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Design of blended facility to provide upfront capital for development of distributed renewable energy projects in South & Southeast Asia

Convergence awarded a feasibility study grant under the Asia Climate Solutions Design Grant to Powertrust for the design of a blended finance facility to provide upfront capital for distributed renewable energy (DRE) projects in South and Southeast Asia. This facility aims to address the challenges faced by DRE developers in accessing capital for their projects, particularly in emerging markets.

According to the International Energy Agency, annual clean energy investment in developing economies needs to increase by more than seven times – from less than USD 150 billion last year to over $1 trillion by 2030 to reach net-zero emissions by 2050. Distributed renewable energy (DRE) projects would need to be a significant part of that investment with nearly half of the global solar installations estimated to be DRE projects.

However, DRE project developers in emerging markets especially in Asia often lack access to the capital needed to build new projects. This facility aims to address that challenge by providing upfront capital to DRE project developers to accelerate the deployment of projects across South and Southeast Asia. The facility will target DRE projects that have the potential to generate Renewable Energy Certificates (RECs) once operational. Powertrust will also facilitate long-term commitments from corporates for purchasing these RECs enabling them to meet their carbon emission reduction targets while supporting these projects to become viable.

The facility will look to mobilize around $180 million in investments to support the development of nearly 100MW of new renewable energy capacity that has the potential to avoid up to 150,000 tons of carbon emissions annually. The facility will also aim to positively impact more than 240,000 individuals by providing local communities and businesses reliable access to energy.

Design question and learning potential for the market: How can a blended facility be structured to provide upfront capital for DRE projects with potential to generate RECs?

During the feasibility study, Powertrust will engage with concessional and commercial investors to assess their potential investment interest in such a facility and accordingly design the initial financial structure of the facility. Powertrust will also utilize this grant to develop the initial financial model and for identifying the appropriate legal structure for this facility.

Another important aspect of the feasibility study will be engaging with corporates to understand the types of projects they are interested in and the potential for them to purchase RECs generated by these projects. This will help Powertrust to define their project selection criteria and engage with developers in the region to establish a pipeline of projects that can be funded by the facility.

    In progress
    Year and Quarter
    Asia Climate Solutions Design Grant, 2023, Cycle 1
    Design Activity
    Feasibility Study
    Region Focus
    South Asia, Southeast Asia
    Sector Focus