Experts urge innovative financing to derisk renewable energy investments

KARACHI: Renewables First, a leading think tank for energy and environment, successfully hosted a pivotal event titled ‘Renewable Energy Finance Insights - Assessing Risks in a Changing Landscape’ in Islamabad on Tuesday.

This initiative was aimed at bridging the gap between financial sector stakeholders and power sector policymakers and fostering a collaborative dialogue on critical issues, particularly the high cost of financing for solar and wind energy in Pakistan.

The event pointed out that while Pakistan had made notable strides in utility-scale solar and wind projects, attracting further investment was still a significant challenge due to the country’s risk profile and macroeconomic conditions.

To address these issues, Ahtasam Ahmad from Renewables First presented the study titled, ‘Capitalizing on Green: A Stocktake of Renewable Energy Finance for Pakistan’. -- a report which maps the current state of renewable energy financing and highlights the obstacles that have kept the cost of capital high.

The event brought together regulators, lenders, investors, developers, advisors, and public-sector representatives, creating a platform for collaborative discussions and potential de-risking measures.

CEO of Bank of Punjab Farid Ahmed Khan highlighted the scarcity of capital market investors in renewable energy and encouraged both local and foreign entrepreneurs to invest in this sector.

He pointed out the high-risk nature and resultant high costs that drive up prices, proposing solutions such as promoting development finance institutions (DFIs) and increasing capital market participation in energy projects.

Head of Investment Banking at JS Bank Shehzad Abdullah reflected on the evolution of wind power financing since 2011, emphasizing the learning curve through successive generations of financing.

He noted the pivot in market dynamics and highlighted the need for consistent policies and more engaging conversations to drive progress.

Chief Investment Officer at Karandaaz Navid Goraya highlighted the need for exploring alternate mechanisms for financing renewable energy projects, presenting securitization as an avenue to free up liquidity for the financial sector.

Ali Khizar, head of BR research at Business Recorder, and Senior Economist at PIDE Afia Malik advocated for decentralization and the use of local currency in financing, respectively.

Developers from China Three Gorges, Foundation Wind, and UEP stressed the importance of integrated planning, robust transmission infrastructure, and streamlined permitting and land acquisition processes to reduce the risk profile of renewable energy technologies.

Managing Director of PPIB Shah Jahan Mirza emphasized the need for a concerted effort from all stakeholders to pave the way forward for sustainable energy solutions in Pakistan. The experts unanimously agreed that reviving the renewable energy finance space is crucial, and exploring alternate financing channels through innovative instruments and

de-risking measures is imperative to unlock the sector’s potential.