Enabling Governments and the Private Sector to Harness Wind and Solar Energy in Developing Countries
Solar and wind energy technologies are revolutionizing the power sector. They can become a game-changer in many developing countries where solar and wind power are abundant, providing a less expensive source of electricity than energy derived from fossil fuels. However, while the proportion of solar and wind generation continues to rise every year, it is still far from the level needed to reach the targets for the Sustainable Development Goals and the Paris Agreement on Climate Change.
Large amounts of private funding will have to be unlocked to complement the limited public financing available to reach these objectives. Yet, in developing countries, the deployment of private investment at the necessary scale is hindered by critical challenges such as grid integration technical constraints, off-taker risk, inadequate regulatory frameworks, and a weak procurement and planning capacity.
To unlock private investments, governments need to make changes to address concerns and barriers and establish a pipeline of sustainable and bankable projects while maximizing socioeconomic benefits for their population.
The Sustainable Renewables Risk Mitigation Initiative (SRMI) was launched in 2018 at COP24 under the leadership of the World Bank in partnership with the Agence Française de Développement, the International Renewable Energy Agency, the International Solar Alliance, and SE4all. It was created to help developing countries take a series of important steps to deflate the critical risks perceived by the private sector while minimizing the risks for the public sector. SRMI also helps countries build a pipeline of bankable solar and wind projects for consideration by the private sector while maximizing socioeconomic benefits. The Energizing Renewables program is the implementation window under ESMAP for the SRMI. It offers an integrated package of support for geothermal, onshore wind, and solar solutions combined with financing from multilateral development banks and climate funds.
SRMI offers support through several activities, including but not limited to:
- Provision of technical assistance and advisory services during project identification and design and implementation to support countries in developing evidence-based solar and wind energy targets using solid generation and transmission planning. This also extends to designing and implementing sustainable medium-term solar and wind programs including legal support, domestic lending, and local socioeconomic development. It also lays the foundation for robust procurement processes.
- Supporting countries to craft strategic public investment plans to mobilize critical private investments for electrification purposes towards integrating solar and wind energy and mitigating development risks for the private sector.
- Leveraging World Bank guarantees and climate finance instruments to provide governments in developing countries with risk mitigation instruments to help private investors cover the residual risks in renewable energy projects.
SRMI collaborates with several development partners and key players in the energy sector. For example, in Burkina Faso, with the support of the Clean Technology Fund (CTF), SRMI is working with the Ministry of Energy, Mines, and Quarries to almost double the penetration of solar in the energy mix, thereby generating substantial savings for the country.
Between 2020 and 2021, SRMI implemented projects in several countries. Some examples include:
- Indonesia: The ESMAP-funded activity supported Indonesia in its energy transition from coal to solar with battery, including least-cost generation plans, Variable Renewable Energy (VRE) integration analysis, and reliability analysis. This has introduced new generation plans that will reduce the cost by more than US$300 million by 2030 when switching from new coal projects to solar. In addition, a new US$500 million investment under SRMI, blended with funding from Canada and the Clean Technology Fund’s funding, will finance the identified grid upgrades for VRE integration, grid resilience and reliability, and a transaction advisor to support the selection of private investors (to the tune of US$300 million) for the solar generation.
- Uzbekistan: The ESMAP-funded activity provided comprehensive support to develop policies and strategies for renewable energy uptake in Uzbekistan. In this context, SRMI directly supported the country's ambitious renewable energy development plan by analyzing the current situation and the key barriers to renewable energy development, helping enhance awareness of renewable energy, and addressing concerns on renewable energy grid integration issues. One of the primary outcomes is developing a 100 MW solar PV project, including a small-size battery storage unit under the Scaling Solar scheme. In addition, the staff of key implementing agencies have deepened their knowledge and enhanced their skills in introducing renewable energy and energy storage.
- Turkey: ESMAP-funded activities supported a successful capacity-building program with the utility generation planning staff. The activities explored the feasibility of commercial financing and demonstrated that the utility could find attractive funding sources.
Building on its positive impact, SRMI plans to expand its scope of work by leveraging US$160 million to support energy transition programs in nine additional countries.