Financing Renewable Energy in the Developing Countries of the EAS Region

Fukunari Kimura, Shigeru Kimura, Youngho Chang () and Yanfei Li

Chapter 1 in Financing Renewable Energy Development in East Asia Summit Countries A Primer of Effective Policy Instruments, pp 1-11 from Economic Research Institute for ASEAN and East Asia (ERIA)

Abstract: This research aims to identify and update the most effective policies in the Asian context, especially for member states of the Association of Southeast Asian Nations (ASEAN), China, and India. Specifically, it addresses what policies could effectively mitigate the most prominent risks related to renewable energy investments and, therefore, facilitate the application of the most promising financial mechanism in the region. The studies of this project highlight policies that address the following issues regarding more effective promotion of renewable energy investment in the region: (i) to develop viable and innovative business models and financial mechanisms/structures, especially for distributed generation from renewable sources; (ii) to facilitate market creation through the implementation of market-based mechanisms; (iii) to provide stability of policies and the need for renewable energy legislation; (iv) to enhance the availability of high-quality and high-accuracy renewable energy resource data and other technical assistance to reduce the uncertainty of renewable energy production; (v) to rationalise electricity market design that internalises not only the positive externality of renewable energy but also its negative externality (especially the impact on the grid capacity and grid balancing); and (vi) to improve the availability of financial resources in the region through market creation and enhancement of innovative financial instruments, such as Green Bond, which may be familiar and attractive to Asian investors. The other innovative instrument to reduce the cost of debt financing is public foreign exchange hedging facility for renewable energy financing.

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