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Research Report

Unlocking climate finance for decentralised energy access

Neha Rai
Sarah Best
Marek Soanes
Copyright Date: Jun. 1, 2016
Pages: 48
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Table of Contents


    • (pp. 10-13)

      Today 1.1 billion people lack access to electricity (15 per cent of the world’s population) and 2.9 billion lack access to modern cooking fuels (41 per cent of the population) (IEA and World Bank 2015). The access deficit is overwhelmingly rural⁶ and concentrated in sub-Saharan Africa and South Asia, as well as East Asia for cooking.⁷

      The IEA and SE4All estimate that nearly USD 50 billion a year⁸ is needed between now and 2030 to achieve universal access to energy (IEA, 2011, IEA, 2012, SE4ALL, 2015). These financing estimates are only indicative and other studies have calculated both higher and...

    • (pp. 14-19)

      There are several different estimates on the investment needs to achieve universal energy access. The IEA and SE4All calculate that nearly USD 50 billion a year is needed between now and 2030 (IEA 2011; 2012; SE4All 2015). This research uses the IEA/SE4All figures as a reference point because they have a lot of traction in public debates. However, it is important to recognise that these figures are only a broad estimate and that other studies have calculated the amount needed to be either much lower or higher. Table 2 provides a summary of different estimates on the overall investment needs.14...

    • (pp. 20-27)

      Climate finance implies the flow of public and private finance channelled by a range of actors and institutions towards adaptation and mitigation actions. Countries need significant amounts of climate finance to both reduce greenhouse gas emissions and also cope with climate change. To address these needs, the Cancun Agreement sought commitments in the range of USD 100 billion ‘new and additional’ climate finance to developing countries annually by 2020. Since then, countries have committed USD 30 billion between 2010 and 2012 as Fast Start Finance (FSF), with most developed nations managing to exceed their funding targets in the early days....


    • (pp. 28-30)

      The factors that stop climate finance from being channelled toward investments in decentralised energy access can be divided two types:

      General barriers that hold back all types of public and private investment from reaching low income energy markets and decentralised, renewable energy in developing countries. These barriers are very wide-ranging and cover issues such as market development, maturity of business models, and political risk factors.

      Specific barriers within the structure and practice of climate spending, for example in terms of particular funds’ goals, instruments and governance, or countrypreparedness for receiving climate finance.

      There is significant overlap between the two: for...

    • (pp. 31-34)

      A wide range of countries are designing mechanisms to incentivise decentralised energy access. The examples from Nepal and Bangladesh which are profiled here identify two main public financing channels for promoting decentralised energy investments:

      Special purpose agency

      Central and national development banks.

      Both use specific models to incentivise the flow of finance to low income markets, and a combination of financial intermediaries and instruments to promote inclusive investment. The main features are summarised below.

      In Bangladesh, around two-fifths of the population is not connected to the grid. Currently only 62 per cent of the population has access to electricity, and...

  3. (pp. 35-37)

    Our research has investigated to what extent international public finance for climate change is targeting decentralised energy access for the poor.

    The analysis shows that while the energy sector is a big recipient of climate funds, these are mainly going to large-scale grid-connected projects in middle income countries and only a small share is going towards decentralised energy. In fact, just over 3 per cent (USD 475 million) of the total USD 14.1 billion in approved climate finance (2003–2015) has been approved for decentralised energy. While the precise finance needs for decentralised energy are still being debated, the current...