Page 15 - REM Annual Review 2021

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clean energy investments, mostly renewables from $45 per person today to $240 per person
and efficiency, must be privately financed. by 2030.
Public actors have a role is developing less This spending would cover clean power and
attractive areas such as transmission grids and electricity networks, as well as spending on
emissions-intensive industries. energy efficiency and electrification via greener
For emerging economies alone, the IEA buildings, appliances and EVs
calls for the private sector to account for 59% This would equate to at least 1,600 GW
of energy investments. Meanwhile, domestic of renewable capacity being added by 2030,
sources of financing must account for 75% of increasing the share of renewables in total
total investment, while 54% should be equity installed capacity to well above half by 2030,
investment and 46% debt. from 30% today.
DFIs’ ability to act as catalysts, for exam- The report follows on from the IEA’s May
ple through blended finance, will be critical to report that called for an immediate end to the
attract capital to markets emerging and sectors financing of new coal-fired power plants.
at early stages of readiness, or with hard-to-mit- The report also gave a date of 2040 for a total
igate risks, phase-out of coal generation in developing econ-
For the moment, capital is significantly more omies, 10 years later than a target date of 2030 for
expensive in emerging and developing econ- advanced economies.
omies than in advanced economies. Nominal
financing costs are up to seven times higher than Conclusion
in the United States and Europe, with higher lev- The report warns that while aligning capital mar-
els in riskier segments. This points to a relatively kets with net zero goals is possible for developed
high bar for projects to raise debt finance and economies, such a development risks exclud-
offer sufficient returns on equity, the IEA said. ing EMDEs, leaving them with higher-carbon
footprints or a more challenging road towards
Electrification cleaner energy.
The best way to decarbonise the energy sector in The call for more clean energy in developing
EDMEs is to push forward electrification. markets comes as the cost of renewables is fall-
The report forecasts that electricity consump- ing, and, for example, solar price at their lowest
tion in EDMEs will grow at three times the rate ever. At recent auctions, the cost of solar has
of advanced economies, although of course fallen to $0.035 to even $0.015 per kWh.
starting at a far lower level. While there is plenty of solar, wind and dis-
Here the falling cost of renewable technology, tributed energy capacity in emerging markets in
such as solar panels, battery storage capacity and Asia and Africa, what is what is lagging behind
wind turbines, will play a crucial. the falling cost of renewables is government sup-
The report also calls for innovative technol- port, often is the form of support for investment
ogy to retrofit and indeed replace ageing fossil and risk mitigation, and the lack of appropriate
fuels plants across the developing world, espe- finance.
cially carbon capture and underground storage Across the developing world, the European
(CCUS) and hydrogen. model of universal grid access, guaranteed
“Societies can reap multiple benefits from power supplies for major industrial customers,
investment in clean power and modern digital- regular maintenance, cross-border trading and
ized electricity networks, as well as spending on more competition, especially in the generating
energy efficiency and electrification via greener and retail ends of the market, is not an imme-
buildings, appliances and electric vehicles,” the diately usable solution. It is also not attractive to
report said. investors.
In order to meet the Paris 1.5 °C climate The IEA stressed that time is of the essence
change temperature targets, investment in power and that current trends in investment volumes
must increase in EMDEs in the 2020s five times must be reversed quickly. ™

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