6 insights on financing clean energy projects in emerging economies

The briefing identifies regulatory instability and off-taker creditworthiness as primary barriers to clean energy investment in emerging economies. It suggests that leveraging local financiers can mitigate foreign exchange and political risks, while blended finance can address the risks associated with newer technologies like green hydrogen and battery storage. Additionally, it notes that Weighted Average Cost of Capital (WACC) evaluation methods are evolving to account for inflation and supply chain disruptions, and calls for greater transparency in cost of capital data to attract private sector participation.

• Regulatory unpredictability and instability are primary drivers of the cost of capital and can lead financiers to cease operations in specific markets. The document suggests that improving monetary regulations—specifically regarding the denomination of Power Purchase Agreements (PPAs) in liquid global currencies, simplifying KYC processes, and easing earnings repatriation—is essential for accelerating investment.
• Financiers prioritize credit-worthy off-takers, often requiring government guarantees or letters of credit from commercial banks. Projects may be penalized if the sovereign credit rating of the host government is lower than that of the off-taker, as the sovereign rating is typically the prevailing benchmark.
• Utilizing local financiers is recommended to reduce capital costs by mitigating political risks, foreign exchange risks, and global 'flight-to-safety' market conditions. In Brazil, for example, developers may prioritize local banks, Spanish banks with local branches, or local capital markets over international project finance.
• While technologies like carbon capture and storage, green hydrogen, and battery storage face limited backing due to a lack of established business models, blended finance is emerging as a viable de-risking mechanism. An example includes using blended finance for bifacial solar panel projects to allow for deferred principal payments based on projected revenue gains.
• Weighted Average Cost of Capital (WACC) is currently increasing for emerging economies due to global recession expectations, inflation, and forex volatility. Consequently, evaluation methods are evolving to include more frequent forecast updates, scenario-based models, and the impact of disrupted supply chains.

APA

Gopalakrishnan, O. K. R. (2022). 6 insights on financing clean energy projects in emerging economies. World Economic Forum. https://www.weforum.org/stories/climate-action/cop27-6-insights-financing-clean-energy-emerging-economies/

Chicago

Gopalakrishnan, Ogan Kose, Raj. 6 insights on financing clean energy projects in emerging economies. World Economic Forum, 2022. https://www.weforum.org/stories/climate-action/cop27-6-insights-financing-clean-energy-emerging-economies/.

Wikipedia

{{cite report |last1=Gopalakrishnan |first1=Ogan Kose, Raj |title=6 insights on financing clean energy projects in emerging economies |publisher=World Economic Forum |date=1 November 2022 |url=https://www.weforum.org/stories/climate-action/cop27-6-insights-financing-clean-energy-emerging-economies/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{gopalakrishnan2022insights, author = {Gopalakrishnan, Ogan Kose, Raj}, title = {{6 insights on financing clean energy projects in emerging economies}}, institution = {World Economic Forum}, year = {2022}, month = nov, url = {https://www.weforum.org/stories/climate-action/cop27-6-insights-financing-clean-energy-emerging-economies/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }