The International Energy Agency’s (IEA’s) latest flagship report, “Financing clean energy transitions in emerging and developing economies,” barely mentions nuclear, except in passing, in its 237 pages. In his Foreword to the report, IEA Executive Director Dr Fatih Birol says the IEA “has made it crystal clear that countries around the world must urgently accelerate their transitions to clean energy” to stave off the worst effects of climate change and “to build a more healthy, prosperous and secure future where everyone has access to clean and affordable energy supplies”. He warns: “If energy transitions and clean energy investment do not quickly pick up speed in emerging and developing economies, the world will face a major fault line in efforts to address climate change and reach other sustainable development goals.” This is because most growth in global emissions in the coming decades is set to come from emerging and developing economies as they grow, industrialise and urbanise.

He says there is “a huge opportunity to take advantage of lower-cost clean energy technologies, led by solar and wind, to forge a new low-emissions development model for the developing world”. There is also no shortage of capital globally to realise such a vision. However, “private capital does not yet see the right balance of risk and reward in clean energy projects”. Birol says: “Every country must choose its own energy path based on its specific needs and resources, and there is a lot that countries themselves can do to create and improve the conditions for clean energy investment. But the global challenge of climate change demands global solutions: the international community has to ensure that all countries have the support that they need to move forward in this critical endeavour.”

This why the IEA joined forces with the World Bank and the World Economic Forum to produce this special report, “which draws on nearly 50 on-the-ground case studies – across clean power, efficiency and electrification, as well as transitions for fuels and emissions intensive sectors – in countries ranging from Brazil to Indonesia, and from Senegal to Bangladesh. This enables us to offer recommendations for priority actions to get the investment tap flowing to vast under-served areas of the world.”

According to Birol: “The massive scale of the challenge requires rethinking how we approach it – and major efforts from international financial institutions, their donors, multilateral development banks and many other actors. Many institutions are already seeking to do more, which I welcome. But when we look at the numbers globally today, it is clear that we are nowhere near mobilising the level of funds that will be needed. This is why one of the most urgent recommendations is that governments give international public finance institutions a strong strategic mandate to finance clean energy transitions in the developing world.”

Neither the introduction nor the extensive executive summary mention nuclear at all, nor does the report look anywhere at the role of state financing for energy development – something which is key for most nuclear projects. IEA says the report focuses on clean energy transitions “in the universe of emerging market and developing economies in Africa, Europe, Latin America, the Middle East, and Asia (EMDEs) but excludes China. It analyses “the outlooks for investment and financing across sectors that are key for clean energy transitions, assesses the key issues related to attracting finance and provides advice on how policy reforms and financial mechanisms can work together to mobilise and align private finance, at scale”. Given the scope to 2030, the analysis “focuses on financing sectors that are market-ready, based on technologies at mature and early adoption stages, such as in renewables and efficiency”. It also “examines options for financing transitions in fuels and emissions-intensive sectors, where decisions taken over the next decade can lay the groundwork for the integration of new technologies, but also have the potential to lock in emissions for decades”.

Chapter 1 sets the scene for financing clean energy transitions in EMDEs. It outlines the investments that would be required to align with IEA climate scenarios. Chapter 2 assesses the sources and types of capital required to fund these investments and proposes ways in which major economies and EMDEs can step up efforts to catalyse capital flows. Chapter 3 examines how to scale up and finance investments for clean electricity, “including in utility-scale renewable power, as well enabling grid and flexibility infrastructure”. It also focuses on cross-cutting investment issues related to the financial performance of utilities and how to finance energy access. Chapter 4 looks at financing transitions in fuel supply and in emissions-intensive sectors. “It considers the choices facing major hydrocarbon-resource holders during energy transitions, as well as the role of gas in EMDE transitions. It explores financing options for emissions-intensive sectors, such as heavy industry, where commercial options are currently more limited as well as considerations for newer technologies, such as carbon capture and low-carbon gases.”

IEA says: “Mobilising capital on a much larger scale will require a dramatic increase in the role of the private sector, and an enhanced role for international and development finance institutions will be critical to catalyse this investment….Public sources of finance, including state-owned enterprises, will continue to play vital roles, especially in grid infrastructure and in transitions for emissions-intensive sectors. Provision of blended capital from development finance institutions is critical to attract private investment to markets and sectors at early stages of readiness – or in situations where the risks are hard to mitigate, such as energy access projects for vulnerable communities or in remote areas. Boosting finance to the required scale demands a wide range of instruments and approaches, including long-term local-currency debt for renewable power, corporate and consumer finance for efficiency, and risk capital to support new technologies, companies and project development.”

Smart use of public finance will need to come with much more private capital. Mobilising investment across all sectors will depend on enhancing financial flows from local sources as well as from international providers. Renewable power offers the most likely route for increased participation by international project developers, commercial banks and other relevant investors. Consumer-based investments or those coming from state-owned enterprises – in fuel supply and grids, for example – rely more heavily on domestic sources of capital, but they also need access to a wider set of fundraising options.

IEA says a clear set of priority actions must guide strategies and accelerate transitions:

  • Redouble international support: give international public finance institutions a strong strategic mandate to finance clean energy transitions; boost and improve the delivery of international climate finance; enhance the deployment of blended finance to mobilise additional private capital; and incentivise international capital markets to fund a broader range of clean energy investment opportunities in emerging and developing economies.
  • Tackle cross-cutting issues that affect investment risks and returns: make it easier and cheaper to develop viable new clean energy projects; improve domestic access to capital through more robust banking and capital markets; remove distortions in markets and prices that work against sustainable investments; put state-owned enterprises, especially utilities, on a firmer financial footing with sustainable strategies; empower local entrepreneurs and small/medium-sized enterprises to drive change; scale up private capital rapidly for clean power, efficiency and electrification.
  • Build equitable and sustainable models for universal access to modern energy; harness the readiness of investors to back renewable power.
  • Focus already on the hardest aspects of transitions: recast the development model for major producer economies; lay the groundwork for scaling up low-carbon fuels and industrial infrastructure; develop innovative strategies to transform emissions-intensive sectors; accelerate the shift away from unabated coal while ensuring a people-centred transition.