The Climate Investment Funds (CIF) brings to COP27 nearly 15 years of experience in supporting energy transition in developing countries. Three of CIF’s energy experts discuss the state of play in this transition, explore what CIF has learned over its years in operation, and reveal how climate finance is driving the transition to cleaner energy: Abhishek Bhaskar, Lead for the ACT Investment Program and the JET Partnership; Daniel Morris, Clean Energy Lead; and Jimmy Pannett, Scaling-up Renewable Energy Program (SREP) in Low-Income Countries Lead, and Renewable Energy Integration (REI) co-Lead.
How does CIF approach the transition to clean energy?
Abhi: Concessional finance has several demonstrated roles in the transition to clean energy. One is lowering the cost of financing. In India for example, CIF investment in the rooftop solar market uptake lowered the cost by 1.5-2 percentage points, which helped open up the market by alleviating key barriers.
Second is to mitigate risks, both real and perceived. For example, geothermal energy carries a front-loading risk, which is essentially a resource risk. Simply put, investment is needed to test whether there are resources underground or not. We have a tailored product, the Contingent Recovery Grant, which does just that. This approach to mitigating risks has helped open markets in Latin America and the Caribbean, in East Asia and Turkey and in Africa.
A third role is that we bring in the private sector, catalyzing their investments and reducing the risk new technologies pose for them.
And a fourth is that we are opening the market for clean energy and its associated technologies and even creating a new sort of market. CIF’s biggest unique selling point is to take the limited public money, pilot different models guided by priorities that come from the ground level through the countries and the multilateral development banks (MDBs) and ultimately mobilize private sector participation to scale up impact on the ground.
What is the role of climate finance in driving the adoption of clean energy?
Jimmy: The Scaling Up Renewable Energy Program (SREP) is a good example of how we support the energy transition and in particular the adoption of clean energy. SREP fills a niche for low-income countries that do not get access to finance for renewable energy programs.
The program mobilizes climate finance and pioneering renewable energy and energy access investments in low-income countries, which are often underserved, or struggle to attract concessional finance. SREP’s concessional and grant financing also facilitates country and MDB support for many first-of-a-kind projects, pursuing technology approaches that carry significant financial or business risk. This helps developing countries tackle the issues of adding renewable energy to their grid systems – often when these systems are at a relatively early stage in their development – helping them adopt clean energy from the start.
A recent independent SREP evaluation found that in the broader landscape of climate funds, SREP remains unique in its dedicated support for sustainable energy transitions in low-income (and often fragile and conflict-affected) countries through the programmatic approach, which encompasses both investment and technical assistance. Some countries have been adopting the programmatic approach as their own sector strategy for dealing with renewable energy and moving the sector forward.
How does the energy transition contribute to climate change adaptation and resilience?
Daniel: As places get warmer and weather gets more variable, you're going to see a need for more energy – where there’s an increase in the use of air conditioning, for example. To keep nations from falling back on fossil fuel infrastructure, renewable infrastructure that can compete and eventually overtake that needs to be established. Secondly, as the war in Ukraine has caused an energy crisis in Europe, fossil fuel supply disruptions are going to become more commonplace. Helping countries to move away from relying on these commodities helps them prepare to adapt to climate change.
Jimmy: A good example of adaptation in the energy sector is hydropower, where hydrological cycles are not as reliable as they once were. Some countries which were highly dependent on hydro energy are faced with difficulties because of climate change. These countries have to adapt by adding more renewable energies. Brazil is an example of a country where their energy matrix is being adapted to add more wind and solar.
What does a successful CIF intervention look like?
Abhi: Our support in scaling up the energy efficiency program in Türkiye is a good example of our holistic approach. There was no market for energy efficiency products or projects in 2010. CIF provided technical assistance and grant funding, which helped inform policies and build capacity. On the investment side, working through financial intermediaries, we created products that, for the first three years, helped scale the market. The next three years removed us from the equation as there was no longer a need or requirement for a public finance source like CIF concessional funds to back that market - the market survived on its own. I think that’s the real value we bring to the table. In countries where fossil fuels continue to dominate, securing the transformation towards a low-carbon future requires fast tracking of investments that help reduce energy consumption, while promoting the development of renewable energy. The Investment Plan for Türkiye adopted this strategy. The overall coherence of the programmatic approach provides a strong model for continuing efforts that support transformation of Turkey’s energy sector.
What are some of the most exciting recent developments in the transition to clean energy?
Daniel: One of the most exciting developments is the path of cost curves that we've seen in technology over the past decade. For example, solar went from being one of the most expensive technology sources to now the least expensive in most places in the world. Similarly, we're seeing storage technologies follow a similar cost curve, which means hopefully in a decade they will undeniably be a good option, if not the best option. And when you pair renewables with storage, you can finally help get past the variable nature of renewables and discussions around base load power.
In parallel, recognition from policymakers that electrification is the way to go in a lot of places to get us on a zero-carbon path is exciting because of innovation opportunities in areas like integration, transportation, and mobility.
Abhi: Along with technology advancements, innovation in delivery models is also exciting. Accelerating Coal Transition Program (ACT) and the Just Energy Transition Partnership (JETP) initiatives stand out as unique implementation modalities that are being tested currently. On the ACT side, we have a three-pillar approach, supporting reforms, building technical and institutional capacities that help governments develop transformation strategies; supporting socioeconomic measures to minimize impacts of transition on communities, and reclaiming and repurposing legacy infrastructure. With JETP, we are testing how initiatives like the ACT Program can catalyze a coordinated approach led by developed countries in pursuit of climate ambitions as set out by developing countries. These very coordinated long-term approaches to addressing countries' transition priorities are important pilots that are going to inform the energy transition strategies globally.