This rapid desk-based study is commissioned by DFID. DFID is interested
to identify evidence of factors that are deterring investment in
renewable energy (RE) in most developing countries in Asia. In our
understanding, DFID proposes to use this evidence, along with
information on the opportunities and risks in this sector, to commission
more in-depth studies in the future. These different studies will
support the scoping of the potential establishment of one or more
investment platforms through which DFID could deploy investment capital
in order to catalyse private investment in south and central Asia. It’s
been proposed that the platform(s) should focus on clean energy,
inclusive agribusiness and financial services.
This rapid study has been conducted based on the review of existing
literature and related databases. As mandated, the study adopts a
political economy assessment framework. Asia is the general focus.
However, examples, wherever applicable, have been drawn only from a
selected set of Asian nations. China and India have generally not been
considered in this study. It is found that although most countries in
developing Asia have RE potentials and plans for mainstreaming
renewables in their energy systems, they have mostly under performed
with regard to attracting investments and capacity build up in the RE
sector. Given the existing scenario, these countries will therefore
struggle to realise the seventh Sustainable Development Goal.
On closer scrutiny, it is found that there is evidence that vast,
fragmented and complex networks of actors exist in the RE sector in most
developing economies in Asia. The networks are characterised by
competing priorities and constraints, lack of capacity and coordination,
administrative difficulties, etc. which translates to considerable
financial risks for potential RE investors. Together, with regard to
policies - bias (towards conventional fossil fuels), conflicts,
communication gaps, uncertainty, etc.; increase the risk of investment
in RE. Additionally, political mandates and political orientation
further aggravates this risk.
However, there is gap in evidence with regard to the specificity of
risks, as most studies - consulted during the course of research for
this work, have concentrated on the whole of Asia and the whole of RE
sector. The nature and dimension of risk change with nations and RE
technologies. Therefore, future studies, if commissioned, are required
to be country specific and RE source specific. Based on the gaps in
evidence, it is also recommended that studies be directed towards
embedding risk mitigation measures in each of the following stages –
project design, implementation, monitoring and evaluation. Scope of
technical assistance may then be designed on the basis of such studies.
For harnessing RE potentials, projects are required to be local in
context and should take advantage of local resources. Aligning the
benefits of RE projects - delivering a global good and various
co-benefits with local priorities can ensure acceptance by the local
actors. Although internationally a lot of financial instruments are in
place for mitigating risks of RE projects, there is evidence that this
acceptance - through communication and negotiation, is the most
effective risk management mechanism.
This report has been produced by Global Change Research, Kolkata and
Department for Economics, The Bhawanipur Education Society College,
Kolkata for Evidence on Demand with the assistance of the UK Department
for International Development (DFID) contracted through the Climate,
Environment, Infrastructure and Livelihoods Professional Evidence and
Applied Knowledge Services (CEIL PEAKS) programme, jointly managed by
DAI (which incorporates HTSPE Limited) and IMC Worldwide Limited.
Ghosh, D.; Ghosh, A. Evidence and gaps in evidence on the principle political economy constraints and opportunities to successful investment in clean energy in Asia. Evidence on Demand, UK (2016) iii + 32 pp. [DOI: 10.12774/eod_hd.january2016.ghoshdetal]