Hydrogen is an emerging clean energy technology and energy vector with many proposed use cases. There will be uncertainties as regard to whether hydrogen will be the most economical clean energy solution for each of the proposed sectors and use cases considered in the analysis. Commercial risks also need to be taken into consideration.
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Blended finance is an international public–private funding mechanism aimed at mobilizing private funds for infrastructure investment in emerging and developing economies (EMDEs). However, expanding the scale of blended finance in clean energy will require innovative efforts from the international community to reform traditional development finance approaches.
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Two recent laws in the U.S. — the Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL) — provide historic levels of investment in climate action and low-carbon technologies, including for the development and deployment of clean hydrogen. With over $9.5 billion in funding from the BIL and enhanced tax credits in the IRA, the stage is set for a rapid increase in hydrogen production and use over the next 5-10 years.
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Investment in the U.S. renewable energy and energy storage sectors in 2022 remained steady at $54.8 billion, while still falling short of the annual investment needed to achieve the administration’s objective for power sector decarbonization by 2035. The IRA has already increased companies’ participation in the market in 2023. All developers and most investors plan to increase their activity in the U.S. renewable energy sector compared to last year. Eighty-four percent of investors plan to increase their renewable energy investment by 5% or more.
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The U.S. renewable energy market is poised for unprecedented growth. The passage of the Inflation Reduction Act (IRA) in August 2022 presents many opportunities for developers and investors. The IRA contains $369 billion in investments to boost clean energy and curb greenhouse gas emissions. One of the biggest wins is the IRA’s long-term extension and expansion of federal tax credits.
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In February 2023, the Indian government concluded the sale of Rs 160 billion in SGBs. The first tranche was released in January 2023, raising a total of Rs 80 billion. Of this, Rs 40 billion was raised for a five-year tenor (2028) at a yield of 7.1 per cent. The remaining Rs 40 billion was issued for a 10-year tenor (2033) at a yield of 7.29 per cent. The second tranche of SGBs was released in February 2023, also for Rs 80 billion, divided into two tranches of Rs 40 billion each.
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In 2021, banks financed 81% as much low-carbon energy supply as fossil fuels – for every dollar of bank financing activity supporting fossil-fuel supply, 0.8 supported low-carbon energy. While financing is a different metric to capital invested, this ratio broadly reflected real-economy investment activity at 0.9:1. For every dollar invested in fossil fuel supply in 2030 this should be matched with four times as much being invested in low-carbon energy supply.
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This paper, for illustration, examines an Archetype project, using 1GW of solar generation to produce 250 ktpa green ammonia be sold at a fixed price of USD 770/tonne (just sufficient to meet the assumed cost of capital). This compares with a 5-year average price of a little over USD 600/tonne but over USD 1,300/tonne. Assuming a 20-year offtake contract and a 15-year loan (with a 3- 27 year construction period), the Archetype project can support a DER of around 65 per cent.
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Under the Inflation Reduction Act (IRA) signed into law in 2022, solar projects may now opt for either an investment tax credit (ITC) or a production tax credit (PTC). What’s at stake for solar developers across the country is making a choice between an upfront investment-based incentive versus a production-based incentive applicable for the project’s first ten years of operations. This decision of whether to opt for PTC or ITC is a balancing act that depends on three primary considerations: expected capacity factor, investment (capital and financing) costs, and bonus eligibility.
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High fossil fuel prices have resulted in windfall profits for some energy companies. In fact, the profits of major oil, gas, coal and refinery companies in the first half of 2022 more than doubled from the same period last year, and discussion on windfall profits in the European Union has extended to electricity generators (including renewables-based ones) that can produce electricity at lower marginal costs than natural gas-fuelled power plants.
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APV plants have several benefits. One, there is dual use of land. There is common civil infrastructure such as fencing, lighting, land grading and storage. Two, there is a high yield of organic horticulture or floriculture due to controlled shading. Three, higher PV generation from bifacial panels is possible due to the elevated installation and higher albedo of the shade net/soil/ crop system. In addition, there is a benefit of possibly lowering panel temperatures due to crop evapotranspiration.
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The climate crisis is a defining challenge for Asia and the Pacific, which as a region is the most vulnerable to global warming, and a significant contributor to its cause. Yet, it is not all doom and gloom. Driven by a combination of climate change, finance, and digital technology —collectively known as ‘climate fintech’ — the financial services industry is preparing to address these challenges and capture opportunities for transitioning to a more sustainable economy.
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During H1, green bonds amounting to USD236 billion were added to the Climate Bonds GBDB as Q2 issuance (USD133 billion) picked up slightly compared to Q1 (USD103 billion). May was the busiest month (USD50 million) helped by several large deals from Austria, which priced its first sovereign green bond, a 2049 maturity (EUR4 billon/USD4.2 billion), TenneT (a four tranche deal worth EUR3.85 billion/ USD4.1 billion), and EIB (EUR4 billion/USD4.3 billion).
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For mature technologies, such as wind and solar, these incentives have the potential to supercharge an already-rapid pace of development. In our analysis, we estimate that the solar and wind LCOEs in 2030 with the IRA will be lower than those without it by 20%-35% and 38%-49%, respectively. However, despite the economic incentives, the IRA may encounter other development challenges facing renewable energy projects.
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Interestingly, mergers and acquisitions (M&A) continue to dominate India’s renewable energy financing, as is the case in many other large markets worldwide. In 2021-22, acquisitions contributed to more than 40 per cent of the total major renewable energy investments in the country. The M&A surge looks likely to continue in 2022-23 as well, with a few big acquisitions already announced and at advanced stages of completion. This article takes a deep dive into some of these acquisitions and assesses the growing renewable energy M&A landscape.
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A review of the impact and achievements of some trailblazing governments, corporates, investors, and civil society across EM&DEs over the last decade also reveals the opportunities that transitioning to a low-carbon economy can generate. In this piece, the authors provide Macquarie’s perspective on why supporting decarbonisation in EM&DEs is central to global climate change mitigation efforts.
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This study evaluates the total cost of ownership (TCO) of fuel cell electric trucks (FCETs), focusing on long-haul tractor-trailers, the highest-emitting HDV segment in the EU. The geographic scope of this study includes seven European countries—France, the United Kingdom, Germany, Italy, Spain, the Netherlands, and Poland—representing more than 75% of HDV registrations in the EU in 2020.
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Asia and the Pacific should consider launching its own transition funds. Transition funds can be launched by either governments or international organizations, such as multilateral development banks and other international financial institutions, or through international collaboration among different countries to reduce the funding costs and risks for these transactions, and help attract private sector investment.
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The passage of the Inflation Reduction Act (IRA) is a long-overdue step toward establishing a national green bank that will unleash tens of billions of public and private dollars for investment in clean energy and climate-resilient infrastructure in underserved communities. In addition to supporting economic development, these investments will reduce air pollution and improve the health and safety of communities.
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A green taxonomy is a list that classifies all business activities based on their contribution to environmental aims and thresholds. Launched in January 2022, Indonesia’s Green Taxonomy 1.0 has been designed mainly as a guidance, rather than a mandatory instrument. This, however, may expand in the future, for example, through mandatory disclosures of taxonomy-relevant investment portfolios.
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