This study aims to present the risks of renewable energy investment in two sample emerging economies, one in Asia (Indonesia) and the other in Africa (South Africa), from the perspective of financiers as well as other important stakeholders such as policymakers and developers.
Developing an understanding of the risks constraining renewable energy investment is essential to design strategic de-risking interventions aimed at increasing the flow of private capital into the sector. Most of the world’s increase in energy demand is expected to come from developing and emerging economies, driven by rising incomes and electrification rates. Therefore, it is critical to understand and underwrite the risk in countries where the transition pathway includes adding renewable energy capacity, even as there are competing investment opportunities being offered in conventional energy markets. Further, renewable energy deployments in developing countries face higher risks compared to developed countries for a variety of reasons including lower institutional capacities or support for deployment, fewer bankable projects, and insufficient domestic financing capacity.