Energy generation and access

Overview

The context

The energy sector is one of the largest contributors to greenhouse gas emissions given the world’s reliance on fossil fuels. At the same time, hundreds of millions of people still lack access to electricity, and a third of the world’s population lack access to clean energy sources for cooking. According to the International Panel on Climate Change (IPCC), this means that renewable energy must supply 70 to 85 percent of all electricity by 2050 for the world to meet the goals of the Paris Agreement and limit warming to well below 2°C. Investments in renewable energy also increase energy access to under-served people, creates jobs, and bolsters economic growth.

Developing countries have a unique opportunity to leapfrog straight to low emissions energy generation from renewable sources, which are now cheaper than new fossil fuel power in many parts of the world.

However, despite increasingly competitive costs for renewable energy technologies, policy,  regulatory and institutional barriers coupled with a lack of depth in local capital markets in developing countries prevents the mobilisation of investments at scale and at competitive rates. Action is needed to address these barriers in order to attract global financial flows and crowd in private investment shift to renewable energy-based power systems and meet national climate, economic and social goals.

GCF's unique role

GCF invests across 4 transition areas: the built environment; energy and industry; human security, livelihoods and wellbeing; and land-use, forests and ecosystems. Under the energy transition, GCF scales up investment in renewable energy and energy efficiency. In order to promote renewable energy, GCF focuses on three main areas: energy generation from renewable sources such as wind, solar, geothermal, hydro, and sustainable bioenergy; efficient and reliable energy transmission, distribution, and storage; and promoting access to clean energy in a way that promotes sustainable development and climate resilience while reducing emissions. 

In each of these areas, GCF achieves results by: 

1. Supporting transformational planning and programming. This includes the development of long-term clean energy planning and budgeting that integrates climate externalities and socio-economic co-benefits;
2. Catalysing climate innovation through innovative business models and employing high-impact innovative technologies;
3. Mobilising funds at scale through de-risking investments, and unlocking local capital; and
4. Sharing knowledge of successful innovations and funding mobilisation efforts at scale and developing climate expertise of financial institutions to replicate them. This can include enabling the adoption of best practices in grid capacity, storage and flexibility for higher penetration renewable; increasing the national and sub-national energy service buyers’ green procurement capacity; and strengthening the scientific verification of causality between access to electricity and increased climate resilience. 

GCF’s investments are anchored in our core principle of country ownership and are aligned with existing national planning processes (e.g. Nationally Determined Contributions (NDCs), Technology Need Assessments (TNAs) and National Adaptation Plans (NAPs).  GCF supports countries through its Readiness programme by providing grants to help countries develop bankable investment plans based upon their NDCs.

GCF leverages its range of financing instruments (grants, concessional loans, guarantee funds, equity investment) to meet country-specific needs and reduce risks for investors. By doing so, GCF mobilises capital at scale for investments where risk may otherwise be considered too high. This accelerates the transition to renewable energy, as well as providing energy access and affordability for millions of people, including marginalised groups.

Resources

Sectoral guide: Energy efficiency

22 Sep 2022

Given the need to significantly reduce greenhouse gas (GHG) emissions during this decade to meet the Paris Agreement goals, GCF has identified the following three energy efficiency (EE) paradigm shifting pathways for advancing the highest climate impact projects and supporting country needs: (1) Scaling-up industrial energy efficiency, (2) Enhancing “space” energy efficiency, and (3) Catalysing rapid market switch to highest efficiency appliances/equipment. GCF is a fundamentally partnership-based institution, thus leveraging existing sectoral initiatives, coalitions, and platforms remains critical to creating multiplier effects and to promoting joint learning and knowledge transfer.

Sectoral guide: Energy access and power generation

06 May 2022

Three distinct paradigm-shifting pathways can deliver significant paradigm shift in the Energy access and power generation sector: (1) low emission power generation, efficient, reliable energy transmission, distribution, and storage, (2) efficient, reliable energy transmission, distribution, and storage, (3) promoting access to modern renewable energy. GCF aims to leverage its range of financial instruments to de-risk renewable energy investments, reduce the cost of financing and thus the expected rate of return required by investors to improve affordability to end-users and accelerate the transition to renewable energy technologies.

Thematic brief: Renewable energy

09 Apr 2021

The energy sector is one of the largest contributors to greenhouse gas emissions given the world’s reliance on fossil fuels. At the same time, hundreds of millions of people still lack access to electricity, and a third of the world’s population lack access to clean energy sources for cooking. According to the International Panel on Climate Change (IPCC), this means that renewable energy must supply 70 to 85 per cent of all electricity by 2050 for the world to meet the goals of the Paris Agreement and limit warming to well below 2°C.

SAP Technical Guidelines: Renewable energy

21 Feb 2023

This publication provides technical guidance for the preparation of SAP proposals. Renewable energy (RE) is produced using natural resources that are constantly replaced within the human timescale. Just as there are many natural sources of energy, there are many technologies that can help to harness RE sources. Solar photovoltaic (PV) is the most well- known, wind power is the most widespread and hydropower is one of the oldest. Other RE technologies harness geothermal energy, solid waste or ocean-wave energy to produce heat or electricity.

Case studies

Transforming the renewable energy market in Chile

Combining solar energy with an innovative pumped-storage hydroelectric system to offer a continuous and stable supply of low-carbon electricity, reducing Chile’s dependence on fossil fuels and transforming its energy market. This initiative exemplifies GCF’s support for financial and technical innovations and willingness to accept higher risks. By investing equity in the early development stage, prior to having a Power Purchase Agreement (PPA) in place, GCF de-risks the project, enabling renewable energy developers to complete the development stage and win a PPA. GCF’s anchor investment also helps attract and catalyse much larger private sector financing. See project details >

Solar microgrids bring affordable electricity to rural Haïti

Solar-powered microgrids are the lowest-cost, most resilient, and most climate-friendly method of quickly delivering quality energy services in rural areas. In Haiti, GCF and the Nordic Environment Finance Corporation are building 22 community-scale solar plus battery storage micro-grids in areas where no grid power exists. The project provides affordable and reliable 24/7 access to energy services, and technical assistance for building the capacity of women as microgrid entrepreneurs and customers. GCF support crowds in the necessary levels of project debt and equity which enables this innovative clean energy project to be replicated. See project details >

Catalysing an innovative financing model for renewable energy

Energy transition is hindered by obstacles such as scarcity of early-stage and equity financing. In partnership with FMO, GCF is supporting this innovative blended finance facility. The facility provides integrated, full project life cycle financing to support the development and commissioning of renewable energy projects in 11 developing countries. This leads to faster and more cost-effective project development and delivery vis-à-vis conventional financing. By providing a reimbursable grant, GCF catalyses institutional private sector co-financing – demonstrating a novel financing model with paradigm-shifting potential and scope for replication across other areas of climate finance. See project details >

Multiplying access to solar roof-top generation in India

Enabling access to long-term, affordable finance for solar rooftop installation projects in commercial, industrial and residential housing sectors, including vulnerable communities. India’s NDC targets 40% electric power capacity from non-fossil fuel-based resources by 2030 - with a target of 40 GW of rooftop solar power by 2022. The programme provides long-term and affordable financing to construct 250 MW of rooftop solar capacity, reducing emissions by 5.2 million tonnes of CO2 equivalent over 20 years. This pioneering private sector-driven initiative will unlock private sector investment in the rooftop solar market and pave the way towards a sustainable bankable model in India and beyond. See project details >

Sustainable renewables risk mitigation initiative (SRMI) facility

The need for a low emission, climate resilient economic recovery post COVID19 is crucial in shaping the long-term development pathways and determining whether NDC targets can be achieved. SRMI is helping seven target countries including Botswana, Central African Republic, Democratic Republic of Congo, Kenya, Mali, Namibia and Uzbekistan ensure that they continue on low-emission sustainable development pathways and increase access to affordable, reliable, sustainable and modern energy – providing critical support for new solar and wind projects. To do this, the programme supports the use of technical assistance and help unlock the large amounts of private finance needed to complement the limited public funding available. GCF’s USD 280 million will be complemented by an expected USD 1.3 billion in World Bank financing which in turn is expected to leverage around USD 3 billion in private investments. See project details >