Governments should consider the scaling up of renewable energy as part of economic development strategy, rather than as an environmental strategy with the secondary benefits of job creation. This is one of many recommendations from a report exploring financing strategies for large scale deployment of renewable energy projects. The report was authored by the Clean Energy Group, commissioned by the International Energy AgencyRenewable Energy Technology Deployment (IEARETD ). IEARETD is a cooperation of nine countries under the umbrella of the IEA.
Making the switch to large-scale renewable energy systems will require investment with magnitudes in the trillions of dollars. The necessary transformation is on the scale of the information technology revolution of the past three decades.
Renewable energy investments are on a growth trajectory, reflected by $243 billion of global CAPEX in 2009. However, these recent figures do not reflect international consensus among many policymakers on the future levels of investment required to finance the large-scale deployment of renewable energy technologies to address climate change risks. Such commitments have been made all the more difficult in the current financial crisis.
However, the level of capital is available with new, conventional investors, but only on terms that are within their investment parameters. Governments have an important role in providing the right conditions. Simply scaling up public subsidies is not a viable solution.
The report advises that policies should specifically reduce the technical and institutional policy risks associated with renewable energy technologies and, at the same time, increase the profit potential of these investments. An economic and infrastructure systems approach is required. Some major recommendations for present day up to 2015 include:
Build local markets for a countrys renewable energy products.
Fill identified gaps in industry value chains such as manufacturing support or workforce development.
Institutionalize the functions to manage the economic development, finance mechanisms and technology innovation.
Create investment incentives that will attract investments from new pools, like corporations.
Consider creation of green bonds.
Increase private and public research and development in renewable energy technologies.
Combine feed-in tariffs (FITs), national tax credit schemes and mandatory renewable procurement for utilities into successful instruments.
Public procurement of renewable energy and mandatory use of renewable technologies in new buildings are possible quick wins in policies.
Establish the emerging technology renewable auction mechanism (ET-RAM) that requires local utilities to procure renewable energy project outputs from specific technology classes. This would be a driver for innovative renewable energy technologies to enter the market.
In the phase from 20162020, policies have to build on these experiences, stimulating reinvestment and attracting even more cautious investors. In the period from 20202050, a fully formed infrastructure investment portfolio will continue along the new renewable energy economy path, producing jobs, wealth and environmental benefits, the report said. HP