Green Investing 2011: reducing the cost of financing

Introduction

The World Economic Forum is proud to release Green Investing 2011: Reducing the Cost of Financing as part of its Green Investing project. The Green Investing project, which was mandated by the Forum’s Investors community at the World Economic Forum Annual Meeting 2008 in Davos-Klosters, Switzerland, aims to explore ways in which the world’s leading investors can most effectively engage in the global effort to address climate change.

Given recent geopolitical events, discussions about alternative sources of energy have gained additional traction. Investment in clean energy is no longer only a means to addressing the issue of climate change, but in a time of increasing price volatility of traditional sources of energy and heightened concerns related to nuclear energy, clean energy sources are becoming a vital component to sustained economic growth.

For the past three years, the World Economic Forum, in collaboration with Bloomberg New Energy Finance, has created a series of reports as part of the Green Investing project. The first report, Green Investing 2009: Towards a Clean Energy Infrastructure, described what a low-carbon energy system could look like, and estimated that it would require investment in clean energy to grow to US$ 500 billion per year by 2020 for global warming to be limited to 2°C without compromising economic growth. In our second report, Green Investing 2010: Policy Mechanisms to Bridge the Financing Gap, we reviewed various potential public and private sector financing mechanisms at the national, state and local levels that could unleash the required US$ 500 billion investment per annum in clean energy.

This year’s report finds that, despite the challenging economic environment, the clean energy sector has made significant progress and investments have increased to approximately US$ 250 billion per annum. However, a US$ 250 billion per annum financing gap persists. Given the long-term importance of growing the clean energy sector to both help address climate change and provide alternatives to traditional sources of energy, policy-makers will need to find ways to make clean energy available at
the lowest possible cost.

To facilitate a better understanding of the underlying cost of generating clean energy, we use the Levelized Cost of Energy (LCOE), which examines the costs – excluding the effects of any subsidies or support mechanisms – associated with generating
clean energy from various technologies. Since, the LCOE seeks to take into account all project costs and financial assumptions over the lifetime of a project, it allows us to examine which policies have proven more or less effective in reducing generation
costs.

We hope that this report provides decision-makers (i.e. business leaders, government representatives and sector experts) with valuable input as they determine policies to ensure appropriate allocation of resources to the clean energy sector.

Through the LCOE and other analyses, the Green Investing project helps inform the World Economic Forum’s broader Climate Change Initiative. The Climate Change Initiative enables companies pioneering business models in the low-carbon space to work closely with policy-makers, the domestic private sector and multinationals in select emerging economies to develop green investment-enhancing project and policy recommendations.

On behalf of the World Economic Forum, we would like to thank our collaborators at Bloomberg New Energy Finance, in particular Michael Liebreich, Ethan Zindler, Tyler Tingras, Nicky Aspinall and Vicky Cuming. Last but not least, we are especially
grateful to the numerous experts who, since the launch of the Green Investing project, have provided input to the reports and participated in workshops and interviews.

Download the PDF.

About BloombergNEF

BloombergNEF (BNEF), Bloomberg’s primary research service, covers clean energy, advanced transport, digital industry, innovative materials and commodities. We help corporate strategy, finance and policy professionals navigate change and generate opportunities.

Available online, on mobile and on the Terminal, BNEF is powered by Bloomberg’s global network of 19,000 employees in 176 locations, reporting 5,000 news stories a day.
 
Sign up for our free weekly newsletter →

Want to learn how we help our clients put it all together? Contact us