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Finance Mechanisms for Lowering the Cost of Renewable Energy in Rapidly Developing Countries

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Published: January, 2014

PRESENTATION

SUMMARY

Renewable energy financing in emerging economies faces particularly daunting challenges, but there are creative policy solutions that could potentially reduce the cost of renewable energy support by as much as 30%.

In this series, we look at two potential solutions:

  • Reduce the cost of using debt sourced from the developed world: Index renewable energy tariffs to foreign currency, in so doing eliminate the currency hedging costs that are responsible for the largest share of the difference between developed world and rapidly emerging country debt costs.
  • Improve the cost-effectiveness of domestic renewable energy support programs: Provide lower-cost debt through debt concession programs, which our research shows could lower the total cost of providing required support.

Many developing countries are looking to grow their renewable energy portfolios to meet environmental, economic, business, and energy security goals, particularly as the costs for these technologies are declining rapidly.