Boosting Renewable Energy Financing

Transcription

1 Boosting Renewable Energy Financing Senior Director Ms. Anita Marangoly George Tokyo, Japan / November 4 th, 2014

2 CONTENTS Global Trends Future Scenarios Progress Challenges Markets Expansion World Bank Group Portfolio

3 I GLOBAL TRENDS

4 Overall share of renewable energy has remained quite flat, albeit some sources grew exponentially from a small base

5 Traditional biomass accounts for over half of renewable energy, mainly for heating and cooking

6 Less developed regions show higher (though declining) renewable energy shares and vice versa

7 Countries with highest renewable shares reach 50% mark (excluding traditional biomass)

8 Largest increases in renewable energy consumption registered by OECD and some emerging countries

9 II FUTURE SCENARIOS

10 Global models show that business as usual falls well short of where we need to be by 2030

11 III PROGRESS

12 The cost of wind and solar PV technology have gradually lower, to the point that they are competitive in many systems

13 2013 USD/Wp A steep price decline of solar PV modules registered between 2011 and 2012 reduced investment costs Crystalline Germany Crystalline China Crystalline Japan Thin film CdS/CdTe Thin film a-si Thin film a-si/u-si or Global Price Index (Q onwards) Source: Bloomberg New Energy Finance

14 At least 138 countries have a renewable energy target in 2014 Number of countries with a target % HIC UMIC LMIC LIC HIC UMIC LMIC LIC 2020 Renewable Energy Target in Japan 10% of Primary Energy (currently 7.1%) 100% 80% 60% 40% 20% 0% 2% 6% 14% Percent of countries with a target 79% 1% 75% 68% 63% 1% 1% HIC UMIC LMIC LIC HIC UMIC LMIC LIC 1% Technology specific: GW Biopower GW Geothermal - 49 GW Hydro GW Ocean - 28 GW Solar PV - 5 GW Wind Source: REN21 Renewables Global Status Report

15 Middle and lower income economies are increasingly adopting policies to support renewable energy development Share of Countries with RE Policies By Income Group Source: REN21, 2014

16 Number of countries Many countries have introduced feed-in tariff policies (68 to date) but after 2010 there has been marked preference for the use competitive schemes early FIT/FIP Tendering RPS/Quota Net Metering Heat Obligation Biofuel Blend Mandate Power Generation Heating and Cooling Transport

17 III CHALLENGES

18 Global investment in renewable energy has declined over the last two years, in part due to reductions in technology cost, but mainly attributed to policy uncertainty Annual investment need to reach SE4ALL target to 2030 is $320 Billion

19 Roughly 60 percent of annual investment needed to reach SE4ALL renewable goal is in emerging markets Baseline and annual investments needed in each region to attain SE4ALL goal in renewable energy by 2030 (USD Billion) Regional Share of Annual Investment Gap Source: Global Energy Assessment 2012 by IIASA; Bloomberg New Energy Finance 2013; World Bank

20 About 50 percent of annual investment needed to the close investment gap will have to be in hydro and wind Baseline and annual investments needed to attain SE4ALL goal in renewable energy by 2030, by technology (USD Billion) Share of Annual Investment Gap by Technology Source: Global Energy Assessment 2012 by IIASA; Bloomberg New Energy Finance 2013; World Bank Note: Others includes synthetic fuels, hydrogen and hydrogen fuel cells from renewables

21 In many developing countries the local banks and domestic capital markets lack the depth necessary to meet the required investment needs Banking sector and capital markets in many developing countries lack necessary depth Significant local institutional investor pools exist but very little is targeted towards sustainable energy infrastructure Commercial banks in less developed countries often have substantial energy exposure to national utilities, which limits new lending Access to debt capital markets via bond issuance and syndicated loans is currently insufficient to meet investment needs Having an in-country environment that enables investment is key Strong regulatory framework - an appropriate policy setting Economic stability Political and institutional stability

22 Potential to mobilise $120bn incremental new annual investment by 2020 for sustainable energy 1. $35bn Green Bonds: Catalyse further expansion of Green Bond market, use it to drive fresh capital into new sustainable energy investments, in particular into the more nascent project bond market and asset-backed Green Bond segments 2. $30bn DFIs (co-lending): Develop tailored structures that allow private sector to co-lend with DFIs in emerging markets, as well as helping to refinance existing sustainable energy loan portfolios by attracting new investors 3. $30bn DFIs (private sector lending): Encourage new construction stage lending, supported by DFI supported subordinated debt credit enhancement instruments, and enable later-stage institutional investor flows 4. $25bn Aggregation: Develop aggregation and blended funding structures for renewable energy project developers including those doing replicable small-scale projects in emerging markets and for energy efficiency

23 Policies need to embody key attributes to effectively attract private participation in renewable energy investment Attribute Predictability Description Associated with the long term certainty of RE production purchase and price purchase obligation imposed on utilities, discos or other service providers explicit rules for price level modifications and their frequency inclusion of mechanisms in tenders that promote realistic price bids Refers to the efficiency of the remuneration level (price, period of support) Efficiency Policy makers need to ensure that the price incentive is closely aligned to costs to avoid over compensation or infra-marginal rents Incremental cost is covered through a sustainable mechanism Sustainability Pass-through to the consumer tariff (surcharge) Consumer affordability Associated with access to the grid Accessibility Prioritized access to the grid (or priority dispatch) Existence of a grid code that includes measures or standards for managing variable renewable energy Transparency in cost allocation of curtailment

24 The Planning Challenge There is still a lack of adequate planning to integrate renewables into power systems, not only in developing but also in developed economies Key elements of planning include: 1. Target with a corresponding action plan 2. Inclusion of existing RES options in long term expansion planning (LTEP) using traditional least cost planning and if possible other complementary or cutting edge tools 3. Proactive transmission expansion planning 4. Comprehensive high-quality and validated resource assessment and mapping, including ideally the publication of a strategic planning or zoning guidance

25 The Challenge of Integrating Variable Renewable Energy Areas of intervention to accommodate variable renewable energy

26 IV RENEWABLE MARKETS

27 Trade Volume (USD Million) Trade Volume (USD Million) Trade Volume (USD Million) Trade Volume (USD Million) Growing Markets: Increased Trade in Solar PV Cells HIGH INCOME UPPER MIDDLE INCOME Imports Exports Imports Exports LOWER MIDDLE INCOME Imports Exports LOW INCOME Imports 80 Exports HS Code: Photosensitive semiconductor devices, incl. photovoltaic cells whether or not assembled in modules or made up into panels; light emitting diodes (excl. photovoltaic generators)

28 Top 10 countries in trade volume of key component of solar PV by income level HIGH INCOME Volume of Trade in 2012 (USD Billion) UPPER MIDDLE INCOME Volume of Trade in 2012 (USD Billion) Germany Netherlands USA Japan Korea, Republic of Taipei, Chinese Hong Kong, China Italy Belgium Singapore Exports Imports China Malaysia Mexico Thailand Bulgaria Hungary Romania Brazil Peru South Africa Exports Imports LOWER MIDDLE INCOME Volume of Trade in 2012 (USD Billion) India Ukraine Philippines Viet Nam Indonesia Exports Nigeria Imports Ghana Morocco Pakistan Nicaragua LOW INCOME Volume of Trade in 2012 (USD Billion) Bangladesh Uganda Kenya Exports Mali Tanzania Imports Ethiopia Sierra Leone Nepal Cambodia Rwanda Note: Figure shows net trade of photosensitive semi-conductor device.

29 Top 10 countries in trade of wind turbines by income level HIGH INCOME Volume of Trade in 2012 (USD Billion) UPPER MIDDLE INCOME Volume of Trade in 2012 (USD Billion) Germany China Denmark Mexico USA Spain Exports Brazil Turkey Exports United Kingdom Imports Romania Imports Italy Thailand Canada Venezuela Sweden Bulgaria Australia Malaysia France Azerbaijan LOWER MIDDLE INCOME LOW INCOME Volume of Trade in 2012 (USD Billion) Volume of Trade in 2012 (USD Billion) Ukraine Nicaragua India Morocco Pakistan Sri Lanka Exports Imports Ethiopia Tanzania Sierra Leone Bangladesh Burundi Kenya Exports Imports Viet Nam Gambia Indonesia Rwanda Mauritania Madagascar Syrian Arab Republic Malawi

30 V WBG LENDING / PORTFOLIO

31 US$ Millions WBG had a strong year in 2014 with over $9 billion in energy lending 14,000 12,000 11,920 10,000 9,445 8,000 7,226 7,547 7,018 World Bank 6,000 MIGA IFC 4,000 2,

32 US$ Millions Renewable Energy accounted for over $3.5 billion of WBG energy lending 14,000 12,000 11,919 10,000 9,445 Upstream extractives and policy 8,000 7,226 7,547 7,018 Policy and Institutional development Transmission and Distribution Coal and Oil fired generation 6,000 Gas fired generation Energy Efficiency 4,000 Renewable Energy (Non-Hydro) generation Renewable Energy (Hydro) generation 2,

33 ESMAP Resource mapping program Coordinate with other donor-funded programs Collect and generate geospatial data Initial outputs inform WB- Client policy dialogue Provide training and capacity building Build country and global partnerships Disseminate via open data repository and GIS portal Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Preliminary resource mapping output based on satellite and global atmospheric and meteorological data Ground-based data collection (met masts installed for months) Production of validated resource atlas based on satellite and ground-based data Geospatial planning (GIS) and strategic environmental assessment Develop and agree policy framework to support investment

34 Global Geothermal Development Plan Aims to better manage and reduce risks of exploratory drilling, and to bring what is now a marginal renewable energy source into the mainstream to deliver power to millions Convene donors and multilateral lenders around an investment plan to scale up geothermal power in the developing world Perform exploratory test drilling Develop a pipeline of commercially-viable projects that are ready for private investment Source: Sustainable Energy Department 34

35 ANNEX 1 CLIMATE INVESTMENT FUNDS

36 Climate Investment Funds Design and Operating Principles Partnership among MDBs (AfDB, AsDB, EBRD, IDB, and WBG) Demonstrate scale and transformation Multi-stakeholder at governance and country levels Leverages public and private sector Complementarity with other partners at the country level Governance 36 o o Sunset clause Trust Fund (Sub-) Committees CIF Admin Unit, Trustee, MDB Committee

37 Structure and Funding Clean Technology Fund Finance scaled-up demonstration, deployment and transfer of low carbon technologies Strategic Climate Fund Targeted programs with dedicated funding to pilot new approaches with potential for scaling up Investment Plans Support country and regional development strategies Optimize blending with MDB financing and other sources, including bilateral programs Range of financial products to stimulate private sector engagement ±$5.5 billion Pilot Program for Climate Resilience (PPCR) Mainstream climate resilience into core development planning Forest Investment Program (FIP) Reduce emissions from deforestation and forest degradation Scaling Up Renewable Energy in Low Income Countries (SREP) Create economic opportunities and increase energy access through renewables $1.3 billion $639 million $551 million ±$ 2.5 billion 37

38 Scaling Up Renewable Energy Program in Low Income Countries (SREP) Purpose To pilot and demonstrate the economic, social and environmental viability of low carbon development pathways in the energy sector by creating new economic opportunities and increasing energy access through the use of renewable energy Scale $551 million in pledges for programs of investments and capacity building in renewable energy. Expected Co-financing 1:4 Private sector program for $90 million SREP funding Governance SREP Sub-Committee (recipient/donor countries) Administrative Unit Trustee Multilateral Development Banks (MDBs) - ADB, AfDB, IDB, EBRD, and WB/IFC Observers: civil society, Indigenous Peoples, private sector, GEF, UNDP, UNEP, UNFCCC 38 Contributor Contribution Type Contribution in million USD eq. (as of March 31, 2014) Australia Grant 10 Denmark Grant 12 Japan Grant 40 Korea Grant 6 Netherlands Grant 76 Norway Grant 97 Spain Grant 4 Sweden Grant 44 Switzerland Grant 26 United Kingdom Capital * 186 United States Grant 50 Total 551 * Near-zero interest loan

39 Scaling-Up Renewable Energy Program in Low-Income Countries (SREP) 10 Investment Plans endorsed for $384M (Kenya, Ethiopia, Tanzania, Mali, Liberia, Honduras, Maldives, Nepal, Armenia, Solomon Islands) 3 Investment Plans in the Pipeline (Mongolia, Yemen, Vanuatu) 14 New countries (Benin, Lesotho, Ghana, Madagascar, Malawi, Rwanda, Sierra Leone, Uganda, Zambia, Bangladesh, Kiribati, Cambodia, Nicaragua, Haiti) Set Aside Reserve for Private Sector ($90M) Expected co-financing (1 to 4) SREP-supported installed RE generation capacity by technology, in MW (as of Sep 30, 2014) Cookstoves, 2% Solar PV, 3% Waste to Energy, 5% SREP Investment Criteria Transformative impact Enabling environment Implementation capacity Catalyze increased investments in RE 39 Improve long-term economic viability of RE sector Increase energy access Mixed RE (e.g., hybrid mini-grids), 40% Geothermal, 36% Hydropower, 14%

40 Types of Activities Investments Eligible Investments: Solar, wind, bio energy, geothermal, small-hydro (<10MW) Electricity and thermal On-grid, Off-grid, Mini-grid Capacity Building & Advisory Services Development of energy policies and legislation Assessment of technical resources potential Strengthening governance and institutional capacity Creation of incentive scheme to improve financial viability of RETs 40

41 Clean Technology Fund (CTF) Finance scaled-up demonstration, deployment and transfer of low carbon technologies Support 15 countries* and 1 region (MENA) WB portfolio and pipeline totals US$ 2.1 billion CTF Portfolio and Pipeline (US$ m) Pipeline 668 Portfolio 1,396 Renewable Energy 941 Energy Efficiency 230 Transport 225 * Chile, Colombia, Egypt, India, Indonesia, Kazakhstan, Mexico, Morocco, Nigeria, Philippines, South Africa, Thailand, Turkey, Ukraine, Vietnam

42 Scaling Up Renewable Energy Program (SREP) To scale up the deployment of renewable energy solutions and expand renewables markets in the world s poorest countries Support 27 countries*, including 14 new countries** endorsed in June 2014 WB portfolio and pipeline totals US$ 179 million SREP Portfolio and Pipeline (US$ m) * Armenia, Ethiopia, Honduras, Kenya, Liberia, Maldives, Mali, Nepal, Solomon Islands, Tanzania, Mongolia, Yemen, Vanuatu, and 14 new countries below ** Bangladesh, Benin, Cambodia, Ghana, Haiti, Kiribati, Lesotho, Madagascar, Malawi, Nicaragua, Rwanda, Sierra Leone, Uganda, and Zambia *** 4 projects in portfolio, including geothermal, biogas, solar and hybrid Pipeline 119 Portfolio** * 60

43 ANNEX 2 ESMAP

44 Clean Energy Program Global Geothermal Development Plan ($7.5 million): Identifying and developing geothermal resource validation projects and mobilizing $500 million concessional finance for investment-ready exploratory drilling projects Djibouti IDA project approved. Clean Technology Fund has allocated $115 million; first projects for Chile and Mexico (IDB) approved. Potential projects under development in Armenia, Indonesia, Nicaragua, Turkey, East Africa and Caribbean Renewable Energy Resource Mapping ($22 million): In 12 countries in AFR, EAP, and SAR, ground-based measurements, combined with geospatial analysis and strategic environmental assessment for wind, solar, biomass, and small-hydro Global Knowledge Products RE staff training program with IFC Grid integration (smart grids, integration of RE into grids) Climate Resilience

45 Energy Access Program Sustainable Energy for All TA Facility ($15 million): Accelerating and scaling up energy access programs through preparation of investment prospectuses in Burundi, Guinea, Liberia, Mozambique, Myanmar, Nepal, Senegal, and Central America for clean cooking Africa Renewable Energy and Access Program ($24 million): supporting IDA pipeline SE4ALL Knowledge Hub ($8.2 million): Defining and measuring access to energy: implementing a multi-tier framework through global surveys Updating the SE4ALL Global Tracking Framework Periodic State of Energy Access Report: WDR for Energy Access Readiness for Investment in Sustainable Energy (RISE): doing business

46 Energy Assessments and Strategies Program Energy Subsidy Reform and Delivery TA Facility ($19 million): Assessing subsidies, designing reforms and mitigation measures for poor, supporting communications Activities underway in Egypt, Vietnam, Belarus, Turkey, Kyrgyz Rep, and Haiti, plus regional program in Central America and a global study on the political economy of subsidy reforms Global Knowledge Products: Electricity sector planning Open Access and Private Sector Participation in T&D Systems

47 City Energy Efficiency Transformation Initiative Integrating Energy Efficiency in Urban Planning and developing Investment Programs: Public Lighting, Water and Waste-water, Buildings, Power and Heat, Waste Management, and Urban Transport ($10 million) Initial projects: Brazil (Rio de Janeiro and Belo Horizonte), Shenzen, Macedonia, Karachi, Ukraine and IFC EDGE program (global and South Africa) Global deployment of city energy diagnostic tool TRACE more than 25 cities to-date Knowledge Program: training program for urban transport leaders Annual grants for analytical and advisory activities for regional transport teams to promote energy efficient urban transport

48 Special Initiative SIDS DOCK Support Program $16 million program for Small Island Developing States (SIDS) funded by Denmark and Japan Co-financing IDA in Maldives, Tuvalu, and Vanuatu Establishing (with IDA) Eastern Caribbean Electricity Regulatory Authority Geothermal and Solar PV scale-up in Caribbean Energy Efficiency TA in Sao Tome Pilot PPP model for solar PV for health care facilities in Cabo Verde TA for renewable energy supply to grid in Mauritius and Seychelles

49 ANNEX III ADDITIONAL INTERESTING SLIDES

50 US$ Billions Global investment in renewable energy has declined over the last two years, in part due to reductions in technology cost, but also policy uncertainty Wind - On shore Wind - Off shore STE 150 PV Ocean Hydropower Geothermal 63 Bioenergy Source: IEA

51 Annual RE investment still falls short of that needed to achieve the SE4ALL target, estimated at $ 320 Million per year * Access values include electricity but exclude non-solid fuels; values presented are estimates 51

52 Global models show that business as usual falls well short of where we need to be by 2030

53 Total Trade to GDP Ratio (2012) Japan is among the top 15 countries in next trade of wind turbines Denmark 100 Germany Sweden 80 United Kingdom 60 Canada India China Spain Italy Mexico Turkey 40 Australia 20 Japan Brazil USA CAGR of Trade Volume of Product ( ) Note: Bubble size denotes net trade volume of product

54 Number of Countries Number of Countries Number of Countries Number of Countries Lower middle income and low income countries increasingly importing wind turbines HIGH INCOME Imports 20 Exports UPPER MIDDLE INCOME Imports 30 Exports LOWER MIDDLE INCOME LOW INCOME Imports Exports Imports Exports HS Code: Wind-powered generating equipment

55 Top 10 countries in trade of wind turbines by income level HIGH INCOME Volume of Trade in 2012 (USD Billion) UPPER MIDDLE INCOME Volume of Trade in 2012 (USD Billion) Germany China Denmark Mexico USA Spain Exports Brazil Turkey Exports United Kingdom Imports Romania Imports Italy Thailand Canada Venezuela Sweden Bulgaria Australia Malaysia France Azerbaijan LOWER MIDDLE INCOME LOW INCOME Volume of Trade in 2012 (USD Billion) Volume of Trade in 2012 (USD Billion) Ukraine Nicaragua India Morocco Pakistan Sri Lanka Exports Imports Ethiopia Tanzania Sierra Leone Bangladesh Burundi Kenya Exports Imports Viet Nam Gambia Indonesia Rwanda Mauritania Madagascar Syrian Arab Republic Malawi

56 Total Trade to GDP Ratio (2012) Japan is among the top 15 countries in net trade of solar PV cells (figure shows net trade of photosensitive semi-conductor device ) 500 Hong Kong, China 400 Singapore Malaysia Taipei, Chinese Germany Korea Belgium Netherlands 0 Japan Spain France Italy China USA CAGR of Trade Volume of Product ( ) Note: Bubble size denotes net trade volume of product

57 Number of Countries Number of Countries Number of Countries Number of Countries Number of countries participating in the trade of key solar PV components (module/cell) increasing slowly Access to clean energy technology dependent on investment climate and skill / knowledge base HIGH INCOME 70 UPPER MIDDLE INCOME Imports Exports Imports Exports LOWER MIDDLE INCOME Imports 5 Exports LOW INCOME Imports 5 Exports Product : HS Code: Photosensitive semiconductor devices, incl. photovoltaic cells whether or not assembled in modules or made up into panels; light emitting diodes (excl. photovoltaic generators)

58 Auctions are performing extremely well in emerging economies Brazil, China, India, South Africa and many other countries are using the auction based approach to deploy renewables competitively and minimize subsidies

59 The private sector requires policies with sustainable and affordable incentives Impact of Feed-in Tariffs on Household Income and Residential Electricity Bill (selected sample of countries) Source: World Bank

60 Danish green transition High levels of variable renewables (mostly wind) achieved thanks to: - Attractive VRE incentives - Strong interconnections (Nordic electricity system and Germany) (and 50 years of common planning). - Advanced operations (forecasting, etc.) and market design. Source: Energinet