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Big role for Brics development bank as RE investment falls short

The New Development Bank (NDB), created in 2014 by the Brics group (Brazil, Russia, India, China and South Africa) could have an important role in guaranteeing the $177bn yearly investments the group would need to meet self-declared renewable energy targets over the next ten to 20 years, says a new report.

The study carried out by the US-based Institute for Energy Economics and Financial Analysis (IEEFA.org) comes as the NDB announces it is ready to offer $2.5bn in financing for 2017, adding to $811m already allocated mostly to renewable energy since its creation.

According to the study, the NDB, in addition to government funds, would be essential to boost private financing, which needs more transparency and detailed data on projects. It also needs to help overcome uncertainty about macroeconomics in less developed debt and capital markets.

“Public funds can help remove these impediments partially or completely and can in turn attract significant private investment,” the report said.

“It can safely be assumed that the public development funding can catalyse about four times private investment in the clean energy initiatives in the Brics countries,” IEEFA.org concluded.

In 2015 the gap between the $177m needed in investments in renewables and the amount invested by the five Brics nations was $51bn.

While South Africa invested $1.5bn more than its $3bn yearly target, China invested $102bn, some 18% less than the $124bn needed.

But Brazil, Russia and India registered significant shortfalls of $5bn, $10bn and $16bn respectively.

Brazil is by far the country with the most renewables capacity when large hydropower is included. But its efforts now need to be channelled to solar and wind which, by 2024, is projected to reach 32GW from 11GW, IEEFA.org said. With necessary large-hydro expansion, IEEFA.org estimates that Brazil will need $12bn yearly. It invested only $7bn in 2015.

Russia, which currently has only 16% of its energy supply from renewables, has a target of reducing emissions and increasing the participation of renewable power supply which would add 22GW of new renewables capacity by 2020, at a required yearly investment of $11bn. In 2014, the Russian federation invested only $1bn in renewables.

India plans to increase renewable energy supply to 40% by 2030, up from 17% currently. This indicates an increase in renewable capacity, including large hydro, by 128GW from 97GW currently, with a required investment of $21bn a year.

South Africa, the only country to invest more than the average yearly in 2015, plans to install 17.8GW of renewable capacity by 2030 up from 2.1GW now, with a needed investment of $3bn a year over the coming decade. In 2015 it invested  $4.5bn.

China has targets to increase its solar capacity from 43GW to 127GW and its wind capacity from 145GW to 250GW by 2020. IEEFA.org calculates the Asian giant will need an estimated yearly investment of $124bn in the same period, which also includes hydro. With 74% of its electricity supply from polluting sources, China invested $102bn in 2015.

Apart from overcoming the barriers to private investment, these developing nations would also have to overcome scepticism by most investment funds who don’t have clear mandates to invest in emerging markets despite decisions taken to increase overall investment in renewables, IEEFA.org concluded.

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