Optimising the Role of Public Finance Will Advance Universal Energy Access

The world has only 7 years left to achieve the Sustainable Development Goals (SDG). Together with other custodian agencies of the goal 7 – to ensure access to affordable, reliable, sustainable and modern energy – the International Renewable Energy Agency (IRENA) has been annually tracking the progress towards the goal’s achievement, specifically the progress of the international financial flows to developing countries in support of clean energy.

According to the 2023 edition of the SDG 7 Tracking Report, 660 million people are projected to still lack access to electricity in 2030. To reach universal access to energy services by 2030, the world has to drastically increase efforts by scaling up finance, investment, and policy support.

While private investments are important, public finance remains essential to bridge the funding gap, particularly in countries and regions that are not yet considered investible by the private sector.

To identify challenges and solutions in enhancing the role of public finance and policies in addressing energy access needs, IRENA convened a roundtable session during the second part of its 14^th Assembly in Abu Dhabi today. The discussion took place against the backdrop of the United Nations (UN) global stocktaking of sustainable energy taking place this month, which reviews the progress achieved at the conclusion of the UN Decade of Sustainable Energy for All (2014-2024) .

Bringing together governments, development bodies, donors, businesses and energy experts, the IRENA roundtable served as a platform to explore new avenues for cooperation that are crucial to close existing finance gaps. A new brief by IRENA titled Public Finance for Universal Energy Access was also presented during this roundtable, to guide policymakers and public financiers to track and optimise public financing in advancing energy access.

Introducing the brief in his opening remarks, Raul Alfaro Pelico, Director of Knowledge, Policy and Finance – IRENA, said, “It maps the public financing needs across the whole energy access ecosystem and identifies instruments to channel public funds into the different solutions, through defined intermediaries.”

The brief identifies the priority needs for public finance in advancing universal energy access, which are electricity (covering stand-alone systems, mini-grids) and productive use applications and clean cooking (covering improved cookstoves, biogas/biofuel and solar/electric solutions). For electricity, future public investments should focus on improving inclusion for the demand side, market sustainability for the supply side and coordination across the ecosystem.

For access to clean cooking, the brief recommends early-stage market development and awareness raising as top public investment priorities. Integrated planning with the electricity sector and innovation across technologies can also serve as promising interventions for public finance providers.

The roundtable highlighted other critical markets where private capital is not yet present and public finance could make a substantial impact. These include sectors like education, agriculture, and health.

“Bridging the finance gap ensures that no one is left behind by ensuring access to underserved and remote communities. Championing of the public finance landscape can have a substantial impact across sectors including education, health and agriculture,” said Ntsebo Sephelane, Associate Professional – Knowledge, Policy, and Finance Centre, IRENA, upon presenting the key findings of the brief.

In exchanging best practices and lessons learned, speakers explored ways for public finance to support research and development, promote local capacity building and create jobs within the energy sector. More importantly, the discussion emphasised how public finance can increase energy access through stronger roles; by bridging end-user affordability gaps and mitigating investment risks.

As Heike Henn, Director Climate, Energy and Environment, German Federal Ministry for Economic cooperation and development (BMZ), said, “Access to finance has to be affordable. Regulatory frameworks should make sure public finance's role is enhanced, including to de-risk investments, so energy access projects can bring tangible impact to communities.”