COP21 has the potential to be a turning point on global climate action with a massive coming together of nations. The Intended Nationally Determined Contributions pledged in advance will contribute to substantial reductions in carbon emissions, although not currently enough to limit global warming to two degrees Celsius. Over the next week the world will be watching to see if more ambitious targets will be negotiated in Paris and whether countries will agree to review their commitments through five yearly reviews, to allow for innovation and technological advances, and up their INDCs accordingly.
Renewable energy costs still falling
Onshore wind, according to the International Renewable Energy Agency, now offers some of the cheapest new electricity capacity available, and solar photovoltaic module prices have fallen by around 80 percent since the end of 2009. Electricity from large-scale solar PV plants costs half what it did in 2010 and we are seeing in places like India and California that large scale solar is now at grid parity. IRENA believes that, with the right regulatory framework and access to low-cost finance, solar PV could now offer utility-scale electricity cheaper than fossil fuels across the globe.
Additionally, the cost of batteries for energy storage systems has more than halved and huge improvements in energy efficiencies, such as LED bulbs, are also allowing power to go much further. It’s vital for the success of renewables and reducing global CO2 emissions that the cost of energy storage comes down further and advances in energy efficiency technologies make even greater strides.
Financing for small and medium sized enterprises
For the last 15 years Ashden’s international work has focused on increasing energy access to the 1.3 billion people that have none. The organizations that have achieved this most effectively have been pioneering and innovative small and medium sized enterprises. However, they struggle to get the appropriate finance to start and to grow their enterprises. A report that Ashden published with Christian Aid found that it is enormously difficult for them to access finance in their early growth stage. Working capital and grants focused on growth, new programs and innovation need to be made accessible to them as they're at the vanguard of getting modern sustainable energy to those who need it the most in a cost effective way.
Blended finance — “the strategic use of development finance and philanthropic funds to mobilize private capital flows to emerging and frontier markets” — is a way to help address the clean energy funding gap by attracting capital from the private sector. Increasingly being integrated into development projects, blended finance from multiple sources often leads to funds being deployed as softer loans, guarantees, equity and grants for projects that would generally not be taken up by the private sector alone due to high project risks or technology costs.
By creating demand and bringing commercially viable and scalable solutions to market, SMEs can both meet customers’ needs and see sales grow dramatically. A highly efficient charcoal-burning stove, such as the one produced by BURN Manufacturing in Kenya, dramatically improves the health and wellbeing of its users, saves its users — who are almost all women — time and money, and the factory that manufactures the stoves has a workforce where over half are women. About one third of BURN’s sales of the Jikokoa™ stove are through partners like Equity Bank who provide credit to help low-income purchasers. Jikokoas are sold through more than 150 partners including banks and microfinance organizations, social distributors, and retail outlets ranging from supermarkets to small stores.
COP21 and beyond
As well as a high level of ambition and strong international coordination and collaboration at COP21, we need to see a commitment to investment in the right kind of energy infrastructure in order to promote green growth and international development. As respected climate economist Lord Stern suggests, to encourage capital expenditure for the sustainable urban infrastructure that we need, low-cost loans are very important to bring the right kind of climate finance forward. Financial instruments such as green bonds and risk-sharing between public and private institutions could also cut the cost of capital for sustainable growth, for instance by up to about a fifth for low-carbon electricity alone.
With the costs of renewable energies dramatically reducing and the cost of fossil fuel extraction increasing, it makes good financial sense to be investing in the former right now. Low carbon energy is also a key ingredient for climate change mitigation, which in turn is crucial if we are to overcome poverty. We need the outcomes of the COP21 negotiations to be the turning point that dramatically accelerates the uptake and rollout of cost-effective modern sustainable energies.
The road from Paris may not be entirely smooth but it needs to be optimistic and a catalyst for creating the dramatic shift in our energy systems that is needed for the sake of this planet and future generations.
Planet Worth is a global conversation in partnership with Abt Associates, Chemonics, HELVETAS, Tetra Tech, the U.N. Development Program and Zurich, exploring leading solutions in the fight against climate change, while highlighting the champions of climate adaptation amid emerging global challenges. Visit the campaign site and join the conversation using #PlanetWorth.
