Assessment
of Financial Risk Management Instruments for Renewable Energy Projects
in Developing Countries
Project
Background
Risks and
barriers specific to Renewable Energy (RE) projects have been increasingly
discussed in recent years. As shown in UNEP's scoping study carried
out by a consortium led by Marsh Ltd, if used properly, risk management
measures can transfer certain types of risks away from investors
and lenders and reduce the cost of financing RE projects.
Although insurance products and other financial risk management
instruments/ structures are gradually becoming available to RE projects
in OECD countries, their application in developing countries has
beenlimited to date.
The GEF and donor agencies could play a catalytic role in the development
of new risk management approaches in developing countries where
real and erceived risks are higher. However, the identification
of effective and replicable interventions requires in-depth examination
among experts.
Objective
of the Project
This UNEP/GEF targeted research project aims to catalyse new thinking
in the risk management area, examining existing instruments and
approaches and suggesting potential modalities for new instruments
that could be developed in partnership with private and public sector
financial institutions. The project is being implemented in cooperation
with the other GEF Implementing Agencies- the World Bank, UNDP-,
GEF Scientific and Technical Advisory Panel (STAP) , as well as
a number of RE financing relevant industry partners.
 The
project will identify risks associated with RE projects which could
be effectively mitigated by financial risk management instruments,
evaluate existing and emerging instruments, and identify the most
promising modalities of such instruments where private sector actors
are ready to play an active role.
Feasibility studies of four or more selected risk management instruments
will be conducted to estimate the market prospects in specific GEF
eligible countries, so that promising approaches have the potential
for further development.
The ultimate goal of the effort is to bring about a faster and more
systematic deployment of RE by supporting and positively influencing
the development of markets for RE risk management instruments/ approaches.
Expected
project outcomes
- Development
of adapted financial risk management instruments for RE
projects for implementation by donor agencies and industry
-
Facilitation
of greater engagement by private sector financial institutions
in RET risk management and financing in GEF eligible countries
 funded
project
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