Private sector investment in medium and large scale renewable energy projects in low- and middle-income countries has increased strongly during the past five years. Investment commitments to new renewable energy projects with private sector participation during 2005-2009 totaled $60 billion, approximately four times the level of investments during the previous five years. In terms of number of projects, 253 renewable energy projects with private sector participation reached financial closure during 2005-2009, 2.5 times more than in 2000-2004. In 2009 (the last year of available data), private activity in renewable energy reached a record high of 60 new projects for a total investment greater than $24 billion. In comparison, during that year traditional energy generation totaled 52 projects representing $30 billion.
Renewable energy projects with private sector participation in low- and middle-income countries reaching financial closure
In general, the total installed capacity of medium and large scale renewable energy projects with private sector participation is becoming quite sizeable. More than 72GW of renewable energy were installed through projects with private sector investment over the last decade; most were installed during the last five years (49GW) and 21GW during 2009 alone. With progress in technology driving down the relative cost of renewable energy, and with the increase of energy prices during the last years, renewable energy has become more competitive and represents now a substantive share of energy generation projects.
During 2005-2009, renewable energy represented about 25 percent of medium and large scale energy generation projects’ total capacity in low- and middle-income countries.
Not all renewable energy technologies have developed at the same pace. Hydropower remains the most commonly used technology, numbering 129 projects and $45 billion in investment in 2005-2009. Wind power is increasing, with 85 projects and $11 billion in 2005-2009. In the third place in terms of energy mix, biomass accounted for 31 projects and $1.7 billion in 2005-2009. Medium and large scale private renewable energy projects based on other technologies, such as solar, are currently less developed in low- and middle-income countries. The choice of the energy technology is directly linked to the associated generation cost and the natural conditions, hydropower and wind being less costly and more exploitable. Solar power generation remains in general more expensive, and is usually less developed through private medium and large scale projects.
Cumulative capacity of renewable energy projects with private sector participation in low-and middle-income countries reaching financial closure
Brazil, India, and China are the most active countries in terms of private investment in medium and large scale renewable energy projects. The size of these economies, their important energy needs, natural conditions, and fiscal and financial incentives explain why these three countries are ahead in the development of private renewable energy projects. From 2005-2009, the three countries implemented 57 percent of all private renewable energy projects in low- and middle-income countries, representing 68 percent of total investment commitments and 69 percent of renewable energy capacity installed.
In Brazil, where $26 billion was invested in 73 projects of a total capacity of 14GW, most projects were large hydropower plants (41), followed by biomass (21) and wind (11). In India, where $9.8 billion was invested in 27 projects of a total capacity of 12GW, most projects were also hydropower plants (21), followed by wind (five) and biomass (one). In China, $5.5 billion was invested in 46 projects of a total capacity of 7GW. Wind power was the predominant technology used (31 projects), followed by hydropower (10) and biomass (5).
These figures certainly underestimate the real scope of private sector participation in renewable energy in low- and middle-income countries, as many renewable energy projects are small scale and remain difficult to track. As the relative cost of renewable energy keeps declining, it is expected that private sector participation in renewable energy projects will continue developing strongly: wind, hydropower and small hydro projects in the short term, and solar in the medium term with the decrease of associated costs and the development of incentive programs. Brazil, India, and China are expected to remain the first destination for renewable energy projects in low-and middle-income countries for quite some time.
All calculations are based on data from the PPI Database (World Bank and PPIAF). http://ppi.worldbank.org/ Data from the PPI Database on energy projects with private participation include primarily medium and large scale projects as reported by the media and other public sources. Small-scale projects are usually not included because of lack of public information.