G20: Key Role of Energy Planning to Drive Just Transition Investment in Global South
Current global investment not only suffers from significant disparities between advanced economies and emerging markets and developing economies (EMDEs), but also with group of EMDEs, new IRENA reports commissioned by Brazil’s G20 presidency find.
Global transition-related investments exceeded USD 2 trillion for the first time in 2023. But current patterns of investment are skewed, with most financing going to advanced economies and a handful of large EMDEs such as China, India and Brazil. The rest of the world received just 10% of global investments in 2023.
Often, investment gaps are the result of risks like political instability, grid integration problems, regulatory barriers, unreliable off-taker arrangements, currency volatility and a shortage of skilled workers. They can drive the cost of capital, limit financial flows and hamper socioeconomic development eventually.
A strong national energy planning enables national institutions to collaborate effectively with international financial institutions, particularly in the areas of sectoral de-risking, blended finance and green bonds. National energy planning can help present a clear view of investment needs, minimise uncertainties and avoid ad hoc decisions. In return, it will create an environment for investment and ultimately mobilise financing and boost investors’ confidence.
Furthermore, risk mitigation could come through innovative de-risking instruments and financing schemes, accompanied by institutional reforms and collaboration. G20 can play a key role in enlarging the scale and scope of investments, particularly through their own direct bilateral funding and their capital contributions to multilateral development banks, development finance institutions, and other sources of concessional and grant-based sources.
International collaboration has a pivotal role to play, not only in terms of providing concessional loans and grants, but also in technical support, technology and knowledge transfer, policy advice, capacity building, and, particularly, robust energy planning.