Managing Executive, Corporate and Investment Banking
Absa Bank
The urgent need to combat climate change has thrust renewable energy into the global spotlight. As governments, businesses, and individuals grapple with the challenges of reducing carbon emissions, the role of financial institutions in supporting and propelling the renewable energy transition is becoming increasingly prominent.
The financial services sector, with its financial power, extensive networks, and ability to drive systemic change, has a unique opportunity to be the catalyst that accelerates the pace and scale of this critical transition. Financing is undoubtedly one of the most significant contributions that can be made to the renewable energy transition agenda, by assisting in overcoming the financial barriers that frequently impede the development and deployment of clean energy solutions by providing capital for renewable energy projects.
Financial institutions are helping to build solar farms, wind parks, geothermal facilities, and other renewable energy infrastructure by providing loans, bonds, and other financial instruments. This funding allows projects to move forward, accelerating the transition to a low-carbon economy.
However, because of the relatively new technologies involved, as well as the regulatory uncertainties that accompany the introduction of new energy sources, renewable energy projects are frequently regarded as risky investments. We can play an important role in de-risking these ventures by conducting thorough due diligence, assessing project viability, and providing risk-mitigation financial instruments. Financial institutions can boost investor confidence and encourage greater participation in renewable energy projects by offering guarantees, insurance products, or structured finance solutions. This de-risking mechanism attracts additional capital and accelerates the transition.
Absa Bank Kenya, for example, has had the privilege of working with Kenya's largest energy generator, KenGen, to optimise its capital structure to address the greater funding needed to support its geothermal energy deployment. Kenya's installed geothermal capacity stood at 962 megawatts as of June 30, 2022, placing Kenya seventh among the world's top geothermal energy producers.
Furthermore, KenGen currently generates 86 percent of its electricity from renewable sources such as geothermal, hydro, and wind.
The writer is Executive - Corporate and Investment Banking, Absa Bank Kenya.
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