Catalyzing Private Investments and Climate Finance to Turn Energy Transition Ambitions to Reality

World Bank’s Climate Change Action Plan (CCAP) for 2021-2025 aims to integrate climate and development to maximize the climate impact of its projects. The Energy Sector Management Assistance Program’s (ESMAP) Sustainable Renewables Risk Mitigation Initiative (SRMI) uses climate finance for mitigation activities that reduce emissions and increase climate resilience in the energy sector. SRMI supports countries accelerate the deployment of renewables and decarbonize the power sector with (i) technical assistance and (ii) private investments and climate finance mobilization. SRMI has supported more than 60 countries, which led to enabling 4.4 gigawatts of new renewable energy projects in 14 countries and 2 regional projects, catalyzing over $ 5.5 billion in private capital, securing $ 4 billion in public infrastructure funding and guarantees, and mobilizing $ 1.2 billion in climate finance.

Challenge

According to the Intergovernmental Panel on Climate Change (IPCC), the energy sector is the largest contributor to global greenhouse gas emissions. Accelerating the deployment of renewables and decarbonizing the energy sector can lead to significant emissions reduction. However, to scale up deployment for expanding access, bolstering energy security, and keeping global temperature rise below 1.5 °C, as set out in the Paris Agreement, investments in renewables must triple to $ 1.3 trillion annually by 2030, according to the International Energy Agency (IEA). In addition, increasing the share of renewable energy sources in global electricity production is currently hindered by inadequate public funding and significant disparities among countries and regions. Therefore, mobilizing private investments in renewable energy is essential for achieving energy transition and meeting global climate objectives.

Approach

ESMAP, which focuses on achieving decarbonization across the energy sector in support of international commitments on climate change, manages several renewable energy initiatives, including SRMI. SRMI aims to support governments in developing and implementing sustainable renewable energy programs by creating an enabling environment for privately led renewable energy projects. By combining technical assistance, public investments, and risk mitigation instruments, SRMI provides a comprehensive framework, which includes a series of important steps to mitigate the critical risks perceived by the private sector while reducing the risks for the public sector.

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“Despite being 100% electrified, the Maldives still rely on imported fossil fuels with high and fluctuating power costs. These high fuel costs have often led to a massive drain of hard currency from the economy and made electricity unaffordable for households and businesses. Utilizing SRMI has helped our country engage a tremendous amount of much-needed private-sector investment in renewable projects. This has helped reduce the fiscal deficit burden on the government and consumers, set us on a path to energy security, and supported our sustainable economic development goals.”

Ali Majid

Deputy Minister Ministry of Environment, Climate Change and Technology,

Government of Maldives

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Results

World Bank’s long-standing commitment to energy transition and the 2030 Agenda for Sustainable Development was reiterated through its Climate Change Action Plan for 2021-2025. SRMI is helping countries create, finance, and execute renewable energy programs aiming to mobilize private investments. Results achieved include:

• SRMI has assisted 14 countries and 2 regional projects, as listed in the table below, in generating a substantial 4.4 gigawatts of renewable energy. Furthermore, the Energy Compact of the World Bank pledges to aid client countries in providing electricity access to up to 60 million people by 2025 and to assist countries in implementing comprehensive national electrification strategies.
• SRMI, by enabling reliable and affordable electricity, has provided 14.7 million people with access to modern electricity. This sizeable accomplishment is a significant step towards achieving the objectives of CCAP and the energy compact.

SRMI’s Global Impact: 4.4 Gigawatts of Renewable Energy Enabled in 14 Countries and 2 Regional Projects

* regional project providing support to 19 countries in Sub-Saharan Africa

** regional project providing support to 5 ECOWAS countries

• In Maldives, the World Bank supports the transition to clean energy and the mobilization of private investments for renewable energy projects. The risk mitigation framework developed for the Maldives, with support from SRMI, has helped provide the confidence needed for private sector companies to invest in the country’s renewable energy sector. It resulted in a significant increase in private sector participation from 4 bidders for the Accelerating Private Investments in Renewable Energy (ASPIRE) Project (P145482), Phase I 1.5 MW sub-project to a whopping 63 parties showing interest in the ASPIRE Phase III 11 MW solar PV sub-project. As a result, the project was awarded at a tariff of $ 0.98 MWh, a record-low bid in Maldives and one of the lowest in a Small Island Developing States (SIDS) country.
• In Uzbekistan, the Electricity Sector Transformation and Resilient Transmission Project (P171683), approved in 2021, blends $ 380 million in WB financing and $ 47 million in Green Climate Fund (GCF) financing. The project supports the country’s clean energy transition by improving the transmission network’s capacity to integrate renewable energy produced by the private sector. It allows for the integration of over 1.5 GW of competitively procured solar generation with the support of World Bank guarantees. It also contributes to the Government’s plans to decarbonize the electricity sector.

Bank Group Contribution

Since its inception in 2019 until January 2023, SRMI has provided $ 28.6 million in grants and in-kind technical support focusing on developing sustainable renewable energy programs in over 60 countries.

As of January 2023, 19 SRMI-supported projects were approved by the World Bank’s Board, amounting to $ 3.9 billion of WB financing ($ 3.18 billion of IDA and $ 0.725 billion of IBRD financing) blended with $ 675 million of climate finance (GCF, the Clean Technology Fund (CTF), Canada Facility and other donors) enabling the deployment of 4.4 GW of renewable energy projects.

Partners

Under SRMI, ESMAP brought together partners to catalyze an integrated approach to scaling renewable energy deployment. SRMI is a collaborative partnership between World Bank, ESMAP, the International Solar Alliance (ISA), l’Agence Francaise de Developpement (AFD), the International Renewable Energy Agency (IRENA), and Sustainable Energy for All (SEforAll). The Initiative is further supported by a stakeholder group that includes the African Development Bank, the European Investment Bank, the Kreditanstalt für Wiederaufbau (KfW), and the Deutsche Gesellschaft für Internationale Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ), among others. By joining their complementary expertise and networks through SRMI, the Partners are supporting ambitious energy transition and climate resilience goals.

Looking Ahead

As of January 2023, SRMI is providing technical support to more than 60 countries to support the preparation and implementation of renewable energy projects through grants and in-kind technical support by the SRMI team.

SRMI will continue to advance its efforts to create enabling environments that can improve private investment mobilization for the deployment of renewable energy. In the upcoming ESMAP Business Plan, currently under development, SRMI is expected to remain an important tool to deliver the climate commitments of the World Bank while promoting synergies between key development banks and agencies. SRMI’s approach is now scaling up to Small Islands Developing States (SIDS) and to further support implementation. In 2022, SRMI launched a Risk Mitigation Facility in collaboration with the World Bank Infrastructure Finance, PPPs & Guarantees Global Practice, the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA).