Accelerate access to low-cost finance for clean energy projects and grids

Finally, it is critical to accelerate access to low-cost finance for clean energy projects and grids. As low-carbon projects have increasingly come to resemble traditional infrastructure investments rather than risky alternatives, a larger pool of investment capital has emerged. However, project developers and banks are still responsible for the majority of financial flows and the cost to access this capital remains a limiting factor. As renewable power projects are capital-intensive at first, investments have become concentrated in wealthier nations.

One strategy to decrease the cost of capital is allowing developers to borrow on a portfolio basis, rather than borrowing from project to project. Renewable projects often have nearly no operating costs, meaning their profitability can largely be determined at the time of commissioning with virtually all costs related to capex. However, sometimes there are other factors at play beyond the cost of capital, such as high political risk, adding additional challenges for accessing private capital. Development institutions can help overcome this with concessional finance instruments – including loans, grants, and guarantees offered below market rate – to both decrease the cost of capital and improve access with longer repayment times and lower interest rates for renewables projects.