its investments to clean energy in 2021, the country should still even progress. Heavily dependent on coal, South Africa has entered into a Just Energy Transition Partnership (JETP) which offers a new model of international support for national efforts to develop renewable energy and reduce dependence on coal. It has just been joined by Senegal.
For hydrocarbon exporting countries, such as Nigeria, Angola, Congo or Gabon, they are called upon to reduce their dependence on hydrocarbon revenues.
Finally, others, such as the Democratic Republic of Congo (DRC), stand to gain from a shift to clean energy sources because they have significant reserves of metals and minerals critical to energy generation technologies. renewable.
The macroeconomic context deteriorated with the sequence of the economic crisis linked to the Covid-19 pandemic, then to the war in Ukraine which caused high inflation of raw materials.
All these factors have contributed to the increase in indebtedness and to the increase in the cost of servicing the debt. “Despite high renewable energy potential in many cases, particularly in Africa and parts of South Asia, investment in many low- and lower-middle-income countries is impeded in practice by barriers such as as higher financing costs, high electric utility indebtedness, lack of clean energy deployment strategies, and challenges with land acquisition, infrastructure, and buyer creditworthiness,” detail the report. Difficult under these conditions to raise funds to finance clean energy projects both from the private sector, which does not like risk, and from that of multilateral climate funds, which deter applications with very complex procedures .
“Increased public finance can be used more effectively in partnership with private sector capital to reduce project risk – a concept commonly known as blended finance,” the report explains.
For new technologies, such as battery storage, offshore wind, desalination powered by renewables or low-emission hydrogen, which have not yet reached the scale necessary to make them profitable, the report recommends concessional financing, ie a loan on very favorable financial terms granted by donors. This type of financing is also necessary for projects in markets considered to be at risk.
Among other avenues, the report highlights the potential of green bond issues, but also platforms that aggregate and securitize many investments that can help overcome the relatively small size of energy transition and energy transition projects. reach a sufficient level for large institutional investors to engage.
Beyond financial solutions, the report highlights the need for policy reforms and the creation of an enabling climate for investments in this clean energy sector. “Fossil fuel subsidies, lengthy licensing procedures, lack of clarity on land use rights, restrictions on private or foreign ownership, and inappropriate pricing policies create barriers to investment or increase the cost of clean energy projects. Removing these barriers will help emerging and developing economies better take advantage of the opportunities of the new global energy economy,” the report comments.
Investing in clean energy is a necessary condition not only for tackling climate change but for achieving other Sustainable Development Goals (SDGs), such as poverty reduction, health and education.
“The battle against climate change will be won in emerging and developing economies; indeed, there is great potential for clean energy, but the level of investment is much lower than it should be. To meet growing energy needs and emission reduction targets in emerging and developing economies, we need to mobilize private capital quickly and at scale and urgently develop more projects attractive to investors,” said Makhtar. Diop, managing director of the International Finance Corporation. “This report is a call to action and offers a clear roadmap on what is needed to achieve both climate and energy goals and both climate and energy goals,” he said. -he.
