Financing renewable energy: policy insights from Brazil and Nigeria

Creators: Isah, Abdulrasheed; Dioha, Michael O.; Debnath, Ramit; Abraham-Dukuma, Magnus C.; Butu, Hemen Mark

Abstract

Background: Achieving climate targets will require a rapid transition to clean energy. However, renewable energy (RE) firms face financial, policy, and economic barriers to mobilizing sufficient investment in low-carbon technologies, especially in low- and middle-income countries. Here, we analyze the challenges and successes of financing the energy transition in Nigeria and Brazil using three empirically grounded levers: financing environments, channels, and instruments. Results: While Brazil has leveraged innovative policy instruments to mobilize large-scale investment in RE, policy uncertainty and weak financing mechanisms have hindered RE investments in Nigeria. Specifically, Brazil's energy transition has been driven by catalytic finance from the Brazilian Development Bank (BNDES). In contrast, bilateral agencies and multilateral development banks (MDBs) have been the largest financiers of renewables in Nigeria. Policy instruments and public–private partnerships need to be redesigned to attract finance and scale market opportunities for RE project developers in Nigeria. Conclusions: We conclude that robust policy frameworks, a dynamic public bank, strategic deployment of blended finance, and diversification of financing instruments would be essential to accelerate RE investment in Nigeria. Considering the crucial role of donors and MDBs in Nigeria, we propose a multi-stakeholder model to consolidate climate finance and facilitate the country's energy transition.

Additional Information

This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/. The Creative Commons Public Domain Dedication waiver (http://creativecommons.org/publicdomain/zero/1.0/) applies to the data made available in this article, unless otherwise stated in a credit line to the data. The authors are grateful to Gregor Semieniuk for his comments and guidance in the early stages of the paper and for sharing valuable data used in the analysis. The authors acknowledge the support of colleagues in the Energy, Environment, and Resources Programme at Chatham House, London, and the feedback from participants at the 2019 conference of the Nigerian Association of Energy Economics. The authors are solely responsible for all errors in the paper. Open access funding provided by Swiss Federal Institute of Technology Zurich. This work was supported by the Foreign, Commonwealth and Development Office [Grant Number NGS-2017-266] at SOAS University of London; the German Academic Exchange Service [Grant Number 91784348] at University of Bonn; and the Bill & Melinda Gates Foundation through the Gates Cambridge Scholarship [Grant Number OPP1144], Quadrature Climate Foundation and Laudes Foundation at the University of Cambridge. Contributions. AI developed the research idea and wrote the first draft. MOD, RD, and HMB contributed to writing sections of the manuscript. MAD edited the draft. All authors reviewed the manuscript. All authors read and approved the final manuscript. Availability of supporting data. All data used are publicly available and carefully referenced in the paper. The authors declare no competing interests.

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