LED FINANCING

Exploring existing and new LED financing solutions and opportunities to unlock wider sources of finance for large-scale LED infrastructure projects, particularly in developing countries.

THE CHALLENGE:

To finance a transition to a net zero emissions global economy, and keep global warming well below the 2 degree Celsius target detailed in the Paris Agreement on climate change, large sums will have to be invested over the coming years in new clean energy solutions and infrastructure projects.

recent report from McKinsey estimates that over the next 15 years US$90 trillion will be required globally to finance infrastructure projects, with 75% of this finance needed in the developing world.

LED lighting has been recognized as one of the most immediate and effective solutions available to cities to help reduce emissions and upgrade their infrastructure. As The Climate Group’s Global LED consultation reveals, financing of such projects remains a key barrier due to the high up-front costs required, which are often not directly covered by the cities’ municipal budget.

However, the significant savings that can be achieved over the lifetime of these projects provides options for different servicing loan repayment schemes. These initial ‘up-front’ cost barriers are more acute in developing regions, where municipal budgets are often very limited and cities’ poor credit ratings can hinder the chances of getting an external loan to finance the transition.

New financing options are therefore urgently needed to ensure a resilient and energy efficient infrastructure for the future.

WHAT WE AIM TO DO:

Acknowledging the need for new and innovative approaches to financing infrastructure upgrades, The Climate Group has initiated a ‘finance activity’ within the ongoing LED street lighting consultation work.

We are working collaboratively with finance organizations such as the International Finance Corporation, the World Bank, and global finance companies, to explore different financial models applicable to street lighting infrastructure projects. These include potential opportunities to manage territory and investee credit risk, drive investor confidence and demonstrate successful roll-outs. 

These models could help reduce the risk from a primary funders’ perspective and include risk-mitigation instruments that could be supported by foundations and combined with commercial funding, thereby unlocking much larger sources of domestic and international financing.  

We are exploring approaches where small and medium size city lighting projects could be grouped together by region, and where standardized regional documentation could help reduce transaction costs, help enhance investor confidence and accelerate regional scale-up.

ACTIVITIES:

Our activities focus on consultation, roundtables and workshops that include discussions around management of project and investor risk, current and new business models.

  • April 2016, India: EESL and WB event - Initial discussion with Indian cities.
  • June 2016, Brazil: WB and TCG event in Sao Paulo – Initial discussion with Brazil cities.
  • June 2016, London, UK: Business and Climate Summit – Broader conversation on how to unlock the investments needed to reach a 2 degree world, focus on Led infrastructure financing. 
  • 22 September 2016, New York, US: Financing City LED projects in Developing Countries, Roundtable at Climate Week NYC

For a full list of events please refer to our Global LED Consultation page

RELATED LINKS:

An overview of most commonly available options for financing LED street lighting projects with links to examples where these solutions have been successfully used.

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