Financial Instruments & Support for Renewable Energy - Revision history

Ranisha: /* Further Information */

2017-03-22T16:02:34Z

‎Further Information

Laura Jakobeit: /* Further Information */

2014-11-14T11:54:04Z

‎Further Information

Wiki Gardener at 11:00, 6 October 2014

2014-10-06T11:00:55Z

Ranisha: /* Results-Based Finance */

2014-08-11T13:57:28Z

‎Results-Based Finance

Fungai Cecilia Sandamu at 14:52, 28 August 2013

2013-08-28T14:52:49Z

Fungai Cecilia Sandamu at 14:52, 28 August 2013

2013-08-28T14:52:15Z

Show changes

Fungai Cecilia Sandamu at 14:22, 27 August 2013

2013-08-27T14:22:39Z

Fungai Cecilia Sandamu at 14:14, 27 August 2013

2013-08-27T14:14:45Z

Fungai Cecilia Sandamu at 14:12, 27 August 2013

2013-08-27T14:12:17Z

Fungai Cecilia Sandamu at 14:11, 27 August 2013

2013-08-27T14:11:38Z

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 *[[Revolving Funds|Revolving Funds]]
-*[[DEG_Call_for_Proposals_"Climate_partnerships_with_the_private_sector"|DEG Call for Proposals "Climate partnerships with the private sector"]]
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@@ Line 98: / Line 98: @@
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 = Further Information =
-*[[Revolving Funds|Revolving Funds]]<br/>
+*[[Revolving Funds|Revolving Funds]]
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 = References =

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 = Financial Instruments =
-There are various types of financing instruments that exist to support the scaling up of '''renewable energy technologies (<span data-scaytid="3" data-scayt_word="RETs">RETs</span>)'''. The choice and availability of instruments largely depends on if the project is being undertaken in a developed or developing country, and also on the stage of development of the technologies or projects in question. These can be broadly grouped into those that can be used in addressing financing barriers; those used to address the risks of RET investments; and those that address both simultaneously.<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds. Available at: http://bit.ly/UFHIPy">The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds. Available at: http://bit.ly/UFHIPy</ref>
+There are various types of financing instruments that exist to support the scaling up of '''renewable energy technologies (<span data-scayt_word="RETs" data-scaytid="3">RETs</span>)'''. The choice and availability of instruments largely depends on if the project is being undertaken in a developed or developing country, and also on the stage of development of the technologies or projects in question. These can be broadly grouped into those that can be used in addressing financing barriers; those used to address the risks of RET investments; and those that address both simultaneously.<ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds. Available at: http://bit.ly/UFHIPy">The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds. Available at: http://bit.ly/UFHIPy</ref>
 These financial instruments can be distinguished by the level of risk assumed by the the entity funding the instrument concerned, and also by the level of leverage involved. The figure below illustrates this. The financial instruments in the figure are organised on the horizontal axis by their primary focus: whether to address underdeveloped financial markets, the risks and costs of RETs or both. The vertical axis organises the instruments by the level of risk and leverage associated with their use <ref name="The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds. Available at: http://bit.ly/UFHIPy">The World Bank, 2013. Financing Renewable Energy - Options for Developing Financing Instruments Using Public Funds. Available at: http://bit.ly/UFHIPy</ref>
-<div class="page" title="Page 21"><div class="layoutArea"><div class="column">
+<div title="Page 21" class="page"><div class="layoutArea"><div class="column">
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 = On-Grid Renewable Energy Finance =
-On-grid renewables projects face the key issue of how to create a price support mechanism that provides stability and predictability over the medium and long term. This can reduce the risk premium in the cost of capital, which in turn can increase the amount of investment in renewables and lower the price that consumers have to pay for RE. <span style="font-size: 0.85em;">For on-grid projects the finance sequence is incomplete, and these gaps can often onl be filled with niche financial products. Some of theses products already exist, while some need to be created. The figure below shows which types of finance are often secured by on-grid projects, which types are occassionaly secured, and the current gaps and barriers in the finance sequence <ref name="Sonntag-O’Brien, V., Basel Agency for Sustainable Energy, Usher, E. & UN Environment Programme, 2004. Mobilising Finance for Renewable Energies - Thematic Background Paper, International Conference for Renewable Energies. Bonn, Renewables 2004.">Sonntag-O’Brien, V., Basel Agency for Sustainable Energy, Usher, E. & UN Environment Programme, 2004. Mobilising Finance for Renewable Energies - Thematic Background Paper, International Conference for Renewable Energies. Bonn, Renewables 2004.</ref>.</span>
+On-grid renewables projects face the key issue of how to create a price support mechanism that provides stability and predictability over the medium and long term. This can reduce the risk premium in the cost of capital, which in turn can increase the amount of investment in renewables and lower the price that consumers have to pay for RE. <span style="font-size: 0.85em">For on-grid projects the finance sequence is incomplete, and these gaps can often onl be filled with niche financial products. Some of theses products already exist, while some need to be created. The figure below shows which types of finance are often secured by on-grid projects, which types are occassionaly secured, and the current gaps and barriers in the finance sequence <ref name="Sonntag-O’Brien, V., Basel Agency for Sustainable Energy, Usher, E. & UN Environment Programme, 2004. Mobilising Finance for Renewable Energies - Thematic Background Paper, International Conference for Renewable Energies. Bonn, Renewables 2004.">Sonntag-O’Brien, V., Basel Agency for Sustainable Energy, Usher, E. & UN Environment Programme, 2004. Mobilising Finance for Renewable Energies - Thematic Background Paper, International Conference for Renewable Energies. Bonn, Renewables 2004.</ref>.</span>
 <br/>
-Various forms of capital are involved in the financial sequence/'continuum' of grid-connected RETs as shown in the figure below. The conventional power sector financial sequence includes these sources of capital:
+Various forms of capital are involved in the financial sequence/'continuum' of grid-connected RETs as shown in the figure below. <u>The conventional power sector financial sequence includes these sources of capital:</u>
 *Equity Finance
 *Debt Finance
 *Corporate or Project Finance
 *Guarantees
-*Insurance<ref name="Sonntag-O’Brien, V., Basel Agency for Sustainable Energy, Usher, E. & UN Environment Programme, 2004. Mobilising Finance for Renewable Energies - Thematic Background Paper, International Conference for Renewable Energies. Bonn, Renewables 2004.">Sonntag-O’Brien, V., Basel Agency for Sustainable Energy, Usher, E. & UN Environment Programme, 2004. Mobilising Finance for Renewable Energies - Thematic Background Paper, International Conference for Renewable Energies. Bonn, Renewables 2004.</ref><span style="line-height: 1.5em; font-size: 0.85em;">.</span>
+*Insurance<ref name="Sonntag-O’Brien, V., Basel Agency for Sustainable Energy, Usher, E. & UN Environment Programme, 2004. Mobilising Finance for Renewable Energies - Thematic Background Paper, International Conference for Renewable Energies. Bonn, Renewables 2004.">Sonntag-O’Brien, V., Basel Agency for Sustainable Energy, Usher, E. & UN Environment Programme, 2004. Mobilising Finance for Renewable Energies - Thematic Background Paper, International Conference for Renewable Energies. Bonn, Renewables 2004.</ref><span style="line-height: 1.5em;  font-size: 0.85em">.</span>
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 == Equity Finance ==
-<span style="background-color: rgb(255, 255, 255);"></span>[[Equity Finance|► Read about Equity Finance here]]<br/>
+<span style="background-color: rgb(255, 255, 255)"></span>[[Equity Finance|► Read about Equity Finance here]]<br/>
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 == Debt Finance ==
-<span style="background-color: rgb(255, 255, 255);">[[Debt Finance|► Read about Debt Finance here]]</span>
+<span style="background-color: rgb(255, 255, 255)">[[Debt Finance|► Read about Debt Finance here]]</span>
-<div><div class="page" title="Page 36"><div class="layoutArea"></div></div></div>
+<div><div title="Page 36" class="page"><div class="layoutArea"></div></div></div>
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-== <span style="font-size: 19.09090805053711px; line-height: 23.636363983154297px;">Project Finance</span> ==
+== <span style="font-size: 19.09090805053711px;  line-height: 23.636363983154297px">Project Finance</span> ==
-<span style="background-color: rgb(255, 255, 255);">[[Project Finance|► Read about Project Finance here]]</span>
+<span style="background-color: rgb(255, 255, 255)">[[Project Finance|► Read about Project Finance here]]</span>
-−
-<br/>
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 [[File:Off-grid RE Financing.PNG|thumb|center|650px|Source: Sonntag-O’Brien, V., Basel Agency for Sustainable Energy, Usher, E. & UN Environment Programme, 2004. Mobilising Finance for Renewable Energies - Thematic Background Paper, International Conference for Renewable Energies. Bonn, Renewables 2004.]]<br/>
 = Results-Based Finance =
-[[Results-Based_Financing|► Read about Results-Based Finance here]]<br/>
+[[Results-Based Financing|► Read about Results-Based Finance here]]<br/>
 <br/>
 = Microfinance =

@@ Line 80: / Line 80: @@
 [[File:Off-grid RE Financing.PNG|thumb|center|650px|Source: Sonntag-O’Brien, V., Basel Agency for Sustainable Energy, Usher, E. & UN Environment Programme, 2004. Mobilising Finance for Renewable Energies - Thematic Background Paper, International Conference for Renewable Energies. Bonn, Renewables 2004.]]<br/>
 = Results-Based Finance =
-[[Results-based Financing|► Read about Results-Based Finance here]]<br/>
+[[Results-Based_Financing|► Read about Results-Based Finance here]]<br/>
 <br/>
 = Microfinance =

@@ Line 45: / Line 45: @@
 == Equity Finance ==
-<span style="background-color: rgb(255, 255, 255);"></span>[[Equity_Finance|► Read about Equity Finance here]]<br/>
+<span style="background-color: rgb(255, 255, 255);"></span>[[Equity Finance|► Read about Equity Finance here]]<br/>
 == Debt Finance ==
-<span style="background-color: rgb(255, 255, 255);">[[Debt_Finance|► Read about Debt Finance here]]</span>
+<span style="background-color: rgb(255, 255, 255);">[[Debt Finance|► Read about Debt Finance here]]</span>
 <div><div class="page" title="Page 36"><div class="layoutArea"></div></div></div>
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-=== <span style="font-size: 19.09090805053711px; line-height: 23.636363983154297px;">Project Finance</span> ===
+== <span style="font-size: 19.09090805053711px; line-height: 23.636363983154297px;">Project Finance</span> ==
-<span style="background-color: rgb(255, 255, 255);">[[Project_Finance|► Read about Project Finance here]]</span>
+<span style="background-color: rgb(255, 255, 255);">[[Project Finance|► Read about Project Finance here]]</span>
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 Usually, project preparation for on-grid RE projects is carried out by large energy companies or specialised project-development companies. Energy companies finance the project preparation phase from operational budgets. On the other hand, specialised companies finance this phase through private finance, capital markets or with risk capital from venture capitalists, private equity funds, or strategic investors.
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 [[File:Off-grid RE Financing.PNG|thumb|center|650px|Source: Sonntag-O’Brien, V., Basel Agency for Sustainable Energy, Usher, E. & UN Environment Programme, 2004. Mobilising Finance for Renewable Energies - Thematic Background Paper, International Conference for Renewable Energies. Bonn, Renewables 2004.]]<br/>
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-== Subordinated Debt/Mezzanine Finance ==
+=== Subordinated Debt/Mezzanine Finance ===
 This type of lending sits between the top level of senior bank debt and the equity ownership of a project or company. Mezzanine loans take more risk than senior debt because regular repayments of the mezzanine loan are made after those for senior debt, however, the risk is less than equity ownership in the company. Mezzanine loans are usually of shorter duration and more expensive for borrowers, but pays a greater return to the lender (mezzanine debt may be provided by a bank or other financial institution). A RE project can seek mezzanine finance if the amount of bank debt it can access is insufficient: the mezzanine loan may be a cheaper way of replacing some of the additional equity that would be needed in that situation, and therefore can improve the cost of overall finance (and thus the rate of return for owners) <ref name="Justice, S., Hamilton, K., Sonntag-O’Brien, V., UNEP Sustainable Energy Finance Initiative., Liebreich, M., Greenwood, C., & Bloomberg New Energy Finance. Private Financing of Renewable Energy - A Guide for Policymakers. 2009.">Justice, S., Hamilton, K., Sonntag-O’Brien, V., UNEP Sustainable Energy Finance Initiative., Liebreich, M., Greenwood, C., & Bloomberg New Energy Finance. Private Financing of Renewable Energy - A Guide for Policymakers. 2009. </ref>.
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 = Further Information =
-*[[Revolving_Funds|Revolving Funds]]<br/>
+*[[Revolving Funds|Revolving Funds]]<br/>
 <br/>

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 == Project Finance ==
-Project Finance is debt that is borrowed for a specific project. The amount of debt made available is linked to the revenue that the project will generate over a period of time, as this is the means of paying back the debt. This amount is usually adjusted to refelct inherent risks such as the production and sale of power. Should there be a problem with repaying the loan, the banks will establish firts 'charge' or claim over the assets of a business. The first tranche of debt to be repaid from a project is called 'senior debt' and is described in detail below.<ref name="Justice, S., Hamilton, K., Sonntag-O’Brien, V., UNEP Sustainable Energy Finance Initiative., Liebreich, M., Greenwood, C., & Bloomberg New Energy Finance. Private Financing of Renewable Energy - A Guide for Policymakers. 2009. ">Justice, S., Hamilton, K., Sonntag-O’Brien, V., UNEP Sustainable Energy Finance Initiative., Liebreich, M., Greenwood, C., & Bloomberg New Energy Finance. Private Financing of Renewable Energy - A Guide for Policymakers. 2009. </ref>
+Project Finance is debt that is borrowed for a specific project. The amount of debt made available is linked to the revenue that the project will generate over a period of time, as this is the means of paying back the debt. This amount is usually adjusted to refelct inherent risks such as the production and sale of power. Should there be a problem with repaying the loan, the banks will establish firts 'charge' or claim over the assets of a business. The first tranche of debt to be repaid from a project is called 'senior debt' and is described in detail below.<ref name="Justice, S., Hamilton, K., Sonntag-O’Brien, V., UNEP Sustainable Energy Finance Initiative., Liebreich, M., Greenwood, C., & Bloomberg New Energy Finance. Private Financing of Renewable Energy - A Guide for Policymakers. 2009.">Justice, S., Hamilton, K., Sonntag-O’Brien, V., UNEP Sustainable Energy Finance Initiative., Liebreich, M., Greenwood, C., & Bloomberg New Energy Finance. Private Financing of Renewable Energy - A Guide for Policymakers. 2009. </ref>
 Usually, project preparation for on-grid RE projects is carried out by large energy companies or specialised project-development companies. Energy companies finance the project preparation phase from operational budgets. On the other hand, specialised companies finance this phase through private finance, capital markets or with risk capital from venture capitalists, private equity funds, or strategic investors.
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-{| border="0" cellspacing="1" cellpadding="5" style="font-size: 13.63636302947998px; width: 1298.1817626953125px;"
+{| border="0" cellspacing="1" cellpadding="5" style="font-size: 13.63636302947998px; width: 100%;"
 |-
 | colspan="3" style="text-align: center; background-color: rgb(79, 129, 189);" | <font color="#ffffff"><span style="line-height: 20.39583396911621px;">'''Senior Debt'''</span></font>
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 == Subordinated Debt/Mezzanine Finance ==
-This type of lending sits between the top level of senior bank debt and the equity ownership of a project or company. Mezzanine loans take more risk than senior debt because regular repayments of the mezzanine loan are made after those for senior debt, however, the risk is less than equity ownership in the company. Mezzanine loans are usually of shorter duration and more expensive for borrowers, but pays a greater return to the lender (mezzanine debt may be provided by a bank or other financial institution). A RE project can seek mezzanine finance if the amount of bank debt it can access is insufficient: the mezzanine loan may be a cheaper way of replacing some of the additional equity that would be needed in that situation, and therefore can improve the cost of overall finance (and thus the rate of return for owners) <ref name="Justice, S., Hamilton, K., Sonntag-O’Brien, V., UNEP Sustainable Energy Finance Initiative., Liebreich, M., Greenwood, C., & Bloomberg New Energy Finance. Private Financing of Renewable Energy - A Guide for Policymakers. 2009. ">Justice, S., Hamilton, K., Sonntag-O’Brien, V., UNEP Sustainable Energy Finance Initiative., Liebreich, M., Greenwood, C., & Bloomberg New Energy Finance. Private Financing of Renewable Energy - A Guide for Policymakers. 2009. </ref>.
+This type of lending sits between the top level of senior bank debt and the equity ownership of a project or company. Mezzanine loans take more risk than senior debt because regular repayments of the mezzanine loan are made after those for senior debt, however, the risk is less than equity ownership in the company. Mezzanine loans are usually of shorter duration and more expensive for borrowers, but pays a greater return to the lender (mezzanine debt may be provided by a bank or other financial institution). A RE project can seek mezzanine finance if the amount of bank debt it can access is insufficient: the mezzanine loan may be a cheaper way of replacing some of the additional equity that would be needed in that situation, and therefore can improve the cost of overall finance (and thus the rate of return for owners) <ref name="Justice, S., Hamilton, K., Sonntag-O’Brien, V., UNEP Sustainable Energy Finance Initiative., Liebreich, M., Greenwood, C., & Bloomberg New Energy Finance. Private Financing of Renewable Energy - A Guide for Policymakers. 2009.">Justice, S., Hamilton, K., Sonntag-O’Brien, V., UNEP Sustainable Energy Finance Initiative., Liebreich, M., Greenwood, C., & Bloomberg New Energy Finance. Private Financing of Renewable Energy - A Guide for Policymakers. 2009. </ref>.
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 = Off-Grid Renewable Energy Finance =
 [[File:Off-grid RE Financing.PNG|thumb|center|650px|Source: Sonntag-O’Brien, V., Basel Agency for Sustainable Energy, Usher, E. & UN Environment Programme, 2004. Mobilising Finance for Renewable Energies - Thematic Background Paper, International Conference for Renewable Energies. Bonn, Renewables 2004.]]<br/>
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 = Further Information =
-*[https://energypedia.info/Revolving Funds Revolving Funds]
+*[[Revolving_Funds|Revolving Funds]]<br/>
 <br/>