The Institute for Energy Security (IES) wants government to help establish a green bank as well as explore the idea of offering renewable energy bonds – if it is truly committed to adding renewable energy to the country’s energy mix and helping industry get access to cheaper power.
This, when done it says, could whip-up investor appetite in the green revolution agenda, particularly renewable energy, and put the country on course to achieving a cleaner, modern and cheaper energy in line with international protocols. It also believes this will lend credence to efforts at protecting the environment and tackling the climate crisis.
“Ghana must be among the first countries in the sub-region to introduce the concept of a ‘green bank’. The Institute for Energy Security proposes that in the 2021 economic policy of government, there should be strong statement indicating Ghana’s resolve to go ‘green’ and fund the ‘green revolution’, the energy think-tank said in a statement.
The idea of green bank is not novel. Already, developed countries have established these banks with clear emphasis on supporting the development of green energy. Germany wants to lead the green recovery, and is prepared to spend to reach there.
The European country, as part of its US$145billion recovery budget, has allocated some US$46billion to sustainable investments in areas like renewable power and electric vehicles. The European Union has pledged to spend 25 percent of its budget on climate action. Similarly, South Korea has also made sizeable green commitments, with many other nations working on putting the green agenda at the forefront of their post-COVID activities.
Another way the IES believes government could spur the green or clean energy agenda is to offer renewable energy bonds. Doing so, it explains, will help it to overcome “difficulty with borrowing availability from international markets and the so-called excess capacity” in the power sector.
The IES also wants the country to pay more attention to straightening the regulatory framework in order to allow commercial banks become change agents for project financing in the renewables space. And banks could participate as a single lender, several lenders or syndicates if the space is properly streamlined.
“In Ghana, there have been attempts by the previous and current governments to create an enabling investment climate for renewable energy by introducing several policies and regulatory measures, including the Renewable Energy Act 2011 (Act 832). However, gaps within the existing renewable energy regulatory framework continue to slow down private investment in the sector,” IES lamented.
Other options the country could use to revitalise its green agenda would be to adopt the concepts of revolving credit, term loans, standby letters of credit and performance bond bridge loans, the statement mooted.
“These credit facilities are familiar with most commercial banks in Ghana, and they have the expertise to support the private sector or an international partner in the renewable energy sector,” IES further advocated.
Within the continent, funding for renewable energy is gathering steam. For example, in early 2020 the Board of Directors of African Development Bank (AfDB) approved a US$20million investment in the Metier Sustainable Capital International Fund II, which channels funds to renewable energy and resources, and efficient infrastructure projects across sub-Saharan Africa.
The bank’s funding contributed to production of an additional 178.5 megawatts (MW) of renewable power for commercial and residential use. It also created opportunities for industrial waste-water treatment and waste-to-energy generation.
Meanwhile, in 2018, the AfDB approved a US$1.5million grant from its Sustainable Energy Fund for Africa (SEFA) to assist Ghana’s renewable energy investment drive. The grant supported efforts to overcome technical, financial, regulatory and institutional barriers to scale-up renewable energy investments in the country.
The SEFA grant was to fund two broad components: the technical, commercial, regulatory and feasibility studies, aimed at providing detailed renewable energy resource studies, grid integration studies; and regulatory texts, and resources and public sector skills and capacity development.
In the same 2018, Cal Bank received a US$30million loan facility from PROPARCO to enable the bank increase its capacity to meet needs of the private sector – where a third of the amount was earmarked to finance renewable energy and energy-efficiency projects.