In the next three years, the IDB expects most of its new energy financing for the private sector to go for projects that will use renewable sources such as hydroelectric, wind, geothermal, biomass, and solar, said Hans Schulz, who heads the IDB’s Structured and Corporate Finance Department. The unit expects as much as 80% of its future energy loans to finance projects that use renewable sources of energy compared with 30% today.
Energy demand in Latin America and the Caribbean is expected to increase by 50% to 2030, requiring estimated investments of about $1.5T. In the next decade alone, the region will require a 26% increase in its installed energy generation capacity, according to the international-energy-agency.
Demand is increasing for multilateral financing because institutions like the IDB can offer loans with maturities of up to 15 years, while a typical commercial bank would offer a loan with a maturity of no more than 5 years, Schulz said.
“Without long-term financing, these renewable energy projects cannot become a reality,” Schulz said. “As a result, multilateral support has been essential for many green energy projects to happen.”
In addition to providing long-term lending and guarantees, the IDB also helps mobilize resources from other lenders, through syndicated loans and other financial transactions that allow flexible risk-sharing agreements, as well as the Climate Investment Funds, according to Schulz. The IDB also provides technical assistance for companies that want to access the carbon credit market.
The IDB approved $1.2B in financing for private sector projects last year, of which a third of the total was used to finance renewable energy and energy efficiency projects in the region.
The IDB also finances clean energy and energy efficiency projects through loans and grants to governments in its 26 borrowing members. In 2009, the Bank more than doubled financing for environmental improvement, climate change, and renewable energy. The IDB approved 33 new loans for green projects in the private and public sectors totaling more than $3.5B. Of these loans, 15 ($2.1B) were directed at climate change and renewable energy. The Bank complemented this with a further $61.6M in technical cooperation, investing heavily in energy efficiency, renewable energy, biodiversity and disaster risk management.
