Renewables the frontiers towards low carbon resilience

Are they shaping the landscapes of Energy Markets?

Abstract

As we are transitioning towards low carbon economy, renewables have become a compelling investment for foraying ahead in shaping global energy sector landscapes. Upfront higher costs are an impending challenge for the global renewable market. Ways and means to channelize and inflow of capital into renewables is of utmost priority. Innovation, co-creation and bonds are some approaches towards creating an equally accessible and allocable renewable energy portfolio with reduced credits risks. Credit risks and policy risks are the two major constraints that are undermining the mobilization of finance in renewable energy projects. Hedging solutions per se and reducing barriers better facilitate and manage shall need varied tools, instruments, mechanisms and rating models. This paper aims to put forth the valid policies, practices, frameworks and tools –on improving the access and allocation of green energy projects and credit risk management with better solutions for ease of implementation for future trajectories. Varied policies and tools that reduce barriers and mitigate risks include a) Enabling policies and tools which are divided into Financial policies and regulations, Project Preparation Facilities, Project facilitation tools, on-lending facilities, and Hybrid structures b) Financial Risk Mitigation Instruments which include Guarantees, currency hedging instruments, liquidity facilities, Resource risk mitigation tools and c) Structured Finance Mechanisms and Tools which includes Standardization, Aggregation, Securitization, Green bonds and Yieldcos, The policy push for systems integration of renewables and enabling technologies (such as energy storage) should focused primarily on increasing power system flexibility and control, as well as grid resilience. Flexibility, in particular, is an important requirement for systems integration of renewables as the share of VRE (Variable Renewable Energy) generation rises. The key deliverables from the paper include: policies which should advance the integration of both centralized and distributed VRE and increase the flexibility of the power system pertaining to, for example: market design, demand side management, transmission and distribution system enhancements, and grid interconnections. Since, countries have renewable energy support policies, they should now promote renewable portfolio standards (RPS), other quota obligations, incentives, feed-in policies (tariffs and premiums), renewable power tenders and auctions, incentives and community choice aggregation programmes.