Current global investment not only suffers from significant disparities between advanced economies and emerging markets and developing economies but also with group of EMDEs, new IRENA reports commissioned by Brazil's G20 presidency find.
To propel a just and inclusive transition in the Global South, investment challenges must be addressed through risk mitigation instruments and a strong leveraging of public resources. Effective national energy planning is one of the key enablers that helps to reduce overall risks and uncertainties, as to IRENA.
In many developing countries, cost-effective renewables offer greater social justice in the form of jobs and economic growth and help address deficits in access to electricity and clean cooking technologies. A just and inclusive energy transition in the emerging markets and developing economies: Energy planning, financing, sustainable fuels and social dimensions, highlights the significant role of G20 in scaling investments to meet the growing energy demand with renewables and fully harness their social dividend.
Development banks and energy planning: Attracting private investment for the energy transition; The case of Brazil, jointly done with the Brazilian Development Bank, showcases how energy planning can unlock investment. And Energy Planning Programme Highlights: Global collaboration and capacity building support presents IRENA's programmes to leverage global efforts by G20 in enhancing effective national energy planning worldwide.
Global transition-related investments exceeded USD 2 trillion for the first time in 2023. But current patterns of investment are skewed, with most financing going to advanced economies and a handful of large EMDEs such as China, India and Brazil. The rest of the world received just 10% of global investments in 2023.
Often, investment gaps are the result of risks like political instability, grid integration problems, regulatory barriers, unreliable off-taker arrangements, currency volatility and a shortage of skilled workers. They can drive the cost of capital, limit financial flows and hamper socioeconomic development eventually.
A strong national energy planning enables national institutions to collaborate effectively with international financial institutions (IFIs), particularly in the areas of sectoral derisking, blended finance and green bonds. As demonstrated by Brazil's success, such framework offers promising options for attracting private capital.
"A robust energy planning framework is a precondition for the successful mobilization of finance."
Ultimately, the way in which the energy transition is funded in the Global South must evolve. Scaling investments across regions and countries will not be possible without international and domestic capital from public and private sources, at affordable costs.
Francesco La Camera Director-General
He added: "IRENA is pleased to support Brazil's G20 presidency in advancing the global agenda on climate and energy transition finance. The presidency's proposal to establish Global Coalition for Energy Planning is timely and commendable and we will continue to leverage our global membership to strengthen energy planning with the Clean Energy Ministerial and around the world. Today's knowledge products aim to feed the discussion in pursuit of financing a just and equitable energy transition in the Global South."
In 2021-2022, the public sector provided 24% of renewable energy investment in EMDEs, excluding China. For every USD 1 of public funds spent on projects, an additional USD 3 came from the private sector. Stronger public support will still be needed in the EMDEs to leverage private capital.
National energy planning can help present a clear view of investment needs, minimise uncertainties and avoid ad hoc decisions. In return, it will create an environment for investment and ultimately mobilize financing and boost investors' confidence.
Furthermore, risk mitigation could come through innovative de-risking instruments and financing schemes, accompanied by institutional reforms and collaboration. G20 can play a key role in enlarging the scale and scope of investments, particularly through their own direct bilateral funding and their capital contributions to multilateral development banks (MDBs), development finance institutions (DFIs), and other sources of concessional and grant-based sources.
International collaboration has a pivotal role to play, not only in terms of providing concessional loans and grants, but also in technical support, technology and knowledge transfer, policy advice, capacity building, and, particularly, robust energy planning.
Read Energy Planning Programme Highlights: Global collaboration and capacity building support.
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