A new report published by the World Bank’s Energy Sector Management Assistance Programme (ESMAP) and the International Finance Corporation (IFC) finds that concessional climate financing is essential to unlock offshore wind in emerging markets.
The report, titled ‘The Role of Concessional Climate Finance in Accelerating the Deployment of Offshore Wind in Emerging Markets’ was published on September 6 and estimates that $15-billion in concessional climate financing, consisting of both grants and loans, could catalyse offshore wind deployment in up to ten emerging market countries.
Concessional climate financing for offshore wind investments, delivered through existing channels, could directly avoid 416-million metric tons of greenhouse-gas emissions over the life of the projects, the report indicates.
“Right now, there is the right technology, growing government ambition and huge private sector interest to build up new offshore wind markets. But the development of offshore wind in emerging markets will not happen overnight – nor will it happen without support.
“Our new analysis sets a benchmark of the financing needs to unlock offshore wind’s benefits in emerging markets across the world,” says ESMAP manager Gabriela Elizondo Azuela.
Although the cost of offshore wind is said to have decreased considerably over the past decade, there will be an initial cost premium when developing offshore wind in emerging markets owing to a variety of risks and constraints in establishing a new market.
Concessional climate finance is a potential solution to help countries overcome this initial cost barrier to help reduce costs for future projects and lay the foundation for the development of successful offshore wind markets.
According to the report, concessional climate financing, comprising $4.8-billion of concessional public debt, $8.3-billion of concessional private debt and $2.5-billion in grants over an initial five-year period, would enable the development of ten pathfinder projects of between 500 MW and 1 000 MW each, driving down the average levelised cost of electricity from $100/MWh to $70/MWh.
The report is part of the World Bank’s ESMAP and the IFC’s programme to accelerate the deployment of offshore wind in emerging markets.