The sustainable energy industry has experienced impressive growth in recent years as technologies improve and new market regulations are introduced promoting cleaner forms of energy. For instance, the wind energy industry is currently growing by 32% p.a. with new installations valued at around USD 7 billion per year. Likewise the photovoltaic cell industry is experiencing growth of 37% p.a. with global sales of USD 3.5 billion.
However, despite the sector’s dynamic growth, new renewable energy sources i.e. modern biomass, geothermal, wind, solar, marine and small-scale hydro still provide only about 2% of the world’s energy. This is partly due to the elevated costs of production for many new renewable energy technologies, particularly when the externality benefits of these cleaner and often more secure systems are not factored in. In addition, individual transactions are generally fewer and smaller in nature, which also pushes up costs. The resulting lack (or when available, high cost of) financing has therefore been a major barrier to sector growth.
Furthermore, the majority of financiers do not have the information, experience, and tools required to assess, mitigate and hedge project and investment risks. The challenge is therefore to attract increased investment to sustainable energy projects by providing information, facilitating deal origination, and developing partnerships that can help shift sustainable energy from the margins of energy supply to the mainstream. The SEFD aims to assist with this process.