Pairing concessional finance investments with technical assistance has supported significant progress toward renewable energy and energy access in low-income countries. This emerged from an independent evaluation* of the Scaling up Renewable Energy Program in Low-income Countries (SREP), an ambitious initiative the Climate Investment Funds launched in 2010.
The report, “Evaluation of Scaling up Renewable Energy Program in Low-income Countries,” provides insights into how SREP supports large-scale and transformational clean energy projects in challenging country contexts, particularly low-income, low-capacity, fragile, and conflict-affected states. These countries, the report points out, “typically require a higher level of concessional and grant finance, and a greater focus on capacity building and technical assistance support,” to achieve their sustainable energy transition and development goals.
Climate finance gap
In 2009, recognizing the urgent need for climate action, developed countries committed to mobilizing $100 billion per year in climate finance, by 2020, to support developing countries. In 2020, however, total climate finance was estimated at $83.9 billion, falling around $20 billion short of the target and hopelessly short of actual estimations which are in the trillions. This profound gap means that to be truly effective, multilateral and bilateral sources must use the available public climate finance to trigger transformations in client countries that will catalyze larger volumes of finance, especially from the private sector.
It also means that for transformations to be truly sustainable, more of this climate finance − channeled to developing countries – must be provided as concessional and grant-based funding. A recent report by Oxfam concludes that: “The world’s poorest countries, many of whom are already grappling with unsustainable debts, should not be forced to take out loans to respond to a climate crisis not of their making.”
This evaluation demonstrates how SREP has been filling in this gap by supporting low-income countries and Small Island Developing States (SIDS) to advance their sustainable energy agenda. Lessons and best practices emerging from SREP are becoming more relevant as countries plan and fund their sustainable energy transitions in the context of both internal and external challenges.
CIF’s transformational climate finance
The evaluation finds that SREP provided value by mobilizing climate finance and pioneering renewable energy and energy access investments in low-income countries, often underserved in terms of concessional finance or that struggle to attract it. SREP’s concessional and grant financing also facilitated country and multilateral development bank (MDB) support for many first-of-a-kind projects, pursuing technology approaches that carried significant financial or business risk. As the evaluation notes, “the ‘sweetener’ of grant financing was crucial in encouraging countries to pursue first- and early-mover investments.” The report points to countries such as Mali, where SREP sought to mobilize the first private investment in grid-connected solar power, or Kenya and Armenia for pioneering geothermal projects.
However, as the evaluation notes, SREP’s “level of risk appetite and ambition had implications for the speed and scale of delivery,” including attracting private sector funding. While SREP took on the risk in many challenging markets, it faced its own difficulties that come with increased risk. Nevertheless, progress in pipeline development, investment mobilization, and strengthening enabling environments suggests that more results are expected to emerge and strengthen as the portfolio matures.
Technical assistance
The focus on technical assistance and capacity building to complement investments was another defining feature of SREP that initiated and drove sustainable energy transformations in low-income countries.
SREP projects used technical assistance grants to support regulatory and market reforms, institutional strengthening, and improved capacity of relevant stakeholders. Such improvements are critical: not only can they help a project achieve its higher-level results, but they can also enhance the prospects of adaptive sustainability by paving the way for more long-term, systemic, and sustainable outcomes.
In the Maldives, for example, technical assistance has been a core component of SREP projects. Early SREP capacity building supported the development of solar (hybrid) grids while technical assistance was provided on key licensing and technical regulations, renewable energy investment, and sector roadmap development. Projects co-financed by SREP, such as the World Bank’s Accelerating Sustainable Private Investments in Renewable Energy and the Asian Development Bank’s Maldives Outer Island Sustainable Electricity Development, achieved significant results in improved clean energy access, better enabling environments, increased investment mobilization, as well as laying the foundations for further scaling.
SREP was designed to demonstrate the economic, social, and environmental viability of low-carbon development pathways in the energy sector. In the current global climate landscape, the need for concessional and grant funding to accelerate the clean energy transition is urgent and has become even more pronounced post-COVID-19. Low-income countries are facing rising levels of public debt as they seek to address the impacts of the pandemic and soaring food and energy prices resulting from the war in Ukraine. SREP has had both successes and setbacks since its launch more than a decade ago, but it still occupies a unique place among climate funds, as the independent evaluation report emphasizes:
“In this 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 a programmatic approach encompassing investment and technical assistance.”
Learn more
*The CIF Evaluation and Learning Initiative commissioned the independent report to take stock of SREP’s challenges and achievements to date, and as a learning opportunity to further enhance innovative climate investments.