In conjunction with the International Solar Alliance (ISA), CPI conducted a market readiness analysis of more than 40 ISA member countries with high solar output and significant associated investment potential. The goal was to better understand the investment risk specific to solar energy development and the impact of those risks on the commercial viability of such projects, though the conclusions of this analysis are relevant for all renewable energy investments in developing economies.
Solar investment potential was assessed on three parameters: solar potential; transition readiness; ease of doing business.
The need for a Global Credit Guarantee Facility
This discussion paper gives a brief overview of our methodology, including an analysis of the required rate of equity return or debt for solar projects, by country, under current cost-of-capital environments.
While specific rates can vary considerably depending on conditions at the time of project finance needs, the overall take away is that cost of capital is a significant barrier. To address this, the paper proposes a credit guarantee facility that could help address these cost-of-capital issues, allowing countries with high solar potential to reduce some of these barriers and significantly increase their installed capacity.
This discussion paper is part of CPI’s broader work on IFI innovation.