Strategic research provider, Bloomberg New Energy Finance (BloombergNEF), has said that global supply chain challenges will not affect the energy transition progress in 2023.
This was stated in BloombergNEF’s Energy Transition Investment Trends (ETIT) which was released recently.
The report said that the signs are good for 2023 and beyond, noting that policymakers are now shifting their attention away from vision and goals, and looking toward execution and delivery. The report said:
- “Growing policy support and the increasing competitiveness of clean energy technologies continue to underpin a rapid acceleration in the energy transition. While supply chain disruption and inflation have posed challenges, they do not appear to have put a meaningful dent in the speed of the energy transition.”
The report stated that annual global investment in energy transition technologies has exceeded $1 trillion for the first time, hitting a new record level of $1.11 trillion in 2022 and recording a 31% yearly gain. It also said developing economies still need to unlock a lot of ambitious goals in renewables.
The report further stated that renewable energy, which includes wind, solar, biofuels, and other sources, narrowly retained its position as the largest sector and achieved a new record of $495 billion in new project investments for the year under review.
Fossil fuels still important: The report also noted that regardless of growth in the renewable energy industry growth, fossil fuels still dominate the energy industry. According to BloombergNEF, the shift in investment towards clean energy is a historic change that is unlikely to be reversed, as low-carbon industries continue to grow. However, it should be noted that clean energy supply investments on their own are not yet a match for fossil fuels.
Projections for the future: In the report earlier cited, BloombergNEF highlighted the fact that to be on track for global net zero goals, energy transition and grid investment need to average $4.55 trillion between 2023 and 2030.
According to the report, countries must work to increase cooperation between the public and private sectors to mobilize the capital needed to contribute to the continuous growth of the global renewable energy industry. The following projections were made-
- Investments in electrified transport should be at $1.47 trillion per year
- Investments in renewable energy should be $1.18 trillion per year
- Investment in power grids should be $630 billion per year
The Nigerian context: In October 2022, Nairametrics reported that renewable energy industry experts at the West African Clean Energy & Environment (WACEE) Trade Fair & Conference 2022 identified a lack of data and currency mismatch as the main reasons investors are reluctant to invest in Nigeria’s off-grid power sector.
During the discourse, Eme Kponu, the Energy Market Advisor for the United States Agency for International Development (USAID) pointed out the fact that for Nigeria’s off-grid market to flourish, it is important to have concessionary financing which can be found in private-public partnerships.
According to Kponu, this happens when multilateral organizations work with the government and provide them with result-based grants that can reduce the risk and costs of such investments. She also noted that innovative financing models should be created for financiers, such that when they invest, they can get back their monies through a collateralized approach.
Why this matters: Although Nigeria currently has the highest rate of solar rural mini-grid deployment in sub-Saharan Africa, the Federal Government plans to establish regulations and policies, and set up institutions to minimize challenges associated with investing in the power sector. The renewable energy sector policies the FG is currently working on include;
- National renewable energy and energy efficiency policy
- National renewable energy action plan
- National energy efficiency action plan
- Sustainable energy for all action agenda
These policies have instruments with adequate fiscal incentives for potential investors, which include tax and duty waivers, competitive procurement of renewable energy projects, feed-in tariffs, and viability gap funding.
