Financing the Energy Transition: Meeting a Rapidly Evolving Electricity Demand

To align the energy sector with net-zero emissions by 2050, annual investment must increase from $2 trillion today to ~$4.5 trillion. This report argues for a targeted, standardized approach to reducing the cost of financing and mitigating the risks of energy transition projects. Collaboration between investors, industry executives, policy-makers and financial institutions is essential.

Challenges facing investment in energy transition technologies include high upfront costs, increased risks, inflation, supply chain constraints and high interest rates. Each region faces unique barriers, particularly developing economies, which receive just 15% of global energy transition investment.

This white paper advocates addressing the following key issues:

– Balancing energy security and affordability, to ensure affordable energy access for all

– Reducing financing costs, especially for developing countries

– De-risking innovative technologies, through insurance and guarantee instruments

– Hedging off-taker risk, through financial tools that guard against price swings

– Mobilizing capital to developing countries, both debt and equity, including blended finance